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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 1996
I.C.H. CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-7697 43-6069928
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 North Akard Street
Dallas, Texas 75201 75201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 954-7111
NOT APPLICABLE
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
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ITEM 5. OTHER EVENTS.
ICH Corporation, a Delaware corporation ("ICH"), together with SWL Holding
Corporation ("SWL") and Care Financial Corporation ("Care"), each a wholly-owned
subsidiary of ICH (ICH, SWL and Care, collectively, the "Debtors"), filed a
voluntary petition with the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division (the "Bankruptcy Court") under Chapter 11 of
the United States Bankruptcy Code, Case No. 395-36351-RCM-11, on October 10,
1995. On November 15, 1996, the Bankruptcy Court approved the Debtors' First
Amended Disclosure Statement (the "Disclosure Statement") to be used to solicit
votes on the Debtors' First Amended Joint Plan of Reorganization (the "Joint
Plan"), a copy of which is attached to the Disclosure Statement as Exhibit B.
The voting record date was established as November 15, 1996. All record
holders of claims against ICH (including holders of ICH's 11 1/4% Senior
Subordinated Notes due 1996 and 11 1/4% Senior Subordinated Notes due 2003) or
interests in ICH (including holders of ICH common stock and preferred stock) on
the voting record date will be entitled to vote to accept or reject the Joint
Plan. January 24, 1997, is set as the voting deadline, and the confirmation
hearing to approve the Joint Plan is scheduled to begin on January 31, 1997.
Under the Joint Plan, all assets of ICH, other than assets valued in the
aggregate at approximately $10.5 million which will remain with "Reorganized"
ICH, will be transferred to a liquidating trust in exchange for and in full
settlement of all unsecured claims, including claims of holders of ICH's 11 1/4%
Senior Subordinated Notes due 1996 and 11 1/4% Senior Subordinated Notes due
2003. Reserves are to be set aside for payment in full of all administrative and
priority claims.
The assets which will remain with "Reorganized" ICH consist of the
corporate shell of Bankers Multiple Line Insurance Company, a multiple line
insurance company licensed in 50 states ("BML"), $2.5 million cash, certain real
estate located in Owen County, Kentucky and miscellaneous other assets.
Reorganized ICH will have the option for 90 days after the effective date of the
Joint Plan to sell BML to the Trust for $5 million. Preferred stockholders of
ICH will be allocated 55% of Reorganized ICH Common Stock and the remaining 45%
of the Reorganized ICH Common Stock will be allocated to the common stockholders
of ICH.
Generally, preferred stockholders will be entitled to receive 0.2 shares of
Reorganized ICH common stock for each share of ICH preferred stock held.
However, given the de minimus value of ratable distributions, holders who own
less than 14 shares of preferred stock will receive no shares of the Reorganized
ICH common stock, and holders who own between 14 to 650 shares of preferred
stock may elect to receive a cash payment of $0.36 per share of preferred stock
in lieu of Reorganized ICH common stock. Also, holders of more than 650 shares
of preferred stock may elect to reduce their interest to 650 shares to receive a
cash payment of $234 in lieu of Reorganized ICH common stock.
1
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Common stockholders entitled to receive shares of Reorganized ICH common
stock will be issued 0.0269 shares for each share of ICH common stock held.
Holders who own less than 101 shares of ICH common stock will receive no shares
of Reorganized ICH common stock, and holders who own between 101 and 5,000
shares of common stock may elect to receive a cash payment of $0.05 per share of
ICH common stock in lieu of receiving shares of Reorganized ICH common stock.
Holders of more than 5,000 shares of ICH common stock also may elect to reduce
their interest to 5,000 shares and receive a cash payment of $250 in lieu of
Reorganized ICH common stock.
Effectiveness of the Joint Plan is subject to obtaining the requisite votes
of classes of impaired claims against and interest in ICH and the entry of a
final order of confirmation by the Bankruptcy Court.
A copy of the Disclosure Statement, together with the exhibits thereto
(including the Joint Plan as Exhibit B) is attached hereto as Exhibit 99.1.
On November 15, 1996, ICH issued a press release announcing the Bankruptcy
Court approval of the Disclosure Statement. A copy of this press release is
attached hereto as Exhibit 99.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
99.1 First Amended Disclosure Statement for the First Amended Joint Plan
of Reorganization under Chapter 11 of ICH Corporation, SWL Holding
Corporation and Care Financial Corporation, dated November 15, 1996.
99.2 Press Release of ICH dated November 15, 1996.
2
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
I.C.H. CORPORATION
Date: November 21, 1996 By: /s/ RODNEY D. MOORE
-----------------------------------
Rodney D. Moore, President
3
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INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Number Description Page
- -------------- ----------- ------------
99.1 First Amended Disclosure Statement for the
First Amended Joint Plan of Reorganization
under Chapter 11 of ICH Corporation, SWL
Holding Corporation and Care Financial
Corporation, dated November 15, 1996.
99.2 Press Release of ICH dated November 15, 1996.
<PAGE>
Daniel C. Stewart, SBT #19206500
Josiah M. Daniel, III, SBT #05358500
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower, 1201 Elm Street
Dallas, Texas 75270
(214) 745-5400
ATTORNEYS FOR THE DEBTORS
Michael A. Rosenthal, SBT #17281490
I. Richard Levy, SBT #12265020
GIBSON, DUNN & CRUTCHER
1717 Main Street, Suite 5400
Dallas, Texas 75201
(214) 698-3100
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
Peter D. Wolfson
John A. Bicks
PRYOR, CASHMAN, SHERMAN & FLYNN
410 Park Avenue
New York, New York 10022
(212) 421-4100
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF EQUITY SECURITY HOLDERS
IN THE
UNITED STATES BANKRUPTCY COURT
FOR THE
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
<TABLE>
<S> <C>
IN RE:
I.C.H. CORPORATION, CASE NO. 395-36351
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
SOUTHWESTERN LIFE CORPORATION,
F/K/A I.C.H. CORPORATION,
SWL HOLDING CORPORATION, CASE NO. 395-36352
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
LIFE INTERESTS CORPORATION, AND
CARE FINANCIAL CORPORATION, CASE NO. 395-36354
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
HEALTH INTERESTS CORPORATION,
DEBTORS. JOINTLY ADMINISTERED
CASE NO. 395-36351-RCM-11
</TABLE>
FIRST AMENDED DISCLOSURE STATEMENT FOR THE FIRST
AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
DATED: NOVEMBER 15, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
INTRODUCTION..................................................................................................... 1
I. SUMMARY.................................................................................................. 3
A. Business of Debtors................................................................................. 3
B. Joint Plan Implementation........................................................................... 5
C. Classes and Treatment by Class...................................................................... 6
D. Risk Factors........................................................................................ 7
E. Legally Binding Effect of Joint Plan Confirmation................................................... 7
F. Voting Procedures and Requirements.................................................................. 7
1. Persons Entitled to Vote........................................................................ 7
2. Vote Required for Class Acceptance and Confirmation............................................. 8
3. Voting Instructions............................................................................. 8
4. Assistance in Voting............................................................................ 8
G. Confirmation of the Joint Plan...................................................................... 9
H. Liquidating Trust................................................................................... 9
I. Reorganized ICH..................................................................................... 9
J. Recommendations..................................................................................... 10
II. PURPOSE OF CHAPTER 11.................................................................................... 10
III. CERTAIN RISK FACTORS TO BE CONSIDERED.................................................................... 10
A. Factors Relating to Chapter 11 and the Joint Plan................................................... 10
1. Insufficient Acceptances........................................................................ 10
2. Confirmation Risks.............................................................................. 10
B. Factors Relating to the Liquidating Trust........................................................... 11
1. Projected Recovery.............................................................................. 11
2. Profits Interest in CFSB Corporation............................................................ 11
3. Unknown and Contested Claims.................................................................... 12
4. Lack of Established Market for Trust Interests.................................................. 12
5. Availability of PennCorp Sales Transaction Escrow Amount........................................ 12
6. Modern American/Western and Philadelphia American Indemnification Obligations................... 13
7. Tenneco Settlement.............................................................................. 13
8. Potential Tax Liabilities....................................................................... 13
C. Factors Relating to Reorganized ICH................................................................. 13
1. Business Risks.................................................................................. 13
2. Future Leverage................................................................................. 14
3. Future Dilution................................................................................. 14
4. Potential Investment Company Status............................................................. 14
5. Lack of Established Market for Reorganized ICH Common Stock..................................... 14
6. Dividends....................................................................................... 15
7. Possible Issuance of Preferred Stock............................................................ 15
IV. BUSINESS OF DEBTORS...................................................................................... 15
A. General............................................................................................. 15
B. Employees........................................................................................... 16
C. Assets.............................................................................................. 16
D. Market for ICH's Equity Securities and Related Stockholder Matters.................................. 17
V. THE CHAPTER 11 CASE...................................................................................... 17
A. Factors Precipitating the Chapter 11 Case........................................................... 17
B. Notice of the Chapter 11 Case....................................................................... 18
C. First Day Administration............................................................................ 18
1. Payment of Employee Claims...................................................................... 19
2. Cash Management................................................................................. 19
3. Trade Claims and Utilities...................................................................... 19
4. Retention of Professionals...................................................................... 19
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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D. Continued Administration Under Chapter 11........................................................... 19
<S> <C> <C> <C>
1. Claims Bar Dates and Objections................................................................. 19
2. Compensation of Professionals................................................................... 21
3. Debtors' Management............................................................................. 21
4. The Committees.................................................................................. 22
5. Executory Contracts and Unexpired Leases........................................................ 23
6. Extensions of Exclusivity....................................................................... 23
7. Automatic Stay Litigation....................................................................... 23
8. Sales of Property............................................................................... 24
9. Preferences..................................................................................... 24
10. Fraudulent Transfers............................................................................ 24
11. Tax Settlement.................................................................................. 24
12. Tenneco Settlement.............................................................................. 25
VI. FINANCIAL STATEMENTS OF THE DEBTORS...................................................................... 26
A. Projected Consolidated Balance Sheet of the Debtors at December 31, 1996............................ 26
Notes to Projected Consolidated December 31, 1996, Unaudited Balance Sheet.......................... 26
B. Unaudited Consolidated Financial Statements for 1995................................................ 27
VII. DISCUSSION OF THE JOINT PLAN............................................................................. 27
A. Purpose of the Joint Plan; General Joint Plan Requirements.......................................... 28
B. Treatment of Classes of Claims and Interests........................................................ 28
1. Summary of Joint Plan........................................................................... 28
2. Orderly Liquidation of Trust Assets............................................................. 29
3. Classes of Claims............................................................................... 29
4. Treatment of Claims............................................................................. 30
C. Treatment of Non-Classified Claims.................................................................. 32
1. Administrative Claims........................................................................... 32
2. Administrative and Priority Tax Claims.......................................................... 33
3. Other Priority Claims........................................................................... 33
4. Preservation of Retiree Benefits................................................................ 33
5. U.S. Trustee Fees............................................................................... 33
D. Provisions Relating to Securities................................................................... 34
1. Distribution Record Date........................................................................ 34
2. Cancellation of Securities...................................................................... 34
3. Tender of Securities............................................................................ 34
4. Unsurrendered Outstanding Securities............................................................ 34
5. Treasury Securities............................................................................. 34
6. Cash-Out Election............................................................................... 35
E. Distributions....................................................................................... 35
1. Delivery........................................................................................ 35
2. Distribution Agent.............................................................................. 35
3. No Distributions Pending Allowance.............................................................. 36
4. Reserve for Certain Distributions............................................................... 36
5. Distributions After Disallowance................................................................ 36
6. Unclaimed Property.............................................................................. 36
7. Treatment of Contingent or Unliquidated Claims.................................................. 36
8. De Minimis Distributions and Fractional Shares.................................................. 36
9. Form of Payments................................................................................ 37
F. Shaw Settlement..................................................................................... 37
1. Background of the Settlement.................................................................... 37
2. The Settlement.................................................................................. 37
3. Release of Shaw Group........................................................................... 37
G. Provisions Regarding BML............................................................................ 37
H. Executory Contracts and Unexpired Leases............................................................ 38
I. Claims for Rejected Executory Contracts and Unexpired Leases........................................ 38
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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J. Stipulation and Agreement with the Indenture Trustee................................................ 38
<S> <C> <C> <C>
K. Tenneco Settlement.................................................................................. 38
L. Property of Estates................................................................................. 38
M. Securities-Related Claims........................................................................... 39
N. Release of Certain Officers......................................................................... 40
VIII. MANAGEMENT OF THE DEBTORS................................................................................ 40
A. Management.......................................................................................... 40
B. Compensation of Officers............................................................................ 40
C. Limitation of Liability............................................................................. 41
IX. THE TRUST................................................................................................ 41
A. Creation of the Trust............................................................................... 41
B. Management of the Trust............................................................................. 41
C. Trust Assets and Liquidation of the Trust Assets.................................................... 42
D. Termination of the Trust............................................................................ 42
E. Trust Interests..................................................................................... 43
F. Records and Reports................................................................................. 43
X. REORGANIZED ICH.......................................................................................... 44
A. Assets of Reorganized ICH........................................................................... 44
B. Proposed Operating Activities....................................................................... 45
C. Charter Amendments.................................................................................. 45
D. Management.......................................................................................... 46
1. Board of Directors.............................................................................. 46
2. Officers........................................................................................ 46
E. Stock Option Plans.................................................................................. 46
XI. ALTERNATIVES TO THE JOINT PLAN........................................................................... 47
A. Analysis of Liquidation under Chapter 7............................................................. 47
B. Alternatives under Chapter 11....................................................................... 48
XII. CERTAIN REGULATORY AND LEGAL MATTERS..................................................................... 48
A. Environmental Matters............................................................................... 48
B. Reporting Obligations Under Federal Securities Laws................................................. 48
C. Legal Proceedings................................................................................... 48
XIII. VOTING PROCEDURES........................................................................................ 50
A. Classes Entitled to Vote on the Joint Plan.......................................................... 50
B. Persons Entitled to Vote on the Joint Plan.......................................................... 50
C. Vote Required for Class Acceptance.................................................................. 51
D. Voting Instructions................................................................................. 51
1. Ballots and Voting.............................................................................. 51
2. Returning Ballots and Voting Deadline........................................................... 51
3. Special Instructions For Holders of Securities.................................................. 52
4. Incomplete or Irregular Ballots................................................................. 53
5. Changing Votes.................................................................................. 53
6. Single Vote for Each Class of Securities........................................................ 53
E. Contested and Unliquidated Claims................................................................... 53
F. Possible Reclassification of Creditors and Interest Holders......................................... 53
XIV. CONFIRMATION OF THE JOINT PLAN........................................................................... 53
A. Confirmation Hearing................................................................................ 53
B. Requirements for Confirmation of the Joint Plan..................................................... 54
1. Best Interests Test............................................................................. 54
2. No Subsequent Liquidation....................................................................... 54
3. Acceptance by Impaired Classes.................................................................. 54
4. Fair and Equitable Test; "Cram-Down"............................................................ 54
C. Conditions Precedent to Confirmation................................................................ 55
D. Effect of Confirmation; Discharge of Debtors; Releases; Settlement and Adjustment of Claims......... 55
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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1. Legal Binding Effect; Discharge of Claims and Interests......................................... 55
<S> <C> <C> <C>
2. Retention and Enforcement of the Debtors' Causes of Action...................................... 55
3. Releases........................................................................................ 56
4. Further Releases and Settlements................................................................ 57
5. Permanent Injunction............................................................................ 57
6. Survival of the Debtors' Corporate Indemnities.................................................. 57
7. Further Assurances and Authorizations........................................................... 57
8. Right to Resolve Claims......................................................................... 57
9. Rights Regarding Books and Records.............................................................. 57
10. Termination of the Committees................................................................... 57
XV. SECURITIES LAW CONSIDERATIONS............................................................................ 58
A. General............................................................................................. 58
B. Limited Restrictions on Transferability............................................................. 58
C. Effects on the Trust................................................................................ 59
D. Effects on Reorganized ICH.......................................................................... 59
XVI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................. 60
A. Generally........................................................................................... 60
B. Federal Income Tax Consequences to the Debtors...................................................... 61
1. Discharge of Indebtedness Income of the Debtors................................................. 61
2. Gain or Loss on Transfer of Assets to the Trust................................................. 61
3. Liquidations and Mergers........................................................................ 61
C. Federal Income Tax Consequences to Holders of Administrative Claims, Priority Claims, ICH Secured
Claims, SWL Secured Claims and Care Secured Claims.................................................. 61
D. Federal Income Tax Consequences of the Trust........................................................ 62
1. Characterization of the Trust................................................................... 62
2. Establishment of the Trust...................................................................... 62
3. Taxation of the Trust and Interest Holders...................................................... 62
4. Tax Reporting................................................................................... 62
E. Federal Income Tax Consequences to the Holders of Allowed ICH Class 5 Claims........................ 62
1. Tax Characterization of Exchanges to Creditors Holding Allowed Class 5 ICH Claims on the
Effective Date.................................................................................. 63
2. Character and Timing of Gain or Loss............................................................ 63
3. Basis and Holding Period of Property............................................................ 63
4. Receipt of Interest............................................................................. 63
5. Miscellaneous................................................................................... 64
F. Tax Consequences to Holders of Interests in ICH..................................................... 64
1. General Rule.................................................................................... 64
2. Tax Consequences to Holders of Existing Preferred Stock......................................... 64
3. Tax Consequences to Holders of Existing Common Stock............................................ 64
G. Importance of Obtaining Professional Assistance..................................................... 64
XVII. OTHER EFFECTIVE DATE TRANSACTIONS........................................................................ 65
A. Termination of Indentures........................................................................... 65
B. Payment of Indenture Trustees' Fees and Expenses.................................................... 65
XVIII. SOURCES OF INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT............................................ 65
XIX. RECOMMENDATION OF THE PLAN PROPONENTS AND SOLICITATION OF ACCEPTANCES.................................... 65
</TABLE>
<TABLE>
<S> <C> <C> <C>
Exhibit A -- Order (i) Approving the Disclosure Statement, (ii) Setting Hearing on Confirmation of the Joint
Plan of Reorganization and (iii) Granting Other Relief Relating to Joint Plan Solicitation and the
Confirmation Hearing.............................................................................. A -1
Exhibit B -- First Amended Joint Plan of Reorganization Under Chapter 11....................................... B -1
Exhibit C -- Unaudited Consolidated Balance Sheets of the Debtors.............................................. C -1
Exhibit D -- ICH Corporation Projected Consolidated Balance Sheet.............................................. D-1
Exhibit E -- ICH Corporation Liquidation Analysis.............................................................. E -1
Exhibit F -- Reorganized ICH Corporation Statements of Financial Condition and Statements of Operations........ F -1
</TABLE>
iv
<PAGE>
FIRST AMENDED DISCLOSURE STATEMENT
WITH RESPECT TO
FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
FOR
I.C.H. CORPORATION
SWL HOLDING CORPORATION
CARE FINANCIAL CORPORATION
INTRODUCTION
This First Amended Disclosure Statement ("Disclosure Statement") and the
accompanying Ballots are being furnished by I.C.H. Corporation ("ICH"), Care
Financial Corporation ("Care") and SWL Holding Corporation ("SWL Holding")
(collectively, the "Debtors"), the Official Committee of Unsecured Creditors
(the "Creditors Committee") and the Official Committee of Equity Security
Holders (the "Equity Committee") (collectively, the "Plan Proponents") to the
Debtors' Claimants and Interest holders pursuant to Section 1125 of the United
States Bankruptcy Code in connection with the solicitation of ballots for the
acceptance of the First Amended Joint Plan of Reorganization (the "Joint Plan")
under Chapter 11 ("Chapter 11") of Title 11 of the United States Code (the
"Bankruptcy Code") filed by the Plan Proponents. Capitalized terms used in this
Disclosure Statement and not defined herein shall have their respective meanings
set forth in the Joint Plan or, if not defined in the Joint Plan, as defined in
the Bankruptcy Code.
On October 10, 1995, the Debtors, whose principal address is 500 North Akard
Street, Dallas, Texas 75201, filed their Voluntary Petitions for Relief under
Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court, Northern
District of Texas, Dallas Division (the "Bankruptcy Court"). On October 10,
1996, the Plan Proponents filed the plan of reorganization which has
subsequently been amended. On November 15, 1996, the Joint Plan was filed with
the Bankruptcy Court. On November 15, 1996, after notice and hearing, the
Bankruptcy Court approved this Disclosure Statement and authorized the Plan
Proponents to solicit votes with respect to the Joint Plan.
The purpose of this Disclosure Statement is to enable those persons whose
Claims against or Interests in the Debtors are Impaired under the Joint Plan to
make an informed decision with respect to the Joint Plan before exercising their
rights to vote to accept or reject the Joint Plan. On November 15, 1996, after
notice and a hearing, this Disclosure Statement was approved by the Bankruptcy
Court as containing information, of a kind and in sufficient detail, to enable
persons whose votes are being solicited to make an informed judgment with
respect to acceptance or rejection of the Joint Plan. A copy of the Bankruptcy
Court's order approving this Disclosure Statement and establishing procedures
for voting on the Joint Plan (the "Approval Order") is attached as EXHIBIT A to
this Disclosure Statement. The Bankruptcy Court's approval of this Disclosure
Statement does not constitute either a guarantee of the accuracy or completeness
of the information contained herein or an endorsement of any of the information
contained in this Disclosure Statement or the Joint Plan.
Claimants and Interest holders should read this Disclosure Statement in its
entirety before voting on the Joint Plan. No solicitation of votes with respect
to the Joint Plan may be made except pursuant to this Disclosure Statement. No
statement or information concerning the Debtors (particularly as to results of
operations or financial condition, or with respect to distributions to be made
under the Joint Plan) or any of the respective assets, properties or businesses
of the Debtors that is given for the purpose of soliciting acceptances or
rejections of the Joint Plan is authorized, other than as set forth in this
Disclosure Statement. Claimants and Interest holders should not rely on any
information relating to the Debtors or their business other than that contained
in this Disclosure Statement and the exhibits and schedules attached hereto. In
the event of any inconsistencies between the provisions of the Joint Plan and
this Disclosure Statement, the provisions of the Joint Plan shall control. A
copy of the Joint Plan is attached hereto as EXHIBIT B to this Disclosure
Statement.
After carefully reviewing this Disclosure Statement and all exhibits and
schedules attached hereto, please indicate your acceptance or rejection of the
Joint Plan by voting in favor of or against the Joint Plan on the enclosed
Ballot. Then, except as provided below, RETURN THE BALLOT TO HILL AND KNOWLTON,
THE SOLICITATION AGENT, IN THE ENCLOSED, POSTAGE-PAID, RETURN ENVELOPE IN
SUFFICIENT TIME TO BE RECEIVED NO LATER THAN 4:00 P.M., EASTERN STANDARD TIME,
ON JANUARY 24, 1997 (THE "VOTING DEADLINE"). IF YOU ARE A HOLDER OF A SECURITY
OF ICH, AND HOLD SUCH SECURITY IN STREET NAME THROUGH A BROKER OR NOMINEE RECORD
HOLDER, YOU MAY RECEIVE INSTRUCTIONS FROM SUCH BROKER OR NOMINEE RECORD HOLDER
TO RETURN YOUR BALLOT DIRECTLY TO SUCH BROKER OR NOMINEE RECORD HOLDER. IN SUCH
EVENT, YOU SHOULD RETURN YOUR BALLOT AS SO INSTRUCTED SUFFICIENTLY IN ADVANCE OF
THE VOTING DEADLINE IN ORDER TO PERMIT THE BROKER OR NOMINEE RECORD HOLDER TO
FORWARD THE RESULTS OF YOUR BALLOT TO HILL AND KNOWLTON PRIOR TO THE VOTING
DEADLINE. See "Voting Procedures--Voting Instructions--Special Instructions For
Holders of Securities."
1
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THE PLAN PROPONENTS BELIEVE THAT ACCEPTANCE OF THE JOINT PLAN IS IN THE BEST
INTERESTS OF ALL CREDITORS AND INTEREST HOLDERS OF THE DEBTORS AND,
CONSEQUENTLY, THE PLAN PROPONENTS URGE ALL CLAIMANTS AND INTEREST HOLDERS TO
VOTE TO ACCEPT THE JOINT PLAN. THE MEMBERS OF THE CREDITORS COMMITTEE AND OF THE
EQUITY COMMITTEE, WHO HOLD, IN THE AGGREGATE, SUBSTANTIAL AMOUNTS OF THE CLAIMS
AGAINST AND INTERESTS IN THE DEBTORS, HAVE INDICATED THAT THEY INTEND TO CAST
THEIR VOTES IN FAVOR OF THE JOINT PLAN.
Any Ballots received after the Voting Deadline will not be counted (unless
otherwise ordered by the Bankruptcy Court). Ballots that are received after the
Voting Deadline may not be used in connection with the Plan Proponents' request
for confirmation of the Joint Plan or any modification thereof, except to the
extent allowed by the Bankruptcy Court. See "Voting Procedures--Voting
Instructions--Returning Ballots and Voting Deadline."
The statements and information about the Debtors and the historical
financial information of the Debtors and information regarding Claims or
Interests contained herein have been prepared from documents and information
prepared by the Debtors or provided to the Debtors' professionals by the Debtors
and exclude contingent and unliquidated liabilities of the Debtors. Neither the
Equity Committee nor the Creditors Committee nor their respective professionals
assume any responsibility for the accuracy of the information concerning the
Debtors' historical operations, business, or financial information contained
herein. Similarly, all financial information, statements or other information
concerning the future business operations or financial projections regarding
Reorganized ICH have been prepared by the Equity Committee or its professionals.
Neither the Debtors nor the Creditors Committee, nor their respective
professionals assume any responsibility for any of the information regarding the
business plan or projected financial condition of Reorganized ICH.
The statements contained in this Disclosure Statement are made as of the
date hereof unless another time is specified herein, and neither delivery of
this Disclosure Statement nor any exercise of rights granted in connection with
the Joint Plan shall, under any circumstances, create an implication that there
has been no change in the information set forth herein since the date of this
Disclosure Statement.
This Disclosure Statement may not be relied on for any purpose other than to
determine whether to vote in favor of or against the Joint Plan (and, in the
case of holders of ICH Common Stock and ICH Preferred Stock, whether to elect
the cash-out option discussed herein), and nothing contained herein shall
constitute an admission of any fact or liability by any party, or be admissible
in any proceeding involving the Debtors or any other party, or be deemed
conclusive evidence of the tax or other legal effects of the reorganization of
the Debtors on holders of Claims against or Interests in the Debtors. Certain of
the information contained in this Disclosure Statement, by its nature, is
forward looking, contains estimates and assumptions which may prove to be
inaccurate, and contains projections which may prove to be wrong, or which may
be materially different from actual future results. See "Certain Risk Factors to
be Considered," "Financial Statements of the Debtors" and "Discussion of the
Joint Plan--Provisions Relating to Securities--Cash-Out Election."
Each Claimant and Interest holder should consult its individual attorney and
accountant as to the effect of the Joint Plan on such individual Claimant or
Interest holder.
IT IS OF THE UTMOST IMPORTANCE TO THE PLAN PROPONENTS THAT YOU VOTE PROMPTLY
TO ACCEPT THE JOINT PLAN BY COMPLETING AND SIGNING THE BALLOT ENCLOSED HEREWITH
AND RETURNING IT TO HILL AND KNOWLTON, THE SOLICITATION AGENT, AT THE ADDRESS
SET FORTH IN THE BALLOT INSTRUCTIONS THAT ACCOMPANY SUCH BALLOT OR RETURNING THE
BALLOT AS OTHERWISE INSTRUCTED BY A NOMINEE RECORD HOLDER OF A SECURITY. SHOULD
YOU HAVE ANY QUESTIONS REGARDING THE VOTING PROCEDURES, YOUR BALLOT, OR THE
BALLOT INSTRUCTIONS, OR IF YOUR BALLOT IS DAMAGED OR LOST, CALL HILL AND
KNOWLTON AT THE TELEPHONE NUMBER SPECIFIED ON YOUR BALLOT INSTRUCTIONS OR (212)
855-0555.
The Approval Order fixes January 31, 1997, at 9:00 Central Standard Time, in
the Courtroom of the Honorable Robert C. McGuire, Room 14B5, 14th Floor, U.S.
Courthouse, 1100 Commerce Street, Dallas, Texas 75242-1496, as the date, time,
and place for the hearing on Confirmation of the Joint Plan, and fixes January
17, 1997, as the date by which all objections to Confirmation of the Joint Plan
must be filed with the Bankruptcy Court and received by the respective counsel
for each of the Debtors, the Creditors Committee, the Equity Committee and
certain other persons identified in the Approval Order. See EXHIBIT A to this
Disclosure Statement. The Plan Proponents will request Confirmation of the Joint
Plan at the Confirmation Hearing.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN.
The date of this Disclosure Statement is November 15, 1996.
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1. SUMMARY
THE FOLLOWING SUMMARY OF THIS DISCLOSURE STATEMENT AND THE JOINT PLAN IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE
IN THIS DISCLOSURE STATEMENT AND THE JOINT PLAN. THE FOLLOWING SUMMARY OF THIS
DISCLOSURE STATEMENT DOES NOT FULLY DESCRIBE ALL MATERIAL TERMS OF THE JOINT
PLAN. A REVIEW OF THIS SUMMARY OF THE DISCLOSURE STATEMENT DOES NOT SERVE AS A
SUBSTITUTE FOR A CAREFUL REVIEW OF THE ENTIRE DISCLOSURE STATEMENT AND JOINT
PLAN. YOU ARE URGED TO STUDY THIS DISCLOSURE STATEMENT AND THE JOINT PLAN IN
FULL AND CONSULT WITH YOUR LEGAL AND FINANCIAL ADVISORS ABOUT THE JOINT PLAN AND
ITS IMPACT UPON YOUR LEGAL RIGHTS.
A. BUSINESS OF DEBTORS
ICH, a Delaware corporation formerly known as Southwestern Life Corporation,
is an insurance holding company that formerly marketed through its insurance
subsidiaries a broad range of life insurance, accident insurance, health
insurance, and annuity products to individuals and groups in more than forty
states and the District of Columbia. ICH also owns certain non-insurance
subsidiaries, including SWL Holding and Care.
ICH was built on a strategy of pursuing growth through leveraged
acquisitions. As of December 31, 1989, as a result of such acquisitions, ICH had
outstanding debt of approximately $1.18 billion. Between 1989 and the Petition
Date, ICH sold a number of subsidiaries in transactions designed to reduce
leverage. By year-end 1994, ICH had reduced the amount of its debt to $369
million. Over that same five-year period, ICH's total consolidated assets
declined from $8.6 billion to $3.1 billion.
Historically, the primary sources of liquidity for ICH were dividends from
its insurance subsidiaries and earnings on invested assets. However, by late
1994, ICH's primary insurance subsidiaries had agreed with their respective
state insurance regulatory authorities that they would not pay dividends without
prior regulatory approval. Therefore, sources of cash in 1995 were limited to a
moderate amount of investment income, dividends from non-insurance subsidiaries
and amounts generated from the sale of assets.
As a result of its limited sources of cash, ICH projected a significant cash
deficiency for 1995, primarily due to the following payments coming due in 1995:
(1) approximately $60 million of sinking fund payments and principal payments
due to unaffiliated third parties under ICH's 11 1/4% Senior Subordinated Notes
due 1996 (the "1996 Notes"), (2) $47 million in interest requirements primarily
related to the 1996 Notes and the 11 1/4% Senior Subordinated Notes due 2003
(together with the 1996 Notes, the "Notes") and (3) a $68 million settlement of
an IRS tax audit of ICH's insurance subsidiaries for the years 1986-1989 (the
final settlement increased to $71.6 million with the addition of accrued
interest and taxes due for ICH).
On January 27, 1995, ICH initiated a long-range process to address its
financial problems, including suspension of dividend payments on its Convertible
Exchangeable $1.75 Series 1986-A Preferred Stock (the "Preferred Stock"), the
hiring of Donaldson, Lufkin and Jenrette Securities Corporation ("DLJ") as a
financial advisor to assist ICH in developing a plan of capital restructuring,
and a review of certain accounting policies, including primarily the accounting
treatment for intangible assets.
After consideration of alternative courses of action, and in consultation
with DLJ, ICH determined that it was advisable and prudent to seek to sell some
or all of its core insurance subsidiaries in a manner designed to avoid a
decrease in their value resulting from ICH's financial difficulties and to
produce the maximum value for its creditors and stockholders. DLJ assisted ICH's
management in developing a number of sale transaction alternatives, including
the identification of the insurance subsidiaries to be sold and retained and
potential transaction structures. In addition, DLJ prepared offering materials
containing selected financial information relating to ICH and its subsidiaries,
identified and contacted potentially interested parties regarding the purchase
of some or all of the insurance subsidiaries, assisted interested parties in
conducting due diligence investigations, and advised and assisted ICH in
negotiating with the interested parties and in evaluating proposals received.
On October 9, 1995, the Debtors entered into a definitive agreement (the
"Shinnecock Agreement") to sell certain of their insurance subsidiaries,
consisting of Southwestern Life Insurance Company ("Southwestern Life"), Union
Bankers Insurance Company ("Union Bankers"), Constitution Life Insurance Company
("Constitution"), and Marquette National Life Insurance Company ("Marquette"),
to Shinnecock Holdings Inc. ("Shinnecock"), and to sell to an affiliate of
Shinnecock substantially all of the assets of Facilities Management
Installation, Inc. ("FMI"), a subsidiary of ICH that provided management, data
processing and other support services to ICH's insurance subsidiaries (the
"Proposed Sales Transaction"). Net proceeds from the Proposed Sales Transaction
were estimated to be $202 million cash, subject to adjustment under certain
circumstances. The consummation of the Proposed Sales Transaction was subject
to, among other conditions, receipt of regulatory and other approvals. The
Shinnecock Agreement contained provisions for presenting the proposed sale to
the Bankruptcy Court in a Chapter 11 Case to be commenced by the Debtors, and,
at the insistence of the Debtors, for the establishment of a competitive sales
procedure to be conducted as part of such Chapter 11 Case.
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<PAGE>
CHAPTER 11 PROCEEDINGS. On October 10, 1995 (the "Petition Date"), the
Debtors and FMI filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code. Since the Petition Date, the Debtors and FMI have continued to
operate and manage their assets and businesses as debtors in possession as
authorized by the Bankruptcy Code. Seven of ICH's eight insurance subsidiaries
have now been sold and, through a reinsurance transaction, all of the remaining
health insurance business of the remaining insurance subsidiary has also been
sold, as discussed below. Additionally, the Debtors' activities have included
complying with reporting and information requirements under Chapter 11, meeting
with the Creditors Committee and the Equity Committee (collectively, the
"Committees") appointed by the United States Trustee ("U.S. Trustee"),
addressing various business and legal issues and assessing Chapter 11
reorganization strategies.
Following the filing of ICH's Chapter 11 petition, the American Stock
Exchange and Chicago Stock Exchange suspended all trading in the listed
securities of ICH. All such securities were delisted from the American Stock
Exchange and Chicago Stock Exchange on November 15, 1995, and February 9, 1996,
respectively. See "Business of the Debtors-- Market for ICH's Equity Securities
and Related Stockholder Matters."
SALE OF PRINCIPAL INSURANCE SUBSIDIARIES. On the Petition Date, ICH
requested expedited approval from the Bankruptcy Court for an orderly and
competitive sales procedure and for approval of the Proposed Sales Transaction.
On October 20, 1995, the Bankruptcy Court approved ICH's proposed procedure,
with certain modifications, by which interested parties could submit offers to
compete with the offer of Shinnecock for the Proposed Sales Transaction. The
Bankruptcy Court scheduled a hearing beginning November 28, 1995 (the "Sale
Approval Hearing"), to consider additional offers and approval of the Proposed
Sales Transaction. In accordance with the sales procedure order, PennCorp
Financial Group, Inc. ("PennCorp"), Southwestern Financial Corporation ("SFC"),
a corporation newly formed by PennCorp and Knightsbridge Capital Fund I, L.P
("KCF"), and Southwestern Financial Services Corporation ("SFSC", and together
with PennCorp and SFC, the "Bidders") presented a competing offer. During the
days prior to the Sale Approval Hearing, the Debtors received several improved
bids from each of Shinnecock and the Bidders. At the Sale Approval Hearing, a
final round of bidding occurred, resulting in the Debtors' acceptance of
Bidders' final offer of $260 million, consisting of $210 million of cash and $50
million of securities (the "PennCorp Sales Transaction"). As part of the
PennCorp Sales Transaction, the Bidders also agreed to provide ICH the right
(the "KCF Put"), exercisable on or before June 15, 1996, to sell to KCF the four
remaining insurance subsidiaries that were not included in the PennCorp Sales
Transaction--Bankers Multiple Line Insurance Company ("BML") and each of its
subsidiaries, Philadelphia American Life Insurance Company ("Philadelphia
American"), Modern American Life Insurance Company ("Modern American") and
Western Pioneer Life Insurance Company ("Western," and together with BML,
Philadelphia American, and Modern American, the "Remaining Insurance
Subsidiaries")--for an aggregate purchase price of $50 million, consisting of
$25 million of cash and $25 million of KCF notes. The PennCorp Sales Transaction
was approved by the Bankruptcy Court on December 5, 1995, and was completed in
December 1995.
SALE OF REMAINING INSURANCE SUBSIDIARIES. Following the closing of the
PennCorp Sales Transaction, ICH engaged in discussions and negotiations with
potential purchasers regarding the disposition of the Remaining Insurance
Subsidiaries.
On June 28, 1996, BML, a wholly-owned subsidiary of ICH, consummated the
sale of Modern American and Western to Reassure America Life Insurance Company
("Reassure America"), an indirect subsidiary of Life Reassurance Corporation.
Net proceeds to BML from the sale of Modern American and Western were
approximately $27 million, including the estimated value of certain real estate
and mineral interests distributed to BML by Modern American and Western in
connection with the sale. BML also received an assignment of any federal income
tax refunds payable to Modern American for periods prior to January 1, 1996.
Also on June 28, 1996, BML consummated the sale of Philadelphia American to
New Era Life Insurance Company, a wholly-owned subsidiary of New Era
Enterprises, Inc. ("New Era"). BML utilized approximately $6 million of the
proceeds from the sale to purchase certain securities, real estate, limited
partnership interests and reinsurance recoverables from Philadelphia American at
the closing, as required under the purchase agreement with New Era. ICH
estimates the net proceeds from the sale of Philadelphia American, the
liquidation of the securities, real estate, limited partnership interests
purchased by BML from Philadelphia American and the settlement of reinsurance
recoverables assigned to BML by Philadelphia American will total approximately
$11 million.
BML has also sold, through a reinsurance transaction effective as of March
31, 1996, all of its remaining health insurance business and related agent debit
balance for $5.75 million cash.
After taking into account the current assets of BML, including the proceeds
from the sales of Modern American, Western, Philadelphia American and the health
insurance business of BML, ICH expects ultimately to realize approximately $89
million from BML, net of reserves for pending policyholder litigation and
contingent liabilities due under indemnification agreements related to the sales
of Modern American, Western and Philadelphia American, as compared to the $50
million offered under the KCF Put. See "The Trust--Trust Assets and Liquidation
of the Trust Assets." As a result, the KCF Put was not exercised.
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<PAGE>
TAX SETTLEMENT. On August 23, 1996, a Joint Motion for Approval of
Agreement for Compromise and Settlement of Tax Claims and Certain Tax-Related
Liabilities of the Debtors (the "Tax Settlement Motion") was filed in the
Bankruptcy Court by ICH, SWL Holding, Care, FMI, Southwestern Life,
Constitution, Union Bankers, Marquette, BML, SFC, PennCorp, and the United
States of America, on behalf of the IRS (collectively, the "Movants").
Consolidated National Corporation ("CNC"), Robert T. Shaw ("Shaw"), C. Fred Rice
("Rice" and together with CNC and Shaw, the "Shaw Group"), and Edward J.
Carlisle ("Carlisle") filed with the Bankruptcy Court their statement supporting
the relief requested in the Tax Settlement Motion and an undertaking to perform
their portion of the settlement.
On September 13, 1996, the Court approved the Tax Settlement Motion and
authorized the Debtors, on behalf of themselves and their consolidated
subsidiaries, to consummate the Tax Settlement Motion. The Tax Settlement Motion
resolved all federal income tax liabilities of the Debtors for periods prior to
January 1, 1996, with no taxes due, and entitles the Debtors to receive a tax
refund of $3.4 million from the IRS and a total payment of $550,000 from the
Shaw Group and Carlisle. As part of the Tax Settlement Motion, the Debtors have
waived any tax attributes (but not tax basis in assets) arising on or before
January 1, 1996. See "The Chapter 11 Case--Continued Administration Under
Chapter 11--Tax Settlement" and EXHIBIT D to this Disclosure Statement.
B. JOINT PLAN IMPLEMENTATION
The Joint Plan was developed as an alternative to the more severe measures
available to the Debtors to resolve their financial distress, including
conversion of the Chapter 11 Case to a case under Chapter 7 of the Bankruptcy
Code. The Joint Plan was prepared after extensive negotiations among the
Debtors, the Creditors Committee, the Equity Committee, and the Shaw Group, and
incorporates a number of compromises and settlements. The Plan Proponents
believe the allocation and distribution of the Debtors' property in the manner
set forth in the Joint Plan will provide to the Claimants and the Interest
holders distributions equal to or greater than the distributions that such
persons would receive if the Debtors were liquidated under Chapter 7 of the
Bankruptcy Code and, therefore, permit the maximum recovery possible for such
persons. Set forth below is a brief description of the proposed treatment of
Claimants and Interest holders under the Joint Plan.
FOR THE CLAIMANTS: Under the Joint Plan, substantially all of the assets of
the Debtors' Estates will be transferred to a liquidating trust (the "Trust")
for the benefit of creditors. The Trust will be formed to liquidate the assets
of the Debtors' Estates transferred to it and distribute the proceeds thereof to
the Claimants as described under "Discussion of the Joint Plan--Treatment of
Classes of Claims and Interests." The Trust will be established pursuant to, and
will be governed by, a trust agreement (the "Trust Agreement"), a preliminary
form of which is attached as Exhibit A to the Joint Plan and the final form of
which will be filed with the Bankruptcy Court prior to the Confirmation Hearing.
For a discussion of the assets of the Debtors' Estates that will be transferred
to the Trust, see "The Trust--Trust Assets and Liquidation of the Trust Assets."
FOR THE INTEREST HOLDERS: Reorganized ICH will retain certain designated
assets, receive a $500,000 contribution pursuant to a settlement with the Shaw
Group, and exit Chapter 11 as a reorganized corporation owned by its existing
preferred and common stockholders. Pursuant to the Joint Plan, existing shares
of Preferred Stock and Common Stock will be cancelled, and Reorganized ICH will
issue new common stock to members of ICH Classes 6 and 7 following the Effective
Date. See "Summary--Classes and Treatment by Class" and "Discussion of the Joint
Plan--Treatment of Classes of Claims and Interests." For a discussion of the
assets of the Debtors' Estates that will be retained by Reorganized ICH, see
"Reorganized ICH--Assets of Reorganized ICH."
CASH-OUT OPTION FOR CERTAIN HOLDERS OF ICH PREFERRED STOCK AND ICH COMMON
STOCK. Each holder of ICH's outstanding Preferred Stock who holds between 14
and 650 shares of Preferred Stock on the Effective Date (which date will also be
the record date for distributions under the Joint Plan to holders of the
Securities) may elect to receive a single cash payment of $.36 per share of
Preferred Stock in lieu of receiving shares of Reorganized ICH Common Stock. In
addition, any holder of ICH's outstanding Preferred Stock who holds more than
650 shares of Preferred Stock may elect to reduce its Class 6 Interest to 650
shares of Preferred Stock and receive a single cash payment of $234 ($.36 X 650
shares) in lieu of receiving shares of Reorganized ICH Common Stock.
Each holder of ICH's outstanding Common Stock who holds between 101 and
5,000 shares of Common Stock on the Effective Date may elect to receive a single
cash payment of $.05 per share of Common Stock in lieu of receiving shares of
Reorganized ICH Common Stock. In addition, any holder of ICH's outstanding
Common Stock who holds more than 5,000 shares of Common Stock may agree to
reduce its ICH Class 7 Interest to 5,000 shares of Common Stock and receive a
single cash payment of $250 ($.05 per share X 5,000 shares) in lieu of receiving
shares of Reorganized ICH Common Stock.
Letters of Transmittal distributed to holders of Preferred Stock and Common
Stock will contain a provision allowing such holders to make the election
described above, and will be accompanied by updated information regarding the
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<PAGE>
anticipated business operations of Reorganized ICH to the extent any material
developments with respect thereto have occurred since the date of this
Disclosure Statement.
The per share cash-out allocations referred to above represent approximately
50% of the expected per share book value of Reorganized ICH's Common Stock
immediately following the Effective Date. If a cash-out election as described
herein is made with respect to any portion of an Interest within ICH Class
6-Preferred Stock or ICH Class 7-Common Stock, the election will apply to such
holder's entire Interest within such Class. See "Discussion of the Joint Plan--
Treatment of Classes of Claims and Interests--Treatment of Claims" and
"Discussion of the Joint Plan--Provisions Relating to Securities--Cash-Out
Election."
C. CLASSES AND TREATMENT BY CLASS.
The following table lists the Classes of Claims and Interests designated
under the Joint Plan, the types of Claims or Interests contained in each Class,
the estimated amount of Claims within each Class of Claims and the proposed
treatment of the Claims or Interests under the Joint Plan.
<TABLE>
<CAPTION>
ESTIMATED AMOUNT
OF CLAIMS PROPOSED
CLASS CLAIMS OR INTERESTS (IN THOUSANDS) TREATMENT
- -------------------------- ------------------------------------------------- ----------------- ---------------------------------
<S> <C> <C> <C>
Post-petition Liabilities $ 5,216 Paid in full
Priority Tax Claims 69 Paid in full
Retiree Benefit Claims 5,565 Paid in full
ICH Class 1 Secured Claim of Ozark 368 Paid in full
ICH Class 2 Secured Claim of Sayyah 27,000(1) Subject to Offset
ICH Class 3 Claim of Tenneco 21,952(2) Subject to settlement/offset
ICH Class 4 Any other Secured Claims -0- Paid in full or delivery of
collateral
ICH Class 5 All general unsecured claims, including Claims of 380,085 Prorated distributions to total
Holders of Notes(4) $.9603 per dollar(3)
ICH Class 6 Holders of Preferred Stock and Securities-Related N/A Retain equity ownership of
Claims related to Preferred Stock(5) approximately 55% of
Reorganized ICH
ICH Class 7 Holders of Common Stock and Securities-Related N/A Retain equity ownership of
Claims related to Common Stock(5) approximately 45% of
Reorganized ICH
SWL Holding Class 1 Holders of Secured Claims Against SWL Holding -0- Paid in full or delivery of
collateral
SWL Holding Class 2 Holders of General Unsecured Claims Against SWL -0- Paid in full
Holding
SWL Holding Class 3 Holders of SWL Holding Common Stock N/A Retained by Reorganized ICH(6)
Care Class 1 Holders of Secured Claims Against Care -0- Paid in full or delivery of
collateral
Care Class 2 Holders of General Unsecured Claims Against Care -0- Paid in full
Care Class 3 Holders of Care Common Stock N/A Retained by Reorganized ICH(6)
</TABLE>
- ------------------------------
(1) The Secured Claim of Sayyah is subject to offset against a debt owed by
Sayyah to ICH.
(2) The Claim of Tenneco is subject to offset against a debt owed by Tenneco to
ICH, and is subject to compromise through a negotiated settlement between
Tenneco and ICH. See "Discussion of the Joint Plan--Tenneco Settlement."
(3) The Allowed Claims of Note holders include principal and accrued interest to
the Petition Date. The estimated distribution to Note holders against the
principal amount of the Notes, EXCLUDING ACCRUED INTEREST, is estimated to
be $.9990 per dollar.
(4) Securities-Related Claims related to Notes, if any, will receive
distributions only to the extent that they are Allowed and in accordance
with the provisions of the Joint Plan. See "Discussion of the Joint
Plan--Securities-Related Claims."
(5) Securities-Related Claims related to Preferred Stock and Common Stock, if
any, will receive distributions only to the extent that they are Allowed and
in accordance with the provisions of the Joint Plan.
(6) After such Debtors transfer their assets to the Trust and to Reorganized
ICH, as applicable, pursuant to the Joint Plan.
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The estimated amounts for Claims set out above for the various Classes of
ICH, SWL Holding and Care Claims are based on the Debtors' financial statements
and the schedules filed in the Chapter 11 Case, and do not include contingent
and unliquidated claims. For a more detailed discussion of the classification of
Claims and Interests and their treatment, see "Discussion of the Joint
Plan--Treatment of Classes of Claims and Interests" and EXHIBIT D to this
Disclosure Statement.
The projected recovery set out above with respect to ICH Class 5 Claims is
based on the estimated amounts for Claims identified above and the estimated
value of assets available to the Trust. The Equity Committee assumes no
responsibility for that projection. The projected recovery is forward-looking,
and is based on assumptions described in "Financial Statements of the Debtors."
The actual recovery may be more or less than, and may differ materially from,
the amounts set forth above. For additional information regarding the assets
that will be available to the Trust and certain factors that may affect
recoveries from the Trust, see "Certain Risk Factors to be Considered--Factors
Relating to Chapter 11 and the Joint Plan" and "--Factors Relating to the
Liquidating Trust," "Business of Debtors--Assets," "The Trust--Trust Assets and
Liquidation of the Trust Assets" and EXHIBIT D to this Disclosure Statement.
The amounts ultimately realized by holders of Interests in ICH Classes 6 and
7 will depend on the future business operations of Reorganized ICH or, if
Reorganized ICH does not develop further business operations, on the amounts
realized by Reorganized ICH for the assets retained by Reorganized ICH, as well
as the resolutions of Securities-Related Claims. See "Certain Risk Factors to be
Considered--Factors Relating to Reorganized ICH," "Discussion of the Joint
Plan--Securities-Related Claims" and "Reorganized ICH."
D. RISK FACTORS
The Chapter 11 Case and the Joint Plan are subject to certain risks relating
to the Debtors, bankruptcy law, the business of Reorganized ICH, and the overall
economy in general. See "Certain Risk Factors to be Considered."
E. LEGALLY BINDING EFFECT OF JOINT PLAN CONFIRMATION
If confirmed, the provisions of the Joint Plan will (1) bind all holders of
Claims and Interests, whether or not they accept the Joint Plan and (2)
discharge the Debtors from all debts that arose before the Confirmation Date,
except as otherwise provided in the Joint Plan.
The distributions provided for in the Joint Plan will be in exchange for and
in complete satisfaction, discharge, and release of all Claims against and
Interests in the Debtors or any of their assets or properties, including any
Claim or Interest arising after the Petition Date and before the Confirmation
Date. Following confirmation of the Joint Plan, all holders of Claims or
Interests will be precluded from asserting any claims against the Debtors or
their assets or properties or other interests in the Debtors based on any
transaction or other activity of any kind that occurred before the Confirmation
Date. Furthermore, pursuant to the Joint Plan, certain persons will be released
from claims which the Debtors may have against them. See "Confirmation of the
Joint Plan--Effect of Confirmation; Discharge of Debtors; Releases; Settlement
and Adjustment Claims--Legal Binding Effect; Discharge of Claims."
F. VOTING PROCEDURES AND REQUIREMENTS
1. PERSONS ENTITLED TO VOTE
For purposes of Joint Plan solicitation, all Classes of ICH Claims and
Interests are deemed to be impaired, as that term is defined in Section 1124 of
the Bankruptcy Code, and, therefore, entitled to vote to accept or reject the
Joint Plan. All Classes of Claims of SWL Holding and Care are unimpaired and,
therefore, are not entitled to vote on the Joint Plan. Any holder of an Allowed
Claim against or Allowed Interest in ICH at the close of business on November
15, 1996 (the "Voting Record Date"), is entitled to vote to accept or reject the
Joint Plan (except as discussed below). Any holder of a Claim or Interest as to
which an objection has been filed is not entitled to vote unless the Bankruptcy
Court, upon application by such holder, temporarily allows the Claim or Interest
in an amount that it deems proper for the purpose of voting on the Joint Plan.
See "Voting Procedures--Contested and Unliquidated Claims."
IF YOU ARE A MEMBER OF A CLASS ENTITLED TO VOTE ON THE JOINT PLAN AND DID
NOT RECEIVE A BALLOT FOR SUCH CLASS, OR IF A BALLOT IS DAMAGED OR LOST, OR IF
YOU HAVE ANY QUESTIONS REGARDING THE PROCEDURES FOR VOTING ON THE JOINT PLAN,
PLEASE CONTACT:
Hill and Knowlton, Inc.
466 Lexington Avenue, 3rd Floor
New York, NY 10017
Telephone: (212) 885-0555
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<PAGE>
2. VOTE REQUIRED FOR CLASS ACCEPTANCE AND CONFIRMATION
As a condition to confirmation, the Bankruptcy Code requires acceptance of a
plan of reorganization by all impaired classes, except as discussed below. As
described above, and for purposes of Joint Plan solicitation, all ICH Classes
are deemed to be impaired and are entitled to vote on the Joint Plan, and all
Classes of Claims of SWL Holding and Care are unimpaired. An Impaired Class of
Claims will be determined to have accepted the Joint Plan if the holders of
Allowed Claims in the class casting votes in favor of the Joint Plan (1) hold at
least two-thirds of the total amount of the Allowed Claims of the holders of
such Class who vote and (2) constitute more than one-half in number of all
holders of Allowed Claims in such Class who vote on the Joint Plan. A Class of
Interests will be determined to have accepted the Joint Plan if the holders of
Allowed Interests in the Class casting votes in favor of the Joint Plan
constitute at least two-thirds of all Allowed Interests of the holders of such
Class who vote on the Joint Plan. A vote by any holder of a Claim or Interest
may be disregarded if the Bankruptcy Court determines that it was not solicited
or procured in good faith or in accordance with the provisions of the Bankruptcy
Code.
Notwithstanding the requirement of class acceptance, a plan may be confirmed
even if one or more impaired classes does not accept the plan, as long as at
least one impaired class of claims has accepted the plan and the Bankruptcy
Court determines that the plan does not discriminate unfairly against and is
fair and equitable, with respect to each class that is impaired and has not
accepted the plan. See "Summary--Confirmation of the Joint Plan" and
"Confirmation of the Joint Plan--Requirements for Confirmation of the Joint
Plan."
3. VOTING INSTRUCTIONS
A Ballot to be used to vote for or against the Joint Plan, together with a
postage-paid return envelope, is enclosed with this Disclosure Statement. BEFORE
COMPLETING YOUR BALLOT, PLEASE READ CAREFULLY THE INSTRUCTIONS THEREON.
As indicated above, the Bankruptcy Court has directed that, in order to be
counted for voting purposes, Ballots must be received by Hill and Knowlton, no
later than 4:00 p.m., Eastern Standard Time, on January 24, 1997, at the
following address:
IF RETURNED BY MAIL:
Hill and Knowlton, Inc.
Attn: ICH Ballot Tabulation Group
P. O. Box 5508
Grand Central Station
New York, New York 10164-0825
IF RETURNED BY HAND OR OVERNIGHT COURIER:
Hill and Knowlton, Inc.
Attn: ICH Ballot Tabulation Group
466 Lexington Avenue, 3rd Floor
New York, New York 10017
EXCEPT AS OTHERWISE PROVIDED HEREIN, YOUR BALLOT WILL NOT BE COUNTED IF IT IS
RECEIVED BY HILL AND KNOWLTON AFTER 4:00 P.M., EASTERN STANDARD TIME, ON JANUARY
24, 1997. You may be contacted by the Debtors or the Solicitation Agent with
regard to your vote on the Joint Plan. Votes cast by holders of Claims and
Interests will be irrevocable after the Voting Deadline, unless the Bankruptcy
Court, after application, notice and hearing, permits a change of vote.
Bank and broker nominees of holders of Securities will transmit a copy of
this Disclosure Statement to each Beneficial Holder of Securities held in the
name of such nominees, together with a request for voting instructions or
instructions to forward Ballots directly to Hill and Knowlton. BENEFICIAL
HOLDERS OF SUCH SECURITIES SHOULD FOLLOW THE INSTRUCTIONS OF THEIR BANKS OR
BROKERAGE FIRMS WITH RESPECT TO THE RETURN OF BALLOTS OR REQUESTS FOR VOTING
INSTRUCTIONS. Record Holders authorized to vote on behalf of any Beneficial
Holders will be required to follow certain procedures including those set forth
in the Approval Order attached as EXHIBIT A to this Disclosure Statement. See
"Voting Procedures--Voting Instructions--Special Instructions for Holders of
Securities."
4. ASSISTANCE IN VOTING
If you require assistance in voting, you should contact Hill and Knowlton at
(212) 885-0555.
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<PAGE>
G. CONFIRMATION OF THE JOINT PLAN
In order for the Joint Plan to be confirmed, the Bankruptcy Code requires
that the Bankruptcy Court determine that the Joint Plan complies with the
technical requirements of Chapter 11 of the Bankruptcy Code and that the
Debtors' disclosures concerning the Joint Plan have been adequate and have
included information concerning all payments made or promised by the Debtors in
connection with the Joint Plan and the Chapter 11 Case.
Among the requirements for confirmation set forth in the Bankruptcy Code as
applicable to the Joint Plan are the following: (i) the Joint Plan must be
accepted by the requisite vote of holders and amounts of Claims in at least one
Class, (ii) the Joint Plan must be feasible (I.E., there is a reasonable
possibility that the obligations under the Joint Plan will be performed without
need for further financial reorganization), (iii) with respect to each Class
that does not accept the Joint Plan, the Bankruptcy Court determines (a) that
the Joint Plan does not discriminate unfairly against, and is fair and equitable
with respect to each holder of a Claim or Interest in such Class, and (b) that
each holder of an Allowed Claim against or Allowed Interest in the Debtors
within such Class will receive at least as much pursuant to the Joint Plan as
such holder would receive in a liquidation under Chapter 7 of the Bankruptcy
Code. Even if all Classes accept the Joint Plan by the requisite vote, the
Bankruptcy Court must make independent findings respecting the conformity of the
Joint Plan with the requirements of the Bankruptcy Code before confirming the
Joint Plan. See "Confirmation of the Joint Plan-- Requirements for Confirmation
of the Joint Plan."
As described above, for purposes of Joint Plan solicitation all ICH Classes
are deemed to be impaired and are entitled to vote on the Joint Plan, and all
Classes of Claims of SWL Holding and Care are unimpaired and will be deemed to
accept the Joint Plan. Accordingly, provided that any ICH Class other than ICH
Classes 6 or 7 accepts the Joint Plan, the Joint Plan may be confirmed if the
Bankruptcy Court determines that the Joint Plan is fair and equitable with
respect to, and does not discriminate unfairly against, the holders of Allowed
Claims or Allowed Interests within each Class that rejects the Plan. See
"Confirmation of the Joint Plan--Requirements for Confirmation of the Joint
Plan." If the Plan is confirmed, all holders of Claims against and Interests in
the Debtors, whether voting or non-voting and, if voting, whether accepting or
rejecting the Joint Plan, will be bound by the terms of the Joint Plan.
H. LIQUIDATING TRUST
The Joint Plan provides that the assets of the Debtors, except the assets to
be retained by Reorganized ICH, will be transferred on the Effective Date to the
Trust for liquidation and distribution to ICH Class 5 Claimants, subsequent to
distributions to administrative and priority Classes of Claims under the Joint
Plan. The Trust Agreement will govern the Trust and provide for a Managing
Trustee who will manage the Trust subject to approval on certain issues by three
supervisory trustees. The form of Trust Agreement included as Exhibit A to the
Joint Plan may be amended prior to the Confirmation Hearing. Therefore,
provisions of the Trust Agreement may be subject to significant changes prior to
Confirmation. Beneficial interests in the Trust ("Trust Interests") are expected
to be transferrable upon the issuance of Trust Certificates. The Managing
Trustee will maintain a register of Trust Interests. The ability to transfer
Trust Interests and the manner in which Trust Interests may be transferred may
be affected by certain securities laws issues as discussed further in
"Securities Law Considerations." The Managing Trustee is expected to be Susan A.
Brown, presently Co-Chief Executive Officer and a Director of the Debtors. The
initial supervisory trustees are expected to be persons who currently serve as
members of the Creditors Committee. Claimants are referred to a discussion of
certain risk factors related to the Trust in "Certain Risk Factors to be
Considered--Factors Relating to the Liquidating Trust" and to "The Trust" for
additional information on the Trust and the Trust Assets.
I. REORGANIZED ICH
The Joint Plan provides that, following the Effective Date, ICH will emerge
from Chapter 11 as a reorganized corporation (referred to herein as "Reorganized
ICH"), owned by the existing holders of Preferred and Common Stock. See
"Discussion of the Joint Plan--Treatment of Classes of Claims and Interests."
Reorganized ICH will own the Retained Assets, free and clear of any and all
liens, claims and encumbrances. Pursuant to the terms of the Joint Plan,
immediately following the Effective Date the Retained Assets of Reorganized ICH
likely will consist principally of cash, Perry Park, the corporate shell of BML,
a property and casualty insurer licensed in fifty states (the "BML Shell"), and
certain retained causes of action. The Initial Board of Reorganized ICH (which
will consist of persons who currently serve as members of the Equity Committee)
will direct the business activities and investments of Reorganized ICH following
the Effective Date. Because Reorganized ICH's only operating asset following the
Effective Date may well be Perry Park, the Initial Board may determine to use
all or a substantial portion of Reorganized ICH's cash and other assets to make
acquisitions of the assets or stock of other operating businesses to expand the
scope of Reorganized ICH's business operations. However, no final determination
has yet been made as to the nature of the other business operations, if any,
which will be conducted or acquired by Reorganized ICH following the Effective
Date. See "Reorganized ICH."
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THE DEBTORS AND THEIR PROFESSIONALS HAVE PLAYED NO PART IN THE DEVELOPMENT
OF THE PROSPECTIVE BUSINESS OR FINANCIAL PLAN OF REORGANIZED ICH AND DO NOT
ASSUME ANY RESPONSIBILITY FOR THE PROPOSED BUSINESS OR FINANCIAL ACTIVITIES OF
REORGANIZED ICH.
J. RECOMMENDATIONS
THE DEBTORS, THE CREDITORS COMMITTEE, AND THE EQUITY COMMITTEE RECOMMEND
THAT YOU CAST YOUR BALLOT TO ACCEPT THE JOINT PLAN.
II. PURPOSE OF CHAPTER 11
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. The commencement of a Chapter 11 case creates an "estate"
comprised of all the legal and equitable interests of the debtor. Sections 1101,
1107, and 1108 of the Bankruptcy Code provide that a debtor may remain in
possession of its property and continue to operate its business as a "debtor in
possession." The Chapter 11 Case was commenced with the filing of voluntary
petitions under Chapter 11 by the Debtors on October 10, 1995. Since the filing
of the Chapter 11 Case, the Debtors have been authorized to operate and manage
their business as debtors in possession.
Formulation of a plan of reorganization is the principal purpose of a
Chapter 11 case. The plan is the vehicle for satisfying the holders of claims
against and equity interests in a debtor. The Joint Plan was developed by the
Plan Proponents as a result of negotiations among the Plan Proponents and
certain other persons. See "Summary--Joint Plan Implementation" and "Discussion
of the Joint Plan."
Under the Bankruptcy Code, when soliciting acceptance or rejection of a plan
of reorganization, a debtor must transmit to the holders of claims or interests
a disclosure statement approved by the court as containing "adequate
information." On November 15, 1996 the Bankruptcy Court found that this
Disclosure Statement contained information that is in compliance with the
adequate information requirement of the Bankruptcy Code. The Disclosure
Statement describes various transactions contemplated under the Joint Plan and
is supplied to you for purposes of assisting in your evaluation of, and your
decision of how to vote on, the Joint Plan.
III. CERTAIN RISK FACTORS TO BE CONSIDERED
A. FACTORS RELATING TO CHAPTER 11 AND THE JOINT PLAN
The following is intended as a summary of certain risks associated with the
Joint Plan, but is not exhaustive and must be supplemented by the analysis and
evaluation made by each Claimant and Interest holder of the Joint Plan and this
Disclosure Statement as a whole in consultation with such Claimant's or Interest
holder's own advisors.
1. INSUFFICIENT ACCEPTANCES
The Joint Plan may not be confirmed without sufficient accepting votes. Each
impaired Class of Claims and Interests is given the opportunity to vote to
accept or reject the Joint Plan. The Joint Plan will be accepted by a Class of
impaired Claims if the Joint Plan is accepted by Claimants in such Class
actually voting on the Joint Plan who hold AT LEAST two-thirds ( 2/3) in amount
and MORE THAN one-half ( 1/2) in number of the total Allowed Claims of that
Class which actually vote. The Joint Plan will be accepted by a Class of
impaired Interests if it is accepted by holders of Interests in such Class
actually voting on the Joint Plan who hold AT LEAST two-thirds ( 2/3) in amount
of the total Allowed Interests of the Class which actually vote. Only those
members of a Class who vote to accept or reject the Joint Plan will be counted
for voting purposes.
If any impaired Class of Claims or Interests under the Joint Plan fails to
provide acceptance levels sufficient to meet the minimum Class vote requirements
but at least one impaired Class of Claims accepts the Joint Plan, then, subject
to the provisions of the Joint Plan, the Plan Proponents intend to request
confirmation of the Joint Plan under Section 1129(b) of the Bankruptcy Code.
Pursuant to the Joint Plan, the Plan Proponents' request that the Joint Plan be
confirmed under Section 1129(b) shall not, however, adversely affect the
treatment afforded to ICH Classes 6 and 7, collectively. By accepting the Joint
Plan ICH Class 5 relinquishes, to any extent necessary, its entitlement to
receive further distributions in order to assure that the ICH Classes 6 and 7,
collectively, receive the treatment provided in Article IV of the Joint Plan as
described in "Discussion of the Joint Plan--Treatment of Classes of Claims and
Interests--Treatment of Claims."
2. CONFIRMATION RISKS
Any objection to the Joint Plan filed in the Chapter 11 Case by a Claimant
or Interest holder could either prevent Confirmation of the Joint Plan or delay
such Confirmation for a significant period of time.
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B. FACTORS RELATING TO THE LIQUIDATING TRUST
ALL STATEMENTS, PROJECTIONS, FINANCIAL INFORMATION OR OTHER INFORMATION
CONCERNING THE TRUST HAVE BEEN PREPARED BY THE DEBTORS. NEITHER THE EQUITY
COMMITTEE NOR ITS PROFESSIONALS HAVE CONTRIBUTED IN ANY WAY TO ANY OF SUCH
INFORMATION CONCERNING THE TRUST.
1. PROJECTED RECOVERY
The projected recovery described in this Disclosure Statement with respect
to ICH Class 5 Claims is based on the estimated amount of Claims identified by
the Debtors as of the date of this Disclosure Statement and the estimated value
of assets available to the Trust. The projected recovery is forward-looking, and
is based on assumptions described in "Financial Statements of the Debtors." The
actual recovery may be more or less than, and may differ materially from, the
amounts described in this Disclosure Statement, and ultimately will depend upon
the value realized by the Debtors (or the Trust) for the assets of the Debtors'
estates which, in turn, will depend on, among other factors, general market and
economic conditions that may affect the value of such assets, the resolution of
certain pending litigation and the resolution of Contested Claims. See
"Summary--Classes and Treatment by Class," "Business of Debtors--Assets" and
EXHIBIT D to this Disclosure Statement.
As discussed below, the resolution of claims against the PennCorp Escrow and
Contested Claims will affect the timing, amount and availability of proceeds for
distribution by the Trust. The resolution of Contested Claims also will affect
the amount of initial and ultimate distributions to ICH Class 5 Claimants
because the Joint Plan provides for the reserve of distributions for Contested
Claims. See "Discussion of the Joint Plan--Distributions--Reserve for Certain
Distributions."
2. PROFITS INTEREST IN CFSB CORPORATION
The Trust will hold the CFSB Interest (DEFINED BELOW) upon its creation on
the Effective Date. That interest arises from the agreement of CNC to share with
ICH certain economic benefits it receives in relation to CFSB Corporation
("CFSB"), a holding company organized by James M. Fail ("Fail") to organize and
charter its wholly owned subsidiary, Bluebonnet Savings Bank, FSB
("Bluebonnet"). Bluebonnet was formed in 1988 to acquire 15 insolvent Texas
savings and loan associations as part of the Federal Home Loan Bank Board
government assisted "Southwest Plan." Historically, ICH and CNC loaned monies to
Fail, CFSB, or Bluebonnet for the purpose of capitalizing Bluebonnet. In
connection with its loans, CNC negotiated for, and received, a 49% interest in
(i) dividends or other distributions to or for the benefit of Fail from CFSB,
excluding amounts used for (a) interest and principal payments on certain debt,
(b) amounts specified for certain litigation settlements and (c) certain
dividend payments from Bluebonnet, (ii) certain proceeds from the sale or
transfer of CFSB common stock and (iii) benefits from CFSB's tax attributes
(collectively, the "CFSB Proceeds"). CNC agreed to share the CFSB Proceeds with
ICH based on the proportionate amount of loans granted by ICH as compared to the
total amount of the loans by ICH and CNC. Based on such agreement, ICH is
entitled to receive 27.7% of the payments CNC receives under CNC's agreement
with CFSB and Fail. Therefore, ICH is entitled to 13.57% of the CFSB Proceeds
(such interest referred to herein as the "CFSB Interest"). The CFSB Interest
does not entitle ICH to any voting rights or any other rights of ownership with
respect to CFSB and, therefore, ICH is unable to control or direct the timing or
amount of any distributions that may be declared or paid by CFSB.
The value of the CFSB Interest is subject to considerable uncertainty and,
historically, no value for the CFSB Interest has been reflected in ICH's GAAP
financial statements. For the purpose of calculating the projected recovery by
ICH Class 5 Claimants set forth in "Summary--Classes and Treatment by Class,"
the Debtors have assigned a value of $18 million to the CFSB Interest based on
(a) prior valuations by the Debtors of the CFSB Interest, (b) consideration of
the financial condition of CFSB at the Petition Date and (c) certain risk
factors associated with the CFSB Interest, which include the timing and amount
of dividends that may (or may not) be declared by CFSB, certain restrictions
which may limit the transferability of the CFSB Interest, and the outcome of
certain litigation as described below. The amount ultimately realized by the
Trust for the CFSB Interest may differ materially from the $18 million value
assigned to such interest for purposes of this Disclosure Statement and will
depend, in part, on the effect of the risk factors referred to above, which
factors are (or will be) outside the control of the Debtors (or the Trust). For
a discussion of the restrictions on the transferability of the CFSB Interest,
see "Discussion of the Joint Plan--Shaw Settlement," "Alternatives to the Joint
Plan-- Analysis of Liquidation Under Chapter 7" and Section 6.2(c) of the Joint
Plan.
ARIZONA LITIGATION. Fail and certain of his affiliated entities are
defendants in litigation filed by the State of Arizona as receiver of Farm and
Home Life Insurance Company. Fail and certain other entities and the State of
Arizona have reached a settlement of this and related litigation pursuant to a
settlement agreement dated January 31, 1995, to which CFSB is a party (the
"Arizona Settlement Agreement"). The settlement has been approved by the
Superior Court of the State of Arizona but appealed by certain of the
non-settling respondents. The settlement will be consummated upon the
satisfaction of the conditions set forth in the Arizona Settlement Agreement,
including, among other things, certain settlement orders
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becoming final and non-appealable. If the settlement should occur, ICH expects
to receive approximately $2.9 million in 1996 from its agreement with CNC. This
estimate is based on the distributions CFSB has indicated it will make in
accordance with the Arizona Settlement Agreement. If the settlement does not
occur, the ultimate outcome of this litigation or the impact on CFSB and on the
value of the CFSB Interest cannot presently be determined.
INDIANA LITIGATION. CFSB, Fail and certain other parties also are
defendants in litigation filed in November 1994 by the Indiana Department of
Insurance, as liquidator of Mutual Security Life Insurance Company ("MSL"), in
U.S. District Court for the Southern District of Indiana alleging constructive
fraud and other wrongs in connection with MSL's 1988 purchase of a $35 million
subordinated note issued by Bluebonnet. Based on those allegations, MSL seeks to
acquire ownership, through a constructive trust, of 100% of the equity of
Bluebonnet. Cross-motions for summary judgment are pending. There can be no
assurance that CFSB and Fail will be successful in defending this litigation or
what relief might be granted if CFSB and Fail are unsuccessful.
During 1995 and 1994, ICH received cash payments totaling $133,000 and
$277,000, respectively, on account of the CFSB Interest.
3. UNKNOWN AND CONTESTED CLAIMS
The Debtors believe that no Claims exist in ICH Class 4 or in any Class of
Care or SWL Holding. However, if any such Claims are determined to exist,
distributions that may be required to be made with respect to such Claims will
reduce the amount of cash available to the Trust for distribution to the ICH
Class 5 Claims.
In addition, objections have been filed with respect to certain proofs of
claim. If such objections are unsuccessful, distributions that may be required
to be made with respect to such Claims will reduce the amount available to the
Trust for distribution to ICH Class 5 Claims. See "The Chapter 11
Case--Continued Administration Under Chapter 11--Claims Bar Dates and
Objections."
4. LACK OF ESTABLISHED MARKET FOR TRUST INTERESTS
There will be no established public trading market for the Trust Interests
as of the Effective Date. No application for listing or quotation of the Trust
Interests has been made to any national securities exchange, and there can be no
assurance that an active trading market will develop or, if a market develops,
that it will be maintained. Therefore, there may be substantial restrictions on
the ability of the holders of the Trust Interests to sell, transfer, or
otherwise dispose of the Trust Interests. Certain persons receiving Trust
Interests pursuant to the Joint Plan also may be subject to certain restrictions
on the transferability of their Trust Interests under applicable securities
laws. See "The Trust--Trust Interests" and "Securities Law Considerations."
5. AVAILABILITY OF PENNCORP SALES TRANSACTION ESCROW AMOUNT
As part of the PennCorp Sales Transaction, the Debtors placed approximately
$167 million of the cash proceeds in an interest bearing escrow account (the
"PennCorp Escrow") to satisfy ICH's obligations, if any, arising under certain
tax, environmental, legal and other indemnification agreements provided to the
Bidders by ICH. At September 30, 1996, the remaining funds held in the PennCorp
Escrow totaled approximately $103 million. Under the terms of the PennCorp
Escrow, all funds remaining in the PennCorp Escrow in excess of $35 million will
be made available for distribution under the Joint Plan upon the resolution of
tax liabilities of the Debtors and their consolidated subsidiaries for periods
prior to the closing of the PennCorp Sales Transaction (see "The Chapter 11
Case--Continued Administration Under Chapter 11--Tax Settlement"). On August 31,
1997, the unclaimed balance of the PennCorp Escrow will become available for
distribution. Although the Bidders have not made any claims against ICH for
which the Bidders would be entitled to receive any of the PennCorp Escrow
amount, they have notified the Debtors that Southwestern Life has been named as
a defendant in a policyholder class action lawsuit filed in Louisiana. If
Southwestern Life incurs any liability with respect to such matter, Bidders may
assert a claim for indemnification with respect to which they would seek
recovery from the PennCorp Escrow. The Debtors are not aware of any other
circumstances that would give rise to any claims by the Bidders against the
PennCorp Escrow.
There can be no assurance that the Bidders will not assert any claims
pursuant to which the Bidders may be entitled to recover from the PennCorp
Escrow prior to the time that amounts are scheduled to be released from the
PennCorp Escrow or that, if any such claims are asserted, that such claims will
not be material. To the extent any such claims are asserted by the Bidders,
amounts to which the Bidders may be entitled will be required to be retained in
the PennCorp Escrow until the resolution of such claims. Therefore, to the
extent the Bidders assert claims for which they may be entitled to recovery from
the PennCorp Escrow prior to the date the escrow amount is released to the
Trust, the availability of the PennCorp Escrow amount to the Trust for
distribution to ICH Class 5 Claims may be delayed until the resolution of such
claims. Furthermore, if the Bidders ultimately are entitled to recover from the
PennCorp Escrow, the amount of cash available to the Trust for distribution to
ICH Class 5 Claims will be reduced.
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In addition, any claims asserted by the Bidders with respect to the
indemnification provided by ICH with respect to the PennCorp Sales Transaction
after the release of the PennCorp Escrow or in amounts in excess of the PennCorp
Escrow, to the extent the Bidders ultimately are entitled to recovery thereon,
would be an administrative priority claim in the Chapter 11 Case and, therefore,
would further reduce the amounts available for distribution by the Trust.
6. MODERN AMERICAN/WESTERN AND PHILADELPHIA AMERICAN INDEMNIFICATION
OBLIGATIONS.
In connection with the sale of Modern American and Western to Reassure
America and the sale of Philadelphia American to New Era, BML agreed to provide
indemnification to the buyers in such transactions for liabilities, if any, that
may arise with respect to certain tax, environmental, litigation and other
matters. In addition, BML contributed $3.5 million of the proceeds from the
Modern American and Western transaction to an escrow account to be maintained to
satisfy obligations that may arise with respect to BML's environmental
indemnification obligations to Reassure America, including matters associated
with a property currently owned by Modern American. All amounts remaining in the
escrow account referred to above will be released upon the resolution of known
environmental matters or upon the disposition by Modern American of the
properties to which such environmental matters relate.
Although the buyers in such transactions have not made any claims against
BML for which such buyers would be entitled to receive indemnification from BML
and the Debtors are not aware of any circumstances that would give rise to any
such claims (other than pending environmental matters referred to above), there
can be no assurance that such buyers will not assert any claims pursuant to
which they may be entitled to indemnification from BML or that, if any such
claims are asserted, that such claims will not be material. Furthermore,
although the Debtors believe that the known environmental matters to which the
$3.5 million escrow may be subject will be resolved without any material
liability being incurred by BML or by Reassure America, there can be no
assurance that such environmental matters will be resolved without material
costs or expense. Under the Joint Plan, the Trust will assume BML's
indemnification obligations under the Modern American/Western purchase agreement
and the Philadelphia America purchase agreement, and any claims for
indemnification will be administrative priority claims under the Joint Plan.
Therefore, to the extent Reassure American or New Era are entitled to
indemnification under such agreements, the amount of cash available to the Trust
for distribution to the ICH Class 5 Claims will be reduced. See "Certain
Regulatory and Legal Matters--Legal Proceedings-- Environmental Claims and
Litigation."
7. TENNECO SETTLEMENT
If the Tenneco Settlement is not approved by the Bankruptcy Court prior to
the Confirmation Hearing or as a part of the Confirmation of the Joint Plan, ICH
would not be entitled to receive the $18.5 million from Tenneco, and Tenneco
would not withdraw its proof of claim for $21,952,012. As a result, ICH would
retain its right to seek indemnification from Tenneco for the full amount of
ICH's damages, which could be as great as $37,500,000, and the Debtors would
have the ability to object to the proof of claim filed by Tenneco. See
"Discussion of the Joint Plan--Tenneco Settlement."
8. POTENTIAL TAX LIABILITIES
The transfer of Trust Assets to the Trust is expected to be a taxable
transfer. The Debtors do not anticipate that any tax liability will be incurred
by the Trust on such transfer. However, if the Debtors are not able to offset
losses against gains recognized on the transfer of the Trust Assets to the Trust
or, alternatively, are not able to establish a tax basis in the CFSB Interest
(see "Certain Risk Factors to be Considered--Factors Relating to the Liquidating
Trust--Profits Interest in CFSB Corporation"), the Debtors could incur tax
liability on the transfer. Any such tax liabilities would be administrative
priority claims payable by the Trust out of Trust Assets, thereby reducing the
Trust Assets available for distribution to ICH Class 5 Claims. See "Certain
Federal Income Tax Consequences--Federal Income Tax Consequences to the
Debtors--Gain or Loss on Transfer of Assets to the Trust."
C. FACTORS RELATING TO REORGANIZED ICH
ALL STATEMENTS, PROJECTIONS, FINANCIAL INFORMATION OR OTHER INFORMATION
CONCERNING THE FUTURE BUSINESS OPERATIONS OR FINANCIAL CONDITION OF REORGANIZED
ICH HAVE BEEN PREPARED BY THE EQUITY COMMITTEE OR THEIR PROFESSIONALS. NEITHER
THE DEBTORS NOR THEIR PROFESSIONALS HAVE CONTRIBUTED IN ANY WAY TO ANY OF SUCH
INFORMATION AND DO NOT ASSUME ANY RESPONSIBILITY FOR ANY OF SUCH INFORMATION.
1. BUSINESS RISKS
As described in "Summary--Reorganized ICH" and "Reorganized ICH," the scope
and nature of Reorganized ICH's business operations following the Effective Date
have yet to be determined. Depending on the nature of the business operations
that are undertaken by Reorganized ICH following the Effective Date, there will
be various risks to Reorganized
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ICH's ability to maintain ongoing, profitable business operations, including
risk factors related to the specific business or industry of those operations,
the overall economy in general and the ability of Reorganized ICH to attract and
retain experienced management personnel. No assurance can be given that
Reorganized ICH will develop or implement a business plan or commence further
business operations or, to the extent further business operations are commenced,
that Reorganized ICH will be profitable.
2. FUTURE LEVERAGE
While Reorganized ICH should emerge from the Chapter 11 Case on the
Effective Date with no significant debt and with assets estimated to have a
value of approximately $11 million (See "Reorganized ICH--Assets of Reorganized
ICH"), it is possible that Reorganized ICH could incur debt in the future to
finance the start-up of new business operations, the expansion of ongoing
business operations, the acquisition of other businesses or assets, to provide
working capital for Reorganized ICH, or for other purposes. Should Reorganized
ICH elect to incur debt, Reorganized ICH may be unable to meet the costs of the
related debt-service obligations. Furthermore, there can be no assurance that
future debt financing, if any, will be available to Reorganized ICH on terms
acceptable to Reorganized ICH, and the inability of Reorganized ICH to obtain
any necessary financing might adversely affect or prevent the implementation of
any business plan related to Reorganized ICH's operations. Notwithstanding the
foregoing, the Equity Committee believes that Reorganized ICH will have
sufficient income and cash flow (principally in the form of interest income on
its invested cash) to meet its currently-anticipated operating expenses
immediately following the Effective Date, including costs associated with its
general and administrative expenses, reporting requirements, anticipated
professional expenses and the continued operation of Perry Park.
3. FUTURE DILUTION
The interests of Reorganized ICH's stockholders immediately following the
Effective Date could be subject to significant dilution in the future through
the issuance of authorized but unissued shares of Reorganized ICH Common Stock
to (i) holders of Securities-Related Claims pursuant to the terms of the Joint
Plan, (ii) directors or employees of Reorganized ICH, or to other individuals,
pursuant to stock option plans or (iii) to other entities or individuals in
connection with any public or private offering, acquisition, refinancing or
other transaction entered into by Reorganized ICH. See "Discussion of the Joint
Plan--Securities-Related Claims" and "Reorganized ICH--Stock Option Plans."
4. POTENTIAL INVESTMENT COMPANY STATUS
Reorganized ICH will emerge from the Chapter 11 Case with the bulk of its
assets in the form of cash, and the persons who will constitute the initial
board of directors for Reorganized ICH have not yet determined what business
operations, if any, Reorganized ICH will pursue. Therefore, depending upon the
nature of investments and operating activities by Reorganized ICH, Reorganized
ICH could be deemed to be an "Investment Company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
regulatory scope of the Investment Company Act, which was enacted principally
for the purpose of regulating vehicles for pooled investments in securities,
extends generally to companies engaged primarily in the business of investing,
reinvesting, owning, holding or trading in securities. The Investment Company
Act may, however, also be deemed to be applicable to a company which does not
intend to be characterized as an investment company but which, nevertheless,
engages in activities which may be deemed to be within the definitional scope of
certain provisions of the Investment Company Act. While it is not the present
intention of the Equity Committee or of the Initial Board that Reorganized ICH
will function in such a manner following the Effective Date that it may be
considered an "Investment Company," there can be no assurance that Reorganized
ICH will not be deemed to be an Investment Company, particularly during the
period following the Effective Date during which Reorganized ICH expects that
the bulk of its assets will be in the form of cash. If Reorganized ICH is deemed
to be an investment company, it may become subject to certain restrictions
relating to its activities, including restrictions on the nature of its
investments and the issuance of securities. In addition, the Investment Company
Act imposes certain requirements on companies deemed to be within its regulatory
scope, including registration as an investment company, adoption of a specific
form of corporate structure and compliance with certain burdensome reporting,
record keeping, voting, proxy, disclosure and other rules and regulations.
Reorganized ICH might well be unable to comply with such requirements and,
therefore, could be subject to, among other things, fines and penalties from the
SEC or other regulatory agencies. Thus, in the event of the characterization of
Reorganized ICH as an investment company, the failure by Reorganized ICH to
satisfy such regulatory requirements, whether on a timely basis or at all,
could, under certain circumstances, have a material adverse effect on
Reorganized ICH.
5. LACK OF ESTABLISHED MARKET FOR REORGANIZED ICH COMMON STOCK
There will be no established public trading market for the Reorganized ICH
Common Stock as of the Effective Date. No application for listing or quotation
of the Reorganized ICH Common Stock has been made to any national securities
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exchange and there can be no assurance that an active trading market will
develop or, if a market develops, that it will be maintained. Therefore, there
may be substantial restrictions on the ability of the holders of Reorganized ICH
Common Stock to sell, transfer or otherwise dispose of their Reorganized ICH
Common Stock. Certain persons who receive Reorganized ICH Common Stock pursuant
to the Joint Plan also may be subject to certain restrictions on the
transferability of their Reorganized ICH Common Stock under applicable
securities laws. See "Securities Laws Considerations."
6. DIVIDENDS
Reorganized ICH currently does not intend to pay any dividends or
distributions with respect to the Reorganized ICH Common Stock. In addition, the
Delaware General Corporation Law, to which Reorganized ICH initially will be
subject, permits payment of dividends only out of capital surplus (the excess of
net assets over the aggregate par value of all outstanding shares of capital
stock) or out of net profits for the fiscal year in which the dividend is
declared or the preceding fiscal year. There can be no assurance that any
dividends ever will be paid with respect to the Reorganized ICH Common Stock.
7. POSSIBLE ISSUANCE OF PREFERRED STOCK
Pursuant to Reorganized ICH's Certificate of Incorporation, the board of
directors of Reorganized ICH will have the authority, without any further vote
or action by the stockholders of Reorganized ICH, to provide for the issuance of
preferred stock of Reorganized ICH from time to time upon such terms and
conditions, and having such rights, privileges and preferences, as such board of
directors may determine. The rights of the holders of Reorganized ICH Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of preferred stock that may be issued in the future. Additionally, any
such issuance could have the effect of delaying, deferring or preventing a
change in control of Reorganized ICH and could make the removal of management of
Reorganized ICH more difficult. Any such issuance of preferred stock, as well as
the availability of authorized and unissued shares of preferred stock, also
could adversely affect the market price of Reorganized ICH Common Stock.
IV. BUSINESS OF DEBTORS
A. GENERAL
ICH was organized in 1966 as a Missouri corporation and was reincorporated
in Delaware in 1977. Following the sales during the Chapter 11 Case of its
primary insurance subsidiaries in December 1995 and the sale of three of its
four remaining insurance subsidiaries in June 1996, and as of the date of this
Disclosure Statement, the relationship among the Debtors, FMI and BML (the
remaining insurance subsidiary) is as shown in the chart below:
[CHART]
- ------------------------
SLC Financial Services, Inc., BML Agency, Inc., and REO Holding Corporation are
also direct or indirect subsidiaries of ICH, but do not have any significant
operations. ICH also has an indirect minority interest in ICH Funding Corp.,
which also has no significant operations.
SWL Holding is an intermediate holding company. Its former wholly-owned
subsidiary, Southwestern Life, was sold on December 14, 1995, as part of the
PennCorp Sales Transaction. All cash and securities received from the Bidders as
consideration for Southwestern Life were distributed by SWL Holding to ICH as a
dividend. SWL Holding has no ongoing business.
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Care is an intermediate holding company which owned Union Bankers prior to
its sale in the PennCorp Sales Transaction, which closed on December 14, 1995.
All cash and securities received from the Bidders as consideration for Union
Bankers were distributed by Care to ICH as a dividend. Care's only remaining
subsidiary is BML, which has no ongoing business operations.
FMI is a management and services company which, prior to the PennCorp Sales
Transaction, employed substantially all of the employees of ICH and its indirect
and direct subsidiaries and provided substantially all of the personnel,
investment advisory, management, data processing, administrative, and facilities
management services to ICH and ICH's insurance subsidiaries. In the PennCorp
Sales Transaction, substantially all assets of FMI were sold to SFSC, and all
but one of FMI's Dallas, Texas based employees accepted positions with SFSC.
Since the PennCorp Sales Transaction, SFSC has provided substantially all of the
data processing services, policyholder and claims services, accounting and tax
services, and facilities management services to ICH and its remaining
subsidiaries through employee leasing and data processing agreements.
B. EMPLOYEES
FMI has approximately 40 employees, substantially all of whom are employed
at ICH's Perry Park real estate development in Owen County, Kentucky. For a
discussion of management of the Debtors, see "Management of the Debtors."
C. ASSETS
ICH's assets as of September 30, 1996, are described below:
1. Cash and short-term investments of $88,320,000 (see item 11 below).
2. Restricted cash and investments of $104,255,000, related primarily to
the PennCorp Escrow. See "Certain Risk Factors to be Considered
Factors--Relating to the Liquidating Trust--Availability of PennCorp
Sales Transaction Escrow Amount."
3. Investments in subsidiaries of $100,270,000, reflecting ICH's interest
in BML, BML Agency, Inc. and SLC. The assets of BML, BML Agency, Inc. and
SLC include cash and short-term investments, corporate bonds and
structured securities, limited partnership interests and real estate. ICH
believes the value of these assets is approximately $11 million less than
the carrying value shown in ICH's September 30, 1996, balance sheet. See
EXHIBIT D to this Disclosure Statement.
4. Investment in FMI of $9,572,000. FMI's assets consist principally of $6
million of cash and short-term investments and a $6 million receivable
from ICH. FMI's liabilities of $3 million relate to employment-related
obligations.
5. Note from SFC of $40 million received in the PennCorp Sales Transaction.
6. Profits interests in CFSB with an assigned value of $18 million. The
value of the CFSB Interest is subject to considerable uncertainty and,
historically, no value for the CFSB Interest has been reflected in ICH's
GAAP financial statements. The actual amount realized for the CFSB
Interest could vary significantly from the assigned value of $18 million.
See "Certain Risk Factors to be Considered--Factors Relating to the
Liquidating Trust-- Profits Interest in CFSB Corporation."
7. Recoverable of $7,849,000 from SFC related to contractual amounts due
under the PennCorp Sales Transaction.
8. Real estate consisting of a 2,600-acre residential and recreational real
estate development in Owen County, Kentucky, an office building and
undeveloped land in Baton Rouge, Louisiana, and an inn and golf course in
Burley, Idaho.
9. Notes and accounts receivable of $1,191,000.
10. Estimated amount due from Tenneco, Inc., of $24.6 million related to
indemnification on the 1986 purchase by ICH of certain former
subsidiaries of Tenneco. As reflected on EXHIBIT D to this Disclosure
Statement, the consummation of the Tenneco Settlement will result in
payment to $18.5 million to ICH and the elimination of Tenneco's claim of
$21.952 million against the Debtors and of ICH's $24.6 million
recoverable from Tenneco. See "The Chapter 11 Case--Continued
Administration Under Chapter 11--Tenneco Settlement."
11. Federal income tax refund of $786,000. As reflected on EXHIBIT D to this
Disclosure Statement, the consummation of the Tax Settlement eliminates
this federal income tax refund and the federal tax liability of $11.1
million, and results in an aggregate of $3.4 million in tax refunds being
due ICH and $550,000 due ICH from Shaw, Rice, Carlisle, and CNC
collectively. See "The Chapter 11 Case--Continued Administration Under
Chapter 11--Tax Settlement."
12. Miscellaneous other assets, including a common stock portfolio, of
$2,624,000.
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D. MARKET FOR ICH'S EQUITY SECURITIES AND RELATED STOCKHOLDER MATTERS
Until November 15, 1995, ICH's Common Stock and Preferred Stock were listed
and traded on the American Stock Exchange. The Common Stock also was listed and
traded on the Chicago Stock Exchange prior to February 9, 1996. The American
Stock Exchange halted trading in the Common and Preferred Stocks as of September
26, 1995, and the Chicago Stock Exchange suspended trading in the Common Stock
on November 20, 1995. Following the commencement of the Chapter 11 Case, the
American Stock Exchange and the Chicago Stock Exchange also each made
applications to the Securities and Exchange Commission (the "SEC") for removal
of ICH's securities from continued listing and registration.
Effective as of November 15, 1995, the SEC granted the application of the
American Stock Exchange for removal of the Common and Preferred stock of ICH
from listing thereon and registration under Section 12 of the Securities
Exchange Act of 1934. Effective February 9, 1996, the SEC granted the
application of the Chicago Stock Exchange for removal of the Common Stock of ICH
from listing thereon and continued registration. Since these securities were
delisted, prices and trading volumes for the Common and Preferred Stock have
been reported in the OTC Bulletin Board and both securities have continued to be
traded thereon.
There are approximately 50,000 record holders of Common Stock and 1,300
record holders of Preferred Stock of ICH. Such numbers are based upon the actual
number of holders registered on the books of ICH and do not include the holders
of shares held in "street names." ICH believes that the actual number of
Beneficial Holders of Common Stock may be as high as 75,000.
V. THE CHAPTER 11 CASE
A. FACTORS PRECIPITATING THE CHAPTER 11 CASE
ICH was built on a strategy of pursuing growth through leveraged
acquisitions. As of December 31, 1989, as a result of such acquisitions, ICH had
debt outstanding of approximately $1.18 billion. Between 1989 and the Petition
Date, ICH sold a number of subsidiaries in transactions designed to reduce
leverage. By year-end 1994, ICH had reduced the amount of its debt to $369
million. Over that same five year period, ICH's total consolidated assets
declined from $8.6 billion to $3.1 billion.
Historically, the primary sources of liquidity for ICH were dividends from
its insurance subsidiaries and earnings on invested assets. Generally, the net
assets of ICH's insurance subsidiaries available for transfer to ICH were
limited to the greater of the subsidiaries' net gain from operations during the
preceding year or 10% of the subsidiaries' net surplus as of the preceding year
determined in accordance with accounting practices prescribed or permitted by
insurance regulatory authorities. At December 31, 1994, approximately $15
million would have been available under existing laws for the payment of
dividends by insurance subsidiaries to ICH; however, ICH's primary insurance
subsidiaries had previously agreed with their respective state regulators that
they would not pay dividends without prior regulatory approval. Due to its
financial condition ICH believed that it was unlikely that these insurance
regulatory authorities would have approved payment of dividends in 1995.
Therefore, ICH's sources of cash in 1995 were effectively limited to a moderate
amount of investment income, dividends from non-insurance subsidiaries and
amounts generated from the sale of assets.
As a result of its limited sources of cash, ICH projected a significant cash
deficiency for 1995, primarily due to the following payments coming due in 1995;
(1) approximately $60 million of sinking fund and principal payments due to
unaffiliated third parties under the 1996 Notes, (2) $47 million in interest
requirements primarily related to the Notes, and (3) a $68 million settlement of
an IRS tax audit of ICH's insurance subsidiaries for the years 1986-1989 (the
final settlement amount grew to $71.6 million with the addition of accrued
interest and taxes due for ICH). In addition, ICH had $222 million of
indebtedness due in late 1996, primarily related to the scheduled maturity of
its 1996 Notes.
Anticipating a cash deficiency for 1995, ICH attempted to develop a plan to
improve its capital structure by increasing common equity to debt, reducing its
debt and fixed charges, and extending the maturities on its remaining debt. In
January 1995, ICH engaged DLJ as its financial advisor to assist in the
development of a plan to address ICH's anticipated liquidity problems. In
addition, ICH announced a series of initial actions as part of a long-term
process designed to address the financial problems of ICH and to preserve its
financial flexibility. These actions included the suspension of dividend
payments on the Preferred Stock and the initiation of a review of certain of
ICH's accounting policies, including primarily the accounting treatment for
intangible assets.
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Beginning in January 1995, ICH also began soliciting offers to sell several
of its subsidiaries in order to generate additional liquidity. Prior to the
Petition Date, only two such sales, the sale of Bankers Life Insurance Company
of New York ("Bankers") for $35 million and the sale of Integrity National Life
Insurance Company for $9 million, were consummated in 1995. The proceeds from
the sale of Bankers were not readily available to ICH because Bankers was
directly owned by Southwestern Life, and distribution of any portion of those
sale proceeds required regulatory approval. Because ICH had been unable to
develop plans for dealing with the $222 million in indebtedness coming due in
late 1996, ICH believed that regulatory approval for such distribution was not
likely.
On October 9, 1995, the Debtors and FMI entered into the Shinnecock
Agreement to sell to Shinnecock Southwestern Life, Union Bankers, Constitution,
and Marquette, and to sell to an affiliate of Shinnecock substantially all of
the assets of FMI. Net proceeds from the Proposed Sales Transaction were
estimated at $202 million in cash, subject to adjustment under certain
circumstances. The Shinnecock Agreement contained provisions for presenting the
Proposed Sales Transaction to the Bankruptcy Court in a Chapter 11 Case to be
commenced by Debtors, and the Debtors required, as a condition of the agreement,
the establishment of a competitive sales procedure to be conducted as part of
such Chapter 11 Case.
On the Petition Date, the Debtors and FMI filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code. The Bankruptcy Court ordered
that the cases of the Debtors and FMI be jointly administered. On October 20,
1995, the Bankruptcy Court approved, with certain modifications, the requested
procedure by which interested parties could submit offers to compete with the
offer of Shinnecock. In accordance with the sales procedure order, the Bidders
presented a competing offer. During the days prior to the Sale Approval Hearing,
the Debtors received several improved bids from each of Shinnecock and the
Bidders. At the Sale Approval Hearing, another round of bidding occurred which
resulted in the Debtors' acceptance of Bidders' final offer of $260 million,
consisting of $210 million in cash, a $40 million SFC 7.0% convertible
subordinated note due December 15, 2005, and PennCorp common stock which has
subsequently been sold for $10 million in cash. The PennCorp Sales Transaction
was approved by the Bankruptcy Court on December 5, 1995, and was closed in
December 1995.
Approximately $167 million of the cash proceeds of the PennCorp Sales
Transaction were required to be and were placed in the PennCorp Escrow to
satisfy ICH's obligations, if any, relative to certain tax, environmental, legal
and other indemnifications. On December 30, 1995, ICH and Modern American paid,
in full, amounts due to the IRS for additional taxes and interest for the tax
years 1986 through 1989. Sixty-seven million dollars of the funds held in the
PennCorp Escrow were released to ICH for such purpose. At September 30, 1996,
remaining funds held in the PennCorp Escrow totaled in excess of $103 million.
As discussed in "The Chapter 11 Case--Continued Administration Under Chapter
11--Tax Settlement," amounts in the PennCorp Escrow in excess of $35 million
will be released upon resolution of certain tax liabilities of the Debtors and
their consolidated subsidiaries, with the remaining balance of the escrow amount
to be released at August 31, 1997, subject to any reserves that may be required
to be retained in the PennCorp Escrow pending the final resolution of any
outstanding claims that may have been asserted by the Bidders for which they may
be entitled to recovery from the PennCorp Escrow. See "Certain Risk Factors to
be Considered--Factors Relating to the Liquidating Trust--Availability of
PennCorp Sales Transaction Escrow Amount."
B. NOTICE OF THE CHAPTER 11 CASE
The Debtors filed their schedules and statements of financial affairs on the
Petition Date. Included therewith was a "mailing matrix" listing the names and
addresses of creditors and other parties in interest. Also on the Petition Date,
the Clerk of the Bankruptcy Court issued a notice concerning the filing of the
Chapter 11 Case and concerning the meeting of creditors required under Section
341 of the Bankruptcy Code. The Debtors served such notice by mail and by
publication in the National Edition of THE WALL STREET JOURNAL and THE DALLAS
MORNING NEWS.
On the Petition Date, the Bankruptcy Court also fixed February 7, 1996, as
the Bar Date with respect to claims against the Debtors, which date was
applicable to all creditors, excluding governmental units.
Also on the Petition Date, the Debtors filed a motion to establish notice
procedures, seeking to determine appropriate notice procedures during the
Chapter 11 Case. That motion sought authority to establish a master service list
which would include and limit notice of all but certain specified major events
to the United States Trustee, the Debtors, counsel for the Debtors, the Debtors'
twenty (20) largest unsecured creditors, the members of any official committee
and its counsel, any party whose interest was directly affected by a specific
pleading, and parties or entities who might formally appear and request service
pursuant to Bankruptcy Rule 2002. On the Petition Date, the Bankruptcy Court
approved the Debtors' utilization of such master service list and the Debtors'
proposed notice procedures.
C. FIRST DAY ADMINISTRATION
Immediately after the filing of Chapter 11 cases, debtors frequently
experience difficulties resulting from the restrictions imposed by the
Bankruptcy Code on their normal business activities. The Debtors prepared, and
upon the commencement of this case, filed motions seeking Bankruptcy Court
orders overriding or limiting certain of such
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restrictions. The Bankruptcy Court orders granting these motions have had the
effect of significantly limiting adverse consequences of the bankruptcy filings,
as described more fully below.
1. PAYMENT OF EMPLOYEE CLAIMS
To insure a continued productive and efficient relationship with employees,
the Debtors sought authority from the Bankruptcy Court for FMI to pay
substantially all prepetition wages, salaries, incentives, benefits, and
reimbursements to current employees. This request was approved by the Bankruptcy
Court on October 13, 1995.
2. CASH MANAGEMENT
Prior to the Petition Date, the Debtors had managed their cash collections
and disbursements through a banking and cash management system (the "Cash
Management System"), involving several bank accounts (the "Bank Accounts"). On a
daily basis, the Debtors customarily deposited revenues received into one of the
Bank Accounts. The Cash Management System was utilized by the Debtors in the
ordinary course of business to maximize, through short-term investments, the
benefit of daily cash flows. The Debtors requested approval to continue to
utilize the Bank Accounts and Cash Management System consistent with the terms
and conditions applicable prior to the commencement of the Chapter 11 Case,
including, but not limited to, treating current accounts for all purposes as
debtor in possession accounts, using, in the present form, checks and other
documents related to the accounts, permitting short-term investments of cash,
and allowing clearance of checks in transit. On October 10, 1995, the Court
authorized the Debtors to maintain the Bank Accounts and Cash Management System.
3. TRADE CLAIMS AND UTILITIES
Prior to the Petition Date, the Debtors generally experienced excellent
relations with trade creditors who historically provided in the aggregate a
substantial amount of short-term financing for the Debtors' operations. On
October 13, 1995, the Bankruptcy Court approved the Debtors' Emergency Motion
for Authority to Pay Prepetition Trade Claims, and on December 14, 1995, the
Bankruptcy Court approved an amended order authorizing the Debtors to pay other
trade claims (collectively the "Trade Claims"). Substantially all of the Trade
Claims of the Debtors have been paid in full.
Also on October 13, 1995, the Court granted the Debtors' Application for
Order Determining Adequate Assurance of Payment to Utilities Pursuant to 11
U.S.C. Section 366 and Allowing Continued Payments to Utilities by ICH
Corporation. Such order allowed the Debtors continued and uninterrupted utility
service notwithstanding the bankruptcy filing.
4. RETENTION OF PROFESSIONALS
The Debtors have employed certain law firms, accounting firms, and financial
advisors since the Petition Date. Winstead Sechrest & Minick P.C. has been
employed as Debtors' general bankruptcy counsel in the Chapter 11 Case and has
acted in such capacity. The Debtors obtained authority to engage the law firm of
Vinson & Elkins as Special Counsel for the limited purpose of conducting certain
investigations relating to potential claims of the Debtors against certain third
parties. The Debtors also obtained authority to retain as accountants Coopers &
Lybrand, who had served as Debtors' auditors prior to the Petition Date. In
addition, the Bankruptcy Court authorized the Debtors to employ DLJ as financial
advisor in connection with the PennCorp Sales Transaction. Since the closing of
the PennCorp Sales Transaction, the Debtors have not utilized the services of
DLJ.
D. CONTINUED ADMINISTRATION UNDER CHAPTER 11
1. CLAIMS BAR DATES AND OBJECTIONS
The Bankruptcy Court fixed February 7, 1996, as the Bar Date by which all
creditors other than governmental units were required to file proofs of claim
under Section 502 of the Bankruptcy Code. April 9, 1996, the date 180 days from
the Petition Date, was set as the Bar Date for filing proofs of claim of
governmental units. With respect to the IRS, the Bar Date was further extended
by the Bankruptcy Court to October 31, 1996. Pursuant to the Tax Settlement,
however, all prepetition federal income tax claims have been fully and finally
resolved and the IRS has not and will not file a Proof of Claim.
The Bar Date has passed for filing proofs of claims for all creditors, and
the Debtors have reviewed and analyzed the possibility of objecting to various
claims. The Debtors have filed Omnibus Objections to Certain Claims (the
"Omnibus Objection"). The first Omnibus Objection objected to in excess of 200
proofs of claim filed with the Bankruptcy Court based upon one or more of the
following grounds: (1) the claims were duplicative of claims filed by a
representative party; (2) the claims were superseded by an amended claim; (3)
the claims provided no supporting documentation; (4) an entity other than the
Debtors has exclusive liability for the claim; or (5) the purported claims state
equity interests and not claims.
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The Debtors also have filed a Second Omnibus Objections to Certain Claims based
on grounds similar to those discussed above.
In addition to the First and Second Omnibus Objections, the Debtors have
also filed specific objections to several proofs of claim. Pursuant to
Bankruptcy Code Section 502, proofs of claim that are objected to are not and
will not become Allowed Claims unless and until the Bankruptcy Court allows such
Claims and determines their proper amount. Under the Joint Plan, Claims to which
Debtors have filed an objection are treated as Contested Claims that are not
entitled to vote and will receive no distribution pursuant to the Joint Plan's
treatment of the relevant Class to which such Contested Claims are classified,
unless and until such Claims become Allowed Claims. The following are the Proofs
of Claim and motions relating to proofs of claims to which the Debtors have
filed specific objections or as to which the Debtors intend to object:
(a) On January 30, 1996, Perry Park Resort Owners Association, Inc. (the
"Perry Park Association") filed Proof of Claim No. 170 alleging a secured
claim in the amount of $2,695,000.00. As a basis for its proof of claim,
the Perry Park Association alleged that services and work had not been
performed and that amenities were not turned over by ICH as required by a
certain contract. On November 13, 1996, the Debtors filed an objection to
Proof of Claim No. 170 on the grounds that such proof of claim did not
set forth an enforceable claim against the Debtors, was not in proper
form, and failed to include any supporting documents. No hearing has been
conducted on such proof of claim or the Debtors' objection.
(b) Certain representatives of an alleged class of plaintiffs filed proofs
of claim asserting as bankruptcy claims the Securities-Related Claims
based upon the same facts as those alleged in the Shareholder Suits. On
October 11, 1996, the Debtors filed an objection to the proofs of claim
filed by the representatives of Securities-Related Claims and an
alternative request for such claims to be estimated at zero by the
Bankruptcy Court pursuant to Bankruptcy Code Section 502(c). No hearing
has been conducted on such proofs of claim or the Debtors' objection and
alternative request for estimation. For a more detailed discussion of the
Securities-Related Claims and the Shareholder Suits, see "Discussion of
the Joint Plan--Securities-Related Claims" and "Certain Regulatory and
Legal Matters--Legal Proceedings--Securities Litigation."
(c) On February 7, 1996, Proof of Claim No. 220 was filed asserting a claim
in the amount of $30 million, but did not list any entity as the
Claimant, instead referencing a non-existent Exhibit A. The basis for the
proof of claim listed "other" and stated: "purchase of ICH 11.25% debt
securities between 4-9-93 and 1-27-95. Our claim is one for damages to
purchasers of ICH 11.25% Debt Securities from 4-9-93 to 1-27-95,
inclusive." On April 16, 1996, the Debtors received service of the Motion
for Leave to File Amended Proof of Claim filed by Raymond Schulman and
Monique Day V. Schulman asserting a claim in the same amount as Proof of
Claim No. 220 and seeking to amend such proof of claim. On October 16,
1996, the Debtors filed their Response to Motion for Leave to File
Amended Proof of Claim and Objection to Claim, requesting that the
Bankruptcy Court deny the Motion to Amend and also objecting to the
substance and merits of such proof of claim. No hearing has been
conducted on the Motion to Amend or the Debtors' objection.
(d) Since the expiration of the Bar Date, several other persons have filed
late-filed proofs of claims. On February 27, 1996, Proofs of Claim Nos.
242 through 247 were filed by Chase National Life Insurance, Philadelphia
Life Insurance Company, Life Partners Group, Inc., All American Life
Insurance Company, Wabash Life Insurance Company, and Massachusetts
General Life Insurance Company (the "Life Partners Claims"). The Life
Partners Claims alleged unliquidated and contingent indemnification
claims against the Debtors. On October 11, 1996, the Debtors filed their
First Objection to Late Filed Claims requesting that the Bankruptcy Court
disallow the Life Partners Proofs of Claims because such claims were not
timely filed. No hearing has been conducted on the Life Partners Claims
or the Debtors' objections.
(e) On September 26, 1996, Great Southern Life Insurance Company filed its
Motion and Supporting Memorandum to Ratify and Allow the Filing of Proof
of Claim After Bar Date (the "Great Southern Motion"). The Great Southern
Motion requested the Court to allow Great Southern Life Insurance Company
("Great Southern") to file a proof of claim and have such proof of claim
treated as timely even though the Bar Date had passed based upon the
concept of excusable neglect. In their proof of claim, Great Southern
states that it has been named as a defendant in a Louisiana class action
styled SHARON K. SELF AND JOHNNY W. SELF, ET AL V. GREAT SOUTHERN LIFE
INSURANCE COMPANY, Case No. 30,801-D, pending in the 18th Judicial
District Court of the Parish of Pointe Coupee, State of Louisiana, and
asserts that the Debtors are liable for certain damages that might be
suffered by Great Southern through this litigation under alleged theories
of direct liability, contribution, and indemnity. On October 16, 1996,
the Debtors and the Creditors Committee filed their respective objections
to the Great Southern Motion requesting that the Bankruptcy Court deny
the Great Southern Motion and also objecting to the substantive
allegations made in the Great Southern Motion. No hearing has been
conducted on the Great Southern Motion or the objections.
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(f) Regarding the Claim of Sayyah, see "Discussion of Joint Plan--Treatment
of Classes of Claims and Interests-- Classes of Claims."
The Debtors anticipate that further objections to certain claims may be
filed by the Debtors or, after Confirmation of the Joint Plan, by the Trust or
Reorganized ICH.
2. COMPENSATION OF PROFESSIONALS
On December 11, 1995, the Debtors filed a Motion For Order Establishing
Interim Procedures and Guidelines For Compensation of Professional Persons (the
"Fee Procedure Motion"). Under the Fee Procedure Motion, any professional
requesting interim payment of fees is required to submit monthly statements to
the Debtors, Debtors' Counsel, the U.S. Trustee, the Committees, and the Court,
and the Debtors are authorized to pay 80% of fees so requested and 100% of
expenses invoiced to the Debtors. On December 14, 1995, the Bankruptcy Court
entered the Order Establishing Procedures and Guidelines For Compensation of
Professional Persons (the "Fee Procedure Order") approving the procedures
outlined in the Fee Procedure Motion.
The procedures approved by the Fee Procedure Order further provided for
interim approval by the Bankruptcy Court of the fees and expenses of
professional persons. On May 6, 1996, the following professionals filed their
respective first applications requesting interim approval of fees: (1) Winstead
Sechrest & Minick P.C., counsel for the Debtors; (2) Coopers & Lybrand L.L.P.,
accountants for the Debtors; (3) Gibson, Dunn & Crutcher, counsel for the
Creditors Committee; and (4) Houlihan Lokey Howard & Zukin, Inc., financial
advisor for the Creditors' Committee. The Bankruptcy Court held a hearing on May
28, 1996, and granted such first interim applications with certain adjustments.
On September 6, 1996, the above professionals filed their second interim
applications, and Pryor, Cashman, Sherman & Flynn, counsel for the Equity
Committee, Southwest Securities, Inc., financial advisors for the Equity
Committee and Lightfoot, Guest, Wagner & Co., accountants for the Equity
Committee, filed their respective first interim fee applications. The Bankruptcy
Court held a hearing on September 30, 1996, and granted such interim
applications with certain adjustments in some cases. On a combined basis, the
fees of all professionals have totaled approximately $6 million through
September 30, 1996. The Debtors estimate that additional professional fees
through the Effective Date will aggregate $2 million.
3. DEBTORS' MANAGEMENT
At the Petition Date, the following persons were employed as executive
officers of the Debtors (collectively, the "Petition Date Officers"): (1) Glenn
H. Gettier, Jr., Chief Executive Officer and Chairman of the Board of Directors;
(2) James R. Kerber, Chief Operating Officer and President; (3) Daniel B. Gail,
Executive Vice President, General Counsel, and Secretary; (4) Robert C. Greving,
Executive Vice President and Chief Actuary; (5) John T. Hull, Executive Vice
President, Chief Financial Officer, and Treasurer; (6) H. Don Rutherford,
Executive Vice President--Marketing; (7) Robert J. Bruce, Senior Vice
President--Administration; (8) Steven R. Cartwright, Senior Vice
President--Corporate Taxes; and (9) W. Hubert Mathis, Vice President--Corporate
Services. Also, at the Petition Date the following persons were serving as
directors of ICH (collectively, the "Petition Date Directors"): (1) Glenn H.
Gettier, Jr.; (2) James R. Kerber; (3) Keith A. Tucker; (4) S. Leroy Stegner;
(5) Vernon K. Zimmerman; and (6) Jon E. Jacoby. Mr. Jacoby resigned from the
Board of Directors on October 18, 1995, and Mr. Tucker resigned from the Board
of Directors as of January 1, 1996.
On November 16, 1995, the Debtors filed their Motion for Order Approving
Continuation of Certain Indemnification of Officers and Directors of the
Debtors. The Creditors Committee agreed to the relief requested, and, on that
date, the Bankruptcy Court entered the Interim Order Approving Continuation of
Certain Indemnification of Officers and Directors of the Debtors providing
indemnification to officers and directors extending to (a) events occurring from
and after the Petition Date and (b) for prepetition events, to the extent of
"Expenses" (as defined in ICH's Bylaws) with a limit of $500,000 (the
"Indemnification Fund").
As a result of the closing of the PennCorp Sales Transaction, all of the
senior managers and officers of the Debtors resigned their employment, and
substantially all of the senior managers and officers accepted employment with
SFSC. In connection with the PennCorp Sales Transaction, the Debtors' Board of
Directors awarded and the Creditors Committee approved the granting of bonuses
to certain management personnel. In accordance with the agreement with the
Creditors Committee, one-half of the bonuses were paid and the remaining
one-half reserved for payment from FMI upon Confirmation of the Joint Plan.
After consultation with the Creditors Committee, the Debtors selected the
following successor officers: (1) Susan A. Brown, Co-Chief Executive Officer,
Chief Financial Officer, and Treasurer; (2) Rodney D. Moore, Co-Chief Executive
Officer, President, and Secretary; and (3) Steven R. Cartwright, Assistant Vice
President and Assistant Secretary. On January 3, 1996, Glenn H. Gettier, Jr.,
resigned from the board of directors and the following persons were elected to
serve as new directors: (1) Susan A. Brown, Director and Chairman of the Board
of Directors; and (2) Rodney D. Moore, Director. Messrs. Kerber, Stegner, and
Zimmerman continue to serve the Debtors as directors. Effective July 5, 1996,
Steven R. Cartwright resigned his position with ICH.
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On February 13, 1996, the Court entered the Order Regarding Employment of
New Officers of the Debtors, ratifying and approving the employment of Susan A.
Brown and Rodney D. Moore. Also on February 13, 1996, the Court entered the
Order Regarding Indemnification of Officers and Directors of Debtors, approving
by final order the previous indemnifications granted and adding indemnifications
for Ms. Brown and Mr. Moore on and after January 1, 1996.
4. THE COMMITTEES
On October 11, 1995, the U.S. Trustee formed an Interim Official Unsecured
Creditors Committee (the "Interim Committee"). The following day, the U.S.
Trustee filed an Emergency Appointment of Interim Official Unsecured Creditors
Committee. The current members of the Creditors Committee are:
1. John M. Tobin
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022
2. Craig S. Johnson
Andereck, Evans, Milne, Peace, & Baumhoer L.L.C.
301 East McCarty Street
P.O. Box 1438
Jefferson City, MO 65102-1438
3. Greg Lathrop
Lathrop Investment Mgt. Corp.
10 Corporate Hill Dr., Suite 225
Little Rock, AR 72205
4. Dr. Jeff Schultz
Schultz Investments
c/o Christian Brothers University
650 E. Parkway S.
Memphis, TN 38139
5. John T. Rippy or Orson Oliver
Bank of Louisville, Indenture Trustee
500 West Broadway
P.O. Box 1101
Louisville, KY 40201
6. Alex Lagetko
CS First Boston Corporation
55 East 52nd Street, 6th Floor
New York, NY 10055
Since the Petition Date, Gibson, Dunn & Crutcher has served as counsel for
the Creditors Committee. The Creditors Committee engaged Houlihan, Lokey, Howard
& Zukin, Inc. to provide valuation, financial advisory, and investment banking
services.
On March 27, 1996, the United States Trustee appointed the Equity Committee.
The members of the Equity Committee are:
1. Trilon Dominion Partners, L.L.C.
250 Park Avenue, Suite 2020
New York, NY 10017
2. Harold Korslin
Perlick Company
18665 Rolling Meadow Court
Brookfield, WI 53045
3. James Morris
40 Halkin Lane
Berkeley, CA 94708
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<PAGE>
4. Carl D. Robinson
Southwestern Insurance Marketing
18800 South Washington
Suite 312
Amarillo, TX 79102
5. James R. Arabia
9404 Genesee Avenue, Suite 330
La Jolla, CA 92037
6. Michael Dunn
2409 Weiler Blvd.
Fort Worth, TX 76112
7. Kenneth Giddens
555 Republic Drive
Plano, TX 75074
The Equity Committee retained Pryor, Cashman, Sherman & Flynn as its
counsel, Southwest Securities, Inc., as its financial advisor, and Lightfoot
Guest Wagner & Co. as its accountants.
5. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
As part of the PennCorp Sales Transaction, the Debtors requested Bankruptcy
Court approval of the assumption of substantially all of their executory
contracts and unexpired leases and the assignment thereof to PennCorp pursuant
to Section 365 of the Bankruptcy Code. As part of the Order Approving the
PennCorp Sales Transaction, the Bankruptcy Court approved the assumption and
assignment of the designated executory contracts. The Debtors have also filed
other motions to either assume or reject various executory contracts and
unexpired leases during the Chapter 11 Case.
The Debtors also filed the Motion for Approval of the Rejection of the
Executory Contract with C. Fred Rice and the Motion for Approval of the
Rejection of the Executory Contract with Robert T. Shaw. The Debtors, Shaw and
Rice agreed to an order on March 26, 1996 to terminate such contracts without
resolution of the issue as to whether such contracts were executory.
Any executory contract not expressly assumed on or before the Confirmation
Date of the Joint Plan shall be deemed rejected. The Debtors do not believe that
any material unassumed executory contracts exist at the present time.
6. EXTENSIONS OF EXCLUSIVITY
Pursuant to Section 1121(b) of the Bankruptcy Code, the Debtors' exclusive
period for filing a plan would have ended on February 7, 1996; and, pursuant to
Section 1121(c), the Debtors' exclusive period for soliciting acceptances of a
plan by impaired classes would have ended on or about April 7, 1996. On February
2, 1996, the Debtors filed their Motion to Extend the Debtors' Exclusivity
Periods Pursuant to 11 U.S.C. Section 1121(d) (the "First Exclusivity Motion"),
requesting that the Bankruptcy Court extend the Section 1121(b) and (c)
exclusivity periods. On February 6, 1996, the Bankruptcy Court granted the
Debtors' First Exclusivity Motion.
The Debtors requested a second extension of their exclusivity periods on
March 3, 1996. The Bankruptcy Court granted the second extension on March 26,
1996, allowing the Debtors until May 31, 1996, to file a plan and 90 days
thereafter for soliciting acceptances of such plan by impaired classes. On May
31, 1996, the Debtors filed a plan which, with the filing of the Joint Plan, has
been effectively withdrawn.
Following the Bankruptcy Court's approval of the second extension motion,
the Equity Committee, the Creditors Committee and the Shaw Group filed motions
seeking the termination of the Debtors' exclusive periods, and on July 2, 1996,
the Court entered the Agreed Order Granting Continuance of Hearings (the "Agreed
Continuance Order") with respect to such motions. Pursuant to the terms of the
Agreed Continuance Order, the Debtors retained the exclusive right to file a
plan of reorganization until August 16, 1996, and the Debtors further agreed not
to seek a further extension of the exclusive period beyond August 16, 1996. On
August 26, 1996, the Creditors Committee filed a plan which, with the filing of
the Joint Plan, has been effectively withdrawn.
7. AUTOMATIC STAY LITIGATION
As of the date hereof, no motion for relief from the automatic stay has been
filed by any party in interest.
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<PAGE>
8. SALES OF PROPERTY
Except with respect to the PennCorp Sales Transaction, as of the date of
this Disclosure Statement, the Debtors have not requested Bankruptcy Court
authority for any sales of property of the estate outside the ordinary course of
business.
9. PREFERENCES
Under federal bankruptcy law, a debtor in possession may avoid prepetition
transfers of assets of a debtor as "preferential transfers." To constitute a
preferential transfer, the transfer must be (1) of the debtor's property; (2) to
or for antecedent debt; (3) made while the debtor was insolvent; (4) made within
90 days before the filing of a bankruptcy petition or made within one year if to
an "insider"; and (5) a transfer that enables the creditor to receive more than
it would receive under Chapter 7 liquidation of the debtor's assets. For this
purpose, the Bankruptcy Code creates a rebuttable presumption that the debtor
was insolvent during the 90 days immediately before the filing of the bankruptcy
petition. The Debtors have conducted an initial review of payments made within
90 days of the filing of the petitions, and believe any potential preference
recoveries within such period to be immaterial.
10. FRAUDULENT TRANSFERS
Fraudulent transfer law generally is designed to avoid two types of
transactions: (i) conveyances that constitute "actual fraud" upon creditors, and
(ii) conveyances that constitute "constructive fraud" upon creditors. In the
bankruptcy context, fraudulent transfer liability arises under Section 548 and
544 of the Bankruptcy Code. Section 548 permits the debtor in possession to
"reach back" for a period of one year to avoid fraudulent transfers made by the
debtors or fraudulent obligations incurred by the debtors, and Section 544
permits the debtor in possession to apply applicable state fraudulent transfer
law to any such action. Assuming that Texas state law were to apply, the debtor
in possession could challenge conveyances, transfers or obligations made or
incurred by the Debtors within the past four years if a number of technical
requirements are met. The Debtors have conducted an initial review of payments
made within one year of the filing of the petition, and believe any potential
fraudulent transfer recoveries within such period to be immaterial.
11. TAX SETTLEMENT
On August 23, 1996, a Joint Motion for Approval of Agreement for Compromise
and Settlement of Tax Claims and Certain Tax-Related Liabilities of the Debtors
(the "Tax Settlement Motion") was filed in the Bankruptcy Court by ICH, SWL
Holding, Care, FMI, Southwestern Life, Constitution, Union Bankers, Marquette,
BML, SFC, PennCorp, and the United States of America, on behalf of its agency,
the IRS (collectively, the "Movants"). CNC, Shaw, Rice and Carlisle subsequently
filed with the Bankruptcy Court their statement supporting the relief requested
in the Tax Settlement Motion and undertaking to perform their respective
portions of the settlement.
The Tax Settlement Motion reflected the fact that the IRS had originally
asserted that the Movants might owe as much as $200 million in taxes for the
years 1990-1995. Following a lengthy and detailed review, information gathering
and negotiations, the Movants sought the Bankruptcy Court's approval of a global
and final compromise and settlement of those liabilities with the IRS. Under the
terms of the Tax Settlement Motion, generally, (i) the federal income tax
liabilities of ICH, Southwestern Life, Constitution, Union Bankers, Marquette,
ICH Funding Corporation, Modern American, Western, BML, and Philadelphia
American for all tax periods ended on or before December 31, 1995, were
determined with no additional taxes due; (ii) the federal income tax liabilities
of CFLIC, Shaw, Rice, and Carlisle for all tax periods ended on or before
December 31, 1994, were resolved; (iii) the federal income tax liabilities of
each corporation listed on Exhibit A attached to the Tax Settlement Motion
(other than ICH, Southwestern Life, Constitution, Union Bankers, Marquette, ICH
Funding, Modern American, Western Pioneer, BML, or Philadelphia American), for
all tax periods ended on or before December 31, 1995, in which such corporation
was included in a consolidated federal income tax return filed by Modern
American, ICH, or a subsidiary of ICH as set forth on such Exhibit A were
finally determined with no additional tax due; and (iv) ICH's federal income tax
indemnification obligations to certain indemnified parties were also resolved
through the Tax Settlement. In addition, ICH will receive approximately $3.4
million from the IRS. Shaw, Rice, Carlisle, and CNC, collectively, are also
required to pay $550,000 to ICH. The Debtors will retain no net operating
losses, general business credits or other tax credits or capital loss carryovers
and will have no earnings and profits accounts remaining from tax years ending
prior to January 1, 1996.
On September 13, 1996, the Bankruptcy Court approved the Tax Settlement
Motion and authorized the Debtors, on behalf of themselves and their
consolidated subsidiaries, to consummate the terms of the Tax Settlement Motion
as described above. The Order approving the Tax Settlement Motion became a Final
Order on September 23, 1996.
After consummation of the Tax Settlement Motion, provided that there is no
showing of fraud or malfeasance or misrepresentation of a material fact (as
required to challenge agreements made pursuant to Section 7121 of the Internal
Revenue Code), the IRS will not assess any taxes, interest, or penalties or
propose any adjustments to or with respect to
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<PAGE>
(a) the Debtors or any entity identified on Exhibit A to the Tax Settlement
Motion for any tax period ended on or before December 31, 1995, or (b) CNC,
Shaw, Rice, or Carlisle for any tax period ended on or before December 31, 1994.
PennCorp and SFC have agreed that, at such time as (i) the Order approving
the Tax Settlement Motion becomes final; (ii) all tax liabilities of the Debtors
and their consolidated subsidiaries for periods prior to the closing of the
PennCorp Sales Transaction have been disposed of, adjudicated, or settled or
provision has been made for the payment thereof in a manner reasonably
acceptable to PennCorp and SFC; and (iii) PennCorp and SFC are satisfied in
their reasonable discretion that none of the companies acquired, directly or
indirectly, from the Debtors has any liability for any such tax liabilities, all
funds in the PennCorp Escrow in excess of $35 million will be returned to ICH
and, therefore, made available for distribution in accordance with the Joint
Plan. See "Certain Risk Factors to be Considered--Factors Relating to the
Liquidating Trust-- Availability of PennCorp Sales Transaction Escrow Amount."
As reflected on EXHIBIT D to this Disclosure Statement, the Tax Settlement
will result in the receipt by the Debtors of the $3.95 million described above,
the release of a substantial amount of the PennCorp Escrow in excess of $35
million and the elimination of the Debtors' tax liability of approximately $11.1
million.
12. TENNECO SETTLEMENT
In 1986, ICH acquired several insurance companies from Tenneco Inc.
("Tenneco") and issued a promissory note in payment of the purchase price (the
"Promissory Note"). A portion of the Promissory Note remains due and owing by
ICH, and Tenneco has filed a proof of claim in the amount of $21,952,012 based
upon the Promissory Note.
In connection with the acquisition, Tenneco provided indemnification to ICH
with respect of certain federal income taxes. ICH maintains it is entitled to
indemnification payments of approximately $37,500,000 pursuant to such
indemnification, and Tenneco maintains that its indemnification liability is for
less than such amount.
The controversy regarding the validity and extent of the claims of ICH and
Tenneco is highly complex. Resolution of such controversy would likely require a
judicial determination of complex issues involving several different entities
over extended periods of time. Such litigation would likely last for a lengthy
period of time and entail substantial expense. Since the outcome cannot be
predicted with certainty and involves risks of adverse consequences to both
parties, the Debtors and Tenneco have reached a compromise and settlement of all
Claims between them. Pursuant to the settlement with Tenneco, Tenneco will pay
ICH $18.5 million and ICH and Tenneco will exchange mutual releases.
As reflected on EXHIBIT D to this Disclosure Statement, the Tenneco
Settlement will result in the receipt of $18.5 million by ICH, the write-off of
the recoverable on tax indemnification of $24.6 million and elimination of
Tenneco's Claim of $21.952 million.
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<PAGE>
VI. FINANCIAL STATEMENTS OF THE DEBTORS
A. PROJECTED CONSOLIDATED BALANCE SHEET OF THE DEBTORS AT DECEMBER 31,
1996:
ASSETS
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash and short-term investments.................................................... $ 186,078
Restricted cash and short-term investments......................................... 35,000
Investments in subsidiaries held for sale.......................................... 89,409
Investment in FMI, debtor in possession............................................ 9,260
Debt securities, at amortized cost (SFC Note)...................................... 40,000
CFSB Interest...................................................................... 18,000(1)
Real estate, at lower of cost or fair market value................................. 2,585
Other assets....................................................................... 469
---------
TOTAL ASSETS..................................................................... $ 380,805
---------
---------
</TABLE>
LIABILITIES/CLAIMS
(IN THOUSANDS)
<TABLE>
<S> <C>
Post petition liabilities not subject to compromise................................ $ 5,216
Priority Tax Claims: Kentucky Tax Claim............................................ 69
Retiree Benefits................................................................... 5,565
Liabilities subject to compromise:
Secured-Ozark (Class 1).......................................................... 368
Secured-Sayyah (Class 2)......................................................... --
Tenneco (Class 3)................................................................ --
Unsecured (Class 5):
11 1/4 due 1996................................................................ 266,425
11 1/4 due 2003................................................................ 94,836
Advances from FMI.............................................................. 6,305
Shaw/Rice Contract (Disputed).................................................. 5,775
Sayyah (Disputed).............................................................. 3,244
Castle......................................................................... 3,039
Other.......................................................................... 461
---------
Total Class 5.................................................................. 380,085
---------
TOTAL LIABILITIES/CLAIMS........................................................... $ 391,303
---------
---------
STOCKHOLDERS' DEFICIT.............................................................. $ 10,498
</TABLE>
- ------------------------------
(1) The value of the CFSB Interest is subject to considerable uncertainty and,
historically, no value for the CFSB Interest has been reflected in ICH's
GAAP financial statements. At the Petition Date, ICH assigned a value of $18
million for the CFSB Interest, based on prior valuations by the Debtors of
the CFSB Interest, CFSB's financial condition at the Petition Date, and
consideration of current uncertainties regarding the CFSB Interests. The
actual amount ultimately realized for the CFSB Interest could vary
significantly from the assigned value of $18 million. See "Certain Risk
Factors to be Considered--Factors Relating to the Liquidating Trust--Profits
Interest in CFSB Corporation."
NOTES TO PROJECTED CONSOLIDATED DECEMBER 31, 1996, UNAUDITED BALANCE SHEET
The projected consolidated balance sheet of the Debtors has been prepared by
the Debtors as of December 31, 1996. The Projected Consolidated Balance Sheet
includes adjustments to the December 31, 1995, balance sheet, which was prepared
according to GAAP on a going concern basis as shown on EXHIBIT C to this
Disclosure Statement, to reflect the actual operations of ICH and its
subsidiaries from January 1, 1996, to September 30, 1996, and the projected
operations from September 30, 1996, to December 31, 1996. The projected
consolidated balance sheet is not necessarily prepared according to GAAP, but
includes management's best estimates as to the market values of the Debtors'
assets. The assumptions used to project balance sheet information of the Debtors
as of December 31, 1996, are described below and shown in detail in EXHIBIT D to
this Disclosure Statement.
The Projected Consolidated Balance Sheet and EXHIBIT D have been prepared to
satisfy certain requirements of the Bankruptcy Code. These statements were not
prepared with a view toward compliance with published guidelines of the American
Institute of Certified Public Accountants regarding forecasts. Also, these
statements do not include all of the
26
<PAGE>
necessary disclosures in order to conform with GAAP. The Debtors did not make
all the disclosures required by GAAP, as the Debtors believe that such
disclosures are not required for the proposed Joint Plan transactions under
Section 1125 of the Bankruptcy Code. The Debtors believe that if the Projected
Consolidated Balance Sheet at December 31, 1996, and EXHIBIT D contained all of
the disclosures required by GAAP they would not materially change. The Debtors'
independent auditors and financial advisors have not examined, reviewed or
compiled these financial statements and, accordingly, assume no responsibility
for them.
Adjustments taken into account to roll forward the December 31, 1995,
balance sheet to September 30, 1996, which reflect the actual consolidated
operating results of the Debtors from January 1, 1996, through September 30,
1996, include the collection of the $10 million receivable due from the PennCorp
Sales Transaction and recognition of the CFSB Interest at an assigned value of
$18,000,000. The actual amount ultimately realized for the CFSB Interest could
vary significantly from the assigned value of $18 million. See "Certain Risk
Factors to be Considered--Factors Relating to the Liquidating Trust--Profits
Interest in CFSB Corporation."
Adjustments from September 30, 1996, through December 31, 1996, include:
- a $10.8 million reduction to Investment in Subsidiaries to reflect the
market value of ICH's remaining subsidiaries, primarily BML. At September
30, 1996, at market value BML had the following: approximately $28 million
in short-term investments ($3.5 million of which is subject to the Modern
American/Western escrow discussed under "Certain Risk Factors to be
Considered--Factors Relating to the Liquidating Trust--Modern
American/Western and Philadelphia American Indemnification Obligations"),
$23 million in corporate bonds and structured securities, $15 million in
limited partnership interests, $14 million in real estate, insurance
licenses valued at $5 million and miscellaneous other assets.
Substantially all of the short-term investments and corporate bonds and
structured securities portfolio are investment grade and highly liquid.
Excluding reserves for pending policyholder litigation and potential
indemnification claims, liabilities, net of reinsurance, are immaterial;
- the impact of the Tax Settlement described herein under "The Chapter 11
Case--Continued Administration Under Chapter 11--Tax Settlement;"
- the impact of the Tenneco Settlement described herein under the caption
"Discussion of the Joint Plan--Tenneco Settlement;" and
- the projected operating results of ICH from September 30, 1996, through
December 31, 1996, including the projected collection of $7.8 million from
a former subsidiary, payment of tax liabilities of former subsidiaries,
accruals for management bonuses and adjustment of a contingent Kentucky
tax liability to the amount filed in a proof of claim. The ultimate amount
owed for the Kentucky tax liability could be substantially greater than
the amount reflected on EXHIBIT D to this Disclosure Statement.
The projected consolidated balance sheet of the Debtors as of December 31,
1996, and the financial information set forth on EXHIBIT D to this Disclosure
Statement are forward-looking, and the values reflected therein are based on
management's estimates of value as of December 31, 1996, and do not include any
reserves for contingent and unliquidated liabilities of the Debtors. In
addition, the projected balance sheet does not include an accrual for any taxes
which may be due upon the transfer of assets to the Trust. See "Certain Risk
Factors to be Considered--Factors Relating to the Liquidating Trust--Potential
Tax Liabilities." There can be no assurance that such values will be achieved,
and the values are subject to significant change if the assumptions and
estimates described above and reflected on EXHIBIT D prove to be incorrect.
Actual values as of December 31, 1996, may differ materially from those
reflected in this Disclosure Statement. See "Summary--Classes and Treatment by
Class" and "Certain Risk Factors to be Considered--Factors Relating to the
Liquidating Trust--Projected Recovery."
B. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR 1995
The unaudited consolidated financial statements of the Debtors for the
fiscal year ending December 31, 1995, are attached as EXHIBIT C of this
Disclosure Statement. For purposes of comparison, the audited consolidated
balance sheet of the Debtors for the fiscal year ending December 31, 1994, and
the audited consolidated statements of earnings of the Debtors for the years
ended December 31, 1994 and 1993, are also attached as EXHIBIT C. As these
financial statements have been prepared on a going concern basis, the values
assigned to the asset categories contained therein do not represent management's
opinions as to the value of those assets in liquidation.
VII. DISCUSSION OF THE JOINT PLAN
A summary of the principal provisions of the Joint Plan and the treatment of
Classes of Claims and Interests is set forth below. The following discussion is
qualified in its entirety by reference to the Joint Plan attached as EXHIBIT B
to this Disclosure Statement.
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<PAGE>
A. PURPOSE OF THE JOINT PLAN; GENERAL JOINT PLAN REQUIREMENTS
The Joint Plan represents a highly negotiated compromise agreed to among the
Debtors, the Creditors Committee, the Equity Committee and certain other
parties.
The Joint Plan divides Claims and Interests into Classes and sets forth the
treatment afforded to each Class, as provided in Section 1123 of the Bankruptcy
Code. Under the Bankruptcy Code, a class of claims or interests is impaired
under a plan, unless a plan (i) leaves unaltered the legal, equitable, and
contractual rights of the holder of such claims or interests, or (ii)
notwithstanding any contractual provision or law that entitles the holder of the
claim or interest to demand or receive accelerated payment after the occurrence
of a default, cures any such default, reinstates the maturity of the claim or
interest as it exists before the default, and compensates the holder of the
claim or interest for any damages incurred as a result of any reasonable
reliance by such holder upon any provision or law that entitles the holder of
such claim or interest to demand accelerated payment. For purposes of
solicitation of the Joint Plan, all Classes of Claims against and Interests in
ICH are deemed to be Impaired.
Section 1122 of the Bankruptcy Code requires that, except for certain
unsecured claims that may be classified for administrative convenience, a plan
of reorganization may place a claim or interest in a particular class only if
such claim or interest is substantially similar to the other claims or interests
of such class. The Plan Proponents believe that the Joint Plan classifies all
Claims or Interests in compliance with the provisions of Section 1122. If the
Bankruptcy Court finds that a different classification is required in order for
the Joint Plan to be confirmed, it is the present intent of the Plan Proponents
to modify the Joint Plan, consistent with the overall settlement of the Plan
Proponents evidenced by the Joint Plan, to provide any reasonable classification
required by the Bankruptcy Court for confirmation and to use the acceptances
received from any creditor or interest holder pursuant to this solicitation for
the purpose of obtaining the approval of the Class or Classes of which such
creditor or interest holder ultimately is deemed to be a member. Any such
reclassification of Claims or Interests could affect the Class in which the
creditor or interest holder was initially a member, or any other Class under the
Joint Plan, by changing the composition of such class and the required vote
thereof for approval of the Joint Plan.
Section 1123(a)(4) of the Bankruptcy Code provides that a plan of
reorganization must provide the same treatment for each claim or interest of a
particular class, unless the holder of a particular claim or interest agrees to
a less favorable treatment of its claim or interest. While the Plan Proponents
believe that the Joint Plan complies with Section 1123(a)(4), if the Bankruptcy
Court finds that the Joint Plan violates Section 1123(a)(4) and the creditors or
interest holders affected do not consent to the treatment afforded them under
the Joint Plan, the Bankruptcy Court could deny confirmation of the Joint Plan.
To the extent permitted by the Bankruptcy Code and the Bankruptcy Court,
acceptance of the Joint Plan by any Claimant or Interest holder pursuant to this
solicitation will be deemed to be a consent to the Joint Plan's treatment of
such Claimant or Interest holder, regardless of the identity of the Class within
which such Claimant or Interest holder is ultimately classified by the
Bankruptcy Court.
In order for the holder of a Claim or Interest to participate in the Joint
Plan and receive the treatment afforded to the applicable Class, such holder's
Claim or Interest must be Allowed. The requirements for a Claim or Interest to
be Allowed are described under "Voting Procedures--Persons Entitled to Vote on
the Joint Plan."
B. TREATMENT OF CLASSES OF CLAIMS AND INTERESTS
1. SUMMARY OF JOINT PLAN
The Joint Plan proposes the combined reorganization of ICH and the
liquidation and distribution of the Debtors' assets which are not being retained
by Reorganized ICH.
As is more fully detailed below, on the Effective Date, certain of the
Debtors' remaining assets (the "Retained Assets") will be retained by
Reorganized ICH free and clear of all liens, claims and encumbrances. All other
assets of the Debtors will be transferred to the Trust (the "Trust Assets").
Title to the Trust Assets will vest in the Trust free and clear of all liens,
claims, encumbrances, and Interests, except the right of the holders of ICH
Classes 1, 2, 3, 4 and 5, Care Classes 1 and 2, and SWL Holding Classes 1 and 2
to receive payment from the Trust under the Joint Plan. The Debtors will execute
all documents or other instruments as may be necessary or requested by the
Managing Trustee to convey and to confirm title to the Trust Assets to the
Trust. In addition, the Managing Trustee will promptly disburse from the Trust
when due: (i) contractual bonus payments to Susan A. Brown and Rodney D. Moore,
in accordance with their Bankruptcy Court approved employment contracts; (ii)
all Allowed Administrative Claims; and (iii) all other Claims required to be
paid under the Joint Plan.
The compensation of the Trustee(s) will be established in the Trust
Agreement and will be paid from the Trust Assets. The expenses of the Trustee(s)
will also be reimbursed from the Trust Assets.
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<PAGE>
For a discussion of the assets of the Debtors' Estates that will be
transferred to the liquidating trust, see "The Trust-- Trust Assets and
Liquidation of the Trust Assets," and for discussions of the assets of the
Debtors' Estates that will be retained by Reorganized ICH, see "Reorganized
ICH--Assets of Reorganized ICH."
2. ORDERLY LIQUIDATION OF TRUST ASSETS
The Trust will manage, liquidate, and distribute the assets of the Trust in
accordance with the applicable provisions of the Joint Plan and the Trust
Agreement. The Trust will be governed by the Trust Agreement, and will be
managed by a Managing Trustee and three Supervisory Trustees. A form of Trust
Agreement is attached as Exhibit A to the Joint Plan, and is subject to
amendment prior to the Confirmation Hearing. See "The Trust."
3. CLASSES OF CLAIMS
ICH CLASSES.
All of the Claims against and Interests in ICH are classified within seven
classes.
ICH CLASS 1 consists of the Claim of Ozark National Life Insurance Company
which is based on a mortgage loan secured by a lien on Perry Park.
ICH CLASS 2 consists of the Claim of Victor A. Sayyah, which claim is based
on a promissory note made by a predecessor of ICH with a current outstanding
balance of approximately $30 million. The Debtors intend to file an objection to
the Claim of Sayyah, and such claim is also subject to offset against an ICH
loan to Sayyah with a current outstanding balance of approximately $27 million.
The Debtors believe that, based upon their objection and the offset of Debtors'
debt, no balance should be found by the Bankruptcy Court to be due to Sayyah.
However, if any balance is found by the Bankruptcy Court to be due to Sayyah
after giving effect to the offset, such balance shall be treated as an ICH Class
5 Claim.
ICH CLASS 3 consists of the Claim of Tenneco. Tenneco's Claim against ICH is
based upon an unsecured note of ICH due in 1996. However, Tenneco's Claim
against ICH is subject to offset against a debt owed by Tenneco to ICH. ICH and
Tenneco have negotiated a settlement of Tenneco's Claim, which will be approved
by the Bankruptcy Court under the Joint Plan. For a discussion of the terms of
settlement with Tenneco, see "Discussion of the Joint Plan--Tenneco Settlement."
ICH CLASS 4 consists of all other Secured Claims against ICH, if any. The
Debtors do not know of any such other Secured Claims and believe no such Claims
exist.
ICH CLASS 5 consists of all Unsecured Claims against ICH, including the
Claims of holders of the ICH 11 1/4% Senior Subordinated Notes due 1996 and the
ICH 11 1/4% Senior Subordinated Notes due 2003. ICH Class 5 also includes
Allowed Securities-Related Claims, if any, related to Notes.
ICH CLASS 6 consists of the equity interests represented by the duly
authorized, validly issued, and outstanding 8,000,000 shares of the $1.75
Convertible Exchangeable Preferred Stock Series 1986-A, issued by ICH, and
Allowed Securities-Related Claims, if any, related to Preferred Stock.
ICH CLASS 7 consists of the equity interests represented by the duly
authorized, validly issued, and outstanding 48,644,112 shares of common stock,
$1.00 par value per share, issued by ICH, and Allowed Securities-Related Claims,
if any, related to Common Stock.
SWL CLASSES.
All of the Claims against and Interests in SWL Holding are classified within
three classes.
SWL CLASS 1 consists of all Secured Claims against SWL Holding, if any. The
Debtors do not know of any Secured Claims against SWL Holding and believe that
no such Claims exist.
SWL CLASS 2 consists of all Unsecured Claims against SWL Holding, if any.
The Debtors do not know of any Unsecured Claims against SWL Holding and believe
that no such Claims exist.
SWL CLASS 3 consists of the outstanding common stock of SWL Holding held by
ICH.
CARE CLASSES
All of the Claims against and Interests in Care are classified within three
classes.
CARE CLASS 1 consists of all Secured Claims against Care, if any. The
Debtors do not know of any Secured Claims against Care and believe that no such
Claims exist.
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<PAGE>
CARE CLASS 2 consists of all Unsecured Claims against Care, if any. The
Debtors do not know of any Unsecured Claims against Care and believe that no
such Claims exist.
CARE CLASS 3 consists of the outstanding common stock of Care held by ICH.
For a discussion of the amount of Claims within each of the above described
Classes, see "Summary--Classes and Treatment by Class."
4. TREATMENT OF CLAIMS
TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN ICH.
All classified Claims against and Interests in ICH, except Administrative
and Priority Claims, will be treated as follows:
Secured Claims.
ICH CLASS 1--SECURED CLAIM OF OZARK. On the Initial Distribution Date, the
Allowed Amount of the Secured Claim of Ozark will be paid in cash in full by the
Trust. The Allowed Amount of such Claim is the sum of (a) the outstanding
balance of the promissory note from ICH to Ozark, which is $323,863.19, (b)
accrued but unpaid prepetition interest of $9,804.62, (c) post-petition interest
from the Petition Date until such Claim is paid in full, calculated at the
contract rate set forth in such promissory note, and (d) reasonable fees and
expenses, if any, incurred by Ozark as provided in Section 506(b) of the
Bankruptcy Code. Ozark will retain its lien on the collateral securing such
Claim until such Claim has been paid in full hereunder, at which time Ozark will
release its lien.
ICH CLASS 2--SECURED CLAIM OF SAYYAH. On the Initial Distribution Date, the
Allowed Secured Claim of Sayyah will be satisfied by an offset of the Allowed
Amount of Sayyah's Claim against the amount of Sayyah's obligation to ICH.
ICH CLASS 3--TENNECO. The Tenneco Claim is the subject of the Tenneco
Settlement anticipated by the Debtors to be presented to the Bankruptcy Court in
the Tenneco Settlement Motion prior to the Confirmation Hearing. If the Tenneco
Settlement Motion has been granted by Order of the Bankruptcy Court on or before
the Confirmation Date, then this Class will be moot and the Tenneco Settlement
will be in exchange for and in full satisfaction of all Claims of Tenneco. If
the Tenneco Settlement has not been approved prior to Confirmation, Confirmation
of the Plan will constitute the Bankruptcy Court's approval of the Tenneco
Settlement. If the Tenneco Settlement Motion has been disapproved by the
Bankruptcy Court prior to Confirmation, the Allowed Secured Claim of Tenneco
will be satisfied by an offset of the Allowed Amount of Tenneco's Claim against
the amount of Tenneco's obligation to ICH. See "Discussion of the Joint
Plan--Tenneco Settlement."
ICH CLASS 4--OTHER SECURED CLAIMS. Each ICH Class 4 Claim will be satisfied
by payment in cash in full from the Trust in the Allowed Amount of such Secured
Claim or by delivery to the holder of an Allowed ICH Class 4 Claim of the
property securing such Claim, at the election of the Trustee, on the later of
(i) the Initial Distribution Date or (ii) the date such payment is due under
applicable law.
Unsecured Claims.
ICH CLASS 5--GENERAL UNSECURED CLAIMS. In exchange for and in full
settlement of all ICH Class 5 Claims, the holders of Allowed ICH Class 5 Claims
will receive a beneficial interest in the proceeds of all Trust Assets, which,
following payment of or provision for all other Claims as provided in Article II
and Section 4.1(a) of the Joint Plan, will be distributed to the ICH Class 5
Claimants according to the following procedures:
(a) on the Initial Distribution Date, a Pro Rata distribution of
Available Cash determined as of the Effective Date; and
(b) subsequent to the Initial Distribution Date, Pro Rata distributions
of Available Cash as and when from time to time determined and declared by
the Trustee in accordance with the provisions of the Trust Agreement.
ICH Interests.
ICH CLASS 6--PREFERRED STOCK. In exchange for and in full satisfaction of
all Interests related to Preferred Stock, Record Holders of Allowed ICH Class 6
Interests on the Effective Date will be entitled to receive, for each share of
Preferred Stock held, 0.2 shares of Reorganized ICH Common Stock, rounded to the
nearest whole number of shares; PROVIDED, HOWEVER, that:
(a) no distribution of Reorganized ICH Common Stock will be made with
respect to any shares of Preferred Stock held by any Beneficial Holder who
holds less than 14 shares of Preferred Stock and the ICH Class 6 Interest of
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such Beneficial Holders will be reduced to zero (and Record Holders who are
nominee holders for more than one such Beneficial Holder will not aggregate
holdings of such Beneficial Holders for purposes of determining the
distribution to which such Record Holder may be entitled);
(b) any Beneficial Holder of an Allowed ICH Class 6 Interest that holds,
in the aggregate, between 14 and 650 shares of Preferred Stock (or that
agrees to voluntarily reduce its Class 6 Interest to 650 shares of Preferred
Stock), or any Record Holder specifically authorized by that Beneficial
Holder, may elect at the time it transmits its Securities pursuant to a
Letter of Transmittal to receive a single cash payment of $.36 per share of
Preferred Stock in lieu of receiving shares of Reorganized ICH Common Stock;
and
(c) any Beneficial Holder of an ICH Class 6 Interest, or any Record
Holder specifically authorized by that Beneficial Holder, may agree in
writing with the Equity Committee prior to the Effective Date, or with
Reorganized ICH on or after the Effective Date, to accept any lesser amounts
of cash or Reorganized ICH Common Stock in full satisfaction of its ICH
Class 6 Interest.
Holders of Allowed Securities-Related Claims related to Preferred Stock, if
any, will receive no distributions except as provided in Section 11.4 of the
Joint Plan.
ICH CLASS 7--COMMON STOCK. In exchange for and in full satisfaction of all
Interests related to Common Stock, Record Holders of Allowed ICH Class 7
Interests on the Effective Date will be entitled to receive, for each share of
Common Stock held, 0.0269 shares of Reorganized ICH Common Stock, rounded to the
nearest whole number of shares; PROVIDED, HOWEVER, that:
(a) no distribution of Reorganized ICH Common Stock will be made with
respect to any shares of Common Stock held by any Beneficial Holder who
holds less than 101 shares of Common Stock and the ICH Class 7 Interest of
such Beneficial Holders will be reduced to zero (and Record Holders who are
nominee holders for more than one such Beneficial Holder will not aggregate
holdings of such Beneficial Holders for purposes of determining the
distribution to which such Record Holder may be entitled);
(b) any Beneficial Holder of an Allowed ICH Class 7 Interest that holds,
in the aggregate, between 101 and 5,000 shares of Common Stock (or that
agrees to voluntarily reduce its ICH Class 7 Interest to 5,000 shares of
Common Stock), or any Record Holder specifically authorized by that
Beneficial Holder, may elect at the time it transmits its Securities
pursuant to a Letter of Transmittal to receive a single cash payment of $.05
per share of Common Stock in lieu of receiving shares of Reorganized ICH
Common Stock;
(c) any Beneficial Holder of an ICH Class 7 Interest, or any Record
Holder specifically authorized by that Beneficial Holder, may agree in
writing with the Equity Committee prior to the Effective Date, or with
Reorganized ICH on or after the Effective Date, to accept any lesser amounts
of cash or Reorganized ICH Common Stock in full satisfaction of its Class 7
Interest.
Holders of Allowed Securities-Related Claims related to Common Stock, if
any, will receive shares of Reorganized ICH Common Stock calculated in
accordance with Section 11.5 of the Joint Plan.
TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN SWL HOLDING.
All classified Claims against and Interests in SWL Holding, except
Administrative and Priority Claims, will be treated as follows:
SWL HOLDING CLASS 1--SECURED CLAIMS. Each SWL Holding Class 1 Claim will be
satisfied by payment in cash in full by the Trust in the Allowed Amount of such
Secured Claim or by delivery to the holder of an Allowed SWL Holding Class 1
Claim of the property securing such Claim, at the election of the Trustee, on
the later of (i) the Initial Distribution Date or (ii) the date such payment is
due under applicable law.
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SWL HOLDING CLASS 2--GENERAL UNSECURED CLAIMS. In exchange for and in full
settlement of all SWL Holding Class 2 Claims, the holders of SWL Holding Class 2
Claims will be paid in cash by the Trust from assets originating in the Estate
of SWL Holding the Allowed Amount of such Claim on the later of (i) the Initial
Distribution Date or (ii) the date such payment is due under applicable law.
SWL HOLDING CLASS 3--COMMON STOCK. On the Effective Date, Reorganized ICH
will retain the common stock in SWL Holding after the transfer of all assets of
SWL Holding to the Trust.
TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN CARE.
All classified Claims against and Interests in Care, except Administrative
and Priority Claims, will be treated as follows:
CARE CLASS 1--SECURED CLAIMS. Each Care Class 1 Claim will be satisfied by
payment in full in cash by the Trust in the Allowed Amount of such Secured Claim
or by delivery to the holder of an Allowed Care Class 1 Claim of the property
securing such Claim, at the election of the Trustee, on the later of (i) the
Initial Distribution Date or (ii) the date such payment is due under applicable
law.
CARE CLASS 2--GENERAL UNSECURED CLAIMS. In exchange for and in full
settlement of all Care Class 2 Claims, the holders of Care Class 2 Claims will
be paid in cash by the Trust from assets originating in the Estate of Care in
the Allowed Amount of such Claim on the later of (i) the Initial Distribution
Date or (ii) the date such payment is due under applicable law.
CARE CLASS 3--COMMON STOCK. On the Effective Date, Reorganized ICH will
retain all of the common stock in Care after the transfer of all non-Retained
Assets of Care to the Trust.
C. TREATMENT OF NON-CLASSIFIED CLAIMS
In accordance with Section 1123 of the Bankruptcy Code, the Joint Plan does
not classify Administrative Claims, wage related claims (if any), employee
benefit plan claims (if any), and Claims held by governmental units for taxes.
1. ADMINISTRATIVE CLAIMS
Each holder of an Administrative Claim except as otherwise set forth in
Article II of the Joint Plan (and specifically excluding Administrative Tax
Claims) shall receive from the Trust either (i) with respect to Administrative
Claims which are Allowed Claims on the Effective Date, the amount of such
holder's Allowed Claim in one cash payment on the Initial Distribution Date,
(ii) with respect to Administrative Claims that become Allowed Claims after the
Effective Date, the amount of such holder's Allowed Claim in one cash payment on
the applicable Distribution Date, or (iii) such other treatment agreed upon in
writing by the Debtors and such holder; PROVIDED, HOWEVER, that any such
Administrative Claim representing a liability incurred in the ordinary course of
business by any of the Debtors shall be paid by the Trust in accordance with the
terms and conditions of the particular transaction giving rise to such liability
and any agreements relating thereto. In connection herewith, the estimated
amounts of such Administrative Claims shall on the Effective Date be reserved by
the Trust with respect to payment of such Allowed Administrative Claims and
shall not be treated as Available Cash.
FEE CLAIMS. Each professional person whose retention with respect to the
Debtors' cases has been approved by the Bankruptcy Court and who holds, or
asserts, an Administrative Claim that is a Fee Claim will be required to file
with the Bankruptcy Court a final fee application within sixty days after the
Effective Date and to serve notice thereof on all parties entitled to such
notice pursuant to the Order Establishing Interim Procedures and Guidelines for
Compensation of Professional Persons. The failure to file timely the fee
application as required under Section 2.1(b) of the Joint Plan will result in
the Fee Claim being forever barred and discharged. A Fee Claim, with respect to
which a Fee Application has been properly Filed pursuant to Section 2.1(b) of
the Joint Plan, will be an Administrative Claim only to the extent allowed by
Final Order. Not later than 15 days following the Effective Date, each such
professional person will file an estimate of its final Fee Claim on all parties
entitled to such notice pursuant to the Order Establishing Interim Procedures
and Guidelines for Compensation of Professional Persons. The estimated amounts
of such Fee Claims will on the Effective Date be reserved by the Trust for
payment of such Fee Claims and will not be treated as Available Cash.
Notwithstanding the above, it is anticipated that there will be
miscellaneous legal work, following the Effective Date, which will need to be
completed by the Debtors' counsel in an orderly winding up of the affairs of the
Debtors and their estates. All such fees will be submitted directly to the
Trustee(s) for review and payment under the same billing guidelines utilized
throughout the Chapter 11 Case.
EMPLOYMENT AGREEMENTS. All amounts due to Susan A. Brown and Rodney D.
Moore pursuant to their respective Employment Agreements entered into with ICH
as of January 1, 1996, will be paid by the Trust on the Initial Distribution
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Date to the extent then owed. Any additional amounts that become thereafter
payable under such Employment Agreements will be paid by the Trust within thirty
days after such amounts are determined.
OTHER ADMINISTRATIVE CLAIMS. Any Administrative Claim must be filed with
the Court within sixty days after the Effective Date and notice thereof served
on all parties entitled to such notice. The failure to file a timely application
as required under Section 2.1(d) of the Joint Plan will result in the Claim
being forever barred and discharged. An Administrative Claim with respect to
which an application has been properly Filed pursuant to Section 2.1(d) of the
Joint Plan, will become an Allowed Administrative Claim to the extent such claim
is allowed by Final Order.
REGARDING CERTAIN INDEMNIFICATIONS. The provisions of the Order Regarding
Indemnification of Officers and Directors of the Debtors entered on February 14,
1996 will be obligations of the Trust, subject to any and all defenses thereto
of the Debtors, the Estates or the Trust, including that such claims are
subordinated pursuant to the provisions of the Bankruptcy Code PROVIDED,
HOWEVER, that such obligations will not be obligations of Reorganized ICH. The
balance of the Indemnification Fund will be utilized as provided in such order.
Upon resolution of all claims against the Indemnification Fund, any remaining
funds in the Indemnification Fund will become Available Cash.
2. ADMINISTRATIVE AND PRIORITY TAX CLAIMS
TAX SETTLEMENT. The Tax Settlement resolves and satisfies all Priority
Claims for federal income taxes for which the Debtors are responsible for tax
years 1990-1995. See "The Chapter 11 Case--Continued Administration Under
Chapter 11--Tax Settlement."
ADMINISTRATIVE TAX CLAIMS. Each holder of an Allowed Administrative Claim
for (a) taxes shown on the Federal income tax returns in which the Debtors are
includible for the period from and after January 1, 1996, and ending on the
Effective Date, and (b) State income tax returns in which the Debtors are
includible for the period during which the Debtors' Chapter 11 Case is being
administered and any other taxes of the Debtors payable pursuant to Section
507(a)(1) of the Bankruptcy Code (collectively, the "Allowed Administrative Tax
Claims"), if any, will be paid in cash in full from the Trust on the later of
(i) the Initial Distribution Date or (ii) the date such payment is due under
applicable law. Payment of Allowed Administrative Tax Claims will be the
responsibility of the Trust, and the estimated amounts of such tax liabilities
as of the Effective Date will be reserved and will not be treated as Available
Cash. The amount of Allowed Administrative Tax Claims will be determined after
giving effect to the terms of the Tax Settlement by a deemed closing of the
books of the Debtors as of the close of the Effective Date, and will be
determined where appropriate on a consolidated or combined basis consistent with
the manner in which the Debtors have previously filed tax returns. If the
Effective Date occurs in a taxable year subsequent to the taxable year including
January 1, 1996, the amount of Allowed Administrative Tax Claims will be
determined by carrying forward all available net operating losses, capital
losses, alternative minimum tax net operating losses, and other tax attributes
of the Debtors and members of their consolidated or combined groups, where
applicable, for full use in the period of such subsequent taxable year deemed
for these purposes to end on the Effective Date.
PRIORITY TAX CLAIMS. Each Allowed Claim for State taxes entitled to
priority in accordance with Section 507(a)(8) of the Bankruptcy Code, will be
paid in cash in full by the Trust on the later of (i) the Initial Distribution
Date or (ii) the date such payment is due under applicable law.
3. OTHER PRIORITY CLAIMS
Each Priority Claim, if any, will be paid in cash in full by the Trust on
the Initial Distribution Date, or such later date as provided in any agreement
or employment policy governing such Claims.
4. PRESERVATION OF RETIREE BENEFITS
On the Effective Date, the Trust will provide for the continuation of the
payment of any applicable retiree benefits, as that term is defined in Section
1114 of the Bankruptcy Code, at the level established by the Debtors prior to
Confirmation pursuant to the terms of the applicable retiree benefit documents
in accordance with Section 1114 of the Bankruptcy Code, for the duration of the
period the Debtors have obligated themselves to provide such benefits.
Amendments may be made, where possible, to the benefits and benefit plans of the
Debtors to the extent permitted under the provisions of the benefit plans, and
it is anticipated that a commercial provider(s) of benefits will be retained to
provide such retiree benefits on behalf of the Trust.
5. U.S. TRUSTEE FEES
All fees payable under 28 U.S.C. Section 1930 will be paid in cash in full
by the Trust on the Effective Date and thereafter by the Trust in accordance
with such statute.
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D. PROVISIONS RELATING TO SECURITIES
1. DISTRIBUTION RECORD DATE
The Effective Date will be the date for determining the Entities holding
Securities who are entitled to receive distributions pursuant to Article IV of
the Joint Plan. As of the close of business on the Effective Date, the transfer
ledgers in respect of the Securities will be closed and no transfer of
Securities occurring after the Effective Date will be recognized. Reorganized
ICH, the Trustee(s), the Transfer Agent, the Distribution Agent, the Indenture
Trustee, and their respective agents will be entitled to recognize and deal for
all purposes of the Joint Plan with only those holders of record stated on their
respective transfer ledgers for the Securities as of the close of business on
the Effective Date.
2. CANCELLATION OF SECURITIES
On the Effective Date, all outstanding Securities (and the rights of the
Claimants and Interest Holders therein) together with any options, rights or
warrants to purchase Securities from the Debtors will be terminated, cancelled,
and extinguished. Notwithstanding the foregoing, cancellation of the Securities
will not impair the rights of Record Holders of the Securities as of the
Effective Date to receive distributions on account of such Securities pursuant
to the Joint Plan.
3. TENDER OF SECURITIES
(a) Each Record Holder of a Security as of the Effective Date will be
provided with a Letter of Transmittal for each class of Securities held by
such holder, pursuant to which such holder may transmit its Securities to
the Bank of Louisville and Trust Company, who will act as the Distribution
Agent (the "Distribution Agent"). Each Letter of Transmittal will be
accompanied by instructions for transmitting a holder's Securities to the
Distribution Agent. Beneficial holders of Securities who hold their
Securities through a broker or other nominee holder will receive appropriate
Letters of Transmittal from their broker or other nominee holder, together
with instructions for tendering their Securities. Letters of Transmittal
must be completed and duly executed in accordance with the instructions
accompanying such Letters of Transmittal.
(b) As a condition to the receipt by any holder of Securities of any
distribution under the Joint Plan to be made on account of such Securities,
such holder of the Securities must deliver to the Distribution Agent the
Securities giving rise to such holder's Allowed Claim or Interest, together
with the Letter of Transmittal, properly completed and executed by such
holder of the Securities, and any documents required by the Letter of
Transmittal, on or before the second anniversary of the Effective Date. The
method of delivery of the Securities to the Distribution Agent is at the
election and risk of the holder of the Securities, but if such delivery is
by mail, it is recommended that the holder use properly insured, registered
mail, return receipt requested. The Letter of Transmittal and the Securities
will be sent to the Distribution Agent and will not be sent to the Trustee
or to Reorganized ICH. Upon receipt of Securities, the Distribution Agent
will mark the Securities as "cancelled" or "paid." In the event of any lost
or destroyed Securities, the holder thereof must deliver an affidavit of
loss or destruction to the Distribution Agent (and, if required, the
Transfer Agent or Indenture Trustee, as applicable), as well as an agreement
to indemnify Reorganized ICH, the Distribution Agent, and the Trust (and, if
required, the Transfer Agent or Indenture Trustee, as applicable), in form
and substance reasonably acceptable to Reorganized ICH, the Distribution
Agent, the Trust and, if required, the Transfer Agent or Indenture Trustee,
as applicable, including, if requested, an appropriate bond, in order to
receive any distribution under the Joint Plan on account of such Securities.
(c) All questions as to the validity, form, or eligibility of the
tendered Securities will be resolved by the Bankruptcy Court. The
Distribution Agent will be under no duty to give notification of defects in
such tenders, and will not incur liabilities for failure to give
notification of such defects. Any Securities received by the Distribution
Agent that are not properly tendered and as to which the irregularities have
not been cured or waived, will be returned by the Distribution Agent to the
appropriate tendering holder as soon as practicable.
4. UNSURRENDERED OUTSTANDING SECURITIES
Two years after the Effective Date, any holder of an Allowed Claim or
Allowed Interest arising on account of outstanding Securities (excluding
Securities-Related Claims) who has not surrendered such holder's Securities as
described above will forfeit, to the extent permitted by law, such holder's
right to receive any distribution under the Joint Plan with respect to such
Allowed Claim or Allowed Interest.
5. TREASURY SECURITIES
All Securities held in treasury by ICH immediately before the Effective Date
will be cancelled and extinguished as of the Effective Date without any action
on the part of ICH and no payment or distribution will be made with respect
thereto.
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6. CASH-OUT ELECTION
Each holder of ICH's outstanding Preferred Stock who holds between 14 and
650 shares of Preferred Stock on the Effective Date (which date also will be the
record date for distributions under the Joint Plan to holders of Securities) may
elect at the time it transmits its Securities pursuant to a Letter of
Transmittal to receive a single cash payment of $.36 per share of Preferred
Stock in lieu of receiving shares of Reorganized ICH Common Stock. In addition,
any holder of ICH's outstanding Preferred Stock who holds more than 650 shares
of Preferred Stock may elect to reduce its Class 6 Interest to 650 shares of
Preferred Stock and receive a single cash payment of $234 ($.36 X 650 shares) in
lieu of receiving shares of Reorganized ICH Common Stock.
Each holder of ICH's outstanding Common Stock who holds between 101 and
5,000 shares of Common Stock on the Effective Date may elect at the time it
transmits its Securities pursuant to a Letter of Transmittal to receive a single
cash payment of $.05 per share of Common Stock in lieu of receiving shares of
Reorganized ICH Common Stock. In addition, any holder of ICH's outstanding
Common Stock who holds more than 5,000 shares of Common Stock may elect to
reduce its ICH Class 7 Interest to 5,000 shares of Common Stock and receive a
single cash payment of $250 ($.05 per share X 5,000) in lieu of receiving shares
of Reorganized ICH Common Stock.
Letters of Transmittal distributed to holders of Preferred Stock and Common
Stock will contain a provision allowing holders of Preferred Stock and/or Common
Stock, as applicable, to make the election described above and will be
accompanied by updated information regarding the anticipated business operations
of Reorganized ICH to the extent any material developments with respect thereto
have occurred since the date of this Disclosure Statement.
The per share cash-out allocations referred to above represent approximately
fifty percent of the expected per share book value of Reorganized ICH's Common
Stock immediately following the Effective Date. If a cash-out election as
described herein is made with respect to any portion of an Interest within ICH
Class 6--Preferred Stock or ICH Class 7-- Common Stock, the election will apply
to such holder's entire Interest within such Class. See "Discussion of the Joint
Plan--Treatment of Classes of Claims and Interests--Treatment of Claims."
E. DISTRIBUTIONS
1. DELIVERY
Distributions and deliveries called for by the Joint Plan, other than
distributions with respect to non-classified claims, will be made (i) to the
holders of Allowed Claims in ICH Classes 1, 2, 3, 4 and 5 (except as provided in
clause (ii) below), ICH Classes 6 and 7 (to the extent, if any, related to
Securities-Related Claims within those Classes), SWL Holding Classes 1 and 2,
and Care Classes 1 and 2, at the addresses set forth on the proofs of claim
filed by such holders (or at the last known addresses of such holders if no
proof of claim is filed or if the Debtors have been notified of a change of
address), (ii) to Record Holders of Notes on account of their Class 5 Claims, at
the addresses contained in the records of the Indenture Trustee as of the
Effective Date and (iii) to the Record Holders of Preferred Stock and Common
Stock, at the addresses contained in the records of the appropriate Transfer
Agent as of the Effective Date. No distribution will be mailed to any holder of
an Allowed Claim or Allowed Interest if any mailing to such holder's last known
address has been returned as undeliverable, unless and until the Debtors or the
Distribution Agent are notified of such holder's then-current address, at which
time all returned distributions then due will be made to such holder without
interest. All claims for undeliverable distributions will be made on or before
the later of (a) two years after the Effective Date or (b) 120 calendar days
after an order of the Bankruptcy Court allowing such holders' Claim or Interest
becomes a Final Order, after which period the Claim or Interest of any holder
with respect to such property or with respect to any undeliverable distribution
will be deemed abandoned, discharged, and forever barred as of the second
anniversary of the Effective Date.
Notwithstanding the above, if any Trust Interest is transferred after the
Effective Date, distributions to be made with respect to any such Trust Interest
will be made to the record holder of such Trust Interest on the applicable
Distribution Date. See "The Trust--Trust Interests."
2. DISTRIBUTION AGENT
The Distribution Agent will make distributions of Reorganized ICH Common
Stock and cash as required in the Joint Plan to be distributed to holders of
Allowed ICH Class 6 or 7 Interests, except as provided in Section 11.1(b) of the
Joint Plan. The Managing Trustee or such agent as the Trust may employ in its
sole discretion will make all other distributions of cash as are required to be
made under the Joint Plan; provided that distributions to be made to Record
Holders of the Notes as of the Effective Date may be made by the Trust, such
other agent as the Trust may employ in its sole discretion, the Distribution
Agent, or the Indenture Trustee.
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3. NO DISTRIBUTIONS PENDING ALLOWANCE
No payments or distributions will be made with respect to all or any portion
of a Contested Claim or Contested Interest unless and until such Claim or
Interest becomes an Allowed Claim or Allowed Interest as determined by Final
Order.
4. RESERVE FOR CERTAIN DISTRIBUTIONS
On and after the Effective Date, the Trust will withhold from the property
to be distributed under the Joint Plan, and will reserve, an amount sufficient
to be distributed on account of Contested Claims as of the Initial Distribution
Date. As to any Contested Claim, upon a request for estimation by the party in
interest, the Bankruptcy Court will determine what amount is sufficient to
withhold as the reserved distribution amount (the "Reserved Distribution
Amount"). In the event that no party in interest elects to request such an
estimation from the Bankruptcy Court with respect to a Contested Claim, the
Debtors or, after the Effective Date, the Trust will withhold as the reserved
distribution amount the amount which, in the discretion of the Trustee, such
Claimant would have received under the Joint Plan, if any, if the proof of claim
filed by or on behalf of that Claimant were Allowed. Reorganized ICH will
reserve sufficient authorized but unissued shares of Reorganized ICH Common
Stock to allow for distributions to holders of Allowed Securities-Related
Claims, if any, related to the Common Stock or Preferred Stock.
Payments and distributions to each holder of a Contested Claim or Contested
Interest, to the extent that it ultimately becomes an Allowed Claim or Allowed
Interest, will be made in accordance with the provisions of the Joint Plan
governing the respective Class of Claims or Interests of which such Contested
Claim or Contested Interest is a part. As soon as practicable after the date
that the order or judgment of the Bankruptcy Court allowing a Claim becomes a
Final Order, any property in the Reserved Distribution Amount that would have
been distributed to the holder of such Claim had such Claim been an Allowed
Claim on the Effective Date, to the extent of the Allowed Amount of such Claim,
will be distributed to the holder of such Claim.
5. DISTRIBUTIONS AFTER DISALLOWANCE
In the event that any of the property withheld in the Reserved Distribution
Amount remains after all objections to Contested Claims of a particular Class
have been resolved, such remaining property attributable to such Contested
Claims of that particular Class will be returned to the Trust for distribution
pursuant to the Joint Plan.
6. UNCLAIMED PROPERTY
Any assets and property to be distributed by the Trust under the Joint Plan
which remain unclaimed or otherwise not deliverable to the person entitled
thereto on the later of (a) two years after the Effective Date or (b) 120
calendar days after an Order allowing such person's Claim or Interest becomes a
Final Order, will become vested in, and will be transferred and delivered to,
the Trust for distribution pursuant to the Joint Plan. In such event, such
person's Claim or Interest will no longer be deemed to be Allowed and such
Entity will be deemed to have no further claim or interest in respect of such
distribution and will not participate in any further distributions under the
Joint Plan.
7. TREATMENT OF CONTINGENT OR UNLIQUIDATED CLAIMS
Until such time as a contingent or unliquidated Claim becomes fixed and
Allowed, such Claim will be treated as a Contested Claim for purposes related to
voting, allowance, and distributions under the Joint Plan. The Bankruptcy Court
upon request by the Debtors or, after the Effective Date, by the Trust or
Reorganized ICH, will in a summary proceeding on each such contingent Claim or
unliquidated Claim, by estimation determine the allowability of each such
contingent or unliquidated Claim.
8. DE MINIMIS DISTRIBUTIONS AND FRACTIONAL SHARES
(a) The Trust will disregard, and will not make distributions in respect
of, Allowed Claims whose Pro Rata share of a proposed distribution would be
less than $5.00. In such case, the Allowed Amount of such Claims for
purposes of such distribution will be reduced to zero.
(b) Distributions of Reorganized ICH Common Stock will be made only in
whole share amounts, and no fractional shares of Reorganized ICH Common
Stock will be distributed pursuant to the Joint Plan. Fractional shares of
Reorganized ICH Common Stock to which any Beneficial or Record Holder of
Preferred Stock or Common Stock as of the Effective Date may be entitled
pursuant to the Joint Plan, or to which any holder of an Allowed Securities-
Related Claim related to Common Stock or Preferred Stock may be entitled
pursuant to the Joint Plan, will be rounded to the nearest whole share.
Beneficial holders of fewer than 14 shares of Preferred Stock and Beneficial
holders of fewer than 101 shares of Common Stock will not be entitled to any
distribution of Reorganized ICH
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Common Stock on account of their respective Interests, and in each such
case, the Allowed Amount of such Interests for purposes of such distribution
will be reduced to zero.
9. FORM OF PAYMENTS
Payments to be made by the Trust or by Reorganized ICH pursuant to the Joint
Plan will be made by check drawn on a domestic bank or by wire transfer from a
domestic bank.
F. SHAW SETTLEMENT
1. BACKGROUND OF THE SETTLEMENT
At all material times prior to 1992, Robert T. Shaw and C. Fred Rice served
on the board of directors of ICH and owned, directly and/or beneficially
(through their ownership of CNC), interests in ICH. Shaw resigned from the board
in 1992. In 1994, when Shaw and Rice sold substantially all of their individual
and beneficial equity interests in ICH, Rice was a director of ICH, and both
Shaw and Rice beneficially held consulting contracts payable by ICH. In 1994, in
connection with the sale of substantially all of their equity interests in ICH,
Shaw and Rice each became parties to consulting contracts directly with ICH (the
"Consulting Contracts").
After commencement of the Chapter 11 Case, both Shaw and Rice filed proofs
of claim seeking approximately $5.775 million under the Consulting Contracts,
contractual indemnification for certain tax claims asserted by the IRS, and
other relief. ICH disputed its liability under the Consulting Contracts,
challenged the asserted indemnification liability, affirmatively sought the
joinder of the Shaw Group in a proposed tax settlement, and sought a partial
release by the Shaw Group of certain restrictions on the transferability of the
CFSB Interest. After extensive negotiations and discussions with the Plan
Proponents, the Shaw Group agreed to a compromise and settlement of their issues
as part of the Joint Plan.
2. THE SETTLEMENT
The material terms of the settlement with the Shaw Group are as follows:
WITHDRAWAL OF PROOFS OF CLAIMS. On the Effective Date, the Shaw Group will
withdraw the Claims that the Shaw Group, and the members thereof, Filed;
TRANSFERABILITY OF CFSB INTEREST. Pursuant to the Shaw Settlement, the Shaw
Group has agreed to waive certain contractual restrictions on the
transferability of the CFSB Interests as described in Section 6.2(c) of the
Joint Plan; for a discussion of the CFSB Interest, see "Certain Risk Factors to
be Considered--Factors Relating to the Liquidating Trust-- Profits Interest in
CFSB Corporation;"
PERFORMANCE OF TAX SETTLEMENT. The Shaw Group and Carlisle will perform
their obligations under the Tax Settlement; and
CASH CONTRIBUTION. On the Effective Date, the Shaw Group will pay $500,000
in cash to Reorganized ICH.
3. RELEASE OF SHAW GROUP
On the Effective Date, the Debtors will execute a release in favor of the
Shaw Group pursuant to Section 10.3 of the Joint Plan.
Absent a settlement with the Shaw Group, asserted claims by the Shaw Group
against the Debtors, as well as potential claims by the Debtors against the Shaw
Group, would need to be resolved. The resolution of such claims could involve
litigation, and, in all likelihood, would be difficult, costly and time
consuming. Furthermore, there would be no assurance as to the outcome of any
such resolution or the amounts of any recoveries for either party. In
particular, the asserted Claims of the Shaw Group ultimately could be determined
to be liabilities of ICH, thereby reducing the value available for ICH's other
creditors. Accordingly, the Plan Proponents and the Shaw Group believe that the
benefits to be gained from entering into the proposed settlement with the Shaw
Group outweigh the costs and uncertainty associated with proceeding without such
a settlement.
G. PROVISIONS REGARDING BML
On the Effective Date, BML will transfer to Reorganized ICH all of its
right, title and interest in and to Perry Park, free and clear of all liens,
claims and encumbrances. As a portion of Perry Park is currently owned solely by
BML, with the other portion being owned by ICH, this conveyance will have the
effect of consolidating the ownership of Perry Park entirely within Reorganized
ICH.
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Also on the Effective Date, and following the transfer of Perry Park
described above, the Trust will assume all of BML's non-reinsured liabilities,
including BML's indemnification obligations under the Modern/Western Agreement
and the Philadelphia American Agreement (See "Certain Risk Factors to be
Considered--Factors Relating to the Liquidating Trust--Modern American/Western
and Philadelphia American Indemnification Obligations"), and BML will transfer
to the Trust all of its assets, other than the BML Licenses and the assets
representing the capital and surplus required by state insurance regulatory
authorities (the "Capital and Surplus Assets").
Within 90 days after the Effective Date, Reorganized ICH will either cause
BML to transfer all of the Capital and Surplus Assets to the Trust (in which
case Reorganized ICH would retain the BML Shell, which owns the BML Licenses) or
sell all of the outstanding capital stock of BML, including the Capital and
Surplus Assets, to the Trust for $5 million cash. No change may be made in the
officers and directors of BML prior to the earlier of the expiration of the
90-day period or the date on which the assets are transferred by Reorganized
ICH, and the Trust will have sole control over the management of the Capital and
Surplus Assets during such period.
If BML is sold prior to the Effective Date, the proceeds of the sale in
excess of the value of the Capital and Surplus Assets that remain with BML will
be retained by Reorganized ICH and the balance of the proceeds will be
transferred to the Trust.
H. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Unless the Debtors expressly assume, as provided by Section 365(a) of the
Bankruptcy Code, an executory contract or an unexpired lease on or before the
Confirmation Date, each executory contract and unexpired lease will be deemed
rejected.
I. CLAIMS FOR REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Any Claims made on account of executory contracts or unexpired leases that
are deemed rejected pursuant to Section 8.1 of the Joint Plan must be Filed
within 30 days after the Confirmation Date or such Claims will be forever barred
and discharged. To the extent all or a part of the damages asserted in such a
rejection claim are Allowed by Final Order, such Claim will be treated as an ICH
Class 5 Claim.
J. STIPULATION AND AGREEMENT WITH THE INDENTURE TRUSTEE
The Debtors and the Indenture Trustee agree and stipulate that the Indenture
Trustee shall hold an Allowed Claim on behalf of holders of the 11 1/4% Senior
Subordinated Notes due 1996 in the amount of $266,425,072 and on behalf of the
holders of the 11 1/4% Senior Subordinated Notes due 2003 in the amount of
$94,835,928.
K. TENNECO SETTLEMENT
Pursuant to the Tenneco Settlement, upon the earlier of the granting by the
Bankruptcy Court of the Tenneco Settlement Motion by Final Order or the
Effective Date of this Joint Plan, ICH and Tenneco will mutually release all
Claims against each other as more fully set forth in the Tenneco Settlement, and
Tenneco will pay to ICH, or to the Trust and Reorganized ICH, as applicable, the
sum of $18.5 million and deliver to ICH the 9 1/2% unsecured note of ICH due
1996 marked "cancelled," and Proof of Claim No. 226 Filed by Tenneco will be
deemed disallowed with prejudice to refiling. Pursuant to the terms of the Joint
Plan, $500,000 of the proceeds of the Tenneco Settlement will be retained by
Reorganized ICH. See "The Chapter 11 Case--Continued Administration Under
Chapter 11--Tenneco Settlement."
L. PROPERTY OF ESTATES
1. SWL HOLDING AND CARE
On the Effective Date:
(a) SWL Holding and Care will distribute to Reorganized ICH all of their
respective assets that constitute Retained Assets, free and clear of all
liens, claims and encumbrances;
(b) Either SWL Holding and Care or, if distributed to ICH, ICH will
distribute to the Trust all assets of, or originating in the estate of, SWL
Holding and Care other than Retained Assets, free and clear of all liens,
claims and encumbrances; and
(c) Subsequently, Reorganized ICH will retain all of the common stock of
SWL Holding and Care.
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2. RETENTION OF THE RETAINED ASSETS BY REORGANIZED ICH
On the Effective Date, the Retained Assets will revest in Reorganized ICH,
together with their respective bases for federal income tax purposes, free and
clear of all liens, claims and encumbrances.
3. TRANSFER OF THE TRUST ASSETS BY ICH TO THE TRUST
On the Effective Date, the Trust Assets owned by ICH will be conveyed to the
Trust by ICH, free and clear of all liens, claims, and encumbrances except as
provided in the Joint Plan.
For a discussion of the assets of the Debtors' Estates that will be
transferred to the liquidating trust, see "The Trust-- Trust Assets and
Liquidation of the Trust Assets," and for a discussion of the assets of the
Debtors' Estates that will be retained by Reorganized ICH See "Reorganized
ICH--Assets of Reorganized ICH."
M. SECURITIES-RELATED CLAIMS
1. THE SHAREHOLDER SUITS
ICH and a number of its present and former officers and directors have been
named as defendants in several purported class action suits brought by alleged
purchasers of ICH's Common Stock and Preferred Stock. The plaintiffs in those
suits, defined in the Joint Plan as the "Shareholder Suits," generally allege,
among other things, that ICH and the individual defendants made misleading and
untrue statements and omissions in ICH's public disclosures and press releases
relative to the financial performance and condition of the company's investment
portfolio, and seek recovery for damages relating to their purchase or sale of
the securities.
2. SECTION 510(B)
Section 510(b) of the Bankruptcy Code provides that claims arising from the
rescission of the purchase or sale of a security, or for damages arising from
the purchase or sale of a security, are subordinated to claims or interests
relating to the ownership of such securities, except in the case of claims
related to common stock, in which case the securities-related claims have the
same priority as the interests in the common stock itself. These types of claims
are defined in the Joint Plan as "Securities-Related Claims" and include the
claims, if any, arising from the Shareholder Suits described above.
3. TREATMENT
In accordance with Section 510(b), the Joint Plan provides that
Securities-Related Claims, if any, related to the Notes or to the Preferred
Stock are, in each case, subordinated in right of payment to the Claims of
holders of those Securities. The Joint Plan provides further that Allowed
Securities-Related Claims, if any, related to the Common Stock have the same
priority as Interests in the Common Stock.
Because any Allowed Securities-Related Claims relating to Common Stock would
be expressed in dollar amounts while Allowed Interests of holders of Common
Stock are expressed in share amounts, the Joint Plan provides a formula to
reconcile those different measurements and provide a pro rata distribution of
the Reorganized ICH Common Stock available to ICH Class 7 as a whole. Pursuant
to the formula set out in Section 11.5 of the Joint Plan, Allowed Securities-
Related Claims related to Common Stock, if any, are converted into a
corresponding number of shares of Reorganized ICH Common Stock by reference to
the average market capitalization of the Common Stock (the average outstanding
shares of Common Stock multiplied by the average price per share of Common
Stock) during the period of time that the plaintiffs in the Shareholder Suits
allege that they sustained economic damages. Holders of Securities-Related
Claims and Claims and Interests should review carefully Section 11.5 of the
Joint Plan for the precise terms of the formula.
The Plan Proponents believe that this formula equitably distributes the
Reorganized ICH Common Stock as between holders of Interests in Common Stock and
holders of Allowed Securities-Related Claims, if any, related to Common Stock.
Furthermore, and as set out more fully in "Certain Regulatory and Legal
Matters--Legal Proceedings," the Bankruptcy Court entered an Order on October 1,
1996, holding that the original complaint filed by the plaintiffs in the
Shareholder Suits failed to adequately plead their alleged causes of action, and
granting the plaintiffs twenty (20) days to either amend their complaint or have
it dismissed by the Bankruptcy Court. Although the plaintiffs in the Shareholder
Suits timely filed an amended complaint, the Plan Proponents do not believe that
the substantive allegations in the amended complaint are materially different
from those in the original complaint. Currently, the Plan Proponents are not
aware of any other action which likely would result in Securities-Related
Claims. Therefore, although there can be no assurance, the Plan Proponents do
not believe that there ultimately will be any Allowed Securities-Related Claims
relating to the Preferred Stock or the Common Stock.
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N. RELEASE OF CERTAIN OFFICERS
In consideration for their agreement to provide advice and information to
Reorganized ICH's effort to reorganize and their agreement to assist and
cooperate with Reorganized ICH's pursuit of the retained Causes of Action,
certain former officers of the Debtors (the "Released Officers") will be granted
releases in accordance with the releases discussed in "Confirmation of the Joint
Plan--Effect of Confirmation; Discharge of Debtors; Releases; Settlement and
Adjustment of Claims." The Plan Proponents believe that the consideration being
provided by the Released Officers, as set forth above, taken together with the
lack of any apparent claim or cause of action against the Released Officers, is
sufficient consideration for the releases being provided.
VIII. MANAGEMENT OF THE DEBTORS
A. MANAGEMENT
Effective January 3, 1996, Susan A. Brown was elected as Chairman of the
Board of Directors, Co-Chief Executive Officer, Chief Financial Officer and
Treasurer of ICH, and Rodney D. Moore was elected as a member of the Board of
Directors, President, Co-Chief Executive Officer and Secretary of ICH. Ms. Brown
and Mr. Moore replaced the previously elected executive officers of ICH,
substantially all of whom became officers of SWL after the PennCorp Sales
Transaction.
Set forth below is certain information regarding the current executive
officers and directors of ICH.
SUSAN A. BROWN, age 41. Ms. Brown has been Chairman of the Board, Co-Chief
Executive Officer, Chief Financial Officer and Treasurer since January 1, 1996.
Ms. Brown also serves as an executive officer of ICH's subsidiaries. Prior to
joining ICH, Ms. Brown served as the trustee of the FRBC Trust from September
1994 to January 1996. From September 1991 to September 1994, Ms. Brown served as
the chief executive officer of First RepublicBank Corporation. From August 1990
to August 1991, Ms. Brown served as the chairman and chief executive officer of
First RepublicBank Corporation.
RODNEY D. MOORE, age 55. Mr. Moore has been Co-Chief Executive Officer,
President, Secretary and a member of the Board of Directors since January 1,
1996. Mr. Moore also serves as an executive officer of ICH's subsidiaries. From
September 1995 to January 1, 1996, Mr. Moore served ICH as a special consultant
in connection with, among other things, the Proposed Sales Transaction and the
PennCorp Sales Transaction. From 1989 to September 1995, Mr. Moore was self-
employed as an attorney and insurance regulatory consultant and was of counsel
to the law firm of Winstead Sechrest & Minick P.C. Mr. Moore served as a
director of Western National Corporation, an insurance holding company, from
1994 to 1995.
JAMES R. KERBER, age 62. Mr. Kerber has been a director since October 10,
1994, and has served as Vice-Chairman of the Board since January 1, 1995. Mr.
Kerber was the President and Chief Operating Officer of ICH from January 18,
1995, to December 12, 1995. Mr. Kerber also served as the interim Chief
Executive Officer from October 10, 1994, to January 18, 1995. Mr. Kerber was
also Chief Executive Officer, President and Chairman of the Board of a majority
of ICH's subsidiaries from October 1994 to December 1995. From 1990 to 1994, Mr.
Kerber served as the senior executive vice president-- insurance operations of
Life Partners Group, Inc., an insurance holding company located in Denver,
Colorado. From 1981 through March 1990, Mr. Kerber had been previously employed
by ICH as its Executive Vice President, Insurance Operations--Denver.
S. LEROY STEGNER, age 71. Mr. Stegner has been a director of ICH since
1970. Mr. Stegner has been an investor and farmer in Pilot Grove, Missouri since
1945.
VERNON K. ZIMMERMAN, age 66. Dr. Zimmerman has been a director of ICH since
1986. Dr. Zimmerman has been employed since 1965 as director of the Center for
International Education and Research in Accounting for the University of
Illinois, Champaign, Illinois. From 1971 to 1985, he also served as dean of the
Business School at the University of Illinois and from 1956 to 1992 as a
professor of accountancy at the University of Illinois. Dr. Zimmerman also
serves as a director of Illinois Power Company, a public utility company, and
First Busey Corporation, a bank holding company.
B. COMPENSATION OF OFFICERS
Ms. Brown, ICH's Chairman and Co-Chief Executive Officer as of January 1,
1996, and Mr. Moore, ICH's President and Co-Chief Executive Officer as of
January 1, 1996 (the "Executives"), each have employment agreements with the
Debtors which have been approved by the Bankruptcy Court. The agreements provide
each of the Executives with a base salary of $250,000 per year and benefits
under any employee benefit plan traditionally made available by ICH to its
senior executives (excluding ICH's executive severance plan). In addition to
salary and benefits, the Executives will receive an incentive bonus which is
dependent upon the amount of distributions in excess of $260 million paid to
non-priority unsecured claimants of the Debtors.
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On the Effective Date, Susan A. Brown and Rodney D. Moore each will receive
bonus payments in the event the amount distributed to Claimants holding general
unsecured Claims exceeds $260 million, as follows:
(1) 1% of any amount in excess of $260 million and less than or equal to
$280 million;
(2) 2% of any amount in excess of $280 million and less than or equal to
$310 million; and
(3) 2.5% of any amount over $310 million distributed.
The estate's expenses related to bonus payments are estimated on the December
31, 1996, Projected Consolidated Balance Sheet and will be accrued as of the
Effective Date. See "Financial Statements of the Debtors--Projected Consolidated
Balance Sheet of the Debtors at December 31, 1996."
C. LIMITATION OF LIABILITY
As permitted by the Delaware General Corporation Law ("DGCL"), the Debtors'
Certificate of Incorporation provides that directors of the Debtors shall not be
personally liable to the Debtors or their stockholders for monetary damages for
breach of a fiduciary duty as a director, including gross negligence, except to
the extent such exemption from liability is not permitted by the DGCL. This
includes liability for (i) any breach of the director's duty of loyalty to the
Debtors or their stockholders, (ii) any act or omission not in good faith or
that involves intentional misconduct or a knowing violation of law, (iii) any
transaction from which the director derived any improper personal benefit, or
(iv) any act or omission where the liability of the director is expressly
provided by statute.
As a result of this provision, the Debtors believe that Debtors and their
stockholders may be unable to obtain monetary damages from a director for breach
of the duty of care, if any. Although stockholders may continue to seek
injunctive or other equitable relief for an alleged breach of fiduciary duty by
a director, stockholders may not have any effective remedy against the
challenged conduct if equitable remedies are unavailable.
ICH has entered into indemnification agreements with each of Glenn H.
Gettier, James R. Kerber, Daniel B. Gail, Robert C. Greving, John T. Hull, H.
Don Rutherford, Robert J. Bruce, Steven R. Cartwright, W. Hubert Mathis, Keith
A. Tucker, S. Leroy Stegner, Vernon K. Zimmerman, Jon Jacoby, Ms. Brown, and Mr.
Moore pursuant to which ICH has agreed to indemnify such persons against all
expenses, judgments, fines and penalties incurred in connection with the defense
or settlement of any action brought against them by reason of the fact that they
are or were directors or officers of ICH or its subsidiaries or assumed certain
responsibilities at the direction of ICH. The Bankruptcy Court, by orders dated
November 16, 1995, and February 14, 1996, has approved the continuation of
portions of such indemnification agreements. In addition, the Debtors'
Certificates of Incorporation and their By-laws provide certain rights of
indemnification for all current and former officers and directors for which they
may have Claims.
Any claims based on these indemnities will be satisfied by the Trust.
IX. THE TRUST
The following description of the terms of the Trust Agreement is based on
its form as of the date of this Disclosure Statement. The Creditors Committee
anticipates that the Trust Agreement will be amended prior to the Confirmation
Hearing, which may affect the following descriptions.
A. CREATION OF THE TRUST
On the Effective Date, the Trust will be established to hold and liquidate
of all the assets of the Debtors and their estates, except the Retained Assets.
The Trust will be administered and its assets liquidated for the benefit of the
holders of Allowed ICH Class 5 Claims as provided in the Joint Plan and to
further provide for distributions of certain property or cash required by the
Joint Plan to be made to Claimants in ICH Classes 1, 2, 3 and 4, SWL Holding
Classes 1 and 2 and Care Classes 1 and 2. Thereafter, the Trust will distribute
Available Cash from time-to-time to Trust Beneficiaries as set forth in the
Trust Agreement.
B. MANAGEMENT OF THE TRUST
The Trust will be managed by a Managing Trustee, expected to be Susan A.
Brown, the present Co-CEO and a Director of ICH who will have the responsibility
for administration of the Trust, the Trust Assets and distributions. Three
Supervisory Trustees, expected to be persons presently serving as members of the
Creditors' Committee, will be appointed. The Managing Trustee will need the
consent of the Supervisory Trustees to take certain actions as specified in
section 5.5 of the Trust Agreement, including but not limited to: (i) early
termination of the Trust or its further extension, (ii) entering into contracts
obligating the Trust to expend funds in an amount greater than $50,000, or to
enter into agreements with an affiliate or former affiliate of the Debtors,
(iii) the borrowing of any funds, (iv) investment of Trust Assets and proceeds
except for Permitted Investments (defined in the Trust Agreement), (v) approving
the establishment of reserves, (vi) hiring
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certain agents and consultants, (vii) approving distributions from the Trust,
(viii) the commencement or defense of any actions on behalf of or against the
Trust, and (ix) any changes to the form of Trust certificates (if issued). The
Trustees will serve subject to possible removal for fraud or willful misconduct.
The Trustees will be indemnified for actions taken in good faith, and upon
termination of the Trust, the Trust will satisfy any possible indemnification
obligations that may arise by the purchase of a sufficient insurance policy. No
bond will be required of any of the Trustees. The Managing Trustee may, subject
to the approval of the Supervisory Trustee if necessary, select and employ
brokers, banks, custodians, investments advisors, attorneys, accountants,
auditors and other agents on behalf of the Trust. The Trust will be entitled to
compensate such parties as approved by the Supervisory Trustees. The Trust will
be able to hire as consultants parties with knowledge of the Debtors' affairs,
including former officers or directors of the Debtors and entities owned by the
Debtors as necessary. The Trust will also be able to employ professionals
formerly employed by the Creditors' Committee, if appropriate.
C. TRUST ASSETS AND LIQUIDATION OF THE TRUST ASSETS
The assets of the Trust ("Trust Assets") will consist of all of the assets
of the Debtors and their estates except for the Retained Assets. The Retained
Assets are described more fully in "Reorganized ICH--Assets of Reorganized ICH."
The assets expected to be transferred to the Trust on the Effective Date
include:
(i) Cash and short-term investments of $183 million;
(ii) Restricted cash of $35 million in the PennCorp Escrow;
(iii) All assets of BML, excluding Capital and Surplus Assets and BML's real
estate interest in Perry Park. BML's assets, prior to satisfying
estimated liabilities of $6 million for pending policy holder
litigation and potential indemnification Claims and other liabilities,
are projected to consist of approximately:
(a) $33 million in cash and short-term investments (in addition to ICH's
cash and short-term investments), including restricted cash of $3.5
million subject to the Modern American/Western Escrow,
(b) $23 million in bonds and structured securities, substantially all of
which is investment grade and highly liquid,
(c) $12 million in limited partnership interests,
(d) $12 million in real estate, and
(e) $8 million in miscellaneous other assets;
(iv) ICH's investment in FMI of approximately $9 million. FMI's assets
consist principally of $6 million in cash and short-term investments
and a $6 million receivable from ICH. Liabilities of $3 million relate
to employment-related obligations;
(v) Note from SFC of $40 million;
(vi) CFSB Interest with an assigned value of $18 million; for a discussion
of the CFSB Interest, see "Certain Risk Factors to be
Considered--Factors Relating to the Liquidating Trust--Profits Interest
in CFSB Corporation;"
(vii) Real estate of $1 million; and
(viii) Common stock portfolio of $469,000.
The Trustee(s) will collect and reduce to cash the Trust Assets as
expeditiously as is compatible with the best interest of the beneficiaries of
the Trust in accordance with the Trust Agreement. Within approximately 90 days
following the Effective Date the Capital and Surplus Assets of BML will be
transferred to the Trust (either by direct transfer or delivery of the BML
Stock). See "Discussion of the Joint Plan--Provisions Regarding BML."
Pursuant to section 10.2 of the Joint Plan, the Trust will own causes of
action or rights related to the Trust Assets, but specifically excluding all
claims related to any asset which has been fully and finally converted into cash
which has been transferred to the Trust as of the Effective Date. Otherwise,
litigation, except where available as defenses or offsets to claims asserted
against the Trust, will be Retained Assets held by Reorganized ICH.
D. TERMINATION OF THE TRUST
The Trust will terminate on the earlier to occur of the fulfillment of the
Trust's purpose by liquidation of all of the Trust assets and the distribution
of the proceeds thereof, or three years after the Effective Date. In order to
terminate prior to three years after the Effective Date, the Managing Trustee,
after receiving the approval of the Supervisory Trustees, must deliver a notice
to all Trust beneficiaries setting forth the date on which the Trust will
terminate. If no beneficiary files an objection with the Bankruptcy Court within
45 days after the date of such notice, the Trust will terminate as provided. In
addition, the Managing Trustee may request, upon the approval of the Supervisory
Trustees, an extension of the term of the
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Trust if circumstances require. Such an application, if any, must be made to the
Bankruptcy Court and approved within six months of the beginning of what would
be the extended term. In no event will the termination of the Trust occur later
than the tenth anniversary of the Effective Date.
E. TRUST INTERESTS
Each holder of an Allowed ICH Class 5 Claim shall have a percentage interest
in the Trust ("Trust Interest") equal to (i) the Allowed Amount of such
Claimant's ICH Class 5 Claim divided by (ii) the sum of the total of the Allowed
Amounts of all Class 5 Claims as of the Effective Date and the total amount of
all Contested Claims as of the Effective Date; provided that such percentage
automatically will be adjusted in accordance with the above formula upon and as
of the date of the disallowance of any such Contested Claims or the allowance of
any such Contested Claim in an amount other than the amount of such Contested
Claim as of the Effective Date.
Trust Interests may be represented by certificate(s) ("Trust Certificates").
Trust Certificates, if issued, will require the signature of the Managing
Trustee and will be issued in amounts solely related to each ICH Class 5 Allowed
Claim or portion thereof that the Trust Certificate represents. Trust
Certificates will be transferable by beneficiaries, but the Trust will
not recognize any transfer unless it is duly registered as provided in the Trust
Agreement on the Trust register. The Trust register will be kept by the Managing
Trustee or by the appropriate transfer agent.
Prior to the distribution, if any, of Trust Certificates, Trust Interests
may not be transferred and no purported transfer of any Trust Interest will be
registered on the Trust register. After any such distribution of Trust
Certificates, any Trust Interest may be transferred upon the Trust register. In
order to register the transfer, a beneficiary wishing to transfer its or part of
its Trust Interest must present its Trust Certificate to the registrar for
cancellation, accompanied by the delivery of a duly executed written instrument
of transfer in an approved form, as well as payment for reasonable transfer
charges, including any tax or other governmental charge related thereto and
evidence satisfactory to the Managing Trustee that such transfer is in
accordance with all applicable federal and state securities laws. Upon transfer
of any Trust Interest, the Managing Trustee will effect the change to the Trust
register and will instruct the transfer agent to issue, authenticate and deliver
new Trust Certificate(s) in respect to the Trust Interests which the transferee,
and if any Trust Interest is retained, the transferor, will be entitled to
receive. The Trust register may be inspected upon reasonable prior written
notice. Provisions are also made in the Trust Agreement for mutilated, lost,
stolen or destroyed certificates, and for resolution of conflicting claims to
Trust Interests.
Notwithstanding the above, no Trust Interest may be transferred unless such
transfer is made (i) pursuant to a registration statement effective under the
Securities Act of 1933, as amended ("Securities Act"), or pursuant to an
available exemption from the registration requirements of the Securities Act and
(ii) in accordance with all applicable state securities laws. See "Securities
Law Considerations--Limited Restrictions on Transferability."
F. RECORDS AND REPORTS
The Managing Trustee will be required to maintain books and records of
account relating to the Trust assets, the proceeds thereof, reserves and other
matters concerning the Trust, as well as the expenses incurred on behalf of the
Trust, and such other matters as the Supervisory Trustees may from time-to-time
direct.
The Managing Trustee will also be responsible for the preparation of the
following reports:
MONTHLY. On a monthly basis, within two (2) weeks after the end of each
month, a report of the receipts and disbursements of the Trust and the Cash
position of the Trust; and
QUARTERLY. On a quarterly basis beginning with the first full calendar
quarter ending after the Effective Date, within forty-five (45) days of the
end of the subject quarter, a report of the activities of the Trust
detailing for the preceding quarterly period the activities of the Trust
including:
(i) an operating statement (prepared on a cash basis) showing all
revenues received by the Trust and all expenses of operations of the
Trust (including all expenses associated with the sale of any Trust
Assets paid by the Trust);
(ii) an unaudited written report and accounting showing (a) the
assets and liabilities of the Trust at the end of such period, (b) any
changes in the Trust Assets, (c) the amount of any reserves or escrows of
the Trust, (d) any material action taken by the Managing Trustee or the
Supervisory Trustees in the performance of their duties under the Plan
and this Agreement; and
(iii) an overall status report for the next quarterly period.
Quarterly reports for the fourth quarter of each calendar year may be
included within the annual reports described below, if such annual reports are
prepared.
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ANNUALLY. To the extent required by the Bankruptcy Court or by applicable
law (or to gain an exemption from applicable law), within 90 days after the end
of each calendar year, beginning with the first year end occurring after the
Effective Date, the Trust will prepare reports for the prior year as described
in clauses (i) and (ii) above, except that such reports shall be for a full year
(or portion thereof in which the Trust has been in existence) and shall be
audited.
The reports will be distributed to each Supervisory Trustee and each Trust
beneficiary who requests a copy in writing. The quarterly and, if prepared,
annual reports also will be filed with the Bankruptcy Court and, if required,
with the SEC. In addition, the Managing Trustee will furnish to Trust
beneficiaries such information and returns with respect to any federal or state
tax as may be required by law.
X. REORGANIZED ICH
A. ASSETS OF REORGANIZED ICH
The Joint Plan provides that, following the Effective Date, ICH will emerge
from Chapter 11 as a reorganized corporation, owned by the existing holders of
Preferred and Common Stock. Reorganized ICH will own the Retained Assets, free
and clear of any and all liens, claims and encumbrances. In addition,
Reorganized ICH will receive the Shaw Settlement Proceeds. See "Discussion of
the Joint Plan--Shaw Settlement."
Immediately following the Effective Date, the assets of Reorganized ICH will
consist principally of:
RETAINED ASSETS
(i) the capital stock of BML (after the Trust has assumed BML's
non-reinsured liabilities, including indemnification obligations to
Reassure America Life Insurance Co. and to New Era Enterprises, Inc., in
exchange for all of BML's capital and surplus and other tangible
property), together with all BML Licenses and all books and records of
BML,
(ii) Perry Park, together with all books and records of Perry Park,
(iii) $2.5 million cash,
(iv) the Retained Causes of Action,
(v) the Tenneco Equity Settlement Proceeds of $500,000,
(vi) any tax attributes remaining after the determination of the Debtors'
tax liability through the Effective Date,
(vii) the Common Stock of SWL Holding and Care, and
(viii) all books and records of ICH.
SHAW SETTLEMENT PROCEEDS
(i) $500,000 cash.
BML. If BML is sold prior to the Effective Date, Reorganized ICH will
receive the proceeds of such sale in excess of the value of the Capital and
Surplus Assets. If BML is not sold prior to the Effective Date, Reorganized ICH
will retain the capital stock of BML with the option for 90 days following the
Effective Date to either sell BML (including the Capital and Surplus Assets) to
the Trust for $5 million cash or transfer all remaining assets of BML to the
Trust and retain the BML Shell (which owns the BML Licenses).
PERRY PARK. The Perry Park development is a residential and recreational
real estate development which covers approximately 2,600 acres of land situated
in Owen County, Kentucky, approximately 50 miles from each of Cincinnati, Ohio
and Louisville, Kentucky. The developed recreational amenities of Perry Park
include an irrigated 18-hole golf course, a country club with a restaurant and
pro shop, an Olympic size swimming pool, hard surfaced tennis courts and a
camping area. Perry Park also has its own water and sewer plants, maintenance
equipment and an air strip.
Roughly half of the acreage of Perry Park is platted for residential
development, consisting of a total of approximately 1,100 lots. Of those lots,
approximately 600 have been sold, and there are currently about 220 residences
on the property. Listed prices for existing residences in Perry Park range from
about $70,000 up to $350,000. Access to the residential property is controlled
through a 24-hour manned gatehouse. Certain undeveloped portions of Perry Park
are also leased out to local farmers under profit sharing agreements for growing
corn and tobacco. Those leasing arrangements have occasionally, although not
consistently, resulted in moderate profits for Perry Park.
Perry Park employs approximately 35 people, including security personnel,
golf course maintenance personnel and a resident golf pro, waiters, cooks and
management personnel connected with the restaurant, and a project manager.
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There have been essentially no active marketing efforts for undeveloped lots
at Perry Park and limited material capital improvements to the property in the
last several years. The capacity of the property's current water and sewer
systems also require expansion in order to permit any further substantial
residential development of the property. A neighboring city has agreed to
sponsor the construction of a new water line that will adjoin Perry Park, and
currently the Carroll County Water District is in the final stages of completing
a preconstruction survey with respect to the construction of that water line.
Once completed, that water line will permit Perry Park to obtain ample water
service to support the residential development of the balance of the platted
property, at a total initial cost to Perry Park of approximately $100,000.
Projected financial operating results for Perry Park for the year ending
December 31, 1996, indicate that the property is likely to incur operating
losses for the year in excess of $250,000. The Equity Committee believes that,
with improved marketing efforts for the remaining undeveloped lots, capital
expenditures for further development and improvement of the property's amenities
and infrastructure, and improvements in operational and management efficiency,
Perry Park could be a profitable enterprise, with value in excess of the $2.5
million currently reflected on ICH's books. The pro forma financial statement
for Reorganized ICH which is attached as EXHIBIT F to this Disclosure Statement
assumes that the operating losses for Perry Park are reduced to $75,000 in the
first year following the Effective Date, and to $20,000 in the second year.
While there can be no guarantee that Perry Park will generate profits in the
future, the Equity Committee and the Initial Board currently intend to devote
necessary capital resources of Reorganized ICH to optimize Perry Park's
operating profitability and to maximize the value of the property. In addition,
Reorganized ICH may sell all or a part of the property if a favorable offer or
offers are received.
RETAINED CAUSES OF ACTION. In addition to Perry Park, BML and the cash
assets described above, the principal remaining assets of Reorganized ICH
following the Effective Date will be various causes of action of the Debtors
which are being retained by Reorganized ICH, defined in the Joint Plan as the
"Retained Causes of Action," including, among others, potential claims against
certain current and former officers, directors, advisors and shareholders of the
Debtors, who are not Released Entities on the Effective Date, and claims based
upon preferences or fraudulent transfers. Any recoveries derived from
Reorganized ICH's pursuit of any of the Retained Causes of Action would become
the property of Reorganized ICH.
The Equity Committee has begun the process of evaluating those potential
claims, and the Initial Board expects to continue that process, as necessary and
appropriate, following the Effective Date. As that claims evaluation process
continues, the Equity Committee, or following the Effective Date the Initial
Board, will determine whether to pursue any of the Retained Causes of Action.
There can be no assurance that Reorganized ICH will ultimately elect to pursue
any of the Retained Causes of Action, or, if any are pursued, what value, if
any, will be recognized by Reorganized ICH as a result. No value has been
attributed to the Retained Causes of Action in the attached pro forma financial
statements for Reorganized ICH.
B. PROPOSED OPERATING ACTIVITIES
In addition to operating Perry Park, as described above, Reorganized ICH
expects to have approximately $8.5 million in cash following the Effective Date
(assuming that Reorganized ICH exercises its right to sell BML to the Trust for
$5 million). Reorganized ICH intends to invest such cash and to operate its
business in such a manner that it will not be required to register as an
"Investment Company" under the Investment Company Act of 1940. While neither the
Equity Committee nor the prospective members of the Initial Board (defined
below) has currently formed a plan as to the specific use of the cash assets of
Reorganized ICH, such funds will be available for general corporate purposes as
determined by the board of directors, including investments, joint ventures and
other business opportunities. Pending such uses, the cash will be invested in a
manner determined by the Initial Board to be in the best interests of
Reorganized ICH's shareholders, and calculated to minimize the possibility of
Reorganized ICH's being classified as an "Investment Company." See "Certain Risk
Factors to be Considered--Factors Relating to Reorganized ICH--Potential
Investment Company Status." It is the current intention of the Equity Committee
and of the Initial Board to actively pursue appropriate potential business
opportunities to expand the scope of the business operations of Reorganized ICH.
Reorganized ICH also could elect to retain BML, either because Reorganized
ICH obtains a purchase offer of more than $5 million for BML from another party,
or because Reorganized ICH determines to remain in the insurance business and to
use some or all of the existing BML Licenses for that purpose.
C. CHARTER AMENDMENTS
The Restated Certificate of Incorporation and the By-laws of Reorganized ICH
shall be adopted substantially in the form filed with the Bankruptcy Court not
less than ten (10) Business Days prior to Confirmation and may be amended as
necessary to satisfy any provisions of the Joint Plan and Section 1123(a)(6) of
the Bankruptcy Code. All such amendments to the Certificate of Incorporation of
Reorganized ICH will be filed with the Delaware Secretary of State on the
Effective Date or as soon thereafter as is reasonably practicable and shall
become effective on the date so filed.
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D. MANAGEMENT
1. BOARD OF DIRECTORS
Upon the Effective Date, the By-laws of Reorganized ICH shall provide that
Reorganized ICH shall have a board of directors consisting of between four (4)
and nine (9) members. The initial board of directors (the "Initial Board") will
be selected by the Equity Committee, and will consist of James R. Arabia,
Michael D. Dunn, Kenneth P. Giddens, and Carl D. Robinson, all of whom have
served as members of the Equity Committee. The Equity Committee may identify
additional directors to serve on the Initial Board at least ten (10) days prior
to the Confirmation Hearing. From and after the Effective Date, the Board will
be selected in accordance with the By-Laws of Reorganized ICH. Brief biographies
of the members of the Initial Board are as follows:
JAMES R. ARABIA, age 40. Mr. Arabia is a member and co-chairman of the
Equity Committee. Mr. Arabia has been a stock broker in San Diego County,
California since 1985.
MICHAEL D. DUNN, age 52. Mr. Dunn is a member of the Equity Committee, and
is employed as the President of Wadco Services Inns, Inc., a privately held
corporation which owns and operates an 85-room full service hotel located in
Henryetta, Oklahoma. Mr. Dunn also serves on the boards of several publicly-held
companies, including PharmaKinetics Laboratories, Inc. (director from 1985 to
date), Transcend, Inc. (director from 1986 to 1993), and Westworld Community
Healthcare, Inc. (director and Chief Executive Officer from 1982 to 1986). Mr.
Dunn is also a director of several privately-held companies, including ARS
Enterprises, Inc. (director since 1989), Horizon Medical, Inc. (director since
1989), LifePort, Inc. (director since 1990), and InnerSet, Inc. (director since
1989).
KENNETH P. GIDDENS, age 44. Mr. Giddens is a member of the Equity Committee.
Mr. Giddens is a Certified Public Accountant and a Certified Valuation Analyst,
and has maintained a public accounting practice located in Plano, Texas since
1987. In addition, between 1990 and 1994, Mr. Giddens served as a director and
Chief Financial Officer for Saber Software Corporation. Prior to opening his own
public accounting practice, Mr. Giddens was employed as Controller of the Jim
Coker Companies from 1982 through 1985, and as Chief Financial Officer of
Cityplace Development Corporation, a subsidiary of the Southland Corporation,
from 1985 through 1987.
CARL D. ROBINSON, age 39. Mr. Robinson is a member of the Equity Committee.
Mr. Robinson is the owner of Southwestern Insurance Marketing, a life insurance
and annuity brokerage firm located in Amarillo, Texas, with 120 licensed
insurance agents throughout Texas, Oklahoma, New Mexico, and Colorado. From 1987
to 1994, Mr. Robinson was a Regional Director of Southwestern Life Insurance
Company, a former affiliate of the Debtors. Since 1994, he has been a Managing
General Agent for Southwestern Life Insurance Company. Mr. Robinson is a
Chartered Financial Consultant and a Certified Life Underwriter. Mr. Robinson
has also served as President and as a member of the board of directors of the
Amarillo Area CLU Association.
2. OFFICERS
On the Effective Date, James R. Arabia shall serve as president and Chief
Executive Officer of Reorganized ICH, pursuant to the terms of a two-year
employment agreement, at the pleasure of the board of directors. Under the
expected terms of Mr. Arabia's employment agreement, he will receive a salary of
$90,000 per year, a bonus in an amount to be determined by the board of
directors, be entitled to reimbursement of his reasonable out-of-pocket expenses
and to certain benefits including health insurance and other typical employee
benefits. Mr. Arabia will also receive options, priced at fair market value, for
the purchase of up to 176,000 shares of Reorganized ICH Common Stock.
To the extent then known, the Equity Committee may identify any further
officers of Reorganized ICH not less than ten (10) days prior to the
Confirmation Hearing.
E. STOCK OPTION PLANS
Following the Effective Date, Reorganized ICH will adopt both an Employee
Stock Option Plan ("Employee Stock Option Plan") and a Director Stock Option
Plan ("Director Stock Option Plan").
Initially, the Board of Directors, or a designated committee of the Board,
("Option Committee") will administer both the Employee and Director Stock Option
Plans. Although the Option Committee may amend or terminate the Employee or
Director Plan at any time, the Committee may not adopt any amendment that would
adversely affect an outstanding award without the option holder's consent. Brief
descriptions of the Employee Option Plan and the Director Option Plan are as
follows:
EMPLOYEE STOCK OPTION PLAN. The Employee Stock Option Plan provides for the
grant to eligible ICH officers and employees of incentive stock options,
referred to as "ISOs," intended to satisfy the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended ("Code") and for the grant of
non-qualifying options referred to as "NISOs." An aggregate of 1,000,000 shares
of Reorganized ICH Common Stock has been reserved for the issuance of options
under
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the Employee Option Plan. Plan awards may be made from authorized but unissued
shares or treasury shares. The Option Committee will select the employees
eligible for option grants and determine the conditions of all plan awards. All
option grants will be evidenced by a written agreement between ICH and the
optionee. An option may only be granted under the Employee Plan with an exercise
price that is no less than the fair market value of a share of stock, determined
as of the date of grant, and no option may be granted that has a term in excess
of ten years. Options under the Employee Plan are expected to vest in annual
installments, based on continuous employment, subject to accelerated vesting
upon certain events.
DIRECTOR STOCK OPTION PLAN. The Director Stock Option Plan will cover
eligible outside directors of ICH and others deemed eligible for awards by the
Option Committee. The Director Option Plan authorizes annual grants of 5,000
options to eligible directors, subject to an individual maximum of 40,000
options and an aggregate maximum to all directors of 280,000 options. A total of
400,000 shares of Reorganized ICH Common Stock has been reserved for the
issuance of awards under the Director Stock Option Plan. Only NISOs may be
granted under the Director Plan and every option must be granted with a fair
market value exercise price, determined on the grant date. No option granted
under the Director Plan may have a term in excess of ten years. Options will
vest in annual installments, based on continuous service to the Board. The terms
of all Plan awards will be determined by the Option Committee, subject to the
terms of the Plan documents. All option grants will be memorialized in a written
grant agreement.
XI. ALTERNATIVES TO THE JOINT PLAN
The Plan Proponents believe that the Joint Plan affords Claimants and
holders of Interests the potential for the greatest realization from the
Debtors' assets, and, therefore, is in the best interests of creditors and
shareholders. The Debtors have considered alternatives to the Joint Plan, such
as alternative Chapter 11 plans and a liquidation in the context of a Chapter 7
case. In the opinion of the Plan Proponents, such alternatives would not afford
creditors or shareholders a return as great as may be achieved under the Joint
Plan.
A. ANALYSIS OF LIQUIDATION UNDER CHAPTER 7
The Debtors could convert the Chapter 11 Case to a case under Chapter 7
(liquidation) of the Bankruptcy Code. In the event of a Chapter 7 case for the
Debtors, a Chapter 7 trustee would be appointed from the panel of standing
Chapter 7 trustees for the Northern District of Texas. There is a strong
probability that such Chapter 7 trustee would not possess any particular
knowledge of the property owned by the Debtors.
Section 704 of the Bankruptcy Code requires a Chapter 7 trustee to "collect
and reduce to money the property of the estate for which such trustee serves,
and close such estate as expeditiously as is compatible with the best interest
of the parties in interest." A Chapter 7 trustee appointed for the Debtors would
face a difficult task in liquidating some of the Debtors' remaining property,
especially ICH's unique interest in CFSB.
Assuming that the Chapter 7 trustee was successful in liquidating the
remaining property, Chapter 7 of the Bankruptcy Code establishes various
priorities for distributions among the creditor and stockholder groups. For
example, unsecured general creditors would have to be paid in full before any
distributions could be made to preferred or common holders. In addition, the
estate would have to honor the Employment Agreements between the Debtors and
each of the Co-Chief Executive Officers as well as incur additional fees and
expenses related to the trustee.
In evaluating their current business operation, the Debtors have considered
the alternative of immediately liquidating their assets without benefit of a
consensual plan with the Equity Committee, the Creditors Committee, and the Shaw
Group. Assumptions made for the Liquidation Analysis include:
(1) The Debtors do not benefit from the Shaw Settlement, and consequently:
(a) the CFSB Interest is subject to the transfer restriction contained in
the Letter Agreement between CNC and ICH dated March 29, 1993 which
says "this agreement is not now and has never been assignable or
transferrable by ICH." Due to the lack of liquidity, the trustee is
forced to sell to one of the principals of CFSB and is able to realize
only $9 million for its interest.
(b) the $500,000 Shaw contribution to Reorganized ICH is eliminated.
(c) Shaw and Rice do not withdraw their respective claims aggregating
$5.775 million, and those claims are paid by the estate.
(2) In addition to paying amounts owed under the Employment Agreements, the
Debtors pay the Chapter 7 trustee 3% of all distributions after initial
cash distributions of $250 million.
Based on these assumptions, after payment of administrative and priority
expenses in full, the Debtors estimate that the unsecured creditors of ICH Class
5 would receive distributions of approximately 94.00% of their Allowed Claims in
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Chapter 7 liquidation as compared to approximately 96.03% in Chapter 11. In a
Chapter 7 case, holders of Preferred Stock and Common Stock would receive
nothing as compared to a total of approximately $11,085,000 estimated by the
Debtors under the proposed Joint Plan. For additional details on these
projections, see EXHIBIT E to this Disclosure Statement.
COMPARISON OF CHAPTER 7 AND CHAPTER 11 DISTRIBUTIONS
<TABLE>
<CAPTION>
CHAPTER 7 CHAPTER 11
----------- ------------
<S> <C> <C>
Unsecured Creditors 94.00% 96.03%
Preferred Shareholder Class -- $ 6,097,000
Common Shareholder Class -- $ 4,988,000
</TABLE>
B. ALTERNATIVES UNDER CHAPTER 11
The Debtors or other parties in interest could attempt to formulate
different plans. Such plans might involve either reorganization or continuation
of some or all of the Debtors' businesses or an orderly liquidation of some
assets. The Plan Proponents believe that the Joint Plan represents the better
alternative.
THE PLAN PROPONENTS BELIEVE THAT CONFIRMATION AND IMPLEMENTATION OF THE
JOINT PLAN IS PREFERABLE TO ANY OF THE ALTERNATIVES DESCRIBED HEREIN BECAUSE IT
SHOULD PROVIDE GREATER RECOVERIES THAN THOSE AVAILABLE IN LIQUIDATION TO THE
HOLDERS OF THE NOTES, PREFERRED STOCK, AND COMMON STOCK, WHO WOULD LIKELY
RECEIVE LESS IN AN IMMEDIATE LIQUIDATION. IN ADDITION, OTHER ALTERNATIVES WOULD
INVOLVE DELAY, UNCERTAINTY, AND SUBSTANTIAL ADMINISTRATIVE COSTS.
XII. CERTAIN REGULATORY AND LEGAL MATTERS
A. ENVIRONMENTAL MATTERS
The Debtors believe that they are currently in compliance in all material
respects with applicable state and federal environmental laws and regulations.
B. REPORTING OBLIGATIONS UNDER FEDERAL SECURITIES LAWS
ICH is the only Debtor that historically has had reporting obligations under
the Securities Exchange Act of 1934 (as amended, the "Exchange Act"). The last
Annual Report on Form 10-K filed by ICH pursuant to the Exchange Act was for the
year ended December 31, 1994, and the last Quarterly Report on Form 10-Q filed
by ICH was for the quarter ended September 30, 1995. By letter dated April 2,
1996, ICH requested that the SEC not require ICH to continue to file annual and
periodic reports as required under the Exchange Act as a result of the Chapter
11 Case, the divestiture of substantially all of ICH's business operations and
the significant hardship and burdens in terms of expense and effort that such
continued reporting requirements would place on ICH and its management,
particularly in light of the resignation of substantially all of ICH's
management as of December 31, 1995, and the other duties required of existing
management in connection with the Debtors' Chapter 11 Case. In lieu of filing
such periodic reports, ICH agreed to file with the SEC, under cover of current
reports on Form 8-K, copies of the periodic financial reports required to be
filed by ICH with the Bankruptcy Court. The SEC granted ICH's request by letter
dated May 10, 1996, and ICH has filed (and will continue to file until the
conclusion of these cases) on Form 8-K current financial reports, as well as
reports with respect to material events.
C. LEGAL PROCEEDINGS
AUTOMATIC STAY. As a result of the filing of the Chapter 11 Case, all
litigation actions against the Debtors have been automatically stayed by
operation of law under Section 362 of the Bankruptcy Code.
SECURITIES LITIGATION. In March and April 1995, prior to the filing of the
Chapter 11 Case, several purchasers of Common and Preferred Stock filed
derivative lawsuits against ICH and certain of its present and former officers
and directors in the United States District Court for the Northern District of
Texas (the "District Court") for: (i) alleged violations of Section 10(b) of the
Securities Exchange Act of 1934 and SEC Rule 10(b)-5 (17 C.F.R. 240. 10(b)-5),
(ii) alleged fraud under state common law, and (iii) alleged breaches of
fiduciary duty under state common law. The lawsuits (collectively, the
"Shareholder Suits") were styled as follows:
(i) Civil Action No. 3:90CV-0516-G; CHARLES OPITZ, ET AL. V. CHARLES DUNCAN;
(ii) Civil Action No. 3:95CV-0626-H; DAVID GOLDE, ET AL. V. DANIEL B. GAIL,
ET AL.;
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(iii) Civil Action No. 3:95CV-06270-H; MICHAEL AND MARILYN SHENIAK, ET AL.
V. SOUTHWESTERN LIFE CORPORATION, ET AL.; and
(iv) Civil Action No. 3:95CV-0696-G; MARION ANTONICELLO V. ROBERT L.
BEISENHERZ,ET AL.
In the Shareholder Suits, the plaintiffs generally alleged that ICH and the
individual defendants made misleading and untrue statements and omissions in
ICH's public disclosures and press releases relative to the financial
performance and condition of its investment portfolio, in particular, ICH's
investments in collateralized mortgage obligations ("CMOs") and so-called
"derivative" CMOs. The plaintiffs contended that the alleged misstatements and
omissions misled the securities markets and fraudulently inflated the share
prices of the Common Stock and Preferred Stock over a 22-month period from April
9, 1993, the date on which ICH made public its 1992 Annual Report to
Stockholders, to and including January 25, 1995, the date ICH publicly announced
certain strategic initiatives. The plaintiffs in the Shareholder Suits are
seeking unspecified amounts of actual and punitive damages.
On August 24, 1995, the District Court consolidated each of the Shareholder
Suits into IN RE: SOUTHWESTERN LIFE CORPORATION SECURITIES LITIGATION, Master
File No. 3-95CV-0516-G, for all purposes, including pretrial proceedings and
trial (the "Consolidated Action"). On October 6, 1995, the plaintiffs in the
Consolidated Action filed a Derivative and Consolidated Amended Complaint
("Consolidated Amended Complaint") against ICH and the individual defendants and
generally realleged the same allegations as described above.
On November 20, 1995, ICH and certain of the individual defendants removed
the Consolidated Action to the Bankruptcy Court, as IN RE: SOUTHWESTERN LIFE
CORPORATION SECURITIES LITIGATION, Adversary Proceeding No. 395-3589 ("Adversary
Proceeding"). On that same date, ICH and the individual defendants moved to
dismiss the Consolidated Amended Complaint for failure to state a claim pursuant
to Fed. R. Civ. P. 12(b)(6) and for failure to allege fraud with particularity
pursuant to Fed. R. Civ. P. 9(b) (the "Motions to Dismiss"). Prior to removal to
the Bankruptcy Court, the plaintiffs had moved to certify the Consolidated
Action as a class action. ICH and the individual defendants have not initiated
discovery with respect to the existence of a class of the plaintiffs under Fed.
R. Civ. P. 23, and no response to the plaintiffs' class certification motion is
due at this time.
The Bankruptcy Court signed two Stipulations and Agreed Orders abating the
Adversary Proceeding to and including May 15, 1996. On June 17, 1996, the
Plaintiffs filed their Motion to Stay Adversary Proceeding Pending the
Resolution of a Motion to Withdraw the Reference in the District Court and in
the Alternative to Strike the Notice of Remand (the "Motion to Stay"). Hearings
were held upon the Motion to Stay on July 19 and August 9, 1996, at the
conclusion of which the Court found the removal of the Adversary Proceeding to
be proper but remanded back to the District Court the claims against the
individual non-debtor Defendants. On August 20, 1996, the Bankruptcy Court heard
arguments on the Motions to Dismiss, and on October 1, 1996, the Bankruptcy
Court entered an order holding, INTER ALIA, that the plaintiffs had failed to
adequately plead their alleged causes of action.
Historically, ICH had provided indemnification to its current and former
officers and directors, some of whom are individual defendants in the Adversary
Proceeding. On November 16, 1995, and February 14, 1996, the Bankruptcy Court
entered orders regarding indemnification of officers and directors of the
Debtors that, INTER ALIA, approve the payment by ICH of a limited amount of
defense costs incurred by certain of the individual defendants subject to
certain terms and conditions set forth in the orders and on the terms and
condition set forth in Article IX of ICH's Bylaws. Accordingly, ICH at this time
continues to provide a defense on behalf of certain of the individual defendants
in the District Court.
ENVIRONMENTAL CLAIMS AND LITIGATION. Modern American, a former subsidiary
of ICH sold in July 1996, together with six other parties, was notified by the
Texas Water Commission ("TWC") (now known as the Texas Natural Resource
Conservation Commission ("TNRCC")) that it is a potentially responsible party
("PRP") under Texas environmental law with respect to certain property located
in East Texas (the "Site") owned by Modern American because the property
allegedly has been contaminated with creosote. In 1992, the TWC entered an
agreed order requiring the six entities to conduct a remedial investigation at
the Site and to submit to the agency an investigative report, a feasibility
study (analyzing the feasibility of available clean-up technologies), and a
Baseline Risk Assessment Report. Five of these named PRPs and another company,
Wal-Mart, entered into an agreement to undertake this work. As part of that
agreement, the participants have agreed to an interim cost sharing arrangement.
Modern American has agreed to pay 6% of the cost of the required work, and Great
Southern (also a former ICH subsidiary, which ICH has agreed to indemnify) has
also agreed to pay 6% of the costs. There is no agreement among the PRPs with
regard to any responsibility for or the allocation of costs of any remedial
action which may ultimately be determined to be necessary at the Site. As part
of the sale of Modern American,
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BML agreed to indemnify Modern American for certain environmental liabilities
related to the Site, and placed $3.5 million of the proceeds of the sale into
escrow to secure such indemnification obligations. See "Certain Risk Factors to
be Considered--Factors Relating to the Liquidating Trust--Modern
American/Western and Philadelphia American Indemnification Obligations."
Various environmental consulting firms have been retained to conduct a
phased investigation to define the extent of the contamination at the Site. The
Phase I Remedial Investigation was completed during the first half of 1993, and
the Phase I Remedial Investigation Technical Memorandum (Phase I Report) was
finalized by the end of 1993. Phase II of the Remedial Investigation was
subsequently completed during 1994 and submitted to the TNRCC in August 1995.
The final Phase III report was submitted to the TNRCC in June of 1996. The
parties are now proceeding to contract for the feasibility study and risk
assessment. Once these are completed, a remediation plan will be developed and
costs of cleanup for the Site can be estimated.
A potentially responsible party brought an action with respect to the Site,
styled TOWNE SQUARE ASSOCIATES AND MILLENNIUM III REAL ESTATE V. GSV PROPERTIES,
ET AL., Cause No. 91-15951, filed November 1991 in the 250th Judicial District,
Travis County, Texas, naming the other potentially responsible parties as
defendants, including Modern American and Great Southern. Modern American and
Great Southern asserted a counterclaim against the plaintiff as well as the
other defendants, contesting their status as potentially responsible parties and
seeking contribution and/or indemnity.
POLICYHOLDER LITIGATION. ICH and Robert L. Beisenherz, former Chairman and
Chief Executive Officer of ICH, as well as Robert T. Shaw, former Chairman of
ICH, and certain former affiliates of ICH, were added by an Amended Complaint,
filed December 3, 1993, as defendants in a lawsuit pending in Marion Circuit
Court in Indianapolis, Indiana, styled MUTUAL SECURITY LIFE INSURANCE COMPANY,
BY ITS LIQUIDATOR, JOHN F. MORTELL V. JAMES M. FAIL, EMILY S. FAIL, JACK A.
GOCHENAUR, ALVIN R. TOWNSEND, SR., JANICE T. TOWNSEND, CHARLES D. CASPER, HARRY
T. CARNEAL, CLIFFORD G. SMITH, KATHERYN F. SMITH, THOMAS K. PENNINGTON, MICHAEL
BOEDEKER, MELVIN R. SCHOCK, LIFESHARES GROUP, INC., LPC-MARKETING, INC.,
LIFESHARES SERVICES COMPANY, MICHAEL S. LANG, LANG ASSOCIATES, INC., BETA
FINANCIAL CORPORATION, THE OKLAHOMA BANK, ROBERT T. SHAW, CONSOLIDATED NATIONAL
CORPORATION, I.C.H. CORPORATION, BANKERS LIFE AND CASUALTY COMPANY, MARQUETTE
NATIONAL LIFE INSURANCE COMPANY, ROBERT L. BEISENHERZ, MARILYN BEISENHERZ,
THEODORE L. KESSNER, AND CROSBY, GUENZEL, DAVIS, KESSNER & KUESTER (THE "MUTUAL
SECURITY CASE"). On January 3, 1994, the suit was removed to the United States
District Court, the Southern District of Indiana at Indianapolis, Case No.
IP94-0001 C. A motion to remand the MUTUAL SECURITY case back to state court,
filed by the plaintiff liquidator, is currently pending. The plaintiff, the
Commissioner of Insurance, who had been appointed Liquidator of Mutual Security
Life Insurance Company ("MSL") pursuant to a Final Order of Liquidation entered
on December 6, 1991, alleges in the amended complaint that James M. Fail and
others acquired control of MSL through a series of transactions and misused
assets of MSL to acquire control of Bluebonnet Savings Bank, FSB, thereby
contributing to the insolvency of MSL. The allegations against ICH arise
primarily from a loan that was made to James M. Fail in 1989 by Bankers Life and
Casualty Company, at that time a subsidiary of ICH. The plaintiff alleges that
ICH and others are liable for the acts of James M. Fail under doctrines of joint
venture and conspiracy, including alleged violations of the Racketeer Influenced
& Corrupt Organizations Act ("RICO"), 18 U.S.C. Section 1961, ET SEQ. The
complaint seeks unspecified compensatory damages, treble damages, costs,
attorneys' fees and various other relief. ICH believes it has meritorious
defenses to the MUTUAL SECURITY case and intends to defend the suit vigorously.
XIII. VOTING PROCEDURES
ACCEPTANCE OR REJECTION OF THE JOINT PLAN WILL BE DETERMINED, PURSUANT TO
THE BANKRUPTCY CODE, BASED UPON THE ALLOWED CLAIMS AND ALLOWED INTERESTS THAT
ACTUALLY VOTE ON THE JOINT PLAN. THEREFORE, IT IS IMPORTANT THAT CLAIMANTS AND
INTEREST HOLDERS EXERCISE THEIR RIGHT TO VOTE TO ACCEPT OR REJECT THE JOINT
PLAN.
A. CLASSES ENTITLED TO VOTE ON THE JOINT PLAN
All members of Impaired Classes are entitled to vote to accept or reject the
Joint Plan. Section 1124 of the Bankruptcy Code generally provides that a class
of claims or interests is considered to be Impaired under a plan unless the plan
does not alter the legal, equitable and contractual rights of the holders of
such claims or interest. As discussed in "Discussion of the Joint Plan--Purpose
of the Joint Plan; General Joint Plan Requirements," for purposes of the Joint
Plan solicitation all of the ICH Classes of Claims and Interests are deemed to
be Impaired under the Joint Plan and are, therefore, entitled to vote on the
Joint Plan. All SWL Holding and Care Classes of Claims are unimpaired and,
therefore, not entitled to vote.
B. PERSONS ENTITLED TO VOTE ON THE JOINT PLAN
Any holder of an Impaired or deemed Impaired Claim or Interest which is an
Allowed Claim against or Allowed Interest in the Debtors on November 15, 1996,
the Voting Record Date established by the Bankruptcy Court, is entitled to vote
to accept or reject the Joint Plan. Generally, a Claim or Interest will be
Allowed if either (i) such Claim or Interest has
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been scheduled by the Debtors (and such Claim or Interest is not scheduled as
disputed, contingent or unliquidated) or, in the case of Interests, is reflected
on the Debtors' records or (ii) such holder has filed a proof of Claim or proof
of Interest on or before February 7, 1996, the last date set by the Bankruptcy
Court for such filings and, in the case of both (i) and (ii), no objection to
the allowance thereof has been timely filed or, if timely filed, such Claim is
allowed by order of the Bankruptcy Court or (iii) such Claims or Interests are
deemed allowed by the terms of the Joint Plan. See "Discussion of the Joint
Plan--Purpose of the Joint Plan; General Joint Plan Requirements" and the
definition of "Allowed" in the Joint Plan. Any Claim or Interest which has
previously been disallowed by the Bankruptcy Court or as 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 Interest an objection has been made,
temporarily allows such Claim or Interest in an amount that it deems proper for
the purpose of voting on the Joint 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.
C. VOTE REQUIRED FOR CLASS ACCEPTANCE
During the Confirmation Hearing, the Bankruptcy Court will determine whether
the Classes voting on the Joint Plan have accepted the Joint Plan by determining
whether sufficient acceptances have been received from the holders of Allowed
Claims and Allowed Interests actually voting in such Classes. A Class of Claims
will be determined to have accepted the Joint Plan if the holders of Allowed
Claims in the Class casting votes in favor of the Joint Plan (i) hold at least
two-thirds of the total amount of the Allowed Claims of the holders in such
Class who actually vote and (ii) constitute more than one-half in number of
holders of the Allowed Claims in such Class who actually vote on the Joint Plan.
A Class of Interests will be determined to have accepted the Joint Plan if the
holders of such Interests casting votes in favor of the Joint Plan hold at least
two-thirds of the amount of the Interests of such Class as to which votes are
cast.
In the event any ICH Class shall fail to accept the Joint Plan and so long
as ICH Class 5 votes to accept the Joint Plan, in accordance with Section
1129(a) of the Bankruptcy Code, the Plan Proponents will request that the
Bankruptcy Court confirm the Joint Plan in accordance with the provisions of
Section 1129(b) of the Bankruptcy Code so that and provided that the treatment
afforded to ICH Classes 6 and 7, collectively, is not adversely affected. By
accepting the Joint Plan, ICH Class 5 relinquishes, to any extent necessary, its
entitlement to receive further distributions in order to ensure that the ICH
Classes 6 and 7, collectively, receive the treatment provided in Article IV of
the Joint Plan.
D. VOTING INSTRUCTIONS
1. BALLOTS AND VOTING
Holders of Allowed Claims and Allowed Interests entitled to vote on the
Joint Plan have been sent a Ballot, together with instructions for voting, with
this Disclosure Statement. Claimants and Interest holders should read the Ballot
carefully and follow the instructions contained therein. In voting for or
against the Joint Plan, please use only the Ballot(s) that accompanies this
Disclosure Statement.
If you have Claims or Interests in more than one Class, you will receive
multiple Ballots. IF YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT
EACH BALLOT IS FOR A SEPARATE CLAIM OR INTEREST AND SHOULD COMPLETE AND RETURN
EACH BALLOT.
The Debtors have engaged Hill and Knowlton (the "Solicitation Agent") to
assist in the solicitation and tabulation of votes with respect to the Joint
Plan. IF YOU ARE A MEMBER OF A CLASS ENTITLED TO VOTE ON THE JOINT PLAN AND DID
NOT RECEIVE A BALLOT FOR SUCH CLASS, OR IF YOUR BALLOT IS DAMAGED OR LOST, OR IF
YOU HAVE ANY QUESTIONS CONCERNING VOTING PROCEDURES, YOU SHOULD CONTACT THE
SOLICITATION AGENT AT:
Hill and Knowlton, Inc.
466 Lexington Avenue, 3rd Floor
New York, NY 10017
Telephone: (212) 885-0555
BALLOTS OF CLAIMANTS OR INTEREST HOLDERS THAT ARE SIGNED AND RETURNED, BUT
NOT EXPRESSLY VOTED EITHER FOR ACCEPTANCE OR REJECTION OF THE JOINT PLAN, SHALL
BE COUNTED AS BALLOTS FOR THE ACCEPTANCE OF THE JOINT PLAN IF PERMITTED BY THE
BANKRUPTCY COURT.
2. RETURNING BALLOTS AND VOTING DEADLINE
You should complete and sign each Ballot that you receive and return it in
the pre-addressed envelope enclosed with each Ballot to the Solicitation Agent
by the Voting Deadline (as hereinafter defined). All Ballots will be tabulated
by the Soliciting Agent. If you hold Securities in nominee name and are
instructed to return your Ballot to your bank or broker, or
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the agent of either, you must return your Ballot to them in sufficient time for
them to process your Ballot and return it to the Solicitation Agent by the
Voting Deadline. See "Special Instructions For Holders of Securities" below.
THE VOTING DEADLINE IS 4:00 P.M., EASTERN STANDARD TIME, ON JANUARY 24,
1997. IN ORDER TO BE COUNTED, BALLOTS MUST BE ACTUALLY RECEIVED BY THE
SOLICITATION AGENT ON OR BEFORE 4:00 P.M., EASTERN STANDARD TIME, ON THE VOTING
DEADLINE AT THE ADDRESS SET FORTH IN THE BALLOT INSTRUCTIONS WHICH ACCOMPANY THE
ENCLOSED BALLOT. EXCEPT TO THE EXTENT ALLOWED BY THE BANKRUPTCY COURT, BALLOTS
RECEIVED AFTER THE VOTING DEADLINE MAY NOT BE ACCEPTED OR USED IN CONNECTION
WITH THE PLAN PROPONENTS' REQUEST FOR CONFIRMATION OF THE JOINT PLAN OR ANY
MODIFICATION THEREOF.
3. SPECIAL INSTRUCTIONS FOR HOLDERS OF SECURITIES
The record date for determining which holders of Interests in ICH and which
holders of the Notes are entitled to vote on the Joint Plan is November 15,
1996, the Voting Record Date established by the Bankruptcy Court. Persons who
acquire such Securities after such date will not be entitled to vote on the
Joint Plan; but if they are holding such Securities on the Distribution Record
Date they will be entitled to receive any distribution under the Joint Plan made
in respect of such Securities.
RECORD HOLDERS OTHER THAN NOMINEE RECORD HOLDERS
Except as otherwise provided herein in the case of Ballots to be returned to
the Solicitation Agent directly by Beneficial Holders, Record Holders of
Securities should return their Ballots in the pre-addressed envelope provided
for this purpose. The assumptions that will be made about Ballots submitted by
Record Holders other than Nominee Record Holders (as hereinafter defined) are
that each Ballot is for a single class of Securities and that such Record Holder
was the record and beneficial owner of the Securities voted pursuant to such
Ballot as of the Voting Record Date.
NOMINEE RECORD HOLDERS
Bank and broker nominees ("Nominee Record Holders") who hold Securities as
Record Holders for Beneficial Holders of Securities will transmit a copy of this
Disclosure Statement to each Beneficial Holder of Securities held in the name of
such nominees, together with a request for voting instructions. Beneficial
Holders of such Securities should follow the instructions of their Nominee
Record Holders with respect to the return of Ballots or requests for voting
instructions, and should return their Ballots as promptly as possible in
accordance with such instructions in order to provide sufficient time to process
and tally such Ballots.
Some Beneficial Holders will receive from their Nominee Record Holders
pre-validated Ballots requiring only that the Beneficial Holder vote to accept
or reject the Joint Plan and forward the Ballots directly to the Solicitation
Agent. The assumptions that will be made about these direct votes are that (i)
each Ballot is for a single Beneficial Holder of a class of Securities who was
the Beneficial Holder of the Securities voted pursuant to such Ballot as of the
Voting Record Date and (ii) each vote is a separate vote and not duplicative of
any other votes cast by other Beneficial Holders represented by that Nominee
Record Holder with respect to such Securities (unless specific evidence exists
that indicates that one vote is for the identical account number and amount of
another vote).
Some Beneficial Holders will receive from their Nominee Record Holder
Ballots that are to be forwarded back to their Nominee Record Holder in order to
be counted. Such Nominee Record Holders (or their agents) will, in turn, cast
Ballots on behalf of any Beneficial Holders who have returned Ballots to them.
Nominee Record Holders authorized to vote on behalf of any Beneficial Holder
will be required to indicate on each Ballot (i) the number of Beneficial Holders
of Claims or Interests, as applicable, to which the Ballot relates, (ii) the
principal amount and/or number of Securities voted in favor of the Joint Plan
and the principal amount and/or number of Claims or Interests, as applicable,
voted against the Joint Plan, and (iii) such other information as may be
requested on such Ballot or in the Ballot instructions. By submitting Ballots,
Nominee Record Holders acting on behalf of Beneficial Holders represent (and the
Ballot so provides) that they possess authority to vote on behalf of such
Beneficial Holder and are acting pursuant to instructions validly received from
the Beneficial Holders whom they represent, and Nominee Record Holders may be
required to submit evidence of such authority to the Bankruptcy Court. Nominee
Record Holders who vote Interests on behalf of Beneficial Holders will be
required to maintain accurate and complete records of the voting instructions
given to them by their clients and to provide copies of such records to the
Debtors upon request.
THE INDENTURE TRUSTEE FOR THE NOTES WILL NOT VOTE ON BEHALF OF THE HOLDERS
OF THE NOTES AND CONSEQUENTLY THE HOLDERS OF THE NOTES MUST SUBMIT THEIR OWN
BALLOTS IN ACCORDANCE WITH THE PROCEDURES DESCRIBED ABOVE.
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DO NOT RETURN YOUR SECURITIES WITH YOUR BALLOT. ANY PERSON HOLDING A
SECURITY WHO DOES NOT RECEIVE A BALLOT AND VOTING INSTRUCTIONS SHOULD CONTACT
THE SOLICITATION AGENT AT THE ADDRESS AND TELEPHONE NUMBER SET FORTH ABOVE.
IF YOU HAVE A QUESTION CONCERNING THE VOTING PROCEDURE FOR BENEFICIAL
OWNERS, CONTACT YOUR BANK OR BROKER, OR HILL AND KNOWLTON AT THE ADDRESS AND
TELEPHONE NUMBER SET FORTH ABOVE.
4. INCOMPLETE OR IRREGULAR BALLOTS
Ballots which fail to designate the Class to which they apply shall be
counted in the appropriate Class as determined by the Debtors, subject only to
contrary determinations by the Bankruptcy Court.
BALLOTS OF CLAIMANTS OR INTEREST HOLDERS THAT ARE SIGNED AND RETURNED, BUT DO
NOT INDICATE A VOTE EITHER FOR ACCEPTANCE OR REJECTION OF THE JOINT PLAN SHALL
BE COUNTED AS BALLOTS FOR THE ACCEPTANCE OF THE JOINT PLAN IF PERMITTED BY THE
BANKRUPTCY COURT.
5. CHANGING VOTES
Bankruptcy Rule 3018(a) permits a Claimant or Interest holder, for cause, to
move the Bankruptcy Court to permit such Claimant or Interest holder to change
or withdraw its acceptance or rejection of a plan of reorganization.
6. SINGLE VOTE FOR EACH CLASS OF SECURITIES
Holders of Securities (other than Nominee Record Holders) may not split
their vote on the Joint Plan with respect to any class of Securities held by
such holder. Therefore, if you are submitting a vote with respect to any class
of Securities which you beneficially own, you must vote all of your Securities
of the same class in the same way (I.E., all "accept" or all "reject").
Beneficial Holders may receive multiple mailings containing Ballot(s) for the
same class of Securities, especially if they own Securities through more than
one broker, bank or other intermediary. You should complete each Ballot that you
receive for each class of Securities which you beneficially own, including such
certifications as may be required by such Ballot(s).
E. CONTESTED AND UNLIQUIDATED CLAIMS
Contested Claims are not entitled to vote to accept or reject the Joint
Plan. See "Voting Procedures--Persons Entitled to Vote on the Joint Plan." If
you are the holder of a Contested Claim, you may ask the Bankruptcy Court
pursuant to Bankruptcy Rule 3018 to have your Claim or Interest Allowed for the
purpose of voting.
F. POSSIBLE RECLASSIFICATION OF CREDITORS AND INTEREST HOLDERS
The Plan Proponents are required pursuant to Section 1122 of the Bankruptcy
Code to place Claims and Interests into Classes that contain Claims or Interests
that are substantially similar to each other. While the Plan Proponents believe
they have classified all Claims and Interests in compliance with Section 1122,
it is possible that a Claimant or Interest holder may challenge the
classification of its Claim or Interest. If the Plan Proponents are required to
reclassify any Claims or Interests of any Claimants or Interest holders under
the Joint Plan, the Plan Proponents, to the extent permitted by the Bankruptcy
Court, intend to continue to use the acceptances received from such Claimants or
Interest holders pursuant to the solicitation of acceptances using this
Disclosure Statement for the purpose of obtaining the approval of the Class or
Classes of which such Claimants or Interest holders are ultimately deemed to be
a member. Any reclassification of Claimants or Interest holders could affect the
Class in which such Claimants or Interest holders were initially a member, or
any other Class under the Joint Plan, by changing the composition of such Class
and the required vote thereof for approval of the Joint Plan.
XIV. CONFIRMATION OF THE JOINT PLAN
A. CONFIRMATION HEARING
The Bankruptcy Code requires that, after notice, the Bankruptcy Court hold a
Confirmation Hearing with respect to the Joint Plan. The Confirmation Hearing
for the Joint Plan is scheduled to commence on January 31, 1997, at 9:00 a.m.
Central Standard Time, before the Honorable Robert C. McGuire, in Courtroom
14B5, U.S. Courthouse, 1100 Commerce Street, Dallas, Texas 75240. The
Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice except for an announcement made at the Confirmation
Hearing.
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B. REQUIREMENTS FOR CONFIRMATION OF THE JOINT PLAN
At the Confirmation hearing, the Bankruptcy Court will determine whether the
Joint Plan satisfies the requirements of Section 1129 of the Bankruptcy Code. If
the Bankruptcy Court determines that the Joint Plan does satisfy the
requirements of Section 1129 of the Bankruptcy Code, the Bankruptcy Court will
enter an order confirming the Joint Plan.
1. BEST INTERESTS TEST
Section 1129(a)(7) of the Bankruptcy Code provides that, with respect to
each Impaired Class of Claims and Interests, each holder of an Allowed Claim or
Allowed Interest in such Class, must either (i) accept the Joint Plan or (ii)
receive or retain under the Joint Plan on account of its Claim or Interest
property of a value, as of the Effective Date, that is not less than the amount
that such holder would have received on account of such claim or interest in a
chapter 7 liquidation.
2. NO SUBSEQUENT LIQUIDATION
In order for the Joint Plan to be confirmed, the Bankruptcy Court must also
determine that a need for further reorganization or a subsequent liquidation of
the Debtors is not likely to result following confirmation of the Joint Plan.
This is also known as the "feasibility test." As the Joint Plan provides for
Reorganized ICH to emerge from the Chapter 11 Case with various assets and
without any significant indebtedness as of the Effective Date, and as more fully
set out on the Projected Statement of Operations for Reorganized ICH which is
attached as EXHIBIT F to this Disclosure Statement, the Equity Committee
believes that Reorganized ICH will have sufficient income and cash flow
(principally in the form of interest on its invested funds) to meet its
currently-anticipated operating expenses immediately following the Effective
Date, including costs associated with its general and administrative expenses,
reporting requirements, anticipated professional expenses and with the continued
operation of Perry Park. Moreover, the Joint Plan provides that Claims will be
satisfied by distributions of cash from the Trust established to liquidate the
Assets which are not Retained Assets of ICH. Thus, the Plan Proponents believe
that confirmation of the Joint Plan is not likely to be followed by a need for
subsequent reorganization or liquidation of the Debtors, and, thus, that the
Joint Plan is feasible.
3. ACCEPTANCE BY IMPAIRED CLASSES
Section 1129(a)(8) of the Bankruptcy Code requires that each Impaired Class
accept the Joint Plan by the requisite vote in order for confirmation to occur
without resort to the "cram-down" provisions of Section 1129(b) as discussed
below. As more fully described herein, a Class of Impaired Claims will have
accepted the Joint Plan if holders of at least two-thirds in dollar amount and
more than one-half in number of Allowed Claims in such Class actually voting on
the Joint Plan have voted in favor of acceptance. A class of Interests will have
accepted the Joint Plan if holders of at least two-thirds in amount of each
Class of Interests actually voting on the Joint Plan have voted in favor of
acceptance.
It is important to recognize that the majorities required by Section 1129(b)
of the Bankruptcy Code apply to those creditors or interest holders in a Class
that actually vote on a plan. For example, if there are 1,200 holders of ICH
Class 5 Claims, and only five holders of ICH Class 5 Claims return Ballots
accepting or rejecting the plan, such five holders could determine the
acceptance or rejection of the plan for the entire ICH Class 5. Therefor, it is
important that each holder of a Claim or Interest actually cast its Ballot to
accept or reject the Joint Plan.
4. FAIR AND EQUITABLE TEST; "CRAM-DOWN"
If any Impaired Class of Claims or Interests does not accept the Joint Plan
or is deemed to have rejected the Joint Plan, the Bankruptcy Court still may
confirm the Joint Plan at the request of the Plan Proponents in what is commonly
referred to as a "cram-down." Cram-down may occur if at least one impaired Class
of Claims accepts the Joint Plan, and, as to all non-accepting Impaired Classes,
the Joint Plan "does not discriminate unfairly" and is "fair and equitable" with
respect to such remaining Classes. A plan of reorganization does not
"discriminate unfairly" if no class receives more than it is legally entitled to
receive on account of its claims or equity interests.
"Fair and equitable" has different meanings for Secured Claims, Unsecured
Claims and Interests. With respect to an Unsecured Claim, "fair and equitable"
means either (i) each Impaired Unsecured Claim receives or retains property of a
value equal to the amount of its Allowed Claim, or (ii) the holders of Claims or
Interests that are junior in priority to the Claims of the dissenting Class will
not receive or retain any property under the Joint Plan. With respect to an
Interest, "fair and equitable" means either (i) each holder of an Impaired
Interest of such Class receives property of a value equal to the greatest of the
allowed amount of any fixed liquidation preference to which such holder is
entitled, any fixed redemption price to which such holder is entitled, or the
value of such Interest, or (ii) the holders of all Interests that are junior in
priority to the Interests of the dissenting Class will not receive or retain any
property under the Joint Plan.
The Plan Proponents intend to use the cram-down provisions of the Bankruptcy
Code, if an Impaired Class of Claims or Interests rejects the Joint Plan, and if
the Plan Proponents determine that a basis nevertheless exists to request
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confirmation under the cram-down provisions. The ability to obtain confirmation
of the Joint Plan pursuant to the cram-down provisions of the Bankruptcy Code,
however, will be subject to the Bankruptcy Court determining, among other
things, that the Joint Plan is fair and equitable and that it does not
discriminate unfairly against any Impaired Class of Claims or Interests.
In the event that ICH Class 6 does not vote to accept this Joint Plan, and
this Joint Plan is confirmed pursuant to the cram-down provisions of Bankruptcy
Code Section 1129(b), the portion of Reorganized ICH Common Stock allocated to
ICH Class 7 in this Joint Plan, together with cash sufficient to fund payments
to Holders of Allowed ICH Class 7 Interests who elect the cash payment option,
shall be distributed to the Trust on the Effective Date, and the Trust shall, in
that event, distribute as soon as practicable after the Effective Date, through
the Distribution Agent, such Reorganized ICH Common Stock and cash to the
Holders of Allowed ICH Class 7 Interests in accordance with the terms of this
Joint Plan, with any such distribution to Holders of Allowed ICH Class 7
Interests being made in exchange for the release by Holders of such Allowed
Class 7 Interests of any and all claims, if any, against the Trust; PROVIDED,
HOWEVER, the Trust shall have no obligations to distribute cash or stock to such
holders of Allowed Class 7 Interests other than that which is received from the
Estate and/or Reorganized ICH expressly for that purpose.
C. CONDITIONS PRECEDENT TO CONFIRMATION
At the Confirmation hearing, the Bankruptcy Court will determine whether the
Joint Plan meets all the requirements of Section 1129 of the Bankruptcy Code
governing the confirmation of plans of reorganization. Among the conditions
precedent to the Bankruptcy Court's Confirmation of the Joint Plan are: (i) a
finding that the Joint Plan was solicited upon disclosure of adequate
information as described in Section 1125(a) of the Bankruptcy Code; and (ii) a
finding that at least one of the Impaired Classes of Claims that is voting in
the Chapter 11 Case has accepted the Joint Plan by the affirmative vote of
Claimants that hold at least two-thirds in dollar amount and not less than
one-half in number of the total Allowed Claims of such Classes that have voted
on the Joint Plan, excluding votes of any Claimants designated under Section
1126(e) of the Bankruptcy Code.
D. EFFECT OF CONFIRMATION; DISCHARGE OF DEBTORS; RELEASES; SETTLEMENT AND
ADJUSTMENT OF CLAIMS
1. LEGAL BINDING EFFECT; DISCHARGE OF CLAIMS AND INTERESTS
The provisions of the Joint Plan shall (i) bind all Claimants and Interest
holders, whether or not they accept the Joint Plan, and (ii) discharge the
Debtors, jointly and severally, from all debts that arose before the Petition
Date, and from any liability, including, without limitation, any liability of a
kind specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, that
arose, or has been asserted against, the Debtors, jointly or severally, at any
time before the entry of the Confirmation Order or that arises from any
pre-Confirmation conduct of the Debtors, jointly or severally, whether or not
the Claim is known or knowable as of the date of Confirmation. In addition, the
distributions provided for under the Joint Plan shall be in exchange for and in
complete satisfaction, discharge, and release of all Claims against and
Interests in the Debtors or any of their assets or properties, including any
Claim or Interest accruing after the Petition Date and prior to the Effective
Date. Without limiting the generality of the foregoing, Confirmation discharges
all Unsecured Claims, all Securities-Related Claims, all Claims, if any,
relating to ICH's 1986 retirement of its Class B preferred stock, and all Claims
relating to the escheat of securities or funds attributable to Securities of
ICH. On and after the Effective Date, all holders of Claims or Interests shall
be precluded from asserting any Claim or Interest against the Trust or
Reorganized ICH or their assets or properties based on any transaction or other
activity of any kind that occurred prior to the Confirmation Date except as
expressly provided in the Joint Plan.
2. RETENTION AND ENFORCEMENT OF THE DEBTORS' CAUSES OF ACTION
RETENTION OF CAUSES OF ACTION
(i) All claims recoverable against third parties on account of an
indebtedness, and all other claims held by or in favor of the Debtors or
their Estates pursuant to any federal or state statute, common law, or any
theory of action whatsoever including without limitation claims for
preferences and fraudulent transfers, to the extent not specifically
compromised and released pursuant to this Joint Plan or an agreement
referred to and incorporated herein, are hereby preserved and retained for
enforcement by Reorganized ICH;
(ii) Subject to the provisions of section 10.2 of the Joint Plan,
Reorganized ICH is the successor and designated representative of the
Debtors and their Estates appointed for the purpose of retention and
enforcement of all claims owned or held by the Debtors or their Estates
against third parties;
(iii) Subject to the provisions of section 10.2 of the Joint Plan, the
Trust is the appointed successor and designated representative of the
Debtors and their Estates appointed for the purpose of retention and
enforcement of claims
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specifically relating to or arising from Trust Assets, but specifically
excluding all claims related to any asset which has been fully and finally
converted into cash which has been transferred to the Trust as of the
Effective Date;
(iv) Reorganized ICH or the Trust, as applicable, shall be the only
party authorized to pursue actions to recover their respective claims, and
shall have the sole right to waive or assert any attorney-client or other
privilege of the Debtors, and no other party shall have the right or
obligation to pursue any such actions or to waive, raise, or assert any
claim or privilege related thereto.
JUDGMENT REDUCTION AND HOLD HARMLESS. To the extent a claim, cause of
action, right or remedy, whether legal or equitable, including, but not limited
to, any claim, cause of action, right or remedy of apportionment, reimbursement,
contribution, indemnification or offset, is asserted or commenced against the
Trust that results directly from Reorganized ICH's pursuit of a Retained Cause
of Action or any other right or remedy against an Entity, (a "Contribution
Claim"), the following conditions shall apply:
(i) with respect to any judgment, settlement, payment or compromise in
favor of Reorganized ICH (an "Underlying Judgment") against an Entity which
gives rise to a Contribution Claim by that Entity, Reorganized ICH shall
reduce the amount of its Underlying Judgment against that Entity by the full
amount of that Entity's Contribution Claim, and Reorganized ICH shall
indemnify and hold the Trust harmless from any and all Contribution Claims
arising from the Underlying Judgment; PROVIDED, HOWEVER, that Reorganized
ICH shall have the right to contest the claim of entitlement of any Entity
to a Contribution Claim in which case: (a) Reorganized ICH shall have no
obligation to reduce the amount of the Underlying Judgment unless and until
the entitlement of that Entity to the Contribution Claim has been
determined, either judicially or otherwise with the consent of Reorganized
ICH; and (b) Reorganized ICH's obligation to hold harmless and indemnify the
Trust against such Contribution Claim shall be unaffected;
(ii) with respect to any present or former officer, director, employee,
agent or representative of the Debtors or the Estate who is named as a
defendant by Reorganized ICH in its pursuit of any Retained Cause of Action,
and who is entitled to a right of payment from the Trust for an ongoing
defense prior to any final judgment in that action, Reorganized ICH shall,
at its option, either (a) assume the obligation to pay for such ongoing
costs of defense or (b) discontinue the action against that defendant, in
which case Reorganized ICH shall have no further obligation with respect to
defense costs for that defendant; PROVIDED, HOWEVER, that Reorganized ICH
shall have the right to contest the claimed entitlement of any Entity to
receive ongoing costs of defense from the Trust, and PROVIDED FURTHER that
Reorganized ICH shall have no obligation to fund any such defense costs or
to discontinue such an action unless and until the Indemnification Fund, as
set forth in Section 2.1(e) of the Joint Plan, if available therefore, has
first been applied to such obligations.
THE RIGHT OF TRUST TO ASSERT OFFSET CLAIMS. Notwithstanding any other
provision in the Joint Plan regarding the Retained Causes of Action, the Trust
shall be entitled to assert as an offset, objection, or defense with respect to
any Claim Filed or asserted against the Estate, or against the Trust as
successor to the Estate, any Retained Cause of Action conveyed to Reorganized
ICH under the Joint Plan, PROVIDED, HOWEVER, that the obligations of Reorganized
ICH as set out in section 10.2(b) of the Joint Plan shall not apply to any such
Retained Cause of Action so asserted by the Trust. This provision shall be
deemed to be an assignment of such Retained Cause of Action to the Trust solely
for the limited purpose of, and only to the extent necessary to permit the Trust
to fully assert such offset, objection or defense. Any recovery obtained through
such assertion of a Retained Cause of Action in excess of the amount of the
Claim asserted against the Estate or the Trust, as the case may be, shall be the
property of Reorganized ICH.
3. RELEASES
Except with respect to Claims, if any, pursuant to Chapter 5 of the
Bankruptcy Code, the Joint Plan resolves all disputes between and among the
Debtors and the Released Entities. With respect to all claims that the Debtors
ever had, now have, or may claim to have or hereafter have, or which the Debtors
could have asserted or could assert, jointly or severally, including without
limitation claims held in their corporate capacity and claims that third parties
may assert derivatively on behalf of the Debtors absent bankruptcy, but
excluding claims, if any, arising in or under Chapter 5 of the Bankruptcy Code,
Confirmation of the Joint Plan releases each Released Entity from all such
claims, counterclaims, demands, controversies, costs, contracts, debts, sums of
money, accounts, reckonings, bonds, bills, damages, obligations, liabilities,
objections, actions and causes of action of any nature, type or description,
whether in law or in equity, in contract, tort, or otherwise, known or unknown,
suspected or unsuspected, including claims for negligence, gross negligence, or
otherwise. On the Effective Date, the Debtors shall be authorized to execute a
general release consistent with Section 10.3 of the Joint Plan. In addition,
under the Joint Plan, the Debtors will execute a release of the claims described
in Section 10.3 of this Joint Plan against the Released Officers.
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4. FURTHER RELEASES AND SETTLEMENTS
After the Effective Date, the compromise and settlement by Reorganized ICH
of any Retained Cause of Action may be effected without the necessity of
Bankruptcy Court proceedings under Bankruptcy Rule 9019 or otherwise. To the
extent the Trust is entitled to assert a Retained Cause of Action pursuant to
Section 10.2(c) of the Joint Plan, the Trust may compromise and settle any such
Retained Cause of Action with the consent of Reorganized ICH.
5. PERMANENT INJUNCTION
Confirmation of the Joint Plan shall result in the issuance of a permanent
injunction against the: (i) commencement or continuation of any judicial,
administrative, or other action or proceeding against the Debtors, the Trust, or
Reorganized ICH on account of Claims against or Interests in the Debtors or on
account of claims released pursuant to Sections 10.3 and 10.4 of the Joint Plan
against the Released Entities and the Released Officers; (ii) enforcement,
attachment, collection or recovery by any manner or means of any judgment,
award, decree, or order against the Debtors, the Trust or Reorganized ICH; and
(iii) creation, perfection or enforcement of any encumbrance of any kind against
the Debtors, the Trust or Reorganized ICH arising from a Claim.
6. SURVIVAL OF THE DEBTORS' CORPORATE INDEMNITIES
Any obligations of the Debtors, pursuant to the Order Regarding
Indemnification of Officers and Directors of Debtors entered February 14, 1996
shall not be discharged or impaired by Confirmation or Consummation of the Joint
Plan; accordingly, such indemnification obligations shall survive unaffected by
the reorganization contemplated by the Joint Plan and shall be performed and
honored by the Trust regardless of the Confirmation of the Joint Plan PROVIDED,
HOWEVER, that such obligations shall not be obligations of Reorganized ICH. All
other obligations of the Debtors with respect to indemnification of officers and
directors, or agents, representatives, successors or assigns thereof, shall be
treated as executory contracts rejected under Section 8.1 of the Joint Plan, and
all Claims arising from or related thereto shall be treated and classified as
provided by Section 8.2 of the Joint Plan, subject to any and all defenses
thereto, including but not limited to any subordination under application
provisions of the Bankruptcy Code.
7. FURTHER ASSURANCES AND AUTHORIZATIONS
The Trust or Reorganized ICH, if and to the extent necessary, shall seek
such orders, judgments, injunctions, and rulings as may be required to carry out
further the intentions and purposes, and to give full effect to the provisions
of the Joint Plan. Reorganized ICH shall indemnify the Trust against any Claim
asserted against the Trust which is an obligation of Reorganized ICH, and the
Trust shall indemnify Reorganized ICH against any Claim asserted against
Reorganized ICH which is an obligation of the Trust.
8. RIGHT TO RESOLVE CLAIMS
The Trust and Reorganized ICH shall each have the right to resolve in their
sole and absolute discretion each of the parties' respective claims against
third parties.
9. RIGHTS REGARDING BOOKS AND RECORDS
In the event Reorganized ICH wishes to dispose of any of the Debtors' books
and records that are Retained Assets, it shall first give reasonable notice to
the Trust, which may elect to take such books and records at its own expense;
and if the Trust does not so elect within a reasonable period of time,
Reorganized ICH shall be free to dispose of any such documents. Subject to the
foregoing, the Trust shall have reasonable access to and use of the books and
records of the Debtors for the purpose of administering the Trust Assets and
otherwise discharging its duties under the Joint Plan and the Trust Agreement.
10. TERMINATION OF THE COMMITTEES
On the Initial Distribution Date, the Creditors Committee and the Equity
Committee shall cease to exist and have no further status as parties in interest
except for purposes of prosecuting any applications for Fee Claims and of
participating in any appeal of the Confirmation Order, in which events such
committees will cease to exist immediately after the resolution of such matters.
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XV. SECURITIES LAW CONSIDERATIONS
A. GENERAL
The Reorganized ICH Common Stock to be issued pursuant to the Joint Plan and
any rights of ICH Class 5 Claimants to receive cash distributions from the Trust
pursuant to the Joint Plan (defined in the Joint Plan as "Trust Interests") will
be issued without registration under the Securities Act of 1933, as amended
("1933 Act"), or under any state securities laws, in reliance upon the exemption
from registration afforded by Sections 1125 and 1145 of the Bankruptcy Code. The
order of the Bankruptcy Court confirming the Joint Plan will include provisions
to the effect that such exemption is available for the issuance of the
Reorganized ICH Common Stock and any Trust Interests and that each of
Reorganized ICH and the Trust is a "successor" to ICH within the meaning of
Sections 1125 and 1145 of the Bankruptcy Code. No indenture will be qualified
under the Trust Indenture Act of 1939, as amended (the "1939 Act"), with respect
to the Trust Interests in reliance on the exemption provided by Section
304(a)(9) of the 1939 Act.
ICH also intends to request from the Staff of the Division of Corporation
Finance (the "Staff") of the SEC a no-action letter to the effect that the Staff
will not recommend enforcement action if the issuance and distribution of
Reorganized ICH Common Stock are effected without 1933 Act registration in
reliance on the exemptions referred to above; if Trust Interests are issued and
distributed without registration of such interests under the 1933 Act or
qualification of an indenture under the 1939 Act; if Trust Interests are issued
and distributed, and the Trust is operated, without registration of the Trust
under the Investment Company Act of 1940, as amended; if the Trust does not
comply with the registration and reporting requirements of the 1934 Act; or if
recipients of Reorganized ICH Common Stock and Trust Interests (other than
persons who are underwriters of any of such securities within the meaning of
Section 1145(b) of the Bankruptcy Code and other than (i) with respect to the
Reorganized ICH Common Stock, affiliates of ICH, and (ii) with respect to the
Trust Interests, affiliates of the Trust) resell such securities without
registration under the 1933 Act. If the Staff does not concur with the positions
referred to above, Reorganized ICH and/or the Trust may be required to comply
with the applicable provisions of such laws and the rules promulgated thereunder
or impose certain restrictions on the transferability of the Reorganized ICH
Common stock and/or the Trust Interests (in addition to those described below)
or implement changes to the operation and/or governance of Reorganized ICH
and/or the Trust in order to obtain the Staff's concurrence with the positions
referred to above.
B. LIMITED RESTRICTIONS ON TRANSFERABILITY
In general, Reorganized ICH Common Stock and Trust Interests may be resold
by persons receiving such securities under the Joint Plan without registration
under the 1933 Act or other laws, unless such party is an "underwriter" with
respect to such securities, as that term is defined in the Bankruptcy Code.
Under Section 1145(b) of the Bankruptcy Code, an underwriter is a person or
entity who (i) purchases a claim against or equity interest in a debtor with a
view to the distribution of the securities received on account of such claim or
equity interest; (ii) offers to sell such securities on behalf of the holders
thereof (except offers to sell fractional interests); (iii) offers to buy such
securities from the holders if such offer to buy is with a view to the
distribution thereof pursuant to an agreement made in connection with a plan,
the consummation of a plan or the offer or sale of securities under a plan; or
(iv) is an "issuer" with respect to the securities received, as the term
"issuer" is defined in Section 2(11) of the 1933 Act.
In this context, an "issuer" of Reorganized ICH Common Stock or Trust
Interest under Section 2(11) of the 1933 Act includes any person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with Reorganized ICH or the Trust, respectively. Whether a person is an
"issuer" and, therefore, an "underwriter" for purposes of Section 1145(b)
depends upon a number of factors, including: the relative size of the person's
interests in Reorganized ICH or the Trust; the distribution and concentration of
other interests in Reorganized ICH or the Trust; the contractual or other
relationships giving that person power over management policies and decisions;
and whether the person actually has such power notwithstanding the absence of
formal indicia of control. An officer or director of Reorganized ICH may be
deemed to be a controlling person, particularly if his position is coupled with
ownership of a relatively significant percentage of voting stock. A Trustee may
be deemed a controlling person of the Trust.
Based on the published views of the Commission, the Debtors believe that a
person who receives less than 1% of a class of securities generally would not be
deemed to be an underwriter. This does not mean that persons receiving more than
1% would be deemed to be underwriters. Persons who may be underwriters,
including "issuers" as described above, must either have their securities
registered for resale or use an available exemption from registration.
Because Reorganized ICH and the Trust do not propose to register under the
1933 Act any of the Reorganized ICH Common Stock or Trust Interests,
respectively, to be distributed under the Joint Plan, persons who are
underwriters, including "issuers" as described above, will be able to resell
such securities only in limited circumstances in reliance upon an exemption from
1933 Act registration requirements. Persons who are underwriters by virtue of
being in a control relationship with Reorganized ICH or the Trust ("affiliates")
may resell such securities with respect to which they are deemed an underwriter
in accordance with Rule 144 under the 1933 Act, to the extent available, or
other applicable rules
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and regulations of the SEC and in compliance with applicable state and foreign
securities laws. In addition, persons who are "underwriters" as described above
may freely engage in "ordinary trading transactions" in securities received
under the Joint Plan with respect to which they are deemed an underwriter. What
constitutes "ordinary trading transactions" within the meaning of Section 1145
of the Bankruptcy Code is the subject of interpretive letters of the Staff.
Generally, ordinary trading transactions are those which do not involve (i)
concerted activity by recipients of securities under a plan of reorganization,
or by distributors acting on their behalf, in connection with the sale of such
securities; or (ii) use of informational documents in connection with the sale
other than the disclosure statement relating to the plan, any amendments
thereto, and reports filed by the issuer with the Commission under the 1934 Act;
or (iii) payment of special compensation to brokers or dealers in connection
with the sale.
Broker-dealers effecting sales of Reorganized ICH Common Stock or Trust
Interests distributed under the Joint Plan will have an obligation under Section
1145(a)(4) of the Bankruptcy Code for a period of 40 days after the Effective
Date to provide the purchaser of any such securities with a copy of this
Disclosure Statement (and any supplements thereto, if ordered by the Bankruptcy
Court) at or before the time of delivery of such securities.
C. EFFECTS ON THE TRUST
As stated above, the Debtors intend to seek a "no-action" letter from the
Staff that the provisions of the 1934 Act, the 1939 Act and the 1940 Act do not
apply to the issuance and distribution of the Trust Interests or the operation
of the Trust. In the event that the Staff does not concur with the position of
the Debtors and the Trust Agreement is not modified in a manner satisfactory to
the Staff or to otherwise make an exemption available or render such laws
inapplicable to the Trust, the Trust would be required to comply with such laws.
In the event the Staff requires the Trust to comply with the registration
and reporting requirements of the 1934 Act, the Trust would be required to
register the Trust Interests under Section 12(g) of the 1934 Act within 120 days
after the last day of its first fiscal year if the Trust had total assets
exceeding $1,000,000 and Trust Interests were held by more than 500 persons. If
registered under Section 12(g) of the 1934 Act, and absent an available
exemption, the Trust would be subject to a continuing reporting process,
requiring annual reports including audited financial statements prepared in
accordance with generally accepted accounting principals, quarterly reports and
other periodic reports to be filed with the Commission. Solicitations of
consents of holders of Trust Interests may be subject to the proxy requirements
under Section 14 of the 1934 Act. Additionally, the "short-swing" profits
provisions of Section 16 and the beneficial ownership reporting provisions of
Section 13(d) may be applicable to certain holders of the Trust Interests. In
addition, in the absence of action by the Staff or an available exemption, the
Trust would become subject to the reporting requirements of the 1934 Act if a
registration statement has become effective with respect to the Trust Interests
under the 1933 Act.
The 1939 Act generally requires that notes, bonds, debentures or other
evidences of indebtedness, or a certificate of interest or participation
therein, only be issued pursuant to a qualified indenture. The 1939 Act requires
qualified indentures to include certain provisions governing the eligibility of
persons appointed as trustees to ensure their independence and imposes certain
procedures designed to assure compliance with the terms of the indenture. In the
event that the issuance and distribution of Trust Interests were not exempt from
the 1939 Act, the Trust Agreement would be required to be qualified under the
1939 Act and amended to conform to the requirements of the 1939 Act.
The 1940 Act generally requires the companies engaged in the business of
investing and reinvesting in securities to register with the Staff and imposes
certain operating standards including the preparation and distribution of
financial reports, procedures with respect to the solicitation of votes and
restrictions on compensation and affiliate transactions. In the event that the
Trust were not exempt from the 1940 Act, the Trust would be required to register
as an investment company and would be subject to the provisions governing the
operation of investment companies.
If the Staff does not concur with the Debtors' position that recipients of
Trust Interests under the Joint Plan (other than affiliates and underwriters)
may resell such securities without registration under the 1933 Act, such
recipients (including affiliates and underwriters) may be required to hold such
securities for up to two years or until a registration statement regarding the
resale of securities is filed with and declared effective by the SEC, and
underwriters would not be entitled to engage in ordinary trading transactions
without registration of such transactions. The Trust currently does not intend
to register the resale of Trust Interests issued pursuant to the Joint Plan. See
also "The Trust--Trust Interests."
D. EFFECTS ON REORGANIZED ICH
As stated above, the Debtors intend to seek a "no-action" letter from the
Staff that certain provisions of the 1933 Act do not apply to the issuance and
distribution of the Reorganized ICH Common Stock, and with respect to the
ability of non-affiliates of Reorganized ICH (other than underwriters) who have
received shares of Reorganized ICH Common Stock pursuant to the Joint Plan to
resell such securities without registration under the 1933 Act. In the event
that the Staff does not concur with the positions of the Debtors, Reorganized
ICH would be required to comply with such laws.
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In the event the Staff does not concur that the issuance and distribution
under the Joint Plan of the Reorganized ICH Common Stock may be effected without
registration under the 1933 Act, Reorganized ICH will be required to register
the issuance of such securities. The registration of the issuance of the
Reorganized ICH Common Stock could delay the initial issuance and distribution
of Reorganized ICH Common Stock under the Joint Plan.
If the Staff does not concur with the Debtors' position that recipients of
Reorganized ICH Common Stock under the Joint Plan (other than affiliates and
underwriters) may resell such securities without registration under the 1933
Act, such recipients (including affiliates and underwriters) may be required to
hold such securities for up to two years or until a registration statement
regarding the resale of securities is filed with and declared effective by the
Commission, and underwriters would not be entitled to engage in ordinary trading
transactions without registration of such transactions. Reorganized ICH
currently does not intend to register the resale of shares of Reorganized ICH
Common Stock issued pursuant to the Joint Plan.
It is contemplated that Reorganized ICH will be required to register the ICH
Common Stock under Section 12(g) of the 1934 Act. If registered under Section
12(g) of the 1934 Act, and absent an available exemption, Reorganized ICH would
be subject to a continuing reporting process, requiring annual reports including
audited financial statements prepared in accordance with generally accepted
accounting principals, quarterly reports and other periodic reports to be filed
with the Commission. Solicitations of consents of holders of Reorganized ICH
Common Stock also would be subject to the proxy requirements under Section 14 of
the 1934 Act. Additionally, the "short-swing" profits provisions of Section 16
and the beneficial ownership reporting provisions of Section 13(d) would be
applicable to certain holders of Reorganized ICH Common Stock. Reorganized ICH
also would become subject to the reporting requirements of the 1934 Act if a
registration statement has become effective with respect to the Reorganized ICH
Common Stock under the 1933 Act.
THE DISCUSSION ABOVE IS A SUMMARY OF THE GENERAL EFFECT OF THE REGISTRATION
PROVISIONS OF THE SECURITIES LAWS UPON ISSUANCE AND RESALE OF SECURITIES TO BE
RECEIVED UNDER THE JOINT PLAN. THE EFFECTS MAY VARY BASED ON THE INDIVIDUAL
CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR INTEREST RECEIVING SECURITIES. EACH
RECIPIENT OF SECURITIES UNDER THE JOINT PLAN IS URGED TO CONSULT WITH ITS OWN
COUNSEL WITH RESPECT TO THE EFFECT OF FEDERAL, STATE AND FOREIGN SECURITIES LAWS
INCLUDING BUT NOT LIMITED TO WHETHER OR NOT IT IS AN UNDERWRITER AS DEFINED IN
SECTION 1145(b) OF THE BANKRUPTCY CODE (WHETHER BY VIRTUE OF BEING AN AFFILIATE
OF REORGANIZED ICH OR OTHERWISE) AND THE EFFECT OF ANY APPLICABLE FOREIGN OR
STATE LAW RESTRICTIONS ON RESALES OF ANY SUCH SECURITIES.
XVI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
A. GENERALLY
The following discussion summarizes certain of the significant federal
income tax consequences of the transactions that are described herein and in the
Plan to the Debtors and to taxpayers that own Claims or Interests as capital
assets and not for sale to customers in the ordinary course of business. This
discussion is for informational purposes only and is based on the Tax Code, the
Treasury Regulations promulgated thereunder, judicial authority interpreting the
Tax Code, and current administrative rulings and pronouncements of the IRS, any
of which may be altered with retroactive effect, thereby changing the federal
income tax consequences discussed below. The following discussion does not
address foreign, state or local tax consequences of the Joint Plan, nor does it
purport to address special classes of taxpayers (such as S corporations, mutual
funds, insurance companies, financial institutions, small business investment
companies, foreign companies, nonresident alien individuals, regulated
investment companies, broker-dealers, and tax-exempt organizations).
Furthermore, estate and gift tax issues are not addressed herein. Due to the
lack of applicable legal precedent, the possibility of changes in law, the
difference in the creditors' and interest holders' status and methods of
accounting and the potential for disputes as to legal and factual matters, the
tax consequences described herein are subject to significant uncertainties. No
ruling will be sought from the IRS prior to the Confirmation Date with respect
to any of the tax aspects of the Joint Plan, and it is not likely that a ruling
could be obtained on all issues if one were sought. An opinion of counsel has
neither been sought nor obtained with respect to the tax aspects of the Joint
Plan. EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT WITH ITS
OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE JOINT PLAN.
For purposes of the following discussion, all capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Joint Plan, the Trust or in other parts of this Disclosure Statement.
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B. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS
1. DISCHARGE OF INDEBTEDNESS INCOME OF THE DEBTORS
Subject to several exceptions, a taxpayer generally recognizes taxable
income upon a satisfaction of its indebtedness for less than the amount that the
taxpayer received on issuance of the debt. Accordingly, if the amount "paid" in
cancellation of the debt is less than the adjusted issue price of the debt
(I.E., the amount paid for the debt when originally issued plus accruals of
original issue discount, if any, on the debt to the date of discharge, minus
payments other than payments of qualified periodic interest), the taxpayer
generally is required to include the difference in gross income for the taxable
year of the discharge. One of the exceptions to this rule provides that gross
income does not include amounts attributable to a discharge of indebtedness
pursuant to a plan of reorganization that is approved by a bankruptcy court in a
chapter 11 case (the "Bankruptcy Discharge Exception").
For federal income tax purposes, actions which occur on the Effective Date
to establish the Trust and discharge Claims should be treated as if the holders
of Claims against the Debtors on the Effective Date surrendered their Claims to
the Debtors in exchange for their pro rata portion of the Trust Assets.
For federal income tax purposes, the Debtors intend to treat the discharge
of each Claim in the following manner. To the extent that the adjusted issue
price of Claims, plus the amount of any interest accrued thereon that has been
previously deducted but not paid by the Debtors, exceeds the sum of the cash and
the fair market value of Trust Assets allocable to such Claim, the Debtors
intend to take the position that such excess will constitute discharge of
indebtedness income. Such discharge of indebtedness income realized by the
Debtors as a result of the exchanges will be excluded from their taxable income
under the Bankruptcy Discharge Exception.
Although the discharge of indebtedness income realized by the Debtors as a
result of the exchanges will be excluded from their taxable income under the
Bankruptcy Discharge Exception, the amount of discharged indebtedness will be
applied to reduce certain tax attributes of the Debtors, in the following order:
(i) net operating loss carryovers, (ii) tax credit carryovers, (iii) capital
loss carryovers, (iv) the basis of the Debtor's property, and (v) foreign tax
credit carryovers. Pursuant to the Tax Settlement, the Debtors have waived all
such tax attributes arising in taxable years prior to the taxable year beginning
January 1, 1996, other than the basis in the Debtors' property. As a result, the
Debtors expect that any discharged indebtedness will have the effect of
reducing, as of the beginning of the taxable year following the taxable year of
the discharge, the Debtors' basis in their property.
2. GAIN OR LOSS ON TRANSFER OF ASSETS TO THE TRUST
Although not free from doubt, the Debtors intend to take the position that
they will recognize gain or loss upon the transfer of the Trust Assets to the
Trust to the extent that the fair market value of the Trust Assets is greater or
less than the Debtors' adjusted basis in such Trust Assets. The Debtors do not
anticipate that any tax liability will be incurred by the Trust on such
transfer. However, if the Debtors are not able to offset losses against gains
recognized on the transfer of the Trust Assets to the Trust or, alternatively,
are not able to establish a tax basis in the CFSB Interest (See "Certain Risk
Factors to be Considered--Factors Relating to the Liquidating Trust--Profits
Interest in CFSB Corporation"), the Debtors could incur tax liability on the
transfer. Any such tax liabilities would be administrative priority claims
payable by the Trust out of Trust Assets, thereby reducing the Trust Assets
available for distribution to ICH Class 5 Claims. See "Certain Federal Income
Tax Consequences--Federal Income Tax Consequences of the Trust."
3. LIQUIDATIONS AND MERGERS
It is anticipated that on or before the Effective Date, some of the Debtors
and their subsidiaries will liquidate and/or merge into each other. Although not
free from doubt, the Debtors do not anticipate a material adverse tax
consequence as a result of these liquidations and/or mergers.
C. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF ADMINISTRATIVE CLAIMS,
PRIORITY CLAIMS, ICH SECURED CLAIMS, SWL SECURED CLAIMS AND CARE SECURED
CLAIMS
Holders of Administrative Claims, Priority Claims, ICH Secured Claims, SWL
Secured Claims and Care Secured Claims will generally be paid the full amount of
their Claims pursuant to the Joint Plan. As a result, generally, such holders
should recognize neither gain nor loss with respect to such Claims. A holder of
any such Claim may, however, recognize gain or loss if its tax basis in such
Claim is more or less than the amount of such Claim.
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D. FEDERAL INCOME TAX CONSEQUENCES OF THE TRUST
1. CHARACTERIZATION OF THE TRUST
Although not free from doubt, the Debtors believe that the Trust generally
should be treated as a "grantor" trust under Section 671 of the Tax Code and the
regulations issued thereunder by the United States Department of the Treasury.
Assuming this treatment is correct, the Trust will not be treated as a separate
taxable entity. Rather, the holders of an Allowed Class 5 ICH Claims and other
entities, if any, that own or acquire beneficial interests in the Trust will be
treated as the grantors and thus the owners of the Trust's assets for federal
income tax purposes.
The remainder of this discussion assumes that the foregoing treatment will
be respected. It is possible, however, that the IRS could succeed in requiring a
different characterization of the Trust, which could result in a different and
possibly greater tax liability to the Trust, the holders of Allowed Class 5 ICH
Claims and/or the Debtors.
2. ESTABLISHMENT OF THE TRUST
The transfer on the Effective Date of the Trust Assets (subject to certain
liabilities) to the Trust should be treated for federal income tax purposes as a
transfer of those assets to the holders of Allowed Class 5 ICH Claims, followed
by the contribution of such assets to the Trust in exchange for the Trust
Interests. The deemed contribution should not be a taxable event. As a result of
such deemed contribution, each holder of an Allowed Class 5 ICH Claim will be
deemed to own his pro rata share of the Trust Assets.
3. TAXATION OF THE TRUST AND INTEREST HOLDERS
Each holder of Trust Interests will be required to report on his federal
income tax return his allocable share of any income loss, deduction or credit
recognized or incurred by the Trust, including, but not limited to, interest or
dividend income earned on bank accounts and other investments of the Trust.
If a Trust Asset is sold or otherwise disposed of by the Trust in a
transaction in which gain or loss is recognized for federal income tax purposes,
each holder of a Trust Interest will be required to report on his tax return
gain or loss equal to the difference between (i) his pro rata share of the
amount of cash and/or fair market value of any property received in exchange for
the asset so sold or otherwise disposed of, minus (ii) his adjusted basis in his
pro rata share of such asset on the date it was transferred by Debtor to the
Trust (which should equal the asset's fair market value on that date), as
subsequently adjusted. The character and amount of any such gain or loss will be
determined by reference to the character of the asset sold or otherwise disposed
of and by reference to whether the transaction in which such asset was disposed
of constitutes a sale or exchange for federal income tax purposes.
Each holder's obligation to report his share of any Trust income or gain
upon an asset disposition is not dependent on the Trust distributing any cash or
other proceeds. Accordingly, the holder of a Trust Interest may incur a tax
liability as a result of owning a Trust Interest regardless of whether the Trust
makes a current distribution.
4. TAX REPORTING
The Trust will file an annual information tax return with the IRS which will
include information concerning the allocation of income, gain, loss, deductions
and credits to holders of Trust Interests. Each holder of a Trust Interest will
receive annually a tax information return reflecting income or loss, and will be
required to report on his federal income tax return, his allocable shares of
such items.
The Trust will determine its income or loss based on the assumption that
each holder of a Trust Interest has a taxable year that is a calendar year, and
accordingly, shall compute its income or loss on a calendar year basis. The
Trustee will issue quarterly information statements with regard to the Trust
Interests.
E. FEDERAL INCOME TAX CONSEQUENCES TO THE HOLDERS OF ALLOWED ICH CLASS 5
CLAIMS
The federal income tax consequences of the implementation of the Plan to the
holders of Allowed Class 5 ICH Claims will depend, among other things, on the
consideration to be received by holders of Allowed Class 5 ICH Claims, whether
the holder of Allowed Class 5 ICH Claims reports income using the accrual or
cash method, and on whether the holder of Allowed Class 5 ICH Claims has taken a
bad debt deduction or worthless security deduction with respect to its claim.
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1. TAX CHARACTERIZATION OF EXCHANGES TO CREDITORS HOLDING ALLOWED CLASS
5 ICH CLAIMS ON THE EFFECTIVE DATE
The Debtors believe that each creditor holding an Allowed Class 5 ICH Claim
on the Effective Date should be treated for federal income tax purposes as
transferring his claim to the Debtors in exchange for (A) cash, if any, received
by such creditor and (B) the Trust Assets, if any, in the Trust deemed received
by such holder of Allowed Class 5 ICH Claims.
Subject to the discussion with respect to the transfer of Allowed Class 5
ICH Claims to the Debtors for cash and/or Trust Assets in the Trust, holders of
such Claims should recognize gain or loss to the extent of the difference
between (i) the sum of (a) the amount of cash, if any, received and (b) the
ascertainable fair market value of Trust Assets, if any, allocable to such
holder (other than amounts deemed to have been used to discharge accrued
interest on the Allowed Class 5 ICH Claims), and (ii) the adjusted tax basis of
the Allowed Class 5 ICH Claims deemed to have been transferred by the holders to
the Debtors in exchange therefor.
2. CHARACTER AND TIMING OF GAIN OR LOSS
The character of any gain or loss as capital or ordinary gain or loss and,
in the case of capital gain or loss, as short-term or long-term, will depend on
a number of factors, including (i) the nature and origin of the Allowed Class 5
ICH Claim; (ii) the tax status of the holder of Allowed Class 5 ICH Claim; (iii)
whether the Allowed Class 5 ICH Claim has been held for more than one year; (iv)
the extent to which the holder previously claimed a loss, bad debt deduction or
charge to a reserve for bad debts with respect to the Allowed Class 5 ICH
Claims; (v) whether, in the case of a holder of an Allowed Class 5 ICH Claim
arising from certain indebtedness issued after July 18, 1984, with a term of
more than one year for which no election was made to currently include market
discount in income, the difference between the holder's basis in the
indebtedness immediately after it was acquired and the amount by which the
indebtedness exceeded any then accrued original issue discount (by more than the
"de minimis" amount); and (vi) whether, in the case of an Allowed Class 5 ICH
Claim arising from certain indebtedness with a term of not more than one year
held by certain accrual method holders, the amount by which the face amount of
the indebtedness exceeded the holder's basis in the indebtedness. Each holder of
Allowed Class 5 ICH Claims is urged to consult his own personal tax advisor as
to the applicability of these factors to such holder.
Holders of Allowed Class 5 ICH Claims should consult with their own tax
advisors as to the matters discussed in this section concerning character and
timing of recognition of gain or loss. Because a loss will be allowed as a
deduction only for the taxable year in which the loss was sustained, a holder of
an Allowed Class 5 ICH Claim that claims a loss in the wrong taxable year risks
denial of such loss altogether. In the case of certain claims, consideration
should be given to the possible availability of a bad debt deduction under
Section 166 of the Tax Code for a period prior to the Effective Date. Also, in
the case of any holder that may recognize gain, consideration should be given to
the possible applicability of the installment method rules under Section 453 of
the Tax Code.
3. BASIS AND HOLDING PERIOD OF PROPERTY
The tax basis of property received in exchange for Allowed Class 5 ICH
Claims will be the amount that is included in the holder's amount realized on
the exchange, which, as set forth above, in the case of Trust Assets, should be
the ascertainable fair market value of such Trust Assets allocable to a holder
of an Allowed Class 5 ICH Claim, as of the date of the exchange. The holding
period for such property will begin on the day following the exchange.
4. RECEIPT OF INTEREST
Creditors will recognize ordinary income to the extent that they receive any
cash or property that is allocable to accrued but unpaid interest that has not
already been included for federal income tax purposes in such creditor's taxable
income. A holder of an Allowed Class 5 ICH Claim which includes accrued interest
who receives consideration which is less than the amount of the Allowed Class 5
ICH Claim must allocate such consideration between principal and interest for
federal income tax purposes. Such holder may take the position that the amounts
distributed to holders of Allowed Class 5 ICH Claims on the effective Date are
allocable first to principal, up to the full amount of such principal, with only
the excess, if any, being allocated to interest. However, the proper allocation
between principal and interest of amounts received in exchange for the discharge
of a claim at a discount is unclear and may be affected by, among other things,
the rules in the Tax Code related to imputed interest, original issue discount
and accrued market discount. In connection with the allocation of consideration
between principal and interest, holders should consult their own tax advisors to
determine the amount of consideration received under the Joint Plan that is
allocable to interest.
In the event that the amount of cash and other property allocable to
interest on a holder's Allowed Class 5 ICH Claim is less than the amount
previously included as interest on the Allowed Class 5 ICH Claim in the holder's
federal taxable income, the previously included but unpaid interest may be
deducted, generally as a loss or as an adjustment to a reserve for bad debts.
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5. MISCELLANEOUS
The Debtors will withhold all amounts required by law to be withheld from
payments to holders of claims and interests. In addition, such holders may be
required to provide certain tax information to the Debtors or to the Trust as a
condition of receiving distributions under the Joint Plan.
F. TAX CONSEQUENCES TO HOLDERS OF INTERESTS IN ICH
1. GENERAL RULE
Sections 1036 and 368(a)(1)(E) of the Tax Code generally allow tax free
treatment for exchanges of a corporation's stock for new stock of the same
class. However, Section 305(c) of the Tax Code provides that an exchange of
stock or distribution with respect to stock that has the economic effect of a
dividend will be treated as a dividend for tax purposes. An exchange or
distribution that results in an increase in a shareholder's proportionate
interest in the exchanging or distributing corporation's earnings and profits
("Tax Basis Retained Earnings") will be treated as a dividend under this Tax
Code Section.
ICH may not have current or accumulated Tax Basis Retained Earnings as of
the Effective Date of the Joint Plan. ICH may not have current or accumulated
Tax Basis Retained Earnings in the future. This means that the tax status of all
dividends on common stock issued under the plan will not be determinable until
dividends are paid. For corporate holders of stock, this means that dividend
payments on their shares may be treated as tax-free returns of capital and
reduce their tax basis in their shares. While this treatment defers payment of
tax on a dividend distribution, it may ultimately cause the income to be
converted to capital gain income rather than dividend income. The current
federal income tax rate on dividends received by corporate taxpayers
approximates 10 percent, while the current federal income tax rate on capital
gains of corporate taxpayers approximates 35 percent. Individual holders of
preferred or common stock may benefit if Reorganized ICH does not have
accumulated Tax Basis Retained Earnings since the current tax rate on dividends
received by individuals will generally exceed the rate applied to capital gains.
2. TAX CONSEQUENCES TO HOLDERS OF EXISTING PREFERRED STOCK
Holders of Preferred Stock who receive shares of Reorganized ICH Common
Stock in exchange for their Preferred Stock should not recognize gain or loss on
the exchange. However, if Section 305 of the Tax Code applies to the exchange,
an exchanging holder may recognize income on the exchange.
Pursuant to Section 305 of the Code and the regulations promulgated
thereunder, if the fair market value of the Reorganized ICH Common Stock
received exceeds the "issue price" of the Preferred Stock surrendered, the
receipt of such Reorganized ICH Common Stock would be treated as a taxable
distribution attributable to the dividend arrearages on the Preferred Stock. The
amount so treated as a taxable distribution equals the lesser of (i) the excess
of the fair market value of the Reorganized ICH Common Stock received over the
issue price of the Preferred Stock surrendered or (ii) the amount of the
dividends in arrears.
The aggregate tax basis of the Reorganized ICH Common Stock received in the
exchange will equal (i) the adjusted basis of the Preferred Stock exchanged
therefor plus (ii) the amount of income, if any, taxed as a dividend pursuant to
Section 305 of the Code. The holding period for the portion of any Reorganized
ICH Common Stock treated as a dividend distribution under Section 305 of the
Code will begin the day after receipt. The holding period for the balance of the
Reorganized ICH Common Stock will include the holding period for the Preferred
Stock exchanged therefor. The subsequent sale or exchange of the Reorganized ICH
Common Stock will, if the stock is held as a capital asset, result in capital
gain or loss equal to the difference between the amount realized and the
Holder's adjusted tax basis in the Reorganized ICH Common Stock immediately
before such sale or exchange.
3. TAX CONSEQUENCES TO HOLDERS OF EXISTING COMMON STOCK
Holders of existing Common Stock who receive shares of Reorganized ICH
Common Stock in exchange for their Common Stock will not recognize gain or loss
on the exchange. Their tax basis in the Reorganized ICH Common Stock will equal
their tax basis in the Common Stock of ICH and the holding period of the
Reorganized ICH Common Stock will include the time period during which the
Common Stock of ICH was held.
G. IMPORTANCE OF OBTAINING PROFESSIONAL ASSISTANCE
AS INDICATED ABOVE, THE FOREGOING IS INTENDED TO BE A SUMMARY ONLY AND IS
NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE JOINT PLAN ARE COMPLEX, AND, IN
MANY AREAS, UNCERTAIN. ACCORDINGLY, EACH HOLDER OF A CLAIM OR INTEREST IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING SUCH TAX
CONSEQUENCES.
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XVII. OTHER EFFECTIVE DATE TRANSACTIONS
A. TERMINATION OF INDENTURES
On the Effective Date, the Indentures will, except as provided in the Joint
Plan, be deemed cancelled, except that the Indentures shall continue in effect
for the sole purpose of allowing the Indenture Trustee to facilitate and assist
in making distributions to Record Holders of Notes as of the Effective Date
under the Joint Plan and to maintain records as required under the Indentures.
Upon the completion of distributions required to be made under the Joint Plan to
Record Holders of Notes as of the Effective Date, the Debtors may terminate the
Indenture Trustee's authority to act thereunder by giving notice of termination
to the Indenture Trustee. Termination of the Indenture will be without prejudice
to the rights of the Indenture Trustee (i) to seek or enforce the allowance and
payment of its reasonable and necessary costs and fees under the Indenture, or
(ii) to intervene or appear in the Chapter 11 Case as a party in interest and to
be heard concerning any post-confirmation matter affecting the interests of the
Record Holders of Notes represented by such Indenture Trustee. Notwithstanding
the foregoing, such cancellation of the Indentures shall not impair the rights
of holders of the Notes to receive distributions on account of such Notes
pursuant to the Joint Plan.
B. PAYMENT OF INDENTURE TRUSTEES' FEES AND EXPENSES
The Indenture Trustee may apply to the Bankruptcy Court, pursuant to Section
503(b) of the Bankruptcy Code, for reimbursement from the Debtors' estates of
the Indenture Trustee's reasonable fees and expenses incurred in performing its
duties under the Indenture (including those called for by the Joint Plan),
including those of its attorneys, PROVIDED, HOWEVER, that all fees and expenses,
regardless of the source of payment and regardless of whether paid pursuant to
the Indenture Trustee's lien or the Indenture, are subject to a determination of
reasonableness by the Bankruptcy Court pursuant to section 1129(a)(4) of the
Bankruptcy Code. Provided further, that any fees paid to the Indenture or
otherwise as compensation for services rendered in this Chapter 11 Case shall be
subject to and approved as reasonable by the Bankruptcy Court prior to payment.
XVIII. SOURCES OF INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT
The information contained in this Disclosure Statement has been compiled
from various sources including: (1) the management of the Debtors; (2) the books
and records of the Debtors; (3) the financial statements for the fiscal year
ending 1995 which were prepared by Southwestern Financial Services Corporation
based on information provided by ICH; and (4) the Creditors Committee, the
Equity Committee and their respective legal and financial advisors.
XIX. RECOMMENDATION OF THE PLAN PROPONENTS AND SOLICITATION OF ACCEPTANCES
The Plan Proponents believe that the Joint Plan is feasible, and in the best
interests of the Debtors' creditors and shareholders. Accordingly, the Plan
Proponents unanimously recommend that you vote for acceptance of the Joint Plan
and hereby solicit your acceptance of the Joint Plan.
DATED: November 15, 1996.
I.C.H. CORPORATION,
CARE FINANCIAL CORPORATION, AND
SWL HOLDING CORPORATION
OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF
I.C.H. CORPORATION
OFFICIAL COMMITTEE OF EQUITY
SECURITY HOLDERS OF
I.C.H. CORPORATION
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EXHIBIT A
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
<TABLE>
<S> <C>
IN RE:
I.C.H. CORPORATION, CASE NO. 395-36351
A DELAWARE CORPORATION, F/K/A SOUTH- (CHAPTER 11)
WESTERN LIFE CORPORATION, F/K/A I.C.H.
CORPORATION, FED. TAX NO. 43-6069928,
SWL HOLDING CORPORATION, CASE NO. 395-36352
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
LIFE INTERESTS CORPORATION,
FED. TAX NO. 51-0343581, AND
CARE FINANCIAL CORPORATION, CASE NO. 395-36354
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
HEALTH INTERESTS CORPORATION,
FED. TAX NO. 51-0343580,
JOINTLY ADMINISTERED
DEBTORS. CASE NO. 395-36351-RCM-11
</TABLE>
ORDER (I) APPROVING THE DISCLOSURE STATEMENT,
(II) SETTING HEARING ON CONFIRMATION OF THE
JOINT PLAN OF REORGANIZATION AND
(III) GRANTING OTHER RELIEF RELATING TO JOINT
PLAN SOLICITATION AND THE CONFIRMATION HEARING
CAME ON FOR HEARING on November 14, 1996 the First Amended Disclosure
Statement (the "Disclosure Statement") for the First Amended Joint Plan of
Reorganization Under Chapter 11 (the "Joint Plan") filed and proposed by the
above-captioned Debtors, the Official Committee of Unsecured Creditors (the
"Creditors Committee"), and the Official Committee of Equity Security Holders
(the "Equity Committee" and together with the Debtors and the Creditors
Committee, the "Plan Proponents") together with the Debtors' Motion for Order
Approving Ballots and Solicitation Procedures (the "Motion"); and the Court
having determined that the notice given by the Debtors of this hearing complies
with the Federal Rules of Bankruptcy Procedure and having considered the
Disclosure Statement and the Motion, the evidence regarding the Disclosure
Statement and the statements made by counsel for the proponents of the Joint
Plan and various parties in interest, and the Plan Proponents having refiled the
Disclosure Statement and the Joint Plan on November 15, 1996, in order to
incorporate certain changes announced in open court on November 14, 1996, the
Court is of the opinion that the Disclosure Statement should be approved and
that the Disclosure Statement and Joint Plan should be submitted to the
creditors and equity security holders for consideration and balloting.
Accordingly, it is hereby ORDERED that:
APPROVAL OF DISCLOSURE STATEMENT
1. The Disclosure Statement is in all things approved as containing
adequate information of a kind and in sufficient detail, as far as reasonably
practicable in light of the nature and history of the Debtors, that would enable
a hypothetical reasonable investor typical of the holders of claims and
interests of the relevant impaired classes to make an informed judgment
regarding the Joint Plan pursuant to 11 U.S.C. Section 1125(a)(1).
2. The form and manner of notice approved in this Order is adequate,
appropriate, and satisfies the requirements of the Bankruptcy Code and the
Bankruptcy Rules to the extent applicable to persons and entities affected
thereby.
3. Capitalized terms used in this Order and not defined herein shall have
their respective meanings set forth in the Joint Plan and the Disclosure
Statement as defined in the Bankruptcy Code.
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CONFIRMATION HEARING AND OBJECTIONS
4. The hearing on the confirmation of the Joint Plan (the "Confirmation
Hearing") shall be held in the courtroom of this Court, 1100 Commerce Street,
14th Floor, Dallas, Texas 75242, commencing on January 31, 1997, at 9:00 a.m.
Central Standard Time.
5. Pursuant to Bankruptcy Rule 3020(b), January 17, 1996 is fixed as the
last day for filing and serving written objections to confirmation of the Joint
Plan (a "Confirmation Objection"). Any Confirmation Objection must be in writing
and (a) state the name and address of the objecting party and the amount of its
claim or the nature of its interest in the Debtors' Chapter 11 cases, (b) state
with particularity the basis and nature of the objection, and (c) be filed with
the Clerk of the Bankruptcy Court, together with a certificate of service, and
served on the parties listed below (the "Notice Parties"), so as to be actually
received by each of them on or before 4:00 p.m. Central Standard Time on January
17, 1997.
ATTORNEYS FOR THE DEBTORS:
Daniel C. Stewart, Esq.
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
ATTORNEYS FOR THE CREDITORS COMMITTEE:
Michael A. Rosenthal, Esq.
Gibson, Dunn & Crutcher
1717 Main Street, Suite 5400
Dallas, Texas 75201
ATTORNEYS FOR THE EQUITY COMMITTEE:
Peter D. Wolfson, Esq.
Pryor, Cashman, Sherman, & Flynn
410 Park Avenue
New York, New York 10022
U.S. TRUSTEE:
George W. McElreath, Esq.
Office of the U. S. Trustee
U.S. Courthouse, Room 9C60
1100 Commerce Street
Dallas, Texas 75242
Any Confirmation Objection not filed and served as set forth above shall be
deemed waived and shall not be considered by the Bankruptcy Court at the
Confirmation Hearing.
BALLOT SOLICITATION AND TABULATION PROCEDURES
6. The following procedures are approved with respect to (a) the
distribution to the United States Trustee and all holders of claims or equity
security interests whose claims or interests are impaired under the Joint Plan
of ballot solicitation materials for the Joint Plan, which will consist of the
following documents (collectively, the "Solicitation Packages"): (i) this Order
approving the Disclosure Statement; (ii) the Disclosure Statement; (iii) the
Joint Plan; (iv) a ballot in substantially the form of Official Form 14 or a
master ballot and voting instructions; (v) pre-addressed, postage-paid, return
envelopes; (vi) (A) with respect to solicitation of ballots from the holders of
claims, the recommendation letter from the Creditors Committee, and (B) with
respect to solicitation of ballots from the holders of equity security
interests, the recommendation letter from the Equity Committee; and (b) the
return and tabulation of ballots and master ballots.
A. DISTRIBUTION OF SOLICITATION PACKAGES
7. Pursuant to Federal Rules of Bankruptcy Procedure 3017(c) & (d), those
entities who are holders of claims and equity security interests on the date
this Order is entered by the Bankruptcy Court (the "Voting Record Date") shall
be the entities entitled to receive the Solicitation Package and entitled to
vote on the Joint Plan.
8. On or before 10 days after the date of this Order, the Debtors and/or
Hill and Knowlton, Inc., the ballot solicitation and tabulation agent, will
cause a Solicitation Package to be served upon each entity listed in the
Debtors' schedules and statement of financial affairs (the "Schedules"), as
amended, and to each entity having filed a proof of claim or proof of interest
against the Debtors as to which an objection has not been filed.
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9. In addition to the service described in the preceding paragraph, on or
before 10 days after the date of this Order, the Debtors and/or Hill and
Knowlton, Inc., will cause a Solicitation Package to be served upon each holder
of record, as of the Voting Record Date, of the debt securities and the common
and preferred stock of ICH (the "Securities"). To facilitate the transmittal of
Solicitation Packages to record holders and beneficial holders of the
Securities, and pursuant to Bankruptcy Rules 1007(i) and 3017(e), Bank of
Louisville, which serves as the stock transfer agent and as registrar for ICH's
common stock and as the indenture trustee of the 11 1/4% Senior Subordinated
Notes due in 1996 and 2003 (the "Notes") (the "Bank of Louisville" or the
"Indenture Trustee") and KeyCorp Shareholders Services Inc., which serves as the
transfer agent and registrar for ICH's preferred stock ("KeyCorp")
(collectively, the "Transfer Agents"), will provide the Debtors with lists of
and mailing labels for the names, addresses, and holdings of the respective
holders of record as of the Voting Record Date; to the extent permitted by law,
and such additional information as may be required by the Debtors evidencing
such holder's securities.
10. On or before 10 days after the date of this Order, Hill and Knowlton,
Inc., will cause Solicitation Packages to be provided to brokers or other
nominee holders through which beneficial holders hold Securities ("Street Name
Holders"). The Street Name Holders will promptly (within 5 business days from
their receipt) distribute Solicitation Packages to the beneficial holders for
which they serve. Such Street Name Holders will have two options for obtaining
the votes of beneficial holders of Securities, consistent with customary
practices for obtaining the votes of beneficial holders of Securities held in
street name: (i) the Street Name Holders may "pre-validate" the individual
ballot contained in the Solicitation Package (by indicating the record holder of
the Securities voted and the appropriate account numbers through which the
beneficial holder's holdings are derived) and then forward the Solicitation
Package to the beneficial holder of the Securities for voting, with the
beneficial holder then returning the individual ballot directly to Hill and
Knowlton, Inc., in the return envelope to be provided in the Solicitation
Package, or (ii) the Street Name Holders may forward the Solicitation Package to
the beneficial holder of the Securities for voting along with a return envelope
provided by and addressed to the Street Name Holder with the beneficial holder
then returning the individual ballot to that entity. In the latter case, the
Street Name Holder will summarize the votes of its respective beneficial holders
on a master ballot that will be provided separately by Hill and Knowlton, Inc.,
in accordance with the Joint Plan, the instructions set forth in the Disclosure
Statement and the instructions to the master ballot, and then return the master
ballot to Hill and Knowlton, Inc.
11. Hill and Knowlton, Inc. will cause a copy of the procedures regarding
ballot solicitation and tabulation in accordance with this Order to be served on
(i) KeyCorp; (ii) Bank of Louisville; and (iii) each known Street Name Holder
through which beneficial holders hold Securities.
B. RETURN OF BALLOTS
12. All ballots (except those beneficial holder ballots that are to be
returned to the Street Name Holders), including master ballots and pre-validated
beneficial holder ballots, will be accompanied by return envelopes addressed to
the ICH Ballot Tabulation Center c/o Hill and Knowlton, Inc., P.O. Box 5508,
Grand Central Station, New York, New York 10164-0825. As discussed above, Street
Name Holders may make arrangements to have beneficial holders return individual
ballots directly to the Street Name Holders with that entity summarizing the
votes of the beneficial holders for which it serves on a master ballot and then
returning the master ballot to the ICH Ballot Tabulation Center c/o Hill and
Knowlton, Inc.
13. All ballots, including master ballots and pre-validated beneficial
holder ballots, for accepting or rejecting the Joint Plan must be received by
Hill and Knowlton, Inc., by 4:00 p.m. Eastern Standard Time, on January 24, 1997
(the "Voting Deadline"). Ballots may be received by Hill and Knowlton, Inc., at
the address set forth on the return envelope, or at the following address: Hill
and Knowlton, Inc., 466 Lexington Avenue, 3rd Floor, New York, New York 10017,
Attention: ICH Ballot Tabulation Group, by hand, overnight courier or similar
delivery. Hill and Knowlton, Inc., will NOT accept ballots submitted by
facsimile transmission. Hill and Knowlton, Inc., will date and time-stamp all
ballots and master ballots when it receives them. In addition, Hill and
Knowlton, Inc., will make a photocopy of all ballots and master ballots it
receives and will retain copies of such ballots for a period of one (1) year,
unless otherwise instructed by ICH in writing.
14. Any ballot either not properly completed or not actually received by the
Voting Deadline, except as otherwise provided herein or by subsequent order of
the Court, shall be considered an untimely ballot and shall not be counted as a
vote to accept or reject the Joint Plan.
C. TABULATION OF BALLOTS
15. In order for a ballot to be counted, the original must be timely
received by Hill and Knowlton, Inc., at the address set forth on the return
envelope or at Hill and Knowlton, Inc., 466 Lexington Avenue, 3rd Floor, New
York, New York 10017.
16. With respect to the tabulation of ballots cast by record holders and
beneficial holders of Securities, for purposes of voting, the amount used to
tabulate acceptance or rejection of the Joint Plan will be the amount or number
of Securities
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shown on the records of the Transfer Agents, the Indenture Trustee, or the
broker or other nominee holder through which beneficial holders hold Securities
(as confirmed by record and depository listings), as of the Voting Record Date
("Record Amount"); provided, however, that the final tablulation of acceptances
and rejections from the Ballots of holders of Notes will be calculated to
include accrued interest to the Petition Date as set forth in the Proofs of
Claim of Bank of Louisville, as Indenture Trustee on behalf of the Notes. In
addition, with respect to the tabulation of ballots cast by record holders and
beneficial holders of Securities:
(a) All Street Name Holders shall either arrange to receive and summarize on
a master ballot all individual ballots cast by their respective
beneficial holders and return a master ballot to Hill and Knowlton, Inc.,
or send pre-validated individual ballots to the beneficial holders for
which they serve, for direct return to Hill and Knowlton, Inc. Such
Street Name Holders electing to use the master ballot voting process are
required to retain the ballots cast by their respective beneficial
holders for inspection for one (1) year following the submission of a
corresponding master ballot, unless otherwise instructed by the Debtors
in writing. Street Name Holders electing to pre-validate ballots also are
required to maintain lists of those beneficial holders as of the Voting
Record Date to whom ballots were sent for one (1) year, unless otherwise
instructed by the Debtors in writing.
(b) Votes cast by beneficial holders holding Securities through a Street
Name Holder and transmitted by means of a master ballot or a
pre-validated ballot will be applied against the positions held by such
Street Name Holders in the applicable Securities, as evidenced by the
record list of holders or through participation in a securities
depository. Votes submitted by Street Name Holders on a master ballot or
a pre-validated ballot will not be counted in excess of the position
maintained by a Street Name Holder in the applicable Security.
(c) To the extent that conflicting votes or "overvotes" are submitted by a
Street Name Holder summarizing votes of beneficial holders of Securities
on a master ballot or pre-validated ballots, Hill and Knowlton, Inc.,
will attempt to resolve the conflict or overvote prior to the Voting
Deadline.
(d) To the extent that overvotes on a master ballot or pre-validated ballots
are not reconcilable prior to the Voting Deadline, the ballot tabulation
agent will apply the votes to accept and to reject the Joint Plan in the
same proportion as the votes to accept and reject the Joint Plan
submitted on the master ballot or pre-validated ballot that contained the
overvote, but only to the extent of the broker's or other nominee
holder's position in the applicable Security.
(e) Multiple master ballots may be completed by a single Street Name Holder
summarizing votes of beneficial holders of Securities and delivered to
Hill and Knowlton, Inc. Votes reflected by multiple master ballots will
be counted, except to the extent that they are duplicative of other
master ballots. If two or more master ballots submitted by a single
Street Name Holder are inconsistent, the latest master ballot received
prior to the Voting Deadline will, to the extent of such inconsistency,
supersede and revoke any prior master ballot.
17. With respect to the tabulation of ballots not based on Securities, for
purposes of voting, the amount to be used to tabulate acceptance or rejection of
the Joint Plan will be one of the following: (i) the amount shown on a proof of
claim filed by the holder of a claim on or before the Bar Date (the "Claimed
Amount"); or (ii) the amount appearing on the Debtors' Schedules as amended (the
"Scheduled Amount").
18. For determining which of the above three amounts (the Record Amount, the
Claimed Amount, or the Scheduled Amount) will be counted with respect to each
ballot, Hill and Knowlton, Inc., will use the following guidelines:
(a) USE OF RECORD AMOUNT. Notwithstanding any of the following, when a
ballot is filed that pertains to a claim or interest based on a Security,
the Record Amount, if any, will be used for voting purposes.
(b) USE OF CLAIMED AMOUNT. Notwithstanding any of the following, when a
ballot is filed that pertains to a proof of claim that was filed on or
before the Bar Date (or otherwise deemed timely filed by the Bankruptcy
Court under applicable law), the Claimed Amount will be used for voting
purposes unless an objection to the proof of claim has been filed before
the commencement of the Confirmation Hearing, in which case the ballot
will be allowed or disallowed for voting purposes in accordance with the
following:
i) if the proof of claim is subject to a pending full or partial
objection to claim, the non-disputed amount, if any, will be counted
for voting purposes;
ii) if the Court enters an order fully or partially disallowing the
proof of claim, the amount allowed by the Court, if any, will be
counted for voting purposes;
iii) if the Court approves a stipulation partially allowing the proof of
claim, the stipulated amount will be counted for voting purposes;
iv) if the Court approves a stipulation fixing the Claimed Amount for
voting purposes, the stipulated amount will be counted for voting
purposes; and
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v) if the Court enters an order fixing the Claimed Amount for voting
purposes prior to the Voting Deadline, the ordered amount will be
counted for voting purposes.
(c) USE OF UNLIQUIDATED CLAIMED AMOUNT. When a ballot is filed that
pertains to a proof of claim for an unliquidated or unknown amount that
was filed by the Bar Date (or otherwise deemed timely filed by the
Bankruptcy Court under applicable law), but the claim does not appear on
the Schedules and if the proof of claim is not the subject of an
objection filed before the commencement of the Confirmation Hearing,
then the ballot will be counted for satisfying the numerosity
requirement of Section 1126(c) of the Bankruptcy Code but will not be
counted towards satisfying the aggregate amount provision of that
section.
(d) USE OF SCHEDULED AMOUNT. When a ballot is filed that pertains to a
claim listed on the Schedules and a Record Amount and Claimed Amount do
not exist for voting purposes, the Scheduled Amount will be used for
voting purposes, unless such claim is scheduled as disputed, contingent
or unliquidated, in which case, the ballot will not be counted.
(e) USE OF OTHER AMOUNTS. If the amount shown on the ballot conflicts with
the Record Amount, Scheduled Amount, or Claimed Amount, the Record
Amount, Scheduled Amount, or Claimed Amount, as appropriate, will be
used for voting purposes, unless the Bankruptcy Court determines
otherwise, in which case the amount determined by the Bankruptcy Court
will be used.
(f) NO RECORD AMOUNT, CLAIMED AMOUNT, OR SCHEDULED AMOUNT. If the ballot is
filed with respect to a claim or interest and no related Record Amount,
Scheduled Amount, or Claimed Amount exists that can be used for voting
purposes, the ballot will not be counted.
19. In addition, the following voting procedures and standard assumptions
will be used in tabulating ballots:
(a) If a ballot is NOT received at the ICH Ballot Tabulation Center by the
Voting Deadline, the ballot will not be counted except to the extent
allowed by the Bankruptcy Court.
(b) Each Claimant will be deemed to have voted the full amount of its claim
in each class in which it submits a ballot. Each record holder (other
than a Street Name Holder) or beneficial holder of a Security who votes
any amount or number of any Security will be deemed to have voted the
full amount or number of such Security held by such record holder or
beneficial holder.
(c) Whenever the holder of a claim or interest casts more than one ballot
voting the same claim or interest prior to the Voting Deadline, the later
dated ballot will be deemed to reflect the holder's intent and thus
supersede any prior ballots.
(d) The holder of a claim or interest, other than Street Name Holders, must
vote its entire claim or interest either to accept or reject the Joint
Plan and may not split its vote. Accordingly, a ballot (other than a
master ballot submitted by a Street Name Holder) that partially rejects
and partially accepts the Joint Plan will not be counted, but multiple
Ballots with respect to a claim or interest that vote such claim or
interest in an inconsistent manner will be governed (with respect to the
entire interest or claim interests such Ballot relates) by the latest
dated Ballot.
(e) Each ballot (except master ballots) received will be deemed to have been
voted by one and only one holder of a claim or interest in the full
amount of its claim or interest.
(f) If the Debtors fail to receive any votes either accepting or rejecting
the plan from any holders of a claimed interest in a particular class,
such Class will be deemed to have accepted the Plan.
20. Ballots in the following categories shall not be counted as an
acceptance or rejection, unless otherwise ordered by the Bankruptcy Court:
(a) The holder of a claim or interest, or his representative, did not use
the authorized ballot form, or a form of ballot substantially similar to
such authorized form.
(b) The ballot was not received on or before the Voting Deadline.
(c) The ballot was not signed by the holder of a claim or interest, or his
authorized representative.
21. The Plan Proponents may seek further clarification from the Bankruptcy
Court on vote tabulation and the solicitation process, and retain the right to
object or raise any issue with respect to any ballot.
22. Ballots submitted by the holder of a claim or interest, or his
authorized representative, that did not check one of the boxes indicating
acceptance or rejection of the Joint Plan will be counted as votes for
acceptance of the Joint Plan.
A-5
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23. If the Debtors file an objection to a proof of claim or proof of
interest on or before the Voting Record Date, and the holder of the claim
desires to have such claim or interest allowed for voting purposes, then the
holder of the claim or interest must file and serve on interested parties a
motion to temporarily allow such claim or interest for voting purposes pursuant
to Bankruptcy Rule 3018 (a) (an "Allowance Motion") and schedule a hearing for
such Allowance Motion prior to the Confirmation Hearing. Any Allowance Motion
which is not so filed and served shall be deemed barred. Holders of objected-to
Claims or interests who do not obtain temporary allowance for voting purposes by
order of the Bankruptcy Court shall not be allowed to vote on the Joint Plan.
24. Any objection or challenge to the vote cast by any holder of a claim or
interest on the Joint Plan (a "Voting Objection") must be in writing and (a)
state the name and address of the objecting party and the amount of its claim or
the nature of its interest in the Debtors' Chapter 11 cases, (b) state with
particularity the basis and nature of the objection or challenge and (c) be
filed with the Clerk of the Bankruptcy Court, 12th Floor, U.S. Courthouse, 1100
Commerce St., Dallas, Texas 75242, together with a certificate of service, and
served on (i) the person to whose ballot the objection is addressed; and (ii)
the Notice Parties, so as to be actually received by each of them on or before
4:00 p.m. Central Standard Time on January 28, 1997 (the "Voting Objection
Deadline"). Any Voting Objection not filed and served as set forth above shall
be deemed waived and shall not be considered by the Bankruptcy Court.
25. The Confirmation Hearing may be adjourned or continued from time to time
without further notice other than an announcement made in open court at the
Confirmation Hearing or at any adjourned hearing thereon.
SIGNED this 15th day of November, 1996.
By: _______/s/_ROBERT C. MCGUIRE_______
Robert C. McGuire
CHIEF U.S. BANKRUPTCY JUDGE
APPROVED AS TO FORM AND SUBSTANCE:
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
(214) 745-5400
By: ___/s/_JOSIAH M. DANIEL, III___
Daniel C. Stewart SBT #19206500
Josiah M. Daniel III SBT
#05358500
ATTORNEYS FOR DEBTORS
GIBSON, DUNN & CRUTCHER
1717 Main Street, Suite 5400
Dallas, Texas 75201
(214) 698-3100
By: ______/s/_I. RICHARD LEVY______
Michael A. Rosenthal SBT
#17281490
I. Richard Levy SBT #12265020
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
PRYOR, CASHMAN, SHERMAN & FLYNN
410 Park Avenue
New York, New York 10022
(212) 326-0806
By: _______/s/_JOHN A. BICKS_______
Peter D. Wolfson
John A. Bicks
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF EQUITY SECURITY HOLDERS
A-6
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EXHIBIT B
Daniel C. Stewart, SBT #19206500
Josiah M. Daniel, III, SBT #05358500
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower, 1201 Elm Street
Dallas, Texas 75270
(214) 745-5400
ATTORNEYS FOR THE DEBTORS
Michael A. Rosenthal, SBT #17281490
I. Richard Levy, SBT #12265020
GIBSON, DUNN & CRUTCHER
1717 Main Street, Suite 5400
Dallas, Texas 75201
(214) 698-3100
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
Peter D. Wolfson
John A. Bicks
PRYOR, CASHMAN, SHERMAN & FLYNN
410 Park Avenue
New York, New York 10022
(212) 421-4100
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF EQUITY SECURITY HOLDERS
IN THE
UNITED STATES BANKRUPTCY COURT
FOR THE
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
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IN RE:
I.C.H. CORPORATION, CASE NO. 395-36351-RCM-11
A DELAWARE CORPORATION, F/K/A (CHAPTER 11)
SOUTHWESTERN LIFE CORPORATION,
F/K/A I.C.H. CORPORATION,
SWL HOLDING CORPORATION, CASE NO. 395-36352-RCM-11
A DELAWARE CORPORATION, (CHAPTER 11)
F/K/A LIFE INTERESTS
CORPORATION, AND
CARE FINANCIAL CORPORATION, CASE NO. 395-36354-RCM-11
A DELAWARE CORPORATION, (CHAPTER 11)
F/K/A HEALTH INTERESTS
CORPORATION,
DEBTORS. JOINTLY ADMINISTERED
CASE NO. 395-36351-RCM-11
</TABLE>
FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
(DATED: NOVEMBER 15, 1996)
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TABLE OF CONTENTS
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ARTICLES I
DEFINITIONS............................................................................................................. 2
1.1 Administrative Expense or Administrative Claim............................................................. 2
1.2 Allowed Amount............................................................................................. 2
1.3 Allowed Claim and Allowed Interest......................................................................... 2
1.4 Available Cash............................................................................................. 2
1.5 Bankruptcy Code............................................................................................ 2
1.6 Bankruptcy Court........................................................................................... 2
1.7 Bar Date................................................................................................... 2
1.8 Beneficial Holder.......................................................................................... 2
1.9 BML........................................................................................................ 2
1.10 BML Certificates........................................................................................... 2
1.11 BML Final Reconciliation Date.............................................................................. 3
1.12 BML Holding Period......................................................................................... 3
1.13 BML Initial Reconciliation Date............................................................................ 3
1.14 BML Stock Power............................................................................................ 3
1.15 BML Licenses............................................................................................... 3
1.16 Board of Directors......................................................................................... 3
1.17 Business Day............................................................................................... 3
1.18 Capital and Surplus Retention Assets....................................................................... 3
1.19 Care....................................................................................................... 3
1.20 Carlisle................................................................................................... 3
1.21 CFSB Interest.............................................................................................. 3
1.22 Chapter 11 Case............................................................................................ 3
1.23 Charter Amendments......................................................................................... 3
1.24 Claim...................................................................................................... 3
1.25 Claimant................................................................................................... 3
1.26 Class...................................................................................................... 3
1.27 CNC........................................................................................................ 3
1.28 Common Stock............................................................................................... 3
1.29 Confirmation............................................................................................... 3
1.30 Confirmation Date.......................................................................................... 3
1.31 Confirmation Hearing....................................................................................... 3
1.32 Confirmation Order......................................................................................... 3
1.33 Contested.................................................................................................. 3
1.34 Creditors Committee........................................................................................ 4
1.35 Debtors.................................................................................................... 4
1.36 Disallowed Claim or Disallowed Interest.................................................................... 4
1.37 Disclosure Statement....................................................................................... 4
1.38 Distribution Agent......................................................................................... 4
1.39 Distribution Date.......................................................................................... 4
1.40 Distribution Record Date................................................................................... 4
1.41 Effective Date............................................................................................. 4
1.42 Entity..................................................................................................... 4
1.43 Equity Committee........................................................................................... 4
1.44 Estates.................................................................................................... 4
1.45 Fee Claim.................................................................................................. 4
1.46 Filed...................................................................................................... 4
1.47 Final Order................................................................................................ 4
1.48 ICH........................................................................................................ 4
1.49 Impaired................................................................................................... 4
1.50 Indenture.................................................................................................. 5
1.51 Indenture Trustee.......................................................................................... 5
1.52 Interest................................................................................................... 5
1.53 Initial Distribution Date.................................................................................. 5
1.54 Joint Plan................................................................................................. 5
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1.55 Legal Rate................................................................................................. 5
1.56 Letters of Transmittal..................................................................................... 5
1.57 Modern/Western Agreement................................................................................... 5
1.58 Notes...................................................................................................... 5
1.59 Order...................................................................................................... 5
1.60 Ozark...................................................................................................... 5
1.61 PennCorp................................................................................................... 5
1.62 PennCorp Escrow............................................................................................ 5
1.63 PennCorp Escrow Agreement.................................................................................. 5
1.64 Perry Park................................................................................................. 6
1.65 Petition Date.............................................................................................. 6
1.66 Philadelphia American Agreement............................................................................ 6
1.67 Plan Documents............................................................................................. 6
1.68 Post-Petition Interest..................................................................................... 6
1.69 Preferred Stock............................................................................................ 6
1.70 Priority Claim............................................................................................. 6
1.71 Priority Tax Claim......................................................................................... 6
1.72 Pro Rata................................................................................................... 6
1.73 Record Holder.............................................................................................. 6
1.74 Released Entities.......................................................................................... 6
1.75 Released Officers.......................................................................................... 6
1.76 Reorganized ICH............................................................................................ 6
1.77 Reorganized ICH Common Stock............................................................................... 6
1.78 Reserved Distribution Assets............................................................................... 6
1.79 Retained Assets............................................................................................ 6
1.80 Retained Causes of Action.................................................................................. 6
1.81 Rice....................................................................................................... 6
1.82 Sayyah..................................................................................................... 7
1.83 Schedules.................................................................................................. 7
1.84 Secured.................................................................................................... 7
1.85 Securities................................................................................................. 7
1.86 Securities-Related Claims.................................................................................. 7
1.87 Shaw....................................................................................................... 7
1.88 Shaw Group................................................................................................. 7
1.89 Stock Certificates......................................................................................... 7
1.90 Substantial Consummation................................................................................... 7
1.91 SWL Holding................................................................................................ 7
1.92 Tax Settlement............................................................................................. 7
1.93 Tenneco.................................................................................................... 7
1.94 Tenneco Equity Settlement Proceeds......................................................................... 7
1.95 Tenneco Settlement......................................................................................... 7
1.96 Tenneco Settlement Motion.................................................................................. 7
1.97 Transfer Agent............................................................................................. 7
1.98 Trust...................................................................................................... 7
1.99 Trust Agreement............................................................................................ 7
1.100 Trust Assets............................................................................................... 7
1.101 Trust Interest............................................................................................. 7
1.102 Trustee.................................................................................................... 8
1.103 Unsecured Claim............................................................................................ 8
ARTICLE II
TREATMENT OF NON-CLASSIFIED CLAIMS...................................................................................... 8
2.1 General Administrative Claims.............................................................................. 8
(a) In General............................................................................................ 8
(b) Fee Claims............................................................................................ 8
(c) Employment Agreements................................................................................. 8
(d) Other Administrative Claims........................................................................... 8
(e) Regarding Certain Indemnifications.................................................................... 8
2.2 Administrative and Priority Tax Claims..................................................................... 8
(a) Tax Settlement........................................................................................ 9
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(b) Administrative Tax Claims............................................................................. 9
(c) Priority Tax Claims................................................................................... 9
2.3 Other Priority Claims...................................................................................... 9
2.4 Preservation of Retiree Benefits........................................................................... 9
2.5 U.S. Trustee Fees.......................................................................................... 9
ARTICLE III
DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS.......................................................................... 9
3.1 Classification of Claims Against and Interests In ICH...................................................... 9
(a) Secured Claims........................................................................................ 9
(i) ICH Class 1--Secured Claim of Ozark............................................................ 9
(ii) ICH Class 2--Secured Claim of Sayyah........................................................... 9
(iii) ICH Class 3--Tenneco........................................................................... 9
(iv) ICH Class 4--Other Secured Claims.............................................................. 9
(b) Unsecured Claims...................................................................................... 9
(i) ICH Class 5--General Unsecured Claims.......................................................... 10
(c) Interests............................................................................................. 10
(i) ICH Class 6--Preferred Stock................................................................... 10
(ii) ICH Class 7--Common Stock...................................................................... 10
3.2 Classification of Claims Against and Interests In SWL Holding.............................................. 10
(a) SWL Holding Class 1--Secured Claims................................................................... 10
(b) SWL Holding Class 2--General Unsecured Claims......................................................... 10
(c) SWL Holding Class 3--Common Stock..................................................................... 10
3.3 Classification of Claims Against and Interests In Care..................................................... 10
(a) Care Class 1--Secured Claims.......................................................................... 10
(b) Care Class 2 - General Unsecured Claims............................................................... 10
(c) Care Class 3 - Common Stock........................................................................... 10
ARTICLE IV
PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS..................................................................... 10
4.1 Treatment of Classified Claims Against and Interests In ICH................................................ 10
(a) Secured Claims........................................................................................ 10
(i) ICH Class 1--Secured Claim of Ozark............................................................ 10
(ii) ICH Class 2--Secured Claim of Sayyah........................................................... 10
(iii) ICH Class 3--Tenneco........................................................................... 10
(iv) ICH Class 4--Other Secured Claims.............................................................. 11
(b) Unsecured Claims...................................................................................... 11
(i) ICH Class 5--General Unsecured Claims.......................................................... 11
(c) ICH Interests......................................................................................... 11
(i) ICH Class 6--Preferred Stock................................................................... 11
(ii) ICH Class 7--Common Stock...................................................................... 11
4.2 Treatment of Classified Claims Against and Interests In SWL Holding........................................ 12
(a) SWL Holding Class 1--Secured Claims................................................................... 12
(b) SWL Holding Class 2--General Unsecured Claims......................................................... 12
(c) SWL Holding Class 3--Common Stock..................................................................... 12
4.3 Treatment of Classified Claims Against and Interests In Care............................................... 12
(a) Care Class 1--Secured Claims.......................................................................... 12
(b) Care Class 2--General Unsecured Claims................................................................ 12
(c) Care Class 3--Common Stock............................................................................ 12
ARTICLE V
DESIGNATION OF THE CLASSES OF CLAIMS IMPAIRED UNDER THIS JOINT PLAN..................................................... 12
ARTICLE VI
SETTLEMENTS............................................................................................................. 12
6.1 Tenneco Settlement......................................................................................... 12
6.2 Shaw Group Settlement...................................................................................... 12
(a) Cash Contribution..................................................................................... 12
(b) Withdrawal of Proofs of Claims........................................................................ 12
(c) Transferability of CFSB Interest...................................................................... 13
(d) Performance of the Tax Settlement..................................................................... 13
(e) Release of Shaw Group................................................................................. 13
6.3 Stipulation and Agreement with the Indenture Trustee....................................................... 13
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ARTICLE VII
MEANS FOR EXECUTION OF JOINT PLAN....................................................................................... 13
7.1 Effective Date Entities............................................................................... 13
7.2 Property of Estates........................................................................................ 13
(a) SWL Holding and Care.................................................................................. 13
(b) Retention of the Retained Assets by Reorganized ICH................................................... 13
(c) Transfer of the Trust Assets by ICH to the Trust...................................................... 13
7.3 Provisions Relating to the Trust........................................................................... 14
(a) Creation of the Trust................................................................................. 14
(b) Term.................................................................................................. 14
(c) Liquidation of the Trust Assets....................................................................... 14
(d) Reports............................................................................................... 14
(g) Provisions Regarding Trust Interests.................................................................. 14
(i) Allocation of Trust Interests; Issuance of Trust Certificates.................................. 14
(ii) Legended Certificates.......................................................................... 14
(iii) Trust Interest Register; Ownership of Interests................................................ 14
(iv) Transfer of Trust Interests.................................................................... 14
7.4 Reorganized ICH............................................................................................ 14
(a) Charter Amendments.................................................................................... 14
(b) Board of Directors.................................................................................... 15
(c) Officers.............................................................................................. 15
7.5 Other Business Transactions to Occur on the Effective Date................................................. 15
(a) Provisions Regarding the Modern/Western Agreement and the Philadelphia American Agreement.............
15
(b) Provision Regarding Perry Park........................................................................ 15
(c) Provisions Regarding BML.............................................................................. 15
(d) Sale Prior to Effective Date.......................................................................... 16
(e) Confirmation Order Provisions......................................................................... 16
(f) Additional Provisions................................................................................. 16
7.6 Provisions Relating to Indentures.......................................................................... 16
(a) Termination of Indentures............................................................................. 16
(b) Payment of Indenture Trustee's Fees and Expenses...................................................... 17
7.7 Termination of the Committees.............................................................................. 17
7.8 Closing of Effective Date Transactions..................................................................... 17
ARTICLE VIII
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................................................... 17
8.1 Executory Contracts and Unexpired Leases................................................................... 17
8.2 Claims for Rejected Executory Contracts and Unexpired Leases............................................... 17
ARTICLE IX
PROVISIONS REGARDING TENDER OF SECURITIES, DISTRIBUTIONS, DISTRIBUTION AGENT, AND OBJECTIONS TO CLAIMS..................
17
9.1 Provisions Relating to Securities.......................................................................... 17
(a) Initial Distribution of Available Cash................................................................ 17
(b) Distribution Record Date.............................................................................. 17
(c) Cancellation of Securities............................................................................ 17
(d) Tender of Securities.................................................................................. 17
(e) Unsurrendered Outstanding Securities.................................................................. 18
(f) Treasury Securities................................................................................... 18
9.2 Delivery of Distributions.................................................................................. 18
9.3 Distribution Agent......................................................................................... 18
9.4 No Distributions Pending Allowance......................................................................... 18
9.5 Reserve for Certain Distributions.......................................................................... 19
9.6 Distributions After Disallowance........................................................................... 19
9.7 Unclaimed Property......................................................................................... 19
9.8 Treatment of Contingent or Unliquidated Claims............................................................. 19
9.9 Form of Payments........................................................................................... 19
ARTICLE X
PROVISIONS FOR THE DISCHARGE, SETTLEMENT, AND ADJUSTMENT OF CLAIMS...................................................... 19
10.1 Legal Binding Effect; Discharge of Claims and Interests.................................................... 19
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10.2 Retention and Enforcement of the Debtors' Causes of Action................................................. 19
(a) Retention of Causes of Action......................................................................... 20
(b) Judgment Reduction and Hold Harmless.................................................................. 20
(c) Right of Trust to Assert Offset Claims................................................................ 20
10.3 Releases................................................................................................... 21
10.4 Provisions Regarding the Released Officers................................................................. 21
10.5 Futher Releases and Settlements............................................................................ 21
10.6 Permanent Injunction....................................................................................... 21
10.7 Survival of the Debtors' Corporate Indemnities............................................................. 21
ARTICLE XI
MISCELLANEOUS PROVISIONS................................................................................................ 21
11.1 Request for Relief under Section 1129(b)................................................................... 21
11.2 Modification............................................................................................... 22
11.3 Headings................................................................................................... 22
11.4 Subordination.............................................................................................. 22
11.5 Securities-Related Claims Based on Common Stock............................................................ 22
11.6 Due Authorization.......................................................................................... 22
11.7 De Minimis Distributions and Fractional Shares............................................................. 22
11.8 Authorization of Corporate Action.......................................................................... 22
11.9 Further Assurances and Authorizations...................................................................... 23
11.10 Right to Resolve Claims.................................................................................... 23
11.11 Rights Regarding Books..................................................................................... 23
ARTICLE XII
RETENTION OF JURISDICTION............................................................................................... 23
12.1 ........................................................................................................... 23
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I.C.H. Corporation, Care Financial Corporation, and SWL Holding Corporation,
together with the Official Committee of Unsecured Creditors of I.C.H.
Corporation and the Official Committee of Equity Security Holders of I.C.H.
Corporation (collectively, the "Plan Proponents"), jointly propose the following
First Amended Joint Plan of Reorganization pursuant to the provisions of Chapter
11 of the Bankruptcy Code.
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have the
following meanings when used in initially capitalized form in this Joint Plan.
Such meanings shall be equally applicable to both the singular and plural forms
of such terms. Any term used in initially capitalized form in this Joint Plan
that is not defined herein, but that is defined in the Bankruptcy Code, shall
have the meaning assigned to such term in the Bankruptcy Code.
1.1 ADMINISTRATIVE EXPENSE OR ADMINISTRATIVE CLAIM means an administrative
expense Claim under Section 503 of the Bankruptcy Code and the fees payable to
the United States Trustee under 28 U.S.C. Section 1930.
1.2 ALLOWED AMOUNT means the amount in lawful currency of the United States
of any Allowed Claim, or the number of shares representing any Allowed Interest.
1.3 ALLOWED CLAIM AND ALLOWED INTEREST shall mean, with reference to any
Claim or Interest (i) a Claim against or Interest in the Debtor, proof of which,
if required, was Filed on or before the Bar Date, which is not a Contested Claim
or Contested Interest, (ii) if no proof of claim or interest was so Filed, a
Claim against or Interest in the Debtor which has been or hereafter is listed by
the Debtor in its Schedules as liquidated in amount and not disputed or
contingent, or (iii) a Claim or Interest allowed hereunder or by Final Order. An
Allowed Claim or Allowed Interest does not include any Claim or Interest or
portion thereof which is a Disallowed Claim or Disallowed Interest or which has
been subsequently withdrawn, disallowed, released or waived by the holder
thereof or pursuant to a Final Order. Unless otherwise specifically provided in
this Joint Plan, an Allowed Claim or Allowed Interest shall not include any
amount for punitive damages or penalties.
1.4 AVAILABLE CASH means, as of any date of calculation, the aggregate of
all cash or cash equivalents available for immediate distribution held by the
Trust, as reflected on the books and records of the Trust less (i) cash required
to be placed in reserve or paid on the Effective Date as provided in Article II
of this Joint Plan, (ii) cash required to fund distributions with respect to
Secured Claims as provided in section 4.1(a)(i) of this Joint Plan, (iii) cash
required to fund reserves for Contested Claims as provided in section 9.5 of
this Joint Plan, (iv) an amount, not to exceed $2 million, reasonably determined
by the Trustee to be necessary to fund the expenses of the Trust including costs
of the Distribution Agent for distributions made pursuant to this Joint Plan,
(v) any such cash or cash equivalents deriving from SWL Holding or Care, or
their respective assets, and necessary to make the payments, if any, to the
Classes of Claimants in such Estates, and (vi) if, at such calculation date, the
capital stock of BML is owned by the Trust and the BML Licenses have not been
sold to Reorganized ICH, $5 million pursuant to section 7.5(c).
1.5 BANKRUPTCY CODE means Title 11 of the United States Code, as amended,
to the extent applicable to the Chapter 11 Case.
1.6 BANKRUPTCY COURT means the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division.
1.7 BAR DATE means the deadline by which a Claim must have been Filed. The
Bar Date was February 7, 1996, as to all prepetition Claims, excluding Claims of
governmental units for which the Bar Date was April 9, 1996, and further
excluding the Internal Revenue Service for which the Bar Date is October 31,
1996.
1.8 BENEFICIAL HOLDER means, with respect to any Interest or the Notes, as
of any particular date (i) a Record Holder to the extent that it is the Entity
ultimately entitled to the benefits of ownership of such Securities registered
in its name in the records of the appropriate Transfer Agent or the Indenture
Trustee, as applicable, regardless of whether such Record Holder has delegated
investment and/or voting power with respect to any such Securities to any other
Entity, or (ii) to the extent a Record Holder holds Securities of which an
Entity other than that Record Holder ultimately is entitled to the benefits of
ownership, the Entity listed in the transfer or other records of that Record
Holder as being the Entity ultimately entitled to the benefits of ownership of
those Securities.
1.9 BML means Bankers Multiple Line Insurance Company, an Illinois
corporation.
1.10 BML CERTIFICATES has the meaning ascribed to such term in Section
7.5(c)(iii) of this Joint Plan.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-2
<PAGE>
1.11 BML FINAL RECONCILIATION DATE has the meaning ascribed to such term in
Section 7.5(c)(iii) of this Joint Plan.
1.12 BML HOLDING PERIOD has the meaning ascribed to such term in Section
7.5(c)(iii) of this Joint Plan.
1.13 BML INITIAL RECONCILIATION DATE has the meaning ascribed to such term
in Section 7.5(c)(iii) of this Joint Plan.
1.14 BML STOCK POWER has the meaning ascribed to such term in Section
7.5(c)(iii) of this Joint Plan.
1.15 BML LICENSES means the insurance licenses owned by BML which are in
effect on the Effective Date.
1.16 BOARD OF DIRECTORS means the board of directors of the applicable
Debtor as it exists immediately prior to the Effective Date.
1.17 BUSINESS DAY means any day, other than a Saturday, Sunday, or legal
holiday (as that term is defined in Bankruptcy Rule 9006(a)).
1.18 CAPITAL AND SURPLUS RETENTION ASSETS has the meaning ascribed to such
term in Section 7.5(c)(i) of this Joint Plan.
1.19 CARE means Care Financial Corporation, a Delaware corporation, f/k/a
Health Interests Corporation.
1.20 CARLISLE means Edward J. Carlisle.
1.21 CFSB INTEREST means those certain rights of ICH to participate in
certain economic benefits derived from the ownership of Bluebonnet Savings Bank
FSB by CFSB Corporation which were assigned to ICH by CNC in that certain letter
agreement dated March 29, 1993 and as such economic benefits have been described
and memorialized by the following agreements: the written agreement entered into
by CNC, James M. Fail, and CFSB on January 25, 1993; the Amended and Restated
Agreement dated as of January 31, 1995, by and between CNC, James M. Fail; and
CFSB Corporation, and the Amended and Restated Distribution Account Agreement
dated as of January 31, 1995, by and between CNC, James M. Fail, CFSB
Corporation, and Bank of Louisville and Trust Company.
1.22 CHAPTER 11 CASE means the above entitled and numbered jointly
administered cases Filed by the Debtors pursuant to the provisions of Chapter 11
of the Bankruptcy Code or any single case of a Debtor.
1.23 CHARTER AMENDMENTS means the amendments to the Certificate of
Incorporation and By-laws of ICH to be effected under this Joint Plan.
1.24 CLAIM means (i) right of payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (ii) a right to
an equitable remedy for breach of performance if such breach gives rise to a
right of payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
1.25 CLAIMANT means a holder of a Claim.
1.26 CLASS means all of the holders of Claims against or Interests with
respect to the Debtors which have been designated as a class in Article III
hereof.
1.27 CNC means Consolidated National Corporation.
1.28 COMMON STOCK means the 48,644,112 outstanding shares of common stock,
$1.00 par value per share, of ICH.
1.29 CONFIRMATION means the entry by the Bankruptcy Court of the
Confirmation Order.
1.30 CONFIRMATION DATE means the date on which the Confirmation Order has
been entered on the docket maintained by the Clerk of the Bankruptcy Court.
1.31 CONFIRMATION HEARING means the hearing or hearings to be held before
the Bankruptcy Court in which the Joint Plan Proponents shall seek Confirmation
of this Joint Plan.
1.32 CONFIRMATION ORDER means the Order confirming this Joint Plan.
1.33 CONTESTED when used with respect to a Claim or Interest, means a Claim
against or Interest in the Debtors that is (i) listed in the Debtors' Schedules
as disputed, contingent, or unliquidated and as to which a proof of claim has
been timely
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-3
<PAGE>
Filed; (ii) listed in the Debtors' Schedules as undisputed, liquidated, and not
contingent and as to which a proof of Claim or Interest has been Filed with the
Bankruptcy Court, to the extent the proof of Claim or Interest amount exceeds
the amount provided for in the Debtors' Schedules; or (iii) the subject of an
objection which has been or may be timely Filed and which claim has not been
disallowed by Final Order. To the extent an objection relates to the allowance
of only a part of a Claim or Interest, such a Claim or Interest shall be a
Contested Claim or Contested Interest only to the extent of the objection.
1.34 CREDITORS COMMITTEE means the Official Committee of Unsecured
Creditors of I.C.H. Corporation.
1.35 DEBTORS means ICH, Care, and SWL Holding as debtors and as debtors in
possession of their respective Estates, or any single Debtor.
1.36 DISALLOWED CLAIM OR DISALLOWED INTEREST means a Claim against, or
Interest in, the Debtor, or any portion thereof, (i) that has been disallowed by
Final Order, (ii) proof of which has been untimely Filed and as to which no
order of allowance has been entered by the Court, or (iii) listed as disputed,
contingent, or unliquidated and as to which no proof of claim or proof of
interest has been timely Filed.
1.37 DISCLOSURE STATEMENT means the Disclosure Statement for this Joint
Plan of Reorganization under Chapter 11, together with any supplements,
amendments, or modifications thereto.
1.38 DISTRIBUTION AGENT means Bank of Louisville and Trust Company or such
other Entity as may be designated by the Joint Plan Proponents prior to the
Disclosure Statement hearing and approved by the Bankruptcy Court, which shall
be responsible for making payments or distributions to Record Holders of the
Notes, the Preferred Stock, and the Common Stock pursuant to this Joint Plan.
1.39 DISTRIBUTION DATE means a date set forth in this Joint Plan or the
Trust Agreement upon which distributions to Allowed Claims or Allowed Interests
shall be made.
1.40 DISTRIBUTION RECORD DATE means the close of business in New York, New
York on the Effective Date which shall be the date for determining the Record
Holders of Securities who are entitled to receive distributions pursuant to
Article IV of this Joint Plan.
1.41 EFFECTIVE DATE means the eleventh day following the Confirmation Date
or, if the Confirmation Order is stayed pending appeal, the Effective Date shall
be the eleventh day after such stay is dissolved by a Final Order.
1.42 ENTITY includes any individual, partnership, corporation, estate,
trust, governmental unit, and the United States Trustee.
1.43 EQUITY COMMITTEE means the Official Committee of Equity Security
Holders of I.C.H. Corporation.
1.44 ESTATES mean the respective bankruptcy estates created by Section 541
of the Bankruptcy Code upon the commencement of the Chapter 11 Case.
1.45 FEE CLAIM means a Claim under Sections 330 or 503(b)(2)-(5) of the
Bankruptcy Code.
1.46 FILED means filed with the Bankruptcy Court.
1.47 FINAL ORDER means (i) an order of the Bankruptcy Court as to which the
time to appeal, petition for certiorari, or move for reargument or rehearing has
expired and as to which no appeal, petition for certiorari, or other proceedings
for reargument or rehearing, shall then be pending or, (ii) in the event that an
appeal, writ of certiorari, reargument or rehearing thereof has been sought,
such order of the Bankruptcy Court shall have been affirmed by the highest court
to which such order may be appealed, or certiorari has been denied, and the time
to take any further appeal, petition for certiorari or move for reargument or
rehearing shall have expired; PROVIDED, HOWEVER, that no order shall fail to be
a Final Order solely because of the possibility that a motion pursuant to Rule
60 of the Federal Rules of Civil Procedure may be filed with respect to the
order.
1.48 ICH means I.C.H. Corporation, a Delaware corporation, whose principal
address is 500 North Akard Street, Dallas, Texas 75201.
1.49 IMPAIRED means the treatment of an Allowed Claim or Allowed Interest
under this Joint Plan UNLESS, with respect to such Claim or Interest, either (i)
this Joint Plan leaves unaltered the legal, equitable, and contractual rights to
which such Claim or Interest entitles the holder of such Claim or Interest, or
(ii) notwithstanding any contractual provision
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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or applicable law that entitles the holder of such Claim or Interest to demand
or receive accelerated payment of such Claim or Interest after occurrence of a
default, the Debtors (A) cure any default that occurred before or after the
commencement of the Chapter 11 Case other than default of the kind specified in
Section 365(b)(2) of the Bankruptcy Code; (B) reinstate the maturity of such
Claim or Interest as such maturity existed before such default; (C) compensate
the holder of such Claim or Interest for any damages incurred as a result of any
reasonable reliance by such holder on such contractual provision or such
applicable law; and (D) do not otherwise alter the legal, equitable or
contractual rights to which such Claim or Interest entitles the holder of such
Claim or Interest.
1.50 INDENTURE means any one or more of the trust indentures pursuant to
which the Notes were issued.
1.51 INDENTURE TRUSTEE means Bank of Louisville and Trust Company, and any
successor thereto.
1.52 INTEREST means the equity interests in ICH represented by duly
authorized, validly issued, and outstanding shares of the Preferred Stock and
Common Stock of ICH.
1.53 INITIAL DISTRIBUTION DATE means the first Distribution Date upon which
a distribution to a holder of an Allowed Claim or Allowed Interest shall be
made, which by reference to the respective distribution shall mean (i) for any
Claim or Interest that is an Allowed Claim or Allowed Interest on the Effective
Date, the first Business Day that is ten (10) days after the Effective Date or
as soon thereafter as practicable, but in no event later than twenty (20) days
after the Effective Date, and (ii) for any Clam or Interest that is a Contested
Claim or Contested interest on the Effective Date, the date as soon as
practicable, but in no event more than thirty (30) days, after the date on which
such Claim or Interest becomes an Allowed Claim or Allowed Interest, PROVIDED,
HOWEVER, that the Initial Distribution date with respect to an Allowed Claim or
an Allowed Interest arising from a Security shall occur no earlier than such
date that is as soon as practicable after tender of such Security in compliance
with Article IX of this Joint Plan.
1.54 JOINT PLAN means this Joint Plan of Reorganization under Chapter 11 of
the Bankruptcy Code, as it may be amended or modified from time to time as
permitted herein or in accordance with Section 1127 of the Bankruptcy Code.
1.55 LEGAL RATE means (a) with respect to a Claim arising from a written
document or instrument which expressly sets forth an interest rate, the rate of
interest set forth therein, or (b) with respect to any other Claim, the interest
rate accruing upon judgments as set forth in 28 U.S.C. Section 1961.
1.56 LETTERS OF TRANSMITTAL means such letters of transmittal as may be
distributed by the Trust or the Distribution Agent after the Effective Date to
Record Holders of Securities as of the Distribution Record Date for the purpose
of enabling such Entities to transmit Securities held of record by them as of
the Distribution Record Date to the Distribution Agent as contemplated by
Section 9.1(d) of this Joint Plan, which letters of transmittal shall be in form
and substance acceptable to Reorganized ICH in the case of letters of
transmittal from Record Holders of Interests or the Trust in the case of
transmittal letters from Record Holders of Notes.
1.57 MODERN/WESTERN AGREEMENT means that certain Stock Purchase Agreement
dated as of April 2, 1996, between BML, as seller, and Reassure America Life
Insurance Company, as purchaser, which was consummated on June 28, 1996.
1.58 NOTES means the 11 1/4% Senior Subordinated Notes due 1996 and the
11 1/4% Senior Subordinated Notes due 2003 issued by ICH.
1.59 ORDER means an order of the Bankruptcy Court.
1.60 OZARK means Ozark National Life Insurance Company.
1.61 PENNCORP means PennCorp Financial Group, Inc.
1.62 PENNCORP ESCROW means that certain escrow established under and
pursuant to the PennCorp Escrow Agreement. The funds deposited under the terms
and provisions of the PennCorp Escrow Agreement shall not be considered
Available Cash until released to the Trust in accordance with the terms and
provisions of the PennCorp Escrow Agreement or other agreements entered into by
the Debtors with respect thereto or as authorized by Final Order of the
Bankruptcy Court.
1.63 PENNCORP ESCROW AGREEMENT means the escrow agreement entered into
pursuant to Section 8.2(a) of the Purchase Agreement dated December 1, 1995,
among ICH, SWL Holding, Care, Facilities Management Installation, Inc.,
Southwestern Financial Corporation, Southwestern Financial Services Corporation,
and PennCorp.
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1.64 PERRY PARK means all real property of the Estates of ICH and Care
situated in and around the Glenwood Hall Resort and Country Club in Owen County,
Kentucky, and all improvements, fixtures, and personal property of the Estates
of ICH and Care situated in or on such real property, or related to such real
property, wherever located, together with all appurtenances thereto.
1.65 PETITION DATE means October 10, 1995.
1.66 PHILADELPHIA AMERICAN AGREEMENT means that certain Stock Purchase
Agreement dated as of April 2, 1996, between BML, as seller, and New Era
Enterprises, Inc., as purchaser, which was consummated on June 28, 1996.
1.67 PLAN DOCUMENTS means this Joint Plan, the Disclosure Statement, the
Trust Agreement and all exhibits and attachments to any of the foregoing.
1.68 POST-PETITION INTEREST means interest at the Legal Rate from the
Petition Date through the date of calculation.
1.69 PREFERRED STOCK means the 8,000,000 outstanding shares of $1.75
Convertible Exchangeable Preferred Stock, Series 1986-A, $25.00 stated value,
issued by ICH.
1.70 PRIORITY CLAIM means all Claims entitled to priority under section
507(a)(2)-(a)(7) and (a)(9) of the Bankruptcy Code.
1.71 PRIORITY TAX CLAIM means all Claims entitled to priority under section
507(a)(8) of the Bankruptcy Code.
1.72 PRO RATA means, with reference to any distribution on account of an
Allowed Claim or Allowed Interest, the proportion that an Allowed Claim or
Allowed Interest in a particular Class bears, respectively, to the aggregate
amount of all Claims or Interests in such Class, including Contested Claims or
Contested Interests which are not Disallowed Claims or Disallowed Interests as
of the date of such calculation, but excluding such Claims or Interests that are
subordinated pursuant to Bankruptcy Code Section 510, except that the Pro Rata
share of Allowed Securities-Related Claims based on Common Stock, if any, shall
be calculated as set forth in Section 11.5 of this Joint Plan.
1.73 RECORD HOLDER means, as of any specified date, the holder of a Note,
Preferred Stock, or Common Stock, as applicable, who is registered as holding
such Securities in the transfer or other such records of the appropriate
Transfer Agent or Indenture Trustee, as applicable.
1.74 RELEASED ENTITIES means the Trust, the Trustee, the Creditors
Committee, the Equity Committee, the Shaw Group and their respective present and
former officers, directors, members, employees, agents, attorneys, and such
other persons as the Equity Committee may designate prior to the conclusion of
the Confirmation Hearing.
1.75 RELEASED OFFICERS means W. Hubert Mathis, Steven R. Cartwright, Robert
J. Bruce, H. Don Rutherford, John T. Hull, Robert C. Greving, and Daniel B.
Gail, and such other persons as the Equity Committee may designate prior to the
conclusion of the Confirmation Hearing.
1.76 REORGANIZED ICH means ICH as of the completion of the transactions
contemplated in this Joint Plan to occur on the Effective Date.
1.77 REORGANIZED ICH COMMON STOCK means the shares of new common stock to
be issued by Reorganized ICH as provided in Article IX of this Joint Plan.
1.78 RESERVED DISTRIBUTION ASSETS has the meaning ascribed to such term in
Section 9.5 of this Joint Plan.
1.79 RETAINED ASSETS shall mean (i) the capital stock of BML (after the
Trust has assumed BML's non-reinsured liabilities, including indemnification
obligations to Reassure America Life Insurance Co. and to New Era Enterprises,
Inc. in exchange for, subject to Section 7.5(c), all of BML's capital and
surplus and other tangible property), together with all BML Licenses and all
books and records of BML, (ii) Perry Park, together with all books and records
of Perry Park, (iii) $2.5 million cash, (iv) the Retained Causes of Action, (v)
the Tenneco Equity Settlement Proceeds of $500,000, (vi) any tax attributes
remaining after the determination of the Debtors' tax liability through the
Effective Date, (vii) the common stock of SWL Holding and Care, and (viii) all
books and records of ICH.
1.80 RETAINED CAUSES OF ACTION means the causes of action as defined in
Section 10.2 of this Joint Plan.
1.81 RICE means C. Fred Rice.
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1.82 SAYYAH means Victor L. Sayyah.
1.83 SCHEDULES means those schedules and statements of financial affairs
Filed by the applicable Debtor under Federal Rule of Bankruptcy Procedure 1007,
as same may be amended from time to time.
1.84 SECURED means an Allowed Claim that is secured by a lien on property
in which an Estate has an interest, or that is subject to setoff under Section
553 of the Bankruptcy Code, to the extent of the value of Claimant's interest in
such Estate's interest in such property, or to the extent of the amount subject
to setoff, as the case may be.
1.85 SECURITIES means the Common Stock, the Preferred Stock and the Notes.
1.86 SECURITIES-RELATED CLAIMS means the Claims, if any, arising from
rescission of a purchase or sale of Securities of ICH or of any of its
affiliates, for damages arising from the purchase or sale of Securities, or for
reimbursement or contribution allowed under Section 502 of the Bankruptcy Code
on account of such a Claim, including but not limited to the Claims of the
plaintiffs in the suit styled IN RE SOUTHWESTERN LIFE CORPORATION SECURITIES
LITIGATION, Adversary Proceeding No. 395-3589, pending in the Bankruptcy Court.
1.87 SHAW means Robert T. Shaw.
1.88 SHAW GROUP means Shaw, Rice, and CNC.
1.89 STOCK CERTIFICATES means the certificates representing and evidencing
ownership of the Common Stock and the Preferred Stock.
1.90 SUBSTANTIAL CONSUMMATION means the accomplishment of the transactions
required under Sections 7.1 through 7.8 of this Joint Plan.
1.91 SWL HOLDING means SWL Holding Corporation, a Delaware corporation,
f/k/a Life Interests Corporation.
1.92 TAX SETTLEMENT means that certain settlement set forth in the Joint
Motion for Approval of Agreement for Compromise and Settlement of Tax Claims and
Certain Tax Related Liabilities of the Debtors' Filed on August 23, 1996 by the
Debtors, PennCorp and certain of its affiliates and the IRS, and joined in by
the Shaw Group, as approved by the Bankruptcy Court by order entered September
13, 1996.
1.93 TENNECO means Tenneco, Inc., a Delaware corporation.
1.94 TENNECO EQUITY SETTLEMENT PROCEEDS means the first $250,000 of
proceeds from the Tenneco Settlement in excess of $17,500,000, and fifty percent
(50%) of the proceeds from the Tenneco Settlement in excess of $17,750,000;
PROVIDED, HOWEVER, that in no event shall the aggregate amount of Tenneco Equity
Settlement Proceeds exceed the sum of $500,000.
1.95 TENNECO SETTLEMENT means that certain Settlement Agreement by and
between ICH and Tenneco, which shall be the subject of the Tenneco Settlement
Motion.
1.96 TENNECO SETTLEMENT MOTION means any Motion for Approval of Compromise
and Settlement with Tenneco Filed in the Chapter 11 Case by ICH.
1.97 TRANSFER AGENT means, with respect to the Common Stock, Bank of
Louisville and Trust Company and, with respect to the Preferred Stock, KeyCorp
Shareholders Services Inc.
1.98 TRUST means the Lone Star Asset Liquidating Trust, to be created on
the Effective Date pursuant to the Trust Agreement.
1.99 TRUST AGREEMENT means the agreement governing the Trust and any
exhibits, supplements or amendments thereto, the form of which shall be
acceptable to the Creditors' Committee, in its sole discretion, and Filed no
later than ten (10) Business Days prior to the Confirmation Hearing and which
shall become an exhibit to this Joint Plan.
1.100 TRUST ASSETS means all property of the Estate of the Debtors except
the Retained Assets.
1.101 TRUST INTEREST means a beneficial ownership interest in the Trust,
which represents the right to receive distributions from the Trust in accordance
with section 4.1(b) of this Joint Plan.
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1.102 TRUSTEE means Susan A. Brown and any other person(s) designated by
the Creditors' Committee prior to the Confirmation Hearing to serve as trustees
of the Trust pursuant to the Trust Agreement, and appointed in the Confirmation
Order to serve as Trustee(s) of the Trust, or any successor selected pursuant to
the terms of the Trust Agreement.
1.103 UNSECURED CLAIM means a Claim that is not an Administrative Claim, a
Priority Claim, a Priority Tax Claim, or a Secured Claim.
ARTICLE II
TREATMENT OF NON-CLASSIFIED CLAIMS
This Joint Plan does not classify Claims against the Debtors having priority
as specified in Section 507 of the Bankruptcy Code, which Claims shall be
treated as follows:
2.1 GENERAL ADMINISTRATIVE CLAIMS
(A) IN GENERAL. Each holder of an Administrative Claim except as otherwise
set forth in this Article II (and specifically excluding Administrative Tax
Claims as set forth in Section 2.2 below) shall receive from the Trust either
(i) with respect to Administrative Claims which are Allowed Claims on the
Effective Date, the amount of such holder's Allowed Claim in one cash payment on
the Initial Distribution Date, (ii) with respect to Administrative Claims which
become Allowed Claims after the Effective Date, the amount of such holder's
Allowed Claim in one cash payment on the applicable Distribution Date; or (iii)
such other treatment agreed upon in writing by the Debtors and such holder;
PROVIDED, HOWEVER, that any such Administrative Claim representing a liability
incurred in the ordinary course of business by any of the Debtors shall be paid
by the Trust in accordance with the terms and conditions of the particular
transaction giving rise to such liability and any agreements relating thereto.
In connection herewith, the estimated amounts of such Administrative Claims
shall on the Effective Date be reserved by the Trust with respect to payment of
such Allowed Administrative Claims and shall not be treated as Available Cash.
(B) FEE CLAIMS. Each professional person whose retention with respect to
the Debtors' cases has been approved by the Bankruptcy Court and who holds, or
asserts, an Administrative Claim that is a Fee Claim shall be required to file
with the Bankruptcy Court a final fee application within sixty days after the
Effective Date and to serve notice thereof on all parties entitled to such
notice pursuant to the Order Establishing Interim Procedures and Guidelines for
Compensation of Professional Persons. The failure to file timely the fee
application as required under this Section 2.1(b) of this Joint Plan shall
result in the Fee Claim being forever barred and discharged. A Fee Claim, with
respect to which a Fee Application has been properly Filed pursuant to this
Section 2.1(b) of this Joint Plan, shall become an Administrative Claim only to
the extent allowed by Final Order. Not later than five days prior to the
Effective Date, each such professional person shall file an estimate of such
final Fee Claim on all parties entitled to such notice pursuant to the Order
Establishing Interim Procedures and Guidelines for Compensation of Professional
Persons. The estimated amounts of such Fee Claims shall on the Effective Date be
reserved by the Trust for payment of such Fee Claims and shall not be treated as
Available Cash.
(C) EMPLOYMENT AGREEMENTS. All amounts due to Susan A. Brown and Rodney D.
Moore pursuant to their respective Employment Agreements entered into with ICH
as of January 1, 1996, shall be paid in cash in full by the Trust on the Initial
Distribution Date to the extent then due. Any additional amounts that become
payable under such Employment Agreements shall be paid in cash in full by the
Trust within thirty days after such amounts are determined.
(D) OTHER ADMINISTRATIVE CLAIMS. Any other person or Entity who claims to
hold any other Administrative Claim shall be required to file with the Court an
application within sixty days after the Effective Date and to serve notice
thereof on all parties entitled to such notice. The failure to file timely the
application as required under this Section 2.1(d) of this Joint Plan shall
result in the Claim being forever barred and discharged. An Administrative Claim
with respect to which an application has been properly Filed pursuant to this
Section 2.1(d) of this Joint Plan, shall become an Allowed Administrative Claim
to the extent such claim is allowed by Final Order.
(E) REGARDING CERTAIN INDEMNIFICATIONS The provisions of the Order
Regarding Indemnification of Officers and Directors of the Debtors entered on
February 14, 1996 are hereby ratified and confirmed as obligations of the Trust,
subject to any and all defenses thereto of the Debtors, the Estates or the
Trust, including that such claims are subordinated pursuant to the provisions of
the Bankruptcy Code PROVIDED, HOWEVER, that such obligations shall not be
obligations of Reorganized ICH. The balance of the $500,000 fund provided for in
such order (the "Indemnification Fund") shall be utilized as provided in such
order. Upon resolution of claims against the Indemnification Fund, any remaining
funds in the Indemnification Fund shall become Available Cash.
2.2 ADMINISTRATIVE AND PRIORITY TAX CLAIMS
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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(A) TAX SETTLEMENT The Tax Settlement resolves and satisfies all
Administrative Claims and Priority Claims for federal income taxes for which the
Debtors are responsible for tax years 1990 through 1995.
(B) ADMINISTRATIVE TAX CLAIMS Each holder of an Allowed Administrative
Claim for (a) taxes shown on the Federal income tax returns in which the Debtors
are includible for the period from and after January 1, 1996, and ending on the
Effective Date, and (b) State income tax returns in which the Debtors are
includible for the period during which the Debtors' Chapter 11 cases are being
administered and any other taxes of the Debtors payable pursuant to Section
507(a)(1) of the Bankruptcy Code (collectively, the "Allowed Administrative Tax
Claims"), if any, shall be paid in cash in full from the Trust on the latest of
(i) the Initial Distribution Date, or (ii) the date such payment is due under
applicable law. Payment of Allowed Administrative Tax Claims shall be the
responsibility of the Trust, and the estimated amounts of such tax liabilities
as of the Effective Date shall be reserved and shall not be treated as Available
Cash. The amount of Allowed Administrative Tax Claims shall be determined after
giving effect to the terms of the Tax Settlement by a deemed closing of the
books of the Debtors as of the close of the Effective Date, and shall be
determined where appropriate on a consolidated or combined basis consistent with
the manner in which the Debtors have previously filed tax returns. If the
Effective Date occurs in a taxable year subsequent to the taxable year including
January 1, 1996, the amount of Allowed Administrative Tax Claims shall be
determined by carrying forward all available net operating losses, capital
losses, alternative minimum tax net operating losses, and other tax attributes
of the Debtors and members of their consolidated or combined groups, where
applicable, for full use in the period of such subsequent taxable year deemed
for these purposes to end on the Effective Date.
(C) PRIORITY TAX CLAIMS Each Allowed Claim for State taxes entitled to
priority in accordance with Section 507(a)(8) of the Bankruptcy Code, shall be
paid in cash in full by the Trust on the later of (i) the Initial Distribution
Date, or (ii) the date such payment is due under applicable law.
2.3 OTHER PRIORITY CLAIMS Each Priority Claim, if any, shall be paid in
cash in full by the Trust on the Initial Distribution Date, or such later date
as provided in any agreement or employment policy governing such Claims.
2.4 PRESERVATION OF RETIREE BENEFITS On the Effective Date, the Trust
shall provide for the continuation of the payment of any applicable retiree
benefits, as that term is defined in Section 1114 of the Bankruptcy Code, at the
level established by the Debtors prior to Confirmation pursuant to the terms of
the applicable retiree benefit documents in accordance with Section 1114 of the
Bankruptcy Code for the duration of the period the Debtors have obligated
themselves to provide such benefits.
2.5 U.S. TRUSTEE FEES All fees payable under 28 U.S.C. Section 1930 shall
be paid in cash in full by the Trust on the Effective Date and thereafter by the
Trust in accordance with such statute.
ARTICLE III
DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS
Pursuant to Section 1123 of the Bankruptcy Code, the Debtors designate the
following Classes of Claims and Interests.
3.1 CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN ICH All Claims
against and Interests in ICH, except Administrative and Priority Claims, are
classified as follows:
(A) SECURED CLAIMS
(I) ICH CLASS 1--SECURED CLAIM OF OZARK ICH designates as a Class the
Claim of Ozark against ICH secured by its lien on unplatted property of ICH
situated in Perry Park.
(II) ICH CLASS 2--SECURED CLAIM OF SAYYAH ICH designates as a Class
the Claim of Sayyah against ICH to the extent such Claim is subject, pursuant to
Sections 506(a) and 553 of the Bankruptcy Code, to offset against the debt owed
to ICH by Sayyah. The remaining balance of such Claim, if any, to the extent
such Claim is an Allowed Claim, is and shall be treated as an ICH Class 5 Claim.
(III) ICH CLASS 3--TENNECO ICH designates as a Class the Claims of
Tenneco against ICH, including its Claim represented by the 9% unsecured note
due 1996 issued by ICH which is subject, pursuant to Sections 506(a) and 553 of
the Bankruptcy Code, to offset against the debt owed to ICH by Tenneco.
(IV) ICH CLASS 4--OTHER SECURED CLAIMS ICH designates as a Class all
other Secured Claims against ICH, if any.
(B) UNSECURED CLAIMS
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(I) ICH CLASS 5--GENERAL UNSECURED CLAIMS ICH designates as a Class
the Unsecured Claims including, but not limited to, any Claims of the Record and
Beneficial Holders of Notes as of the Distribution Record Date and the
Securities-Related Claims, if any, to the extent related to the Notes.
(C) INTERESTS
(I) ICH CLASS 6--PREFERRED STOCK ICH designates a Class consisting of
the Interests of the Record and Beneficial Holders of Preferred Stock as of the
Distribution Record Date and the Securities-Related Claims against ICH, if any,
to the extent related to the Preferred Stock.
(II) ICH CLASS 7--COMMON STOCK ICH designates a Class consisting of
the Interests of the Record and Beneficial Holders of Common Stock as of the
Distribution Record Date and the Securities-Related Claims against ICH, if any,
to the extent related to the Common Stock.
3.2 CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN SWL HOLDING All
Claims against and Interests in SWL Holding, except Administrative and Priority
Claims, are classified as follows:
(A) SWL HOLDING CLASS 1--SECURED CLAIMS SWL Holding designates as a Class
all Secured Claims against SWL Holding, if any.
(B) SWL HOLDING CLASS 2--GENERAL UNSECURED CLAIMS SWL Holding designates
as a Class all Unsecured Claims against SWL Holding, if any.
(C) SWL HOLDING CLASS 3--COMMON STOCK SWL Holding designates a Class
consisting of all Interests in SWL Holding arising from outstanding common stock
of SWL Holding as of the Effective Date.
3.3 CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN CARE All Claims
against and Interests in Care, except Administrative and Priority Claims, are
classified as follows:
(A) CARE CLASS 1--SECURED CLAIMS Care designates as a Class all Secured
Claims against Care, if any.
(B) CARE CLASS 2--GENERAL UNSECURED CLAIMS Care designates as a Class all
Unsecured Claims against Care, if any.
(C) CARE CLASS 3--COMMON STOCK Care designates a Class consisting of all
Interests in Care arising from outstanding common stock of Care as of the
Effective Date.
ARTICLE IV
PROVISIONS FOR SATISFACTION OF CLAIMS AND INTERESTS
The Claims and Interests as classified in Article III hereof shall be
satisfied in the manner set forth in this Article IV. The treatment of, and the
consideration to be received by, Entities holding Allowed Claims against and/or
Allowed Interests in the Debtors pursuant to this Joint Plan shall be in full
settlement, release, and discharge of their respective Allowed Claims against
and Allowed Interests in the Debtors.
4.1 TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN ICH All
classified Claims against and Interests in ICH, except Administrative and
Priority Claims, shall be treated as follows:
(A) SECURED CLAIMS
(I) ICH CLASS 1--SECURED CLAIM OF OZARK The Allowed Amount of the
Secured Claim of Ozark shall be paid in cash in full by the Trust. The Allowed
Amount of such Claim is the sum of (a) the outstanding balance of the promissory
note from ICH to Ozark, which is $323,863.19, (b) accrued but unpaid prepetition
interest of $9,804.62, (c) postpetition interest from the Petition Date until
such Claim is paid in full, calculated at the contract rate set forth in such
promissory note, and (d) reasonable fees and expenses, if any, incurred by Ozark
as provided in Section 506(b) of the Bankruptcy Code. Ozark shall retain its
lien on the collateral securing such Claim until such Claim has been paid in
full hereunder, at which time Ozark shall deliver a release of its lien in
recordable form in accordance with the terms of its mortgage.
(II) ICH CLASS 2--SECURED CLAIM OF SAYYAH The Allowed Secured Claim of
Sayyah shall be satisfied by an offset of the Allowed Amount of Sayyah's Claim
against the amount of Sayyah's obligation to ICH.
(III) ICH CLASS 3--TENNECO The Tenneco Claims are the subject of the
Tenneco Settlement anticipated by the Debtors to be presented to the Bankruptcy
Court in the Tenneco Settlement Motion prior to the Confirmation Hearing. If the
Tenneco Settlement Motion has been granted by Order of the Bankruptcy Court on
or before the Confirmation Date, then this Class shall be moot and the Tenneco
Settlement shall be in exchange for and in full satisfaction of all Claims of
Tenneco. If the Tenneco Settlement has not been approved prior to Confirmation,
Confirmation of the Plan shall constitute
FIRST AMENDED JOINT PLAN OF REORGANIZATION
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the Bankruptcy Court's approval of the Tenneco Settlement, and the Confirmation
Order shall contain provisions to such effect. If the Tenneco Settlement has
been disapproved by the Bankruptcy Court prior to Confirmation, the Allowed
Secured Claim of Tenneco shall be satisfied by an offset of the Allowed Amount
of Tenneco's Claim against the amount of Tenneco's obligation to ICH, and the
Confirmation Order shall contain provisions to such effect.
(IV) ICH CLASS 4--OTHER SECURED CLAIMS Each ICH Class 4 Claim shall be
satisfied by payment in full in cash from the Trust in the Allowed Amount of
such Secured Claim or by delivery to the holder of an Allowed ICH Class 4 Claim
of the property securing such Claim, at the election of the Trustee, on the
later of (i) the Distribution Date or (ii) the date such payment is due under
applicable law.
(B) UNSECURED CLAIMS
(I) ICH CLASS 5--GENERAL UNSECURED CLAIMS In exchange for and in full
settlement of all ICH Class 5 Claims, the holders of Allowed ICH Class 5 Claims
shall receive all beneficial interest in and the proceeds of all Trust Assets,
which, following payment of or provision for all other Claims as provided in
Article II and Section 4.1(a) of this Joint Plan, shall be distributed to the
ICH Class 5 Claimants according to the following procedures:
(a) on the Initial Distribution Date, a Pro Rata distribution of
Available Cash determined as of the Effective Date;
(b) subsequent to the Initial Distribution Date, Pro Rata distributions
of Available Cash as and when from time to time determined and declared by
the Trustee in accordance with the provisions of the Trust Agreement.
(C) ICH INTERESTS
(I) ICH CLASS 6--PREFERRED STOCK In exchange for and in full
satisfaction of all Interests related to Preferred Stock, Record Holders of
Allowed ICH Class 6 Interests shall be entitled to receive, on the Effective
Date, for each share of Preferred Stock held, 0.2 shares of Reorganized ICH
Common Stock, rounded to the nearest whole number of shares; PROVIDED, HOWEVER,
that: (a) no distribution of Reorganized ICH Common Stock shall be made with
respect to any shares of Preferred Stock held by any Beneficial Holder who holds
less than 14 shares of Preferred Stock and the ICH Class 6 Interest of such
Beneficial Holders shall be reduced to zero (and Record Holders who are nominee
holders for more than one Beneficial Holder shall not aggregate holdings of such
Beneficial Holders for purposes of determining the distribution to which such
Record Holder may be entitled pursuant to this Section 4.1(c)(i)); (b) any
Beneficial Holder of an Allowed ICH Class 6 Interest that holds, in the
aggregate, between 14 and 650 shares of Preferred Stock (or that agrees to
voluntarily reduce its Class 6 Interest to 650 shares of Preferred Stock), or
any Record Holder specifically authorized by that Beneficial Holder, may elect
at the time it tenders its Securities pursuant to a Letter of Transmittal to
receive a single cash payment of $.36 per share of Preferred Stock in lieu of
receiving shares of Reorganized ICH Common Stock; and (c) any Beneficial Holder
of a Allowed ICH Class 6 Interest, or any Record Holder specifically authorized
by that Beneficial Holder, may agree in writing with the Equity Committee prior
to the Effective Date, or with Reorganized ICH on or after the Effective Date,
to accept any lesser amounts of cash or Reorganized ICH Common Stock in full
satisfaction of its ICH Class 6 Interest.
Holders of Allowed Securities-Related Claims related to Preferred Stock, if
any, shall receive no distributions except as provided in Section 11.4 of this
Joint Plan.
(II) ICH CLASS 7--COMMON STOCK In exchange for and in full
satisfaction of all Interests related to Common Stock, Record Holders of Allowed
ICH Class 7 Interests shall be entitled to receive, on the Effective Date, for
each share of Common Stock held, 0.0269 shares of Reorganized ICH Common Stock,
rounded to the nearest whole number of shares; PROVIDED, HOWEVER, that: (a) no
distribution of Reorganized ICH Common Stock shall be made with respect to any
shares of Common Stock held by any Beneficial Holder who holds less than 101
shares of Common Stock and the ICH Class 7 Interest of such Beneficial Holders
shall be reduced to zero (and Record Holders who are nominee holders for more
than one Beneficial Holder shall not aggregate holdings of such Beneficial
Holders for purposes of determining the distribution to which such Record Holder
may be entitled pursuant to this Section 4.1(c)(ii)); (b) any Beneficial Holder
of an Allowed ICH Class 7 Interest that holds, in the aggregate, between 101 and
5,000 shares of Common Stock (or that agrees to voluntarily reduce its ICH Class
7 Interest to 5,000 shares of Common Stock), or any Record Holder specifically
authorized by that Beneficial Holder, may elect at the time it tenders its
Securities pursuant to a Letter of Transmittal to receive a single cash payment
of $.05 per share of Common Stock in lieu of receiving shares of Reorganized ICH
Common Stock; and (c) any Beneficial Holder of an Allowed ICH Class 7 Interest,
or any Record Holder specifically authorized by that Beneficial Holder, may
agree in writing with the Equity Committee prior to the Effective Date, or with
Reorganized ICH on or after the Effective Date, to accept any lesser amounts of
cash or Reorganized ICH Common Stock in full satisfaction of its Class 7
Interest.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-11
<PAGE>
Holders of Allowed Securities-Related Claims related to Common Stock, if
any, shall receive shares of Reorganized ICH Common Stock calculated in
accordance with Section 11.5 of this Joint Plan.
4.2 TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN SWL
HOLDING All classified Claims against and Interests in SWL Holding, except
Administrative and Priority Claims, shall be treated as follows:
(A) SWL HOLDING CLASS 1--SECURED CLAIMS Each SWL Holding Class 1 Claim
shall be satisfied by payment in full in cash by the Trust in the Allowed Amount
of such Secured Claim or by delivery to the holder of an Allowed SWL Holding
Class 1 Claim of the property securing such Claim, at the election of the
Trustee on the later of (i) the Initial Distribution Date or (ii) the date such
payment is due under applicable law.
(B) SWL HOLDING CLASS 2--GENERAL UNSECURED CLAIMS In exchange for and in
full settlement of all SWL Holding Class 2 Claims, the holders of SWL Holding
Class 2 Claims shall be paid in cash by the Trust from assets originating in the
Estate of SWL Holding the Allowed Amount of such Claim on the later of (i) the
Initial Distribution Date or (ii) the date such payment is due under applicable
law. If the Allowed Amount of such Claims cannot be paid in full from such
assets, then the Trust shall pay all such Claims Pro Rata among such Allowed SWL
Holding Class 2 Claims.
(C) SWL HOLDING CLASS 3--COMMON STOCK On the Effective Date, Reorganized
ICH shall retain the common stock of SWL Holding after the transfer of all SWL
Holding's assets to the Trust.
4.3 TREATMENT OF CLASSIFIED CLAIMS AGAINST AND INTERESTS IN CARE All
classified Claims against and Interests in Care, except Administrative and
Priority Claims, shall be treated as follows:
(A) CARE CLASS 1--SECURED CLAIMS Each Care Class 1 Claim shall be
satisfied by payment in full in cash by the Trust in the Allowed Amount of such
Secured Claim or by delivery to the holder of an Allowed Care Class 1 Claim of
the property securing such Claim, at the election of the Trustee on the later of
(i) the Initial Distribution Date or (ii) the date such payment is due under
applicable law.
(B) CARE CLASS 2--GENERAL UNSECURED CLAIMS In exchange for and in full
settlement of all Care Class 2 Claims, the holders of Care Class 2 Claims shall
be paid in cash by the Trust from assets originating in the Estate of Care the
Allowed Amount of such Claim on the later of (i) the Initial Distribution Date
or (ii) the date such payment is due under applicable law. If the Allowed Amount
of such Claims cannot be paid in full from such assets, then the Trust shall pay
all such Claims Pro Rata among such Allowed Care Class 2 Claims.
(C) CARE CLASS 3--COMMON STOCK On the Effective Date, Reorganized ICH
shall retain the common stock of Care, after the transfer of Care's non-Retained
Assets to the Trust.
ARTICLE V
DESIGNATION OF THE CLASSES OF CLAIMS
IMPAIRED UNDER THIS JOINT PLAN
5.1 For purposes of Joint Plan solicitation, all ICH Classes are deemed to
be Impaired and are, therefore, entitled to cast ballots on this Joint Plan;
PROVIDED, HOWEVER, that if the Bankruptcy Court has entered a Final Order
approving the Tenneco Settlement Motion prior to the balloting deadline, then
Tenneco shall not be entitled to cast a ballot on this Joint Plan. All SWL
Holding Classes of Claims and Care Classes of Claims are NOT Impaired and are,
therefore, NOT entitled to cast ballots on this Joint Plan.
ARTICLE VI
SETTLEMENTS
6.1 TENNECO SETTLEMENT Pursuant to the Tenneco Settlement, upon the
earlier of the granting by the Bankruptcy Court of the Tenneco Settlement Motion
by Final Order or the Effective Date of this Joint Plan, ICH and Tenneco shall
mutually release all Claims against each other as more fully set forth in the
Tenneco Settlement, and Tenneco shall pay to ICH or the Trust, as applicable,
the sum of $18.5 million and deliver to ICH the 9 1/2% unsecured note due 1996
of ICH marked "cancelled," and Proof of Claim No. 226 Filed by Tenneco shall be
deemed disallowed with prejudice to refiling.
6.2 SHAW GROUP SETTLEMENT
(A) CASH CONTRIBUTION On the Effective Date, the Shaw Group shall pay
$500,000 in cash to Reorganized ICH.
(B) WITHDRAWAL OF PROOFS OF CLAIMS On the Effective Date, the Shaw Group
shall withdraw the Claims that the Shaw Group, and the members thereof, Filed.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-12
<PAGE>
(C) TRANSFERABILITY OF CFSB INTEREST Notwithstanding any provisions
related to the CFSB Interest to the contrary, the CFSB Interest shall not be
subject to any transferability or ownership restrictions; PROVIDED, HOWEVER, the
following conditions shall apply:
(i) The CFSB interest may not be transferred, sold, or assigned by the
Trust or any subsequent purchaser except in its entirety. In other words,
the CFSB Interest may not be subdivided and sold in parcels to multiple
entities and this restriction shall apply to subsequent purchasers.
Notwithstanding the foregoing, a transferee of the CFSB Interest may itself
be composed of, or owned by, any number of entities.
(ii) Pursuant to this Joint Plan, the CFSB Interest shall be transferred
to the Trust. Thereafter, the Trust shall conduct an initial sale of the
CFSB interest. In connection with such sale, CNC and Fail shall be entitled
to receive bidding materials and to participate in the bidding process. The
terms of the bidding process shall be determined in the sole discretion of
the Trust, after consultation with such advisors as it deems appropriate.
(iii) Attendant to the sale of the CFSB Interest, the Shaw Group shall
prepare an index of prior written contracts and amendments related to the
CFSB Interest which, together with copies of the documents listed on the
index and such additional materials which the Trust may include
(collectively the "CFSB Documents"), shall be made available for review by
prospective purchasers. Prior to the conclusion of any sale of the CFSB
Interest by the Trust, the Entity to whom the CFSB Interest is to be
transferred must acknowledge in writing that it has had access to and an
opportunity it deems adequate to review the CFSB Documents and an
opportunity it deems adequate to consult with counsel of its choice
concerning the CFSB Documents.
(D) PERFORMANCE OF THE TAX SETTLEMENT The members of the Shaw Group and
Carlisle shall perform their respective obligations under the Tax Settlement.
(E) RELEASE OF SHAW GROUP On the Effective Date, the Debtors shall execute
a release in favor of the Shaw Group pursuant to Section 10.3 of this Joint
Plan.
6.3 STIPULATION AND AGREEMENT WITH THE INDENTURE TRUSTEE
The Debtors and the Indenture Trustee agree and stipulate that the Indenture
Trustee shall hold an Allowed Claim on behalf of holders of the 1996 Notes in
the Amount of $266,425,072 and on behalf of the holders of 2003 Notes in the
amount of $94,835,928.
ARTICLE VII
MEANS FOR EXECUTION OF JOINT PLAN
7.1 EFFECTIVE DATE ENTITIES On the Effective Date, the Debtors shall cause
the execution and delivery of the Trust Agreement in order to create the Trust
and shall file the Charter Amendments for Reorganized ICH.
7.2 PROPERTY OF ESTATES
(A) SWL HOLDING AND CARE On the Effective Date:
(i) SWL Holding and Care shall distribute to Reorganized ICH, all of
their respective assets that constitute Retained Assets, free and clear of
all liens, claims and encumbrances;
(ii) Either SWL Holding and Care, or if distributed to ICH, ICH, shall
distribute to the Trust all assets of, or originating in the estate of, SWL
Holding and Care other than Retained Assets, free and clear of all liens,
claims and encumbrances; and
(iii) Reorganized ICH shall retain the common stock of SWL Holding and
Care free and clear of all liens, claims, and encumbrances.
(B) RETENTION OF THE RETAINED ASSETS BY REORGANIZED ICH On the Effective
Date, the Retained Assets shall revest in Reorganized ICH, together with their
respective bases for federal income tax purposes, free and clear of all liens,
claims, and encumbrances.
(C) TRANSFER OF THE TRUST ASSETS BY ICH TO THE TRUST On the Effective
Date, the Trust Assets owned by ICH shall be conveyed to the Trust by ICH, free
and clear of all liens, claims, and encumbrances except as provided in this
Joint Plan.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-13
<PAGE>
7.3 PROVISIONS RELATING TO THE TRUST
(A) CREATION OF THE TRUST On the Effective Date, the Debtors shall
establish the Trust. The specific terms, conditions, and rules governing the
Trust are contained in the Trust Agreement. The Trustee shall, in accordance
with such Trust Agreement, pay or provide for the payments required by this
Joint Plan to be made to the Claimants in ICH Classes 1, 2, 3, and 4, SWL
Holding Classes 1 and 2, and Care Classes 1 and 2; thereafter the Trustee shall
distribute Available Cash from time to time, in such amounts as the Trustee
shall determine, to the ICH Class 5 Claimants.
(B) TERM The Trust shall have a term of three (3) years from the Effective
Date. The Trustee may apply to the Bankruptcy Court to terminate the Trust prior
to the expiration of the three (3) year term in the event all activities of the
Trust are completed or if all of the Trust Assets have been liquidated and the
proceeds therefrom have been distributed in accordance with this Joint Plan. The
Trustee may apply to the Bankruptcy Court to extend the term of the Trust if the
liquidation of the Trust Assets and distribution of proceeds therefrom has not
been completed, or if other circumstances require such extension.
(C) LIQUIDATION OF THE TRUST ASSETS The Trustee shall collect and reduce
to cash the Trust Assets as expeditiously as is compatible with the best
interests of the beneficiaries of the Trust in accordance with the Trust
Agreement.
(D) REPORTS The Trustee shall prepare and file with the Bankruptcy Court
such reports as the Trust Agreement provides.
(G) PROVISIONS REGARDING TRUST INTERESTS
(I) ALLOCATION OF TRUST INTERESTS; ISSUANCE OF TRUST CERTIFICATES Each
holder of an Allowed ICH Class 5 Claim shall have a percentage of Trust
Interests equal to (A) the Allowed Amount of such Claimant's ICH Class 5 Claim
divided by (B) the sum of the total of the Allowed Amounts of all Allowed Class
5 Claims as of the Effective Date and the total amount of all Contested Claims
as of the Effective Date; PROVIDED THAT such percentage shall automatically be
adjusted in accordance with the above formula upon and as of the date of the
disallowance of any such Contested Claims or the allowance of any such Contested
Claim in an amount other than the amount of such Contested Claim as of the
Effective Date. Trust Certificates (or any other security or instrument
evidencing any Trust Interest) may be distributed only in accordance with the
Trust Agreement.
(II) LEGENDED CERTIFICATES The Trust Certificates, if distributed,
shall contain (i) such legend or legends as may be required under applicable
federal and state securities laws, (ii) such legend or legends as may be
determined by the Trustee, and (iii) the following legend:
The exercise of voting rights with respect to the interests
represented by the Trust Certificates and the transfer of the
Trust Certificates are subject to restrictions set forth in the
Trust Agreement.
(III) TRUST INTEREST REGISTER; OWNERSHIP OF INTERESTS The Trustee or
the Registered Agent thereof shall keep for such purpose at its principal office
a register (the "Trust Interest Register") in which the Trustee shall provide
for the registration of Trust Interests and registration of transfer of Trust
Interests. The Trustee may treat the person or entity in whose name any Trust
Interest is registered on such register as the owner thereof for the purposes of
receiving distributions from Trust Assets and for all other reasons.
(IV) TRANSFER OF TRUST INTERESTS Prior to the distribution, if any, of
Trust Certificates, Trust Interests may not be transferred and no purported
transfer of any Trust Interest shall be registered on the Trust Interest
Register. After any such distribution of Trust Certificates, any Trust Interest
may be transferred upon the Trust Interest Register, upon presentation of the
Trust Certificate evidencing such Trust Interest at the designated office of the
Trustee and evidence satisfactory to the Trustee that such transfer is in
accordance with all applicable federal and state securities laws.
Notwithstanding the above, no Trust Interest may be transferred unless such
transfer is made (i) pursuant to a registration statement effective under the
Securities Act of 1933, as amended ("Securities Act"), or pursuant to an
available exemption from the registration requirements of the Securities Act and
(ii) in accordance with all applicable state securities laws.
7.4 REORGANIZED ICH
(A) CHARTER AMENDMENTS The Restated Certificate of Incorporation and the
By-laws of Reorganized ICH shall be adopted substantially in the form filed with
the Bankruptcy Court not less than ten (10) Business Days prior to Confirmation
and may be amended as necessary to satisfy any provisions of this Joint Plan and
Section 1123(a)(6) of the Bankruptcy Code. All amendments to the Certificate of
Incorporation of Reorganized ICH contemplated by this
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-14
<PAGE>
Section 7.4(a) shall be filed with the Delaware Secretary of State on the
Effective Date or as soon thereafter as is reasonably practicable and shall
become effective on the date so filed.
(B) BOARD OF DIRECTORS Upon the Effective Date, the By-laws of Reorganized
ICH shall provide that Reorganized ICH shall have a board of directors
consisting of between four (4) and nine (9) members. The initial board of
directors (the "Initial Board") shall be selected by the Equity Committee, and
shall consist of James R. Arabia, Michael D. Dunn, Kenneth P. Giddens and Carl
D. Robinson. The Equity Committee may identify additional directors to serve on
the Initial Board at least ten (10) days prior to the Confirmation Hearing. From
and after the Effective Date, Directors shall be selected in accordance with the
By-laws of Reorganized ICH.
(C) OFFICERS On the Effective Date, James R. Arabia shall serve as
president and Chief Executive Officer of Reorganized ICH, pursuant to the terms
of a two-year employment agreement, at the pleasure of the board of directors.
Pursuant to the terms of his anticipated employment agreement, Mr. Arabia shall
receive a salary of $90,000 per year, a bonus in an amount to be determined by
the board, reimbursement of his reasonable out-of-pocket expenses, and certain
benefits including health insurance and other typical employee benefits. Mr.
Arabia shall also receive options, priced at fair market value, for the purchase
of up to 176,000 shares of Reorganized ICH Common Stock. To the extent then
known, the Equity Committee may identify further officers of Reorganized ICH not
less than ten (10) days prior to the Confirmation Hearing.
7.5 OTHER BUSINESS TRANSACTIONS TO OCCUR ON THE EFFECTIVE DATE
(A) PROVISIONS REGARDING THE MODERN/WESTERN AGREEMENT AND THE PHILADELPHIA
AMERICAN AGREEMENT On or before the Effective Date, the Debtors shall execute
such documents as may be necessary or appropriate to effectuate the assumptions
by ICH, and ultimately the Trust, of the obligations of BML under the
Modern/Western Agreement as contemplated by Section 12.15 thereof and under the
Philadelphia American Agreement as contemplated by Section 12.18 thereof;
provided, however, that following the Effective Date, such obligations shall be
obligations of the Trust and shall not be obligations of Reorganized ICH.
(B) PROVISION REGARDING PERRY PARK On the Effective Date, BML shall
transfer to Reorganized ICH all of its right, title and interest in and to Perry
Park, free and clear of all liens, claims and encumbrances. As a portion of
Perry Park is currently owned solely by BML, with the other portion being owned
by ICH, this conveyance shall have the effect of consolidating the ownership of
Perry Park entirely within Reorganized ICH.
(C) PROVISIONS REGARDING BML
(I) TRANSFER OF ASSETS OF BML. On the Effective Date, and following
the transfer described Section in 7.5(b) above, (A) Care and/or ICH shall take
such action as may be necessary or appropriate to cause BML to transfer to the
Trust all assets of BML other than (1) the BML Licenses, (2) assets representing
capital and surplus as may be required by the Illinois Department of Insurance
and other insurance regulatory authorities in those jurisdictions in which BML
holds a BML License to maintain such insurance licenses (the "Capital and
Surplus Retention Assets"), which Capital and Surplus Retention Assets shall
consist of particular BML assets determined by the Trustee, and (3) the books
and records of BML and (B) the Trust shall assume all non-reinsured liabilities
of BML as of the Effective Date. The transfer of BML's assets to the Trust may
take the form of a distribution of such assets to ICH, followed by a transfer
from ICH to the Trust; a purchase by the Trust from BML; or an acquisition by
the Trust in exchange for the assumption by the Trust of certain BML liabilities
that the Trust is required to assume under this Section 7.5.
(II) BML STOCK. Reorganized ICH shall retain the capital stock of BML
on the Effective Date.
(III) BML RECONCILIATION. On the second Business Day after the earlier
of (A) 90 days after the Effective Date or (B) the date Reorganized ICH notifies
the Trust in writing that Reorganized ICH desires to accelerate such 90-day
period (the "BML Initial Reconciliation Date"), Reorganized ICH shall either (1)
cause BML to transfer to the Trust (or to Reorganized ICH, which shall then
transfer to the Trust) all of the Capital and Surplus Retention Assets (adjusted
to reflect any gains or losses incurred thereon) and retain the capital stock of
BML with no further obligation by Reorganized ICH or the Trust under this
Section 7.5(c)(iii) OR (2) transfer to the Trust (or a third party designated by
the Trust) all of the outstanding capital stock of BML (together with the
Capital and Surplus Retention Assets) in return for a payment by the Trust to
Reorganized ICH of $5 million; PROVIDED, HOWEVER, that in the event Reorganized
ICH elects to transfer to the Trust the stock of BML and any regulatory approval
required to be obtained by the Trust (or any third party designated by the
Trust) with respect to the transfer of the BML stock shall not have been
obtained as of the BML Initial Reconciliation Date, then (X) the Trust shall pay
to Reorganized ICH the $5 million purchase price set forth above and (Y)
Reorganized ICH shall deliver to the Bankruptcy Court, or such escrow agent as
the Trust may reasonably direct, the certificates representing all of the
outstanding capital stock of BML (the "BML Certificates") together with a stock
power duly executed in blank
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-15
<PAGE>
(the "BML Stock Power"), and the Bankruptcy Court, or such escrow agent as the
Trust may reasonably direct, shall hold the BML Certificates and the BML Stock
Power until directed by the Trust to deliver the BML Certificates to the Trust
or to a third party designated by the Trust, at which time the Bankruptcy Court,
or such escrow agent as the Trust may reasonably direct, shall deliver the BML
Certificates and the BML Stock Power to the Trust or its designee. The date such
transactions described herein (other than the delivery of the BML Certificates
and the BML Stock Power out of the Bankruptcy Court or an escrow agent, if
applicable) are consummated herein shall be referred to as the "BML Final
Reconciliation Date," and the period from the Effective Date until the BML Final
Reconciliation Date herein shall be referred to as the "BML Holding Period."
(IV) ACTIONS PENDING RECONCILIATION. During the BML Holding Period,
(A) Reorganized ICH shall use all commercially reasonable efforts to preserve
and protect the value of the BML corporate shell (which holds the BML Licenses),
including cooperating with the Trust in connection with any regulatory inquiries
or approvals but excluding any obligation to contribute assets to BML, and the
Trust shall reimburse Reorganized ICH for all reasonable out-of-pocket expenses
incurred in performing its obligations under this clause (A); (B) the Trust
shall maintain in BML additional assets necessary to maintain minimum capital
and surplus plus any other amounts as may be required by the Illinois Department
of Insurance, and all such additional assets shall constitute Capital and
Surplus Retention Assets; (C) Reorganized ICH shall not conduct any operations
of BML or otherwise cause BML to distribute or dispose of any assets; (D) no
change shall be made in the officers or directors of BML; and (E) the Trust
shall provide written instructions to direct the management and investment of
the Capital and Surplus Retention Assets and Reorganized ICH shall have no
liability for any investment loss incurred with respect to the Capital and
Surplus Retention Assets except to the extent arising as a result of Reorganized
ICH violating the provisions of this clause (E).
(D) SALE PRIOR TO EFFECTIVE DATE. BML may be sold prior to the Effective
Date only with the consent of the Equity Committee. If the capital stock of BML
is sold prior to the Effective Date, (A) the actions referred to in Section
7.5(a) and (b) shall occur prior to any such sale; (B) the proceeds of such sale
in excess of the fair market value of the capital and surplus of BML as assigned
for purposes of determining the sales price shall constitute Retained Assets and
shall become the property of Reorganized ICH and all other proceeds shall be
delivered to the Trust; and (C) the foregoing provisions of Section 7.5(c) shall
not apply and the actions referred to in Section 7.5(a) and (b) shall occur
prior to any such sale.
(E) CONFIRMATION ORDER PROVISIONS. The Confirmation Order shall contain
such additional or clarifying provisions as may be reasonably requested by the
Creditors Committee to implement the transaction considered by this Section 7.5.
(F) ADDITIONAL PROVISIONS. The retention of the capital stock of BML by
Reorganized ICH, the delivery of the BML Certificates to the Bankruptcy Court
and the treatment of BML otherwise provided for in this Section 7.5 that may
occur prior to the transfer of the BML Certificates to the Trust or to any
third-party designated by the Trust shall not constitute a change in control of
BML for the purpose of any applicable law governing or otherwise restricting the
ownership or change of control of BML as a property and casualty insurance
company. The foregoing shall not apply to any transfer of the BML Certificates
to the Trust or to any third party designated by the Trust.
7.6 PROVISIONS RELATING TO INDENTURES
(A) TERMINATION OF INDENTURES On the Effective Date, the Indentures shall,
except as provided in this Joint Plan, be deemed cancelled, terminated, and of
no further force or effect and this Joint Plan shall operate to cancel all
obligations of the Debtors, the Trust or Reorganized ICH under the Indentures;
PROVIDED, HOWEVER, that the Indentures shall continue in effect for the sole
purpose of allowing the Indenture Trustee to facilitate and assist in making
distributions to be made to Record Holders of Notes as of the Effective Date
under this Joint Plan and to maintain records as required under the Indentures.
Any actions taken by the Indenture Trustee that are not for the purposes
authorized herein shall be null and void, and the Debtors, the Trust, and
Reorganized ICH shall not have any obligation to the Indenture Trustee for any
fees, costs or expenses incurred in connection with such unauthorized actions.
Upon the completion of distributions required to be made under this Joint Plan
to Record Holders of Notes as of the Effective Date, the Debtors may terminate
the Indentures and the Indenture Trustee's authority to act thereunder by giving
ten (10) days written notice of termination to the Indenture Trustee identifying
the Indenture to be so terminated. Termination of the Indenture shall be without
prejudice to the rights of the Indenture Trustee effected by such termination
(i) to seek or enforce the allowance and payment of its reasonable and necessary
costs and fees under the Indenture, or (ii) to intervene or appear in this
Chapter 11 Case as a party in interest and to be heard concerning any
post-confirmation matter affecting the interests of the Record Holders of Notes
represented by such Indenture Trustee. Notwithstanding the foregoing, such
cancellation of the Indentures shall not impair the rights of holders of the
Notes to receive distributions on account of such Notes pursuant to this Joint
Plan, nor shall it impair the rights of the Indenture Trustee to enforce its
liens, if any, under the Indentures.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-16
<PAGE>
(B) PAYMENT OF INDENTURE TRUSTEE'S FEES AND EXPENSES The Indenture Trustee
may apply to the Bankruptcy Court, pursuant to Section 503(b) of the Bankruptcy
Code, for reimbursement from the Debtors' estates of the Indenture Trustee's
reasonable fees and expenses incurred in performing its duties under the
Indenture (including those called for by the Joint Plan), including those of its
attorneys, PROVIDED, HOWEVER, that all fees and expenses, regardless of the
source of payment and regardless of whether paid pursuant to the Indenture
Trustee's charging lien or the Indenture, are subject to a determination of
reasonableness by the Bankruptcy Court pursuant to Section 1129(a)(4) of the
Bankruptcy Code.
7.7 TERMINATION OF THE COMMITTEES On the Initial Distribution Date, the
Creditors Committee and the Equity Committee shall cease to exist and have no
further status as parties in interest except for purposes of prosecuting any
applications for Fee Claims and of participating in any appeal of the
Confirmation Order, in which events such committees shall cease to exist
immediately after the resolution of such matters. Following the termination of
the Committees, any professional that was employed by the Creditors Committee
may be employed by the Trust and any professional that was employed by the
Equity Committee may be employed by Reorganized ICH.
7.8 CLOSING OF EFFECTIVE DATE TRANSACTIONS The proponents of this Joint
Plan shall File, on or before ten (10) Business Days prior to the Confirmation
Hearing, the agenda and order in which the transactions contemplated in this
Joint Plan shall be closed.
ARTICLE VIII
TREATMENT OF EXECUTORY
CONTRACTS AND UNEXPIRED LEASES
8.1 EXECUTORY CONTRACTS AND UNEXPIRED LEASES Unless the Debtors expressly
assume, as provided by Section 365(a) of the Bankruptcy Code, an executory
contract or an unexpired lease on or before the Confirmation Date, each
executory contract and unexpired lease shall be deemed rejected.
8.2 CLAIMS FOR REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES Any
Claims made on account of executory contracts or unexpired leases that are
deemed rejected pursuant to Section 8.1 must be Filed within 30 days after the
Confirmation Date or such Claim shall be forever barred and discharged. To the
extent all or a part of the damages asserted in such a rejection claim are
Allowed by Final Order, such Claim shall be treated as an ICH Class 5 Claim.
ARTICLE IX
PROVISIONS REGARDING TENDER OF SECURITIES, DISTRIBUTIONS,
DISTRIBUTION AGENT, AND OBJECTIONS TO CLAIMS
9.1 PROVISIONS RELATING TO SECURITIES
(A) INITIAL DISTRIBUTION OF AVAILABLE CASH As provided in Section 4.1(b)
of this Joint Plan, on the Initial Distribution Date, the Trustee shall make her
initial distribution of Available Cash to holders of Allowed ICH Class 5 Claims.
(B) DISTRIBUTION RECORD DATE The Effective Date shall be the date for
determining the Entities holding Securities who are entitled to receive
distributions pursuant to Article IV of this Joint Plan. As of the close of
business on the Effective Date, the transfer ledgers in respect of the
Securities shall be closed, and no transfer of Securities occurring after the
Effective Date shall be recognized. Reorganized ICH, the Trustee, the Transfer
Agent, the Distribution Agent, the Indenture Trustee and their respective agents
shall be entitled instead to recognize and deal for all purposes herein with
only those holders of record stated on the respective transfer ledgers for the
Securities as of the close of business on the Effective Date.
(C) CANCELLATION OF SECURITIES On the Effective Date, all outstanding
Securities (and the rights of the Claimants and Interest Holders therein)
together with any options, rights or warrants to purchase Securities from the
Debtors, shall be terminated, cancelled, and extinguished. Notwithstanding the
foregoing, cancellation of the Securities shall not impair the rights of Record
Holders of the Securities as of the Effective Date to receive distributions on
account of such Securities pursuant to this Joint Plan.
(D) TENDER OF SECURITIES
(i) Letters of Transmittal shall be required to be completed and duly
executed in accordance with the instructions accompanying such Letters of
Transmittal.
(ii) As a condition to the receipt by any holder of Securities of any
distribution under the Joint Plan to be made on account of such Securities,
such holder of the Securities must deliver to the Distribution Agent the
Securities giving rise to such holder's Allowed Claim or Interest, together
with the Letter of Transmittal, properly completed and
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<PAGE>
executed by such holder of the Securities, and any documents required by the
Letter of Transmittal, on or before the second anniversary of the Effective
Date. The method of delivery of the Securities to the Distribution Agent is
at the election and risk of the holder of the Securities, but if such
delivery is by mail, it is recommended that the holder use properly insured,
registered mail, return receipt requested. The Letter of Transmittal and the
Securities shall be sent to the Distribution Agent and shall not be sent to
the Trustee or to Reorganized ICH. Upon receipt of Securities, the
Distribution Agent shall mark the Securities as "cancelled" or "paid." In
the event of any lost or destroyed Securities, the holder thereof must
deliver an affidavit of loss or destruction to the Distribution Agent (and,
if required, the Transfer Agent or Indenture Trustee, as applicable), as
well as an agreement to indemnify Reorganized ICH, the Distribution Agent,
and the Trust (and, if required, the Transfer Agent or Indenture Trustee, as
applicable), in form and substance reasonably acceptable to Reorganized ICH,
the Distribution Agent, the Trust and, if required, the Transfer Agent or
Indenture Trustee, as applicable, including, if requested, an appropriate
bond, in order to receive any distribution under the Joint Plan on account
of such Securities.
(iii) All questions as to the validity, form, or eligibility of the
tendered Securities shall be resolved by the Bankruptcy Court. The
Distribution Agent shall be under no duty to give notification of defects in
such tenders, and shall not incur liabilities for failure to give
notification of such defects. Any Securities received by the Distribution
Agent that are not properly tendered and as to which the irregularities have
not been cured or waived, shall be returned by the Distribution Agent to the
appropriate tendering holder as soon as practicable.
(E) UNSURRENDERED OUTSTANDING SECURITIES Two (2) years after the Effective
Date, any holder of an Allowed Claim or Allowed Interest arising on account of
outstanding Securities who has not surrendered such holder's Securities as set
forth in Section 9.1(d) of this Joint Plan shall forfeit, to the extent
permitted by law, such holder's right to receive any distribution under this
Joint Plan with respect to such Allowed Claim or Allowed Interest, provided that
this Section 9.1(e) shall not apply to Securities-Related Claims.
(F) TREASURY SECURITIES All Securities held in treasury by ICH immediately
before the Effective Date shall be cancelled and extinguished as of the
Effective Date without any action on the part of ICH and no payment or
distribution shall be made with respect thereto.
9.2 DELIVERY OF DISTRIBUTIONS Distributions and deliveries called for by
this Joint Plan, other than distributions with respect to non-Classified Claims,
shall be made (i) to the holders of Allowed Claims in ICH Classes 1, 2, 3, 4 and
5 (except as provided in clause (ii) below), ICH Classes 6 and 7 (to the extent,
if any, related to Securities-Related Claims within those Classes), SWL Holding
Classes 1 and 2, and Care Classes 1 and 2, at the addresses set forth on the
proofs of claim Filed by such holders (or at the last known addresses of such
holders if no proof of claim is Filed or if the Debtors have been notified of a
change of address), (ii) to Record Holders of Notes on account of their Class 5
Claims, at the addresses contained in the records of the Indenture Trustee as of
the Effective Date and (iii) to the Record Holders of Preferred Stock and Common
Stock, at the addresses contained in the records of the appropriate Transfer
Agent as of the Effective Date. No distribution shall be mailed to any holder of
an Allowed Claim or Allowed Interest if any mailing to such holder's last known
address has been returned as undeliverable, unless and until the Debtors or the
Distribution Agent are notified of such holder's then-current address, at which
time all returned distributions then due shall be made to such holder without
interest. All claims for undeliverable distributions shall be made on or before
the later of (a) two years after the Effective Date or (b) 120 calendar days
after an order of the Bankruptcy Court allowing such holder's Claim or Interest
becomes a Final Order, after which period the Claim or Interest of any holder
with respect to such property or with respect to any undeliverable distribution
shall be deemed abandoned, discharged, and forever barred as of the second
anniversary of the Effective Date. Notwithstanding the above, if any Trust
Interest is transferred after the Effective Date, distributions to be made with
respect to any such Trust Interest shall be made to the record holder of such
Trust Interest on the applicable Distribution Date.
9.3 DISTRIBUTION AGENT The Distribution Agent shall make distributions of
Reorganized ICH Common Stock and cash as required in this Joint Plan to be
distributed to holders of Allowed ICH Class 6 and 7 Interests except for
distributions, if any, made pursuant to Section 11.1(b) of this Joint Plan,
which distributions shall be made by the Trust or such agent as the Trust may
employ, as provided in Section 11.1(b). The Trustee or such agent as the Trust
may employ in its sole discretion shall make all other distributions of cash as
are required to be made under this Joint Plan; provided that distributions to be
made to Record Holders of the Notes as of the Effective Date may be made by the
Trust, such other agent as the Trust may employ in its sole discretion, the
Distribution Agent, or the Indenture Trustee.
9.4 NO DISTRIBUTIONS PENDING ALLOWANCE No payments or distributions shall
be made with respect to all or any portion of a Contested Claim or Contested
Interest unless and until such Claim or Interest becomes an Allowed Claim or
Allowed Interest as determined by Final Order.
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9.5 RESERVE FOR CERTAIN DISTRIBUTIONS On and after the Effective Date, the
Trust shall withhold from the property to be distributed under this Joint Plan,
and shall reserve, an amount sufficient to be distributed on account of
Contested Claims as of the Initial Distribution Date. As to any Contested Claim,
upon a request for estimation by the party in interest, the Bankruptcy Court
shall determine what amount is sufficient to withhold as the reserved
distribution amount. In the event that no party in interest elects to request
such an estimation from the Bankruptcy Court with respect to a Contested Claim,
the Debtors or, after the Effective Date, the Trust shall withhold as the
reserved distribution amount (the "Reserved Distribution Amount") the amount
which, in the discretion of the Trustee, such Claimant would have received under
this Joint Plan, if any, if the proof of claim Filed by or on behalf of Claimant
were Allowed. Reorganized ICH shall reserve sufficient authorized but unissued
shares of Reorganized ICH Common Stock to allow for distributions to holders of
Allowed Securities-Related Claims, if any, related to the Common Stock or
Preferred Stock.
Payments and distributions to each holder of a Contested Claim or Contested
Interest to the extent that it ultimately becomes an Allowed Claim or Allowed
Interest, shall be made in accordance with the provisions of this Joint Plan
governing the respective Class of Claims or Interests of which such Contested
Claim or Contested Interest belongs. As soon as practicable after the date that
the order or judgment of the Bankruptcy Court allowing such Claim or Interest
becomes a Final Order, any Reserved Distribution Amount that would have been
distributed to the holder of such Claim or Interest had such Claim or Interest
been an Allowed Claim or Allowed Interest on the Effective Date, to the extent
of the Allowed Amount of such Claim or Interest, shall be distributed to the
holder of such Claim or Interest.
9.6 DISTRIBUTIONS AFTER DISALLOWANCE In the event that any Reserved
Distribution Amount remains after all objections to Contested Claims of a
particular Class have been resolved, such remaining property attributable to
such Contested Claims of that particular Class shall be returned to the Trust
for distribution pursuant to this Joint Plan.
9.7 UNCLAIMED PROPERTY Any assets and property to be distributed by the
Trust under this Joint Plan which remain unclaimed or otherwise not deliverable
to the person entitled thereto on the later of (a) two years after the Effective
Date or (b) 120 calendar days after an Order allowing such person's Claim or
Interest becomes a Final Order, shall become vested in, and shall be transferred
and delivered to, the Trust for distribution pursuant to this Joint Plan. In
such event, such person's Claim or Interest shall no longer be deemed to be
Allowed and such person shall be deemed to have no further Claim or Interest in
respect of such distribution and shall not participate in any further
distributions under this Joint Plan.
9.8 TREATMENT OF CONTINGENT OR UNLIQUIDATED CLAIMS Until such time as a
contingent Claim becomes fixed and Allowed, such Claim shall be treated as a
Contested Claim for purposes related to voting, allowance, and distributions
under this Joint Plan. The Bankruptcy Court upon request by the Debtors or,
after the Effective Date, by the Trust or Reorganized ICH, shall in a summary
proceeding on each such contingent Claim or unliquidated Claim, by estimation
determine the allowability of each such contingent or unliquidated Claim.
9.9 FORM OF PAYMENTS Payment to be made by the Trust pursuant to this
Joint Plan shall be made by check drawn on a domestic bank or by wire transfer
from a domestic bank.
ARTICLE X
PROVISIONS FOR THE DISCHARGE,
SETTLEMENT, AND ADJUSTMENT OF CLAIMS
10.1 LEGAL BINDING EFFECT; DISCHARGE OF CLAIMS AND INTERESTS The
provisions of this Joint Plan shall (i) bind all Claimants and Interest holders,
whether or not they accept this Joint Plan, and (ii) discharge the Debtors,
jointly and severally, from all debts that arose before the Petition Date, and
from any liability, including, without limitation, any liability of a kind
specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, that
arose, or has been asserted against, the Debtors, jointly or severally, at any
time before the entry of the Confirmation Order or that arises from any pre-
Confirmation conduct of the Debtors, jointly or severally, whether or not the
Claim is known or knowable by the Claimant or Interest holder. In addition, the
distributions provided for under this Joint Plan shall be in exchange for and in
complete satisfaction, discharge, and release of all Claims against and
Interests in the Debtors or any of its assets or properties, including any Claim
or Interest accruing after the Petition Date and prior to the Effective Date.
Without limiting the generality of the foregoing, Confirmation discharges all
Unsecured Claims, all Securities-Related Claims, all Claims, if any, relating to
ICH's 1986 retirement of its Class B preferred stock, and all Claims relating to
the escheat of Securities or funds attributable to Securities of ICH. On and
after the Effective Date, all holders of Claims or Interests shall be precluded
from asserting any Claim or Interest against the Trust or Reorganized ICH or
their assets or properties based on any transaction or other activity of any
kind that occurred prior to the Confirmation Date except as expressly provided
in this Joint Plan.
10.2 RETENTION AND ENFORCEMENT OF THE DEBTORS' CAUSES OF ACTION
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<PAGE>
(A) RETENTION OF CAUSES OF ACTION
(i) All claims recoverable against third parties on account of an
indebtedness, and all other claims held by or in favor of the Debtors or
their Estates pursuant to any federal or state statute, common law, or any
theory of action whatsoever including without limitation claims for
preferences and fraudulent transfers, to the extent not specifically
compromised and released pursuant to this Joint Plan or an agreement
referred to and incorporated herein, are hereby preserved and retained for
enforcement by Reorganized ICH (the "Retained Causes of Action");
(ii) Subject to the provisions of section 10.2(c) hereof, and except as
provided in sections 10.2(a)(i) and (iii), Reorganized ICH is the successor
and designated representative of the Debtors and their Estates appointed for
the purpose of retention and enforcement of all claims owned or held by the
Debtors or their Estates against third parties;
(iii) Subject to the provisions of section 10.2(c) hereof, and except as
provided in sections 10.2(a)(i) and (ii), the Trust is the appointed
successor and designated representative of the Debtors and their Estates
appointed for the purpose of retention and enforcement of claims
specifically relating to or arising from Trust Assets, but specifically
excluding all claims related to any asset which has been fully and finally
converted into cash which has been transferred to the Trust as of the
Effective Date;
(iv) Reorganized ICH or the Trust, as applicable, shall be the only
party authorized to pursue actions to recover such claims, and shall have
the sole right to waive or assert any attorney-client or other privilege of
the Debtors; and no other party shall have the right or obligation to pursue
any such actions or to waive, raise, or assert any claim or privilege
related thereto.
(B) JUDGMENT REDUCTION AND HOLD HARMLESS To the extent a claim, cause of
action, right or remedy, whether legal or equitable, including, but not limited
to, any claim, cause of action, right or remedy of apportionment, reimbursement,
contribution, indemnification or offset, is asserted or commenced against the
Trust that results directly from Reorganized ICH's pursuit of a Retained Cause
of Action or any other right or remedy against an Entity, (a "Contribution
Claim"), the following conditions shall apply:
(i) with respect to any judgment, settlement, payment or compromise in
favor of Reorganized ICH (an "Underlying Judgment") against an Entity which
gives rise to a Contribution Claim by that Entity, Reorganized ICH shall
reduce the amount of its Underlying Judgment against that Entity by the full
amount of that Entity's Contribution Claim, and Reorganized ICH shall
indemnify and hold the Trust harmless from any and all Contribution Claims
arising from the Underlying Judgment; PROVIDED, HOWEVER, that Reorganized
ICH shall have the right to contest the claim of entitlement of any Entity
to a Contribution Claim in which case: a) Reorganized ICH shall have no
obligations to reduce the amount of the Underlying Judgment unless and until
the entitlement of that Entity to the Contribution Claim has been
determined, either judicially or otherwise with the consent of Reorganized
ICH; and b) Reorganized ICH's obligation to hold harmless and indemnify the
Trust against such Contribution Claim shall be unaffected;
(ii) with respect to any present or former officer, director, employee,
agent or representative of the Debtors or the Estate who is named as a
defendant by Reorganized ICH in its pursuit of any Retained Cause of Action,
and who is entitled to a right of payment from the Trust for an ongoing
defense prior to any final judgment in that action, Reorganized ICH shall,
at its option, either (a) assume the obligation to pay for such ongoing
costs of defense or (b) discontinue the action against that defendant, in
which case Reorganized ICH shall have no further obligation with respect to
defense costs for that defendant; PROVIDED, HOWEVER, that Reorganized ICH
shall have the right to contest the claimed entitlement of any Entity to
receive ongoing costs of defense from the Trust, and PROVIDED FURTHER that
Reorganized ICH shall have no obligation to fund any such defense costs or
to discontinue such an action unless and until the Indemnification Fund, as
set forth in Section 2.1(e) of this Joint Plan, if available therefore, has
first been applied to such obligations.
(C) RIGHT OF TRUST TO ASSERT OFFSET CLAIMS Notwithstanding any other
provision in this Joint Plan regarding the Retained Causes of Action, the Trust
shall be entitled to assert as an offset, objection, or defense with respect to
any Claim Filed or asserted against the Estate, or against the Trust as
successor to the Estate, any Retained Cause of Action conveyed to Reorganized
ICH under this Joint Plan, PROVIDED, HOWEVER, that the obligations of
Reorganized ICH as set out in section 10.2(b) above shall not apply to any such
Retained Cause of Action so asserted by the Trust. This provision shall be
deemed to be an assignment of such Retained Cause of Action to the Trust solely
for the limited purpose, and only to the extent necessary, to permit the Trust
to fully assert such offset, objection or defense. Any recovery obtained through
such assertion of a Retained Cause of Action in excess of the amount of the
Claim asserted against the Estate or the Trust, as the case may be, shall be the
property of Reorganized ICH.
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<PAGE>
10.3 RELEASES Except with respect to claims, if any, pursuant to Chapter 5
of the Bankruptcy Code, this Joint Plan resolves all disputes between and among
the Debtors and the Released Entities. With respect to all claims that the
Debtors ever had, now have, or may claim to have or hereafter have, or which the
Debtors could have asserted or could assert, jointly or severally, including
without limitation claims held in its corporate capacity and claims that third
parties may assert derivatively on behalf of the Debtors absent bankruptcy, but
excluding claims, if any, arising in or under Chapter 5 of the Bankruptcy Code,
Confirmation of this Joint Plan releases each Released Entity from all such
claims, counterclaims, demands, controversies, costs, contracts, debts, sums of
money, accounts, reckonings, bonds, bills, damages, obligations, liabilities,
objections, actions and causes of action of any nature, type or description,
whether in law or in equity, in contract, tort, or otherwise, known or unknown,
suspected or unsuspected, including claims for negligence, gross negligence, or
otherwise. On the Effective Date, the Debtors shall be authorized to execute a
general release in favor of the Released Entities consistent with this Section
10.3.
10.4 PROVISIONS REGARDING THE RELEASED OFFICERS On the Effective Date, the
Debtors shall execute a release of the claims described in Section 10.3 of this
Joint Plan against the Released Officers.
10.5 FURTHER RELEASES AND SETTLEMENTS After the Effective Date, the
compromise and settlement by Reorganized ICH of any Retained Cause of Action may
be effected without necessity of Bankruptcy Court proceedings under Bankruptcy
Rule 9019 or otherwise. To the extent the Trust is entitled to assert a Retained
Cause of Action pursuant to Section 10.2(c) of this Joint Plan, the Trust may
compromise and settle any such Retained Cause of Action with the consent of
Reorganized ICH.
10.6 PERMANENT INJUNCTION Confirmation of this Joint Plan shall result in
the issuance of a permanent injunction against the: (i) commencement or
continuation of any judicial, administrative, or other action or proceeding
against the Debtors, the Trust, or Reorganized ICH on account of Claims against
or Interests in the Debtors, or on account of claims released pursuant to
Sections 10.3 and 10.4 of the Joint Plan against the Released Entities and
Released Officers; (ii) enforcement, attachment, collection or recovery by any
manner or means of any judgment, award, decree, or order against the Debtors,
the Trust or Reorganized ICH; or (iii) creation, perfection or enforcement of
any encumbrance of any kind against the Debtors, the Trust or Reorganized ICH
arising from a Claim.
10.7 SURVIVAL OF THE DEBTORS' CORPORATE INDEMNITIES Any obligations of the
Debtors, pursuant to the Order Regarding Indemnification of Officers and
Directors of Debtors entered February 14, 1996 shall not be discharged or
impaired by Confirmation or Consummation of this Joint Plan; accordingly, such
indemnification obligations shall survive unaffected by the reorganization
contemplated by this Joint Plan and shall be performed and honored by the Trust
regardless of the Confirmation of this Joint Plan PROVIDED, HOWEVER, that such
obligations shall not be obligations of Reorganized ICH. All other obligations
of the Debtors with respect to indemnification of officers and directors, or
agents, representatives, successors or assigns thereof, shall be treated as
executory contracts rejected under Section 8.1 of this Joint Plan, and all
Claims arising from or related thereto shall be treated and classified as
provided by Section 8.2 of this Joint Plan, subject to any and all defenses
thereto and subordination of such Claims under applicable provisions of the
Bankruptcy Code.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 REQUEST FOR RELIEF UNDER SECTION 1129(B)
(a) In the event any Impaired Class of Interests shall fail to accept this
Joint Plan in accordance with Section 1129(a) of the Bankruptcy Code, the
Proponents request the Bankruptcy Court to confirm this Joint Plan in accordance
with the provisions of Section 1129(b) of the Bankruptcy Code so that and
provided that the treatment afforded to ICH Classes 6 and 7, collectively, is
not adversely affected. By accepting this Joint Plan, ICH Class 5 relinquishes,
to any extent necessary, its entitlement to receive distributions in order to
assure that ICH Classes 6 and 7, collectively, receive the treatment provided in
Article IV of this Joint Plan.
(b) In the event that ICH Class 6 does not vote to accept this Joint Plan,
and this Joint Plan is confirmed pursuant to the cram-down provisions of
Bankruptcy Code Section 1129(b), the portion of Reorganized ICH Common Stock
allocated to ICH Class 7 in this Joint Plan, together with cash sufficient to
fund payments to Holders of Allowed ICH Class 7 Interests who elect the cash
payment option, shall be distributed to the Trust on the Effective Date, and the
Trust shall, in that event, distribute as soon as practicable after the
Effective Date, through the Distribution Agent, such Reorganized ICH Common
Stock and cash to the Holders of Allowed ICH Class 7 Interests in accordance
with the terms of this Joint Plan, with any such distribution to Holders of
Allowed ICH Class 7 Interests being made in exchange for the release by Holders
of such Allowed Class 7 Interests of any and all claims, if any, against the
Trust PROVIDED, HOWEVER, the Trust shall have no
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<PAGE>
obligations to distribute cash or stock to such holders of Allowed Class 7
Interests other than that which is received from the Estate and/or Reorganized
ICH expressly for that purpose.
11.2 MODIFICATION
(a) This Joint Plan shall not be modified except upon the agreement of all
Proponents, which consent shall not be unreasonably withheld, except that the
consent and agreement of the Debtors and Creditors Committee shall not be
required for any reallocation of the distribution of Reorganized ICH Common
Stock as between ICH Classes 6 and 7.
(b) Subject to Subsection 11.2(a) of this Joint Plan, the Proponents may
jointly propose amendments to or modifications of this Joint Plan as permitted
by Section 1127 of the Bankruptcy Code at any time prior to the Confirmation
Date. After substantial consummation, the Trust or Reorganized ICH may remedy
any defects or omissions or reconcile any inconsistencies in this Joint Plan or
in the Confirmation Order in such manner as may be necessary to carry out the
purposes and intent of this Joint Plan so long as the interests of Claimants and
Interest holders are not materially and adversely affected.
11.3 HEADINGS are utilized in this Joint Plan for convenience and
reference only, and shall not constitute a part of this Joint Plan for any other
purpose.
11.4 SUBORDINATION Notwithstanding the provisions of Article IV of this
Joint Plan; (a) Allowed Claims, if any, of a particular class that are
subordinated to other Allowed Claims of such class pursuant to Section 510 of
the Bankruptcy Code shall be paid only after payment in full of all such
non-subordinated Claims of such class; and (b) Allowed Class 6 Interests, if
any, that are subordinated to other Allowed Class 6 Interests, pursuant to
Section 510 of the Bankruptcy Code shall not be entitled to receive any
distributions until after the distribution to holders of Allowed
non-subordinated Class 6 Interests equals the full amount of their liquidation
preference of $25.00 per share of Preferred Stock.
11.5 SECURITIES-RELATED CLAIMS BASED ON COMMON STOCK For purposes of
calculating the distribution of Reorganized ICH Common Stock to holders of
Allowed Securities-Related Claims based on Common Stock, if any, pursuant to the
provisions of Article IV of this Joint Plan, holders of Allowed
Securities-Related Claims, if any, based on Common Stock shall be entitled to
receive their Pro Rata portion of shares of Reorganized ICH Common Stock in an
amount equal to: (i) the total amount of all Allowed Securities-Related Claims
within ICH Class 7, DIVIDED BY (ii) $254 million, MULTIPLIED BY (iii) 1,309,524,
MULTIPLIED BY (iv) a fraction, the numerator of which is the Allowed Amount of
such holder's Allowed Securities-Related Claim within ICH Class 7, and the
denominator of which is the total amount of all Allowed Securities-Related
Claims within ICH Class 7.
11.6 DUE AUTHORIZATION Each and every Claimant and Interest holder who
elects to participate in the distributions provided for herein warrants that
such Claimant or Interest holder is authorized to accept in consideration of
such Claim against or Interest in the Debtors the distributions provided for in
this Joint Plan and that there are not outstanding commitments, agreements, or
understandings, expressed or implied, that may or can in any way defeat or
modify the rights conveyed or obligations undertaken by such Claimant or
Interest holder under this Joint Plan.
11.7 DE MINIMIS DISTRIBUTIONS AND FRACTIONAL SHARES
(a) The Trust shall disregard, and shall not make distributions in respect
of, Allowed Claims whose Pro Rata share of a proposed distribution would be less
than $5.00. In such case, the Allowed Amount of such Claims for purposes of such
distribution shall be reduced to zero.
(b) Distributions of Reorganized ICH Common Stock shall be made only in
whole share amounts, and no fractional shares of Reorganized ICH Common Stock
shall be distributed pursuant to this Joint Plan. Fractional shares of
Reorganized ICH Common Stock to which any Beneficial or Record Holder of
Preferred Stock or Common Stock as of the Effective Date may be entitled
pursuant to the provisions of Section 4.1(c) or to which any holder of an
Allowed Securities-Related Claim related to Common Stock or Preferred Stock may
be entitled pursuant to this Joint Plan, shall be rounded to the nearest whole
share. Beneficial holders of fewer than 14 shares of Preferred Stock and
Beneficial holders of fewer than 101 shares of Common Stock shall not be
entitled to any distribution of Reorganized ICH Common Stock on account of their
respective Interests, and in each such case, the Allowed Amount of such
Interests for purposes of such distribution shall be reduced to zero.
11.8 AUTHORIZATION OF CORPORATE ACTION All matters and actions provided
for under this Joint Plan involving the corporate structure of the Debtors or
corporate action to be taken by or required of the Debtors or Reorganized ICH
shall be deemed to have occurred and be effective as provided herein, and shall
be deemed to be authorized and approved in all respects without any requirement
for further action by the stockholders or directors of the Debtors.
Specifically, all amendments to the certificate of incorporation and By-laws of
ICH pursuant to Section 7.4(a) of this Joint Plan and all
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other corporate action on behalf of ICH, any other Debtor or Reorganized ICH as
may be necessary to put into effect or carry out the terms and intent of this
Joint Plan and the orders and decrees of the Bankruptcy Court entered in the
Chapter 11 Case may be effected, exercised and taken without further action by
the directors or stockholders of ICH, any other Debtor or Reorganized ICH, as
applicable, with like effect as if effected, exercised and taken by unanimous
action of the directors and stockholders of ICH, any other Debtor or Reorganized
ICH, as applicable, as contemplated by Section 303 of the Delaware General
Corporation Law.
11.9 FURTHER ASSURANCES AND AUTHORIZATIONS The Trust or Reorganized ICH,
if and to the extent necessary, shall seek such orders, judgments, injunctions,
and rulings that may be required to carry out further the intentions and
purposes, and to give full effect to the provisions, of this Joint Plan.
Reorganized ICH shall indemnify the Trust against any Claim asserted against the
Trust which is the obligation of Reorganized ICH, and the Trust shall indemnify
Reorganized ICH against any Claim asserted against Reorganized ICH which is an
obligation of the Trust.
11.10 RIGHT TO RESOLVE CLAIMS The Trust and Reorganized ICH shall each
have the right to resolve in their sole and absolute discretion each of the
parties' respective claims against third parties.
11.11 RIGHTS REGARDING BOOKS AND RECORDS In the event Reorganized ICH
wishes to dispose of any of the Debtors' books and records that are Retained
Assets, it shall first give reasonable notice to the Trust, which may elect to
take such books and records at its own expense; and if the Trust does not so
elect within a reasonable period of time, Reorganized ICH shall be free to
dispose of any such documents. Subject to the foregoing, the Trust shall have
reasonable access to and use of the books and records of the Debtors for the
purpose of administering the Trust Assets and otherwise discharging its duties
under this Joint Plan.
ARTICLE XII
RETENTION OF JURISDICTION
12.1 The Bankruptcy Court shall retain exclusive jurisdiction over these
Chapter 11 Cases after Confirmation, notwithstanding Consummation or substantial
consummation, for the following purposes:
(a) to consider and effect any modification of this Joint Plan under
Section 1127 of the Bankruptcy Code;
(b) to hear and determine all controversies, suits and disputes that
arise in connection with the interpretation or enforcement of this Joint
Plan;
(c) to hear and determine all requests for compensation and/or
reimbursement of expenses for the period commencing on the Petition Date
through the Confirmation Date;
(d) to hear and determine all objections to Claims and Interests, and to
determine the appropriate classification of any Claim or Interest, and other
controversies, suits and disputes that may be pending at or initiated after
the Confirmation Date, except as provided in the Confirmation Order;
(e) to hear and determine all claims that the Debtors, as debtors in
possession QUA trustee, or Reorganized ICH as the successor and designated
representative of the Debtors and the Estates could assert under the
Bankruptcy Code;
(f) to consider and act on such other matters consistent with this Joint
Plan as may be provided in the Confirmation Order;
(g) to make such orders as are necessary and appropriate to carry out
and implement the provisions of this Joint Plan; including to effect the
further assurances provided in Section 11.9;
(h) to approve the reasonableness of any payments made or to be made,
within the meaning of Section 1129(a)(4) of the Bankruptcy Code;
(i) to exercise the jurisdiction granted pursuant to Section 505(a) and
(b) of the Bankruptcy Code to determine any and all federal, state,
Commonwealth, local and foreign tax liabilities of, and any and all refunds
of such taxes paid by the Debtors; and
(j) to hear and determine any issues or matters in connection with any
property not timely claimed as provided in this Joint Plan.
Nothing contained in this Article XII shall be construed so as to limit the
rights of Reorganized ICH or the Trust to commence or prosecute any claim in any
court of competent jurisdiction.
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-23
<PAGE>
Respectfully Submitted,
WINSTEAD SECHREST & MINICK P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Tel. (214) 745-5400
By: _____/s/_JOSIAH M. DANIEL, III_____
Daniel C. Stewart SBT #19206500
Josiah M. Daniel, III SBT #05358500
ATTORNEYS FOR THE DEBTORS
GIBSON DUNN & CRUTCHER
1717 Main St., Suite 5400
Dallas, Texas 75201
Tel. (214) 698-3100
By: ________/s/_I. RICHARD LEVY________
Michael A. Rosenthal SBT #17281490
I. Richard Levy SBT #12265020
ATTORNEYS FOR THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF I.C.H.
CORPORATION
PRYOR, CASHMAN, SHERMAN & FLYNN
410 Park Avenue
New York, New York 10022
Tel. (212) 421-4100
By: _________/s/_JOHN A. BICKS_________
Peter D. Wolfson
John A. Bicks
ATTORNEYS FOR THE OFFICIAL COMMITTEE
OF EQUITY SECURITY HOLDERS OF I.C.H.
CORPORATION
FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-24
<PAGE>
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
This Lone Star Asset Liquidating Trust Agreement (the "Agreement"), dated as
of ____________, 1996, is established by I.C.H. Corporation (the "Debtor")
pursuant to the Debtors' First Amended Joint Amended Plan of Reorganization (the
"Joint Plan") in the Chapter 11 case styled IN RE I.C.H. CORPORATION ET AL, Case
No. 395-36351-RCM-11 (the "Case"), in the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Court"), and is accepted by
the Managing Trustee (as defined in Section 1.2 of the Agreement) for the
benefit of the Trust Beneficiaries (as defined in Section 1.2 of the Agreement).
WHEREAS, on October 10, 1995, the Debtor filed its voluntary petition
pursuant to Chapter 11 of the Bankruptcy Code with the Court;
WHEREAS, the Court confirmed the Joint Plan by entering the Order Confirming
Joint Plan on December __, 1996;
WHEREAS, the Joint Plan provides for the creation of a trust to be composed
of all assets of the Debtors and of their Estates (except the Retained Assets)
to be administered and liquidated for the benefit of the holders of Allowed
Claims in ICH Class 5 as provided in the Joint Plan and is further to provide
for distributions of certain property or cash to other classes under the Joint
Plan;
WHEREAS, the Trust is intended to be treated as a liquidating trust pursuant
to Treasury Regulations Section 301.7701-4(d), and as a grantor trust subject to
the provisions of Subchapter J, Subpart E of the Internal Revenue Code of 1986,
as amended (the "Tax Code"), owned by the Trust Beneficiaries as grantors.
WHEREAS, the Joint Plan provides for the orderly disposition and liquidation
of the Trust Assets during a period not to exceed three (3) years from the
formation of this Trust (unless extended as provided in Section 2.7 of the
Agreement), and further provides that the Trustee shall (a) deliver Available
Cash (as defined in Section 1.2 of the Agreement) in compliance with the terms
of the Joint Plan;
WHEREAS, this Trust shall be managed by the Managing Trustee, and supervised
by the Supervisory Trustees appointed in the Joint Plan and approved by the
Court, all pursuant to the terms of the Joint Plan;
WHEREAS, the Joint Plan provides for and requires the appointment of the
Managing Trustee for the purposes outlined herein and the Trustees have been
appointed and approved and have agreed to serve in such capacity under the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby covenant and agree as follows:
I. DEFINITIONS
1.1 GENERAL. All capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned thereto in the Joint Plan, or, if not
defined in the Joint Plan and defined in the Bankruptcy Code shall have the
meanings assigned thereto in the Bankruptcy Code unless the context clearly
requires otherwise.
1.2 CERTAIN DEFINITIONS. For all purposes of the Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Section 1.2 shall have the meaning assigned to them in this
Section 1.2, and shall include the plural as well as the singular.
"AGREEMENT" shall mean this Lone Star Asset Liquidating Trust Agreement
dated as of ___________, 1996.
"AVAILABLE CASH" has the meaning set forth in the Joint Plan.
"CASE" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
"CONTESTED CLAIMS RESERVE" shall have the meaning given to such term in
Section 3.8.1 hereof.
"COURT" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
"DEBTORS" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-1
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"DISTRIBUTION DATE" means the Initial Distribution Date, and thereafter the
first business day after a day set forth in the Agreement upon which a
distribution of Trust Assets, Reserves or Available Cash is to be made, or
if no other date is set forth in the Agreement, the first business day of
the calendar quarter immediately following the date upon which an action is
to occur or be taken, commencing with the first full calendar quarter
following the Initial Distribution Date.
"INITIAL DISTRIBUTION DATE" has the meaning set forth in the Joint Plan.
"MANAGING TRUSTEE" means Susan A. Brown, or any successor thereto appointed
pursuant to the terms of the Agreement.
"OPERATING RESERVE" means ____________________________________.
"PERMITTED INVESTMENTS" means those investments in which the Trust may place
Available and other cash and reserves listed on the attached Exhibit "E".
"JOINT PLAN" shall have the meaning given to such term in the introductory
paragraph of the Agreement.
"SUPERVISORY TRUSTEES" means ________________, ________________ and
________________ and any successors thereto appointed pursuant to the terms
of the Agreement.
"TAX CODE" shall mean the Internal Revenue Code of 1986, as amended.
"TERMINATION DATE" shall have the meaning given to such term in Section 2.7
hereof.
"TRUST" shall have the meaning given to such term in Section 2.1 hereof.
"TRUST ASSETS" shall have the meaning given to such term in Section 2.1
hereof.
"TRUST BENEFICIARIES" shall have the meaning given to such term in Section
2.1 hereof.
"TRUST BENEFICIARY" shall have the meaning given to such term in Section __
of the Agreement.
"TRUSTEES" means the Managing Trustee and the Supervisory Trustees, and
their respective successors appointed pursuant to the terms of the
Agreement.
II. CREATION OF THE TRUST
2.1 PURPOSE OF TRUST. The Debtor and the Managing Trustee, in compliance
with the Joint Plan, hereby constitute and create this Lone Star Asset
Liquidating Trust (the "Trust") for the primary purpose of effecting an orderly
disposition, liquidation and distribution of the assets transferred to it (the
"Trust Assets") and distributing the Available Cash of the Trust Assets to the
holders of Allowed Claims in ICH Class 5 in accordance with the Joint Plan
(collectively, the "Trust Beneficiaries") and to make the other distributions
and payments called for in the Joint Plan to be made by the Trust, and with no
objective to continue or engage in the conduct of a trade or business. The
activities of this Trust shall all be reasonably necessary to and consistent
with no objective to continue or engage in the conduct of a trade or business
with the accomplishment of that purpose, but shall not include the conduct of a
trade or business.
2.2 APPOINTMENT AND ACCEPTANCE OF MANAGING TRUSTEE. In accordance with the
provisions of the Joint Plan, the undersigned, Susan A. Brown, is hereby named,
constituted, and appointed as Managing Trustee, to act and serve as Managing
Trustee of the Trust and to hold, manage, liquidate, and distribute the Trust
Assets and Available Cash subject to the conditions set forth herein and in the
Joint Plan. The Managing Trustee is willing, and does hereby accept the
appointment, to act and serve as Managing Trustee of the Trust and to hold and
administer the Trust Assets and Available Cash pursuant to the terms of this
Trust and the Joint Plan.
2.3 APPOINTMENT AND ACCEPTANCE OF SUPERVISORY TRUSTEES. In accordance with
the provisions of the Joint Plan, the undersigned, ________________,
________________ and ________________ are hereby named, constituted, and
appointed as Supervisory Trustees, to act and serve as Supervisory Trustees of
the Trust and to supervise the management, liquidation and distribution of the
Trust Assets and Available Cash subject to the conditions set forth herein and
in the Joint Plan. The Supervisory Trustees are willing, and do hereby accept
the appointment, to act and serve as a Supervisory Trustee of the Trust and to
supervise the administration of the Trust Assets pursuant to the terms of this
Trust and the Joint Plan.
2.4 NAME OF TRUST. The Trust established hereby shall bear the name "Lone
Star Asset Liquidating Trust." In connection with the exercise of their powers
as Trustees hereunder, a Trustee may use this name or such variation thereon as
such Trustee sees fit, or may use her or his own name, as Trustee.
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-2
<PAGE>
2.5 TRANSFER OF TRUST ASSETS TO TRUST. In accordance with the provisions
of the Joint Plan, all right, title, and interests of the Debtors and their
Estates in and to all of the funds, assets and properties of the Debtors and
their Estates of any kind and character except the Retained Assets, as the same
exist as of the date hereof, are hereby vested in the Trust and preserved for
the benefit of the Trust Beneficiaries. From and after the Effective Date, all
of such funds, assets and properties, together with the Available Cash, shall be
administered by the Managing Trustee, subject to the supervision of the
Supervisory Trustees, on behalf of the Trust Beneficiaries. Prior to the
creation of the Trust, the Debtors shall have executed and delivered or caused
to be executed and delivered to, or upon the order of, the Trustee, any and all
documents and other instruments as may be necessary or useful to convey and to
confirm title to the Trust Assets to the Trust including those listed or
described on EXHIBIT A hereto. After the Effective Date, the Managing Trustee,
acting on behalf of the Debtors, shall execute all other documents necessary or
useful to convey and to confirm title to the Trust Assets to the Trust or, to
the extent requiring the action of Reorganized ICH, shall obtain Reorganized
ICH's execution on such documents pursuant to Section 11.9 of the Joint Plan.
2.6 CAUSES OF ACTION. As provided in the Joint Plan in Sections 10.2(a)
and 10.2(c), all claims and causes of action against third parties on account of
an indebtedness or liability to the Debtors or to their Estates, and all other
claims owed to and all other causes of action in favor of the Debtors and the
Estate, which are not Retained Assets and to the extent not specifically
compromised or released pursuant to the Joint Plan or an agreement referred to
and incorporated in the Joint Plan, are hereby vested in the Trust and preserved
for enforcement by the Trustee for the benefit of the Trust Beneficiaries. To
the extent permitted by law, all rights under Section 363 (h) of the Bankruptcy
Code are also preserved for the benefit of the Debtors' estate, and the Trustee
shall have the right to exercise same subject to Court approval.
2.7 TERMINATION OF THE TRUST. The Trust shall terminate upon the earlier
to occur (the "Termination Date") of: (A) the fulfillment of the Trust's purpose
by the liquidation of all of the Trust Assets and the distribution of the
Available Cash thereof or (B) three (3) years after the Effective Date. In order
to terminate the Trust prior to three (3) years after the Effective Date, the
Managing Trustee, after receiving the approval of the Supervisory Trustees,
shall deliver a notice to all Trust Beneficiaries setting forth the date on
which the Trust will terminate, and if no Trust Beneficiary files an objection
with the Bankruptcy Court within forty-five (45) days after the date of such
notice the Trust shall terminate on the date set forth in the notice.
Notwithstanding the foregoing, in the event the Managing Trustee, after
receiving the approval of the Supervisory Trustees, shall have been unable after
continuing reasonable efforts to sell or otherwise dispose of and realize upon
the Trust Assets in the initial three (3) year term of the Trust or if other
circumstances require such extension, the Managing Trustee shall have the right
to apply to the Bankruptcy Court to extend the term of the Trust for additional
periods of time, provided that each such extension must be approved by the
Bankruptcy Court within six (6) months of the beginning of the extended term.
Upon such application the Trust shall continue until the date approved by the
Bankruptcy Court, provided that in no event shall the Termination Date occur
later than the tenth anniversary of the Effective Date.
III. RIGHTS, POWERS AND DUTIES OF MANAGING TRUSTEE
3.1 DECLARATION ACKNOWLEDGED IN BENEFICIAL INTEREST. The Managing Trustee
hereby acknowledges that, on and after the Effective Date, the Trust
Beneficiaries and their successors and assigns as permitted in Section 6 hereof,
as their interests may appear, will have a beneficial interest in all Trust
Assets. The Trustees will retain only such powers as are necessary to collect,
liquidate, or otherwise convert the Trust Assets into cash and to pay all
expenses, taxes, and other payments referred to in this Trust.
3.2 MANAGEMENT OF TRUST. Subject to the terms hereof and the Joint Plan,
including, without limitation, Section 5.5 hereof, the Managing Trustee shall
take charge of the Trust Assets and shall endeavor to collect, conserve,
protect, and liquidate, or otherwise convert into cash, all claims, causes of
action, and assets which constitute the Trust Assets and all such other property
incidental thereto as may hereafter be acquired from time to time under this
Trust. To this end and subject to the supervision of the Supervisory Trustees
and the provisions of Section 5.5, the Managing Trustee shall manage the affairs
of the Trust, negotiate and consummate sales of the Trust Assets, enter into
agreements binding the Trust, and execute, acknowledge, and deliver any and all
instruments which are necessary, required, or deemed by the Managing Trustee to
be advisable in connection with the performance of the Managing Trustee's duties
hereunder. Except as otherwise provided in this Agreement, and without prior or
further authorization of the Bankruptcy Court, but subject to Section 5.5 hereof
and the supervision of the Supervisory Trustees, the Managing Trustee may
control and exercise authority over the Trust Assets, the acquisition,
management, and disposition thereof; and the management and conduct of the
business of the Trust to the same extent as if the Managing Trustee were the
sole legal and beneficial owner thereof in her own right. No person dealing with
the Trust shall be obligated to inquire into the authority of the Managing
Trustee in
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-3
<PAGE>
connection with the acquisition, management, or disposition of Trust Assets. In
connection with the management and use of the Trust Assets, the Managing
Trustee, without limitation of her power and authority, may do the following:
(i) accept the assets transferred and provided to the Trust pursuant to
this Agreement and the Joint Plan;
(ii) distribute Available Cash to the Trust Beneficiaries in accordance
with the terms of this Trust and the Joint Plan;
(iii) endorse the payment of notes or other obligations of any person or
make contracts with respect thereto;
(iv) engage in all acts that would constitute ordinary course of
business in performing the obligations of a trustee under a trust of this
type;
(v) cause Trust Certificates to be issued to be issued to Trust
Beneficiaries in the number and manner provided in the Joint Plan.
3.3 MAY INCUR DEBT. The Trust may borrow such sums of money at any time
and from time to time for such periods of time upon such terms and conditions
from such persons or corporations for such purposes as the Trustees may deem
advisable, and secure such loans with any of the Trust Assets, provided that no
recourse shall be had to the Trustees or any Trust Beneficiary on any such debt.
3.4 RECOVERY ON CAUSES OF ACTION. The Managing Trustee shall investigate,
sue upon, mediate, arbitrate, and/or to compromise and settle all claims and
causes of action that are Trust Assets.
3.5 DISTRIBUTION OF AVAILABLE CASH. Pursuant to the terms of the Joint
Plan, on the dates provided for in the Joint Plan the Managing Trustee shall
distribute from the Trust Assets the amounts required in Articles II and IV of
the Joint Plan. The Managing Trustee shall distribute at least annually the net
income of the Trust and all Available Cash from the sale of Trust Assets during
such year to the Trust Beneficiaries and to other Claimants in accordance with
the treatment of Claims provided in the Joint Plan. In determining whether there
are any Available Cash available for distribution, the Managing Trustee may, in
her discretion, give due consideration to the possibility that there may exist
unasserted Claims against the Trust or asserted Claims which are not yet allowed
by the Bankruptcy Court or otherwise not yet due and payable. The Managing
Trustee shall make vigorous and continuing efforts to dispose of the Trust
Assets, to make prompt and timely distributions, and to avoid undue prolongation
of the duration of the Trust. The Trust shall not receive or retain cash or cash
equivalents in excess of a reasonable amount to meet claims and contingent
liabilities or to maintain the value of the Trust Assets.
3.6 ASSETS DISTRIBUTABLE TO UNLOCATED BENEFICIARIES. The Trustee shall
hold any unclaimed liquidating distributions or other payments to any Trust
Beneficiaries who cannot be located. The Trustee shall make disposition of any
such distributions or payments distributable to any such Trust Beneficiaries in
accordance with applicable law and Section
of the Joint Plan.
3.7 INVESTMENTS. The Managing Trustee shall invest the Trust Assets in
Permitted Investments.
3.8 RESERVES.
3.8.1 DISPUTED CLAIMS RESERVES. On or as soon as practicable following the
Effective Date, the Managing Trustee shall establish a reserve for distributions
on account of Contested Claims as of the Initial Distribution Date (the
"Contested Claims Reserve"). Upon any distribution to holders of Allowed Claims
in Classes in which Contested Claims still exists, the Managing Trustee shall
withhold from such distributions and set aside in the Contested Claims Reserve
an amount of cash as provided in Section 9.5 of the Joint Plan, which amount may
be based on the amount of a claim, estimation by the Bankruptcy Court or any
other order (or as provided for by subsequent order of the Bankruptcy Court
concerning Contested Claims). At such time thereafter that any Contested Claim,
or portion thereof; becomes an Allowed Claim, the Managing Trustee shall
distribute to the holders such Allowed Claim from the Contested Claims Reserve,
cash in an amount equal to the amount such holder would have received through
such date had such holder's claim been Allowed as of the Effective Date. The
Contested Claims Reserve shall be terminated when all Contested Claims are
resolved; provided however, as a Contested Claim may be resolved, to the extent
that the amount reserved for the Contested Claim exceeds the amount due, if any,
under a distribution as such Contested Claim becomes an Allowed Claim, such
funds shall be transferred to the Trust and become Available Cash. Any funds
remaining in the Contested Claims Reserve upon its termination and after any
distributions pursuant to this section shall no longer be restricted and shall
be Available Cash.
3.8.2 OPERATING RESERVE. On or as soon as practicable following the
Effective Date, the Managing Trustee shall establish an operating reserve with
cash included in the initial amount not to exceed $2,000,000 as approved by the
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-4
<PAGE>
Supervisory Trustees reasonably determined to be necessary to fund the expenses
of the Trust, including costs of the Distribution Agent for distributions made
pursuant to the Joint Plan. The amount of the operating reserve may be increased
or decreased by the Managing Trustee with the consent of the Supervisory
Trustees if the Managing Trustee determines that a greater or lesser amount is
prudent and reasonably sufficient to satisfy the obligations and liabilities,
including tax liabilities (whether absolute, contingent, asserted, unasserted,
payable, not yet payable or otherwise) of, or assumed by, the Trust.
3.9 LIABILITY OF MANAGING TRUSTEE.
3.9.1 STANDARD OF CARE. Except in the case of willful misconduct or gross
negligence, the Managing Trustee shall not be liable for any loss or damage by
reason of any action taken or omitted by her pursuant to the discretion, power,
and authority conferred on her by this Trust.
3.9.2 NO LIABILITY FOR ACTS OF PREDECESSORS. No successor Managing Trustee
shall be in any way responsible for the acts or omissions of the Debtors, or
officers, directors, agents, predecessors or successors thereof; or of any
Trustee in office prior to the date on which such person becomes Managing
Trustee, unless a successor Managing Trustee expressly assumes such
responsibility.
3.9.3 NO IMPLIED OBLIGATIONS. The Managing Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth herein, and no implied covenants or obligations shall be read into
this Trust.
3.9.4 NO LIABILITY FOR GOOD FAITH ERROR OF JUDGMENT. The Managing Trustee
shall not be liable for any error of judgment made in good faith, unless it
shall be proved that she was grossly negligent in ascertaining the pertinent
facts.
3.9.5 RELIANCE BY TRUSTEE ON DOCUMENTS OR ADVICE OF COUNSEL OR OTHER
PERSONS. Except as otherwise provided herein, the Managing Trustee may rely and
shall be protected in acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, or other paper or
document believed by the Managing Trustee to be genuine and to have been signed
or presented by the proper party or parties. The Managing Trustee may also
engage and consult with legal counsel and shall not be liable for any action
taken or suffered by the Managing Trustee in reliance upon the advice of such
counsel.
3.10 SELECTION OF AGENTS. The Managing Trustee may select and employ
brokers, banks, custodians, investment advisors, attorneys, accountants,
auditors, and other agents on behalf of the Trust. Except as otherwise required
to fulfill the terms hereof, such agents may be so employed without regard to
prior employment of such agents by any Trust Beneficiary or by the Creditors'
Committee. The Trust may employ as a consultant of the Trust any person or
persons having particular knowledge of the Debtors' affairs (including, without
limitation, any officer or director or former officer or director of any Debtor
or any entity owned by a Debtor), and may place reliance upon the advice of any
such person. The Trust may pay the salaries, fees, and expenses of such agents
or consultants out of the Trust Assets. No Trustee shall be liable for any loss
to the Trust or any person interested therein by reason of any mistake or
default of any such agent or consultant as shall be selected and retained by the
Trustees in good faith and without gross negligence.
3.11 RECORDS AND REPORTING.
3.11.1 RECORDS. The Managing Trustee shall maintain good and sufficient
books and records of account relating to the Trust Assets, the Available Cash,
the management thereof, all transactions undertaken by the Managing Trustee, all
expenses incurred by or on behalf of the Trust, all distributions either
contemplated or effectuated under the Joint Plan or this Agreement. The Managing
Trustee shall also maintain such books and records as shall from time to time be
directed by the Supervisory Trustees.
3.11.2 PERIODIC REPORTS. The Managing Trustee shall prepare the following
reports under the supervision of the Supervisory Trustees and shall distribute
such reports to each Supervisory Trustee and any Trust Beneficiary who requests
a copy:
(A) on a monthly basis, within two (2) weeks after the end of each
month, a report of the receipts and disbursements of the Trust and the Cash
position of the Trust; and
(B) on a quarterly basis commencing with the first full calendar quarter
ending after the Effective Date, within forty-five (45) days after the end
of such calendar quarter, a report of the activities of the Trust detailing
for the preceding quarterly period the activities of the Trust including:
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-5
<PAGE>
(i) an operating statement (prepared on a cash basis) showing all
revenues received by the Trust and all expenses of operations of the
Trust (including all expenses associated with the sale of any Trust
Assets paid by the Trust);
(ii) an unaudited written report and accounting showing (a) the
assets and liabilities of the Trust at the end of such period, (b) any
changes in the Trust Assets, (c) the amount of any reserves or escrows of
the Trust, (d) any material action taken by the Managing Trustee or the
Supervisory Trustees in the performance of their duties under the Joint
Plan and this Agreement; and
(iii) an overall status report of the Trust for the next quarterly
period.
Quarterly reports for the fourth quarter of each calendar year may be
included within the annual reports described below, if such annual reports are
prepared.
(C) to the extent required by the Bankruptcy Court or by applicable law
(or to gain an exemption from applicable law), within 90 days after the end
of each calendar year, beginning with the first year end occurring after the
Effective Date, the Trust will prepare reports for the prior year as
described in clause (i) and (ii) above, except that such reports shall be
for a full year (or portion thereof in which the Trust has been in
existence) and shall be audited.
The Managing Trustee shall prepare and furnish to the Trust such additional
reports and accounts as the Supervisory Trustees may from time to time request.
All quarterly and, if prepared, annual reports shall be filed with the
Bankruptcy Court on the date of distribution to the Supervisory Trustees after
the approval of the Supervisory Trustees. In addition, all quarterly and, if
prepared, annual reports may be filed with the Securities and Exchange
Commission to the extent the Managing Trustee deems such action to be in the
best interest of the Trust or to the extent required by applicable law or in
order to gain an exemption from compliance with applicable law.
3.11.3 TAX INFORMATION. The Managing Trustee shall furnish to the Trust
Beneficiaries such information and returns with respect to any federal or state
tax as shall be required by law.
3.11.4 ADDITIONAL REPORTS AND FILINGS. The Managing Trustee shall, under
the supervision of the Supervisory Trustees, (i) prepare, file and distribute
such additional reports as may be necessary to cause the Trustee and the
Trustees to be in compliance with applicable law and (ii) prepare and file with
the Court such reports as are required by the Joint Plan. Copies of any such
reports shall be distributed to the Supervisory Trustees.
3.11.5 The Managing Trustee shall provide to a Trust Beneficiary such
additional information concerning the Trust and the Trust Assets as may be
reasonably requested in writing and for a proper purpose by a Trust Beneficiary
and is in the possession of the Managing Trustee, at the expense of the
requesting Trust Beneficiary.
3.12 MANAGING TRUSTEE'S COMPENSATION, INDEMNIFICATION, AND
REIMBURSEMENT. As compensation for services rendered in the administration of
this Trust, the Managing Trustee shall be compensated in an amount and upon
terms which are mutually acceptable to the proposed Managing Trustee and the
Supervisory Trustees. The Managing Trustee shall further be reimbursed for all
reasonable out-of-pocket expenses incurred in the performance of her duties
hereunder. In addition, the Managing Trustee and the Supervisory Trustees shall
be indemnified by and receive reimbursement from the Trust Assets against and
from any and all loss, liability, expense, or damage which any of them may incur
or sustain, in good faith and without gross negligence, in the exercise and
performance of any of their powers and duties under this Trust. The amounts
necessary for all such compensation, indemnification and reimbursement and for
all expenses of administration, including counsel fees, shall be withdrawn by
the Trustees out of the Trust Assets. Notwithstanding the foregoing, the
obligation of the Trust to indemnify as set forth in this section shall either
be limited until the termination of the Trust, or shall be fulfilled by the
purchase an insurance policy which, in the judgment of the Trustees is
sufficient in the size and coverage to perform the Trust obligations undertaken
in this section.
3.13 DISPOSITION OF ASSETS TO DEBTOR AND OTHER INTERESTED PARTIES. Subject
to Section 5.5, the Managing Trustee is specifically authorized and empowered to
negotiate at arms' length and enter into agreements with the Debtor's
affiliates, the Trust Beneficiaries and other interested parties for the sale of
any portion of the Trust Assets.
3.14 INDEPENDENT MANAGING TRUSTEE. The Managing Trustee may not be a Trust
Beneficiary except that Susan A. Brown, a former director and officer of the
Debtors and an administrative creditor of the Trust under a contract of
employment with the Debtors may serve notwithstanding.
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-6
<PAGE>
3.15 RESIGNATION. The Managing Trustee may resign as such by executing and
delivering an instrument in writing to the Supervisory Trustees; PROVIDED,
HOWEVER, that the Managing Trustee shall continue to serve as Managing Trustee
after resignation until the time when appointment of a successor Trustee shall
become effective in accordance with Section 3.17 hereof.
3.16 REMOVAL. The Managing Trustee may be removed from office (a) for
fraud or willful misconduct in connection with the affairs of the Trust upon the
motion of the Supervisory Trustees, and upon a finding by the Bankruptcy Court
of fraud or willful misconduct by such Managing Trustee after a hearing before
the Bankruptcy Court upon not less than 30 days' Notice, (b) for such physical
or mental disability as substantially prevents the Managing Trustee from
performing her duties as Managing Trustee hereunder upon the motion of the
Supervisory Trustees and upon a finding by the Bankruptcy Court of such physical
or mental disability after a hearing before the Bankruptcy Court on not less
than 30 days' Notice or (c) for cause, which shall include a breach of fiduciary
duty or an unresolved conflict of interest, (other than as specified in the
foregoing clauses (a) and (b)) upon the motion of the Supervisory Trustees, and
upon finding by the Bankruptcy Court that cause for such removal has been shown
after a hearing before the Bankruptcy Court on not less than 30 days' Notice.
3.17 APPOINTMENT OF SUCCESSOR MANAGING TRUSTEE. In the event of the death
or incompetency, resignation, or removal of the Managing Trustees, the
Supervisory Trustees shall appoint a successor Managing Trustee. Such
appointment shall specify the date on which such appointment shall be effective.
Every successor Managing Trustee appointed hereunder shall execute, acknowledge,
and deliver to the Supervisory Trustees and to the retiring Managing Trustee an
instrument accepting such appointment, and thereupon such successor Managing
Trustee, without any further act, deed, or conveyance, shall become vested with
all the rights, powers, trusts, and duties of the retiring Managing Trustee.
IV. SUPERVISORY TRUSTEES
4.1 RESIGNATION. A Supervisory Trustee may resign as such by executing an
and delivering an instrument in writing to the Managing Trustee and remaining
Supervisory Trustees.
4.2 REMOVAL. A Supervisory Trustee may be removed in the event of the
physical or mental disability as prevents a Supervisory Trustee from
substantially performing his duties hereunder upon the unanimous consent of the
other Supervisory Trustees. A majority of the Trust Beneficiaries voting
pursuant to this Agreement may at any time remove any Supervisory Trustee with
or without cause.
4.3 APPOINTMENT OF SUCCESSOR SUPERVISORY TRUSTEE. Upon the death,
resignation or removal of a Supervisory Trustee, the remaining Supervisory
Trustees shall appoint a Trust Beneficiary (or employee or member thereof) as a
successor Supervisory Trustee. In the event that the remaining Supervisory
Trustees are unable to reach agreement, such successor shall be appointed by a
vote of the Trust Beneficiaries. Such appointment shall specify the date on
which such appointment shall be effective. In no event shall any insider or
affiliate of the Debtor serve as a Supervisory Trustee.
4.4 COMPENSATION AND EXPENSES. A Supervisory Trustee shall serve in such
capacity with compensation, if any, as may be set in the Confirmation Order. The
Trust shall reimburse the reasonable expenses of the Supervisory Trustees
(including, but not limited to, attorneys fees) incurred in connection with
their service as Supervisory Trustees.
4.5 STANDARD OF CARE, EXCULPATION. No Supervisory Trustee, and no officer,
employee, agent or representative of such member, shall be personally liable to
any other Trustee, any other Trust Beneficiary, or the Trust, or any one of them
except for such of its own acts as shall constitute willful misconduct or gross
negligence. Except as aforesaid, a Supervisory Trustee shall be defended, held
harmless and indemnified from time to time from the Trust Assets against any and
all losses, claims, costs, expenses and liabilities (including legal fees and
expenses) and any costs of defending any action to which they may be subject by
reason of their execution in good faith of their duties under this Trust or by
reason of their reliance upon the matters addressed in Section 4.7 hereof. If
the Supervisory Trustees so desires, the Managing Trustee shall endeavor to
obtain for the benefit of the Supervisory Trustees at the expense of the Trust
insurance against claims of liability, damage awards, and settlement.
4.6 RELIANCE BY SUPERVISORY TRUSTEES. The Supervisory Trustees may rely,
and shall be fully protected personally in acting upon, any resolution,
statement, certificate, instrument, opinion, report, notice, request, consent,
order, or other instrument or document which such members have no reason to
believe to be other than genuine and to have been signed or presented other than
by the proper party or parties or, in the case of facsimile transmissions, to
have been sent other than by the proper party or parties, in each case without
obligation to satisfy itself that the same was given in good faith and without
responsibility for errors in delivery, transmission, or receipt. In the absence
of Its willful misconduct or gross
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negligence, the Supervisory Trustees may rely as to the truth of statements and
correctness of the facts and opinions expressed therein and shall be fully
protected personally in acting thereon. The Supervisory Trustees may consult
with and rely on the advice of legal counsel and such other experts, advisors,
consultants or other professionals as shall have been retained pursuant to this
Agreement and shall be fully protected in respect of any action taken or
suffered by it in accordance with the written opinion of legal counsel.
V. PROVISIONS RELATING TO TRUSTEES GENERALLY
5.1 NO PERSONAL OBLIGATION FOR TRUST LIABILITIES. Persons dealing with the
Trustees, or seeking to assert claims against the Debtor, shall look only to the
Trust Assets to satisfy any liability incurred by the Trustees to such person in
carrying out the terms of this Trust, and the Trustees shall have no personal,
individual obligation to satisfy any such liability.
5.2 BOND REQUIREMENT; EXERCISE OF POWERS. The Trustees shall not be
required to furnish a bond to secure the proper performance of their respective
duties hereunder. Except as other expressly provided in the Agreement, the
Trustees shall not be required to procure authorization by any court in the
exercise of any power conferred upon the Trustees by this Trust.
5.3 TRUST CONTINUANCE. The death or incompetency, resignation, or removal
of a Trustee shall not operate to terminate the Trust created by this Agreement
or to revoke any existing agency created pursuant to the terms of this Agreement
or invalidate any action previously taken by the Trustee. In the event of the
resignation or removal of the Trustee, such Trustee shall promptly (a) execute
and deliver such documents, instruments, and other writings as may be requested
by the remaining Trustees or reasonably requested by the successor Trustee to
effect the termination of the retiring Trustee's capacity under the Trust and
the conveyance of the Trust Assets then held by the retiring Trustee to her
successor Trustee; (b) deliver to the Supervisory Trustees or the successor
Trustee all documents, instruments, records, and other writings related to the
Trust as may be in the possession of the retiring Trustee; and (c) otherwise
assist and cooperate in effecting the assumption of its obligations and
functions by such successor Trustee.
5.4 EFFECT OF TRUST ON THIRD PARTIES. There is no obligation on the part
of any purchaser or purchasers from the Trustee or any agent of the Trustees, or
on the part of any other persons dealing with the Trustees or any agent of the
Trustees, to see to the application of the purchase money or other consideration
passing to the Trustees or any agent of the Trustees, or to inquire into the
validity, expediency, or propriety of any such transaction by the Trustees or
any agent of the Trustees.
5.5 ACTIONS REQUIRING THE CONSENT OF MANAGING TRUSTEE AND SUPERVISORY
TRUSTEES. The following actions may be taken by the Managing Trustee on behalf
of the Trust only with the consent of at least two Supervisory Trustees (or, if
only one Supervisory Trustee is appointed hereunder at any time, with the
consent of such Supervisory Trustee):
5.5.1 TERMINATION OF TRUST. The delivery of a notice seeking to terminate
the Trust prior to three years after the Effective Date or application to the
Bankruptcy Court to extend the Trust term as provided in Section 2.7;
5.5.2 AGREEMENTS, DOCUMENTS, INSTRUMENTS. The execution by the Managing
Trustee of any agreement, document or instrument binding the Trust, including
without limitation any agreements with any affiliate or former affiliate of any
Debtor or any or former employee thereof but excluding contracts or documents
related to sales of assets, or any Trust Beneficiary, provided however that the
Managing Trustee may enter into a contract obligating the Trust to expend funds
in an amount less than of $50,000 without further approval;
5.5.3 BORROWING. The borrowing of any sums of money;
5.5.4 INVESTMENT. The investment of Trust Assets and Available Cash in any
manner other than in Permitted Investments.
5.5.5 RESERVES. The establishment, maintenance, increase or decrease, or
disbursement of reserves, including without limitation the Contested Claims
Reserve and the Operating Reserve.;
5.5.6 AGENTS AND CONSULTANTS. The selection, retention and/or employment
of financial or investment advisors, attorneys, auditors, or the employment of
any consultants;
5.5.7 DISTRIBUTIONS FROM TRUST. The distribution of any amounts from the
Trust, provided that the Managing Trustee without further approval may make the
distributions as set forth in the Joint Plan and on Schedule 5.5.7 hereof;
5.5.8 ACTION AND PROCEEDINGS. The commencement or bringing of any
proceeding permitted hereunder, the defense of any action or proceeding against
the Trust and the expenditure by the Trust of amounts in respect thereof;
including legal fees;
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5.5.9 TRANSFERS OF TRUST CERTIFICATES. Any change to the form of Trust
Certificate or placement of a legend on a Trust Certificate as contemplated by
Section 6.1, appointment of a Registrar other than the Trust, or the
establishment of any additional requirements for transfer of Trust Certificates;
and
5.5.10 COMPLIANCE WITH APPLICABLE LAW. The filing of any registration
statement or report relating to the Trust, the Trust Assets or the Trust
Certificates with any governmental agency.
5.5.11 SALES OR TRANSFERS OF ASSETS. The sale, assignment or transfer of
any Trust Asset, except as otherwise set forth herein, in an amount exceeding
$500,000.
5.6 METHOD OF OBTAINING APPROVAL OF SUPERVISORY TRUSTEES. With respect to
any action requiring the approval of the Supervisory Trustees, approval (i)
shall be had by written confirmation upon the written request of the Managing
Trustee (ii) shall be implied if the Managing Trustee receives no response from
a Supervisory Trustee after four (4) business days from the date the written
request for approval by the Supervisory Trustee is delivered to the Supervisory
Trustee as set forth for delivery of notices in this Agreement.
VI. RIGHTS, POWERS AND DUTIES OF BENEFICIARIES
6.1 NATURE OF CERTIFICATES. Beneficial interests in the Trust ("Trust
Interests") shall be allocated in accordance with Section 7.3(e) of the Plan.
The Trust Interests may be represented by certificates substantially in the form
attached hereto as EXHIBIT B, with such changes as the Managing Trustee may from
time to time find necessary or desirable to conform to the provisions of this
Trust Agreement, the Joint Plan and any applicable laws or regulations. The
Managing Trustee may cause to be placed on any Trust Certificate such legends as
she deems are required or appropriate under tax laws or regulations in
connection with tax withholding pursuant to Section 6.9.3 or otherwise. Any
person to whom a Trust Certificate is issued or transferred, by virtue of the
acceptance thereof, shall assent to and be bound by the terms and conditions of
this Agreement and the Joint Plan. The principal amount of Trust Interests
represented by any single certificate shall be designated on the face of such
certificate. All certificates shall be executed by the manual or facsimile
signatures of the Managing Trustee. In case any Managing Trustee who has signed
or whose facsimile signatures have been placed upon a certificate shall have
ceased to be Managing Trustee before such certificate is issued by the Trust it
may be issued with the same effect as if any such Managing Trustee had not
ceased to be Managing Trustee. All Trust Certificates shall be legended as
provided in the forms for such certificates attached hereto as EXHIBIT B.
6.2 SECURITIES REGISTRATION. [RESERVED]
6.3 TRANSFER AND EXCHANGE.
6.3.1 APPOINTMENT OF REGISTRAR AND TRANSFER AGENT. The Managing
Trustee shall appoint a Registrar and Transfer Agent for the purpose of
registering and transferring Trust Interests as herein provided. The
Registrar and Transfer Agent may be a duly qualified institution or the
Trust itself. For its services hereunder, the Registrar and Transfer Agent,
unless it is the Trust, shall be entitled to receive reasonable compensation
from the Trust.
6.3.2 REGISTRATION AND TRANSFER OF TRUST INTERESTS. The Managing
Trustee shall cause to be kept at the office of the Registrar and Transfer
Agent, or at such other place or places as shall be designated by her from
time to time, the Trust Register. Prior to the distribution, if any, of
Trust Certificates, Trust Interests may not be transferred and no purported
transfer of any Trust Interest will be registered on the Trust Register.
After any such distribution of Trust Certificates, any Trust Interest may be
transferred by the registered holder of any Trust Certificate or in or by
the duly authorized attorney of the registered holder of any Trust
Certificate, upon presentation of the Trust Certificate to the Registrar and
Transfer Agent for cancellation, accompanied by delivery of a duly executed
written instrument of transfer in the form approved by the Registrar and
Transfer Agent and such other documents as may be reasonably required by the
Managing Trustee as well as evidence satisfactory to the Managing Trustee
that such transfer is in accordance with all applicable federal and state
securities laws. Any such transfer shall be registered in the Trust
Register. Such Person shall pay reasonable transfer charges established by
the Registrar and Transfer Agent for the purpose of reimbursing the Trust
and the Registrar and Transfer Agent for the expenses incident thereto,
including any tax or other governmental charge.
Notwithstanding the above, no Trust Interest may be transferred unless
such transfer is made (i) pursuant to a registration statement effective
under the Securities Act of 1933, as amended ("Securities Act"), or pursuant
to an available exemption from the registration requirements of the
Securities Act and (ii) in accordance with all applicable state securities
laws. See "Securities Law Considerations--Limited Restrictions on
Transferability."
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6.3.3 ACCESS TO REGISTER BY TRUST BENEFICIARIES. Trust Beneficiaries
and their duly authorized representatives shall have the right, upon
reasonable prior written notice to the Registrar and Transfer Agent and the
Managing Trustee, and in accordance with reasonable regulations prescribed
by the Registrar and Transfer Agent and the Managing Trustee, to inspect
and, at the expense of the Trust Beneficiary, make copies of the Trust
Register, in each case for a purpose reasonably related to such Trust
Beneficiary's beneficial interest in the Trust.
6.4 ABSOLUTE OWNERS. The Trustees may deem and treat the Trust Beneficiary
of record as the absolute owner of such Trust Interests for the purpose of
receiving distributions and payment thereon or on account thereof and for all
other purposes whatsoever.
6.5 ISSUANCE OF CERTIFICATES UPON TRANSFER. Whenever any Trust Certificate
shall be presented for transfer or exchange as permitted by the provisions of
Section 6.1 and 6.3, the Managing Trustee shall cause the Registrar and Transfer
Agent to issue, authenticate and deliver in exchange therefor, the new Trust
Certificate(s) in respect to the Trust Interests which the transferee, and if
any Trust Interest is retained, the transferor, will be entitled to receive.
6.6 MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. If a Trust
Beneficiary claims that his Trust Certificate has been mutilated, defaced, lost,
stolen or destroyed, the Trust shall issue and the Registrar and Transfer Agent
shall authenticate a replacement Trust Certificate if the Managing Trustee's
requirements are met. Such Trust Beneficiary shall pay reasonable charges
established by the Trustee and the Registrar and Transfer Agent for the purpose
of reimbursing the Trust and the Registrar and Transfer Agent for the expenses
incident thereto, including any tax or other governmental charges. In the case
of lost, stolen or destroyed certificates, such Trust Beneficiary will
indemnify, and if required by the Managing Trustee or the Registrar and Transfer
Agent, provide a bond or other security sufficient in the judgment of the
Managing Trustee to protect the Trust, the Trustees, the Registrar and Transfer
Agent or any authenticating agent from any loss which any of them may suffer if
a Trust Certificate is replaced. The Trustees shall incur no liability to anyone
by reason of anything done or omitted to be done by them in good faith under the
provisions of this Section 6.6. All Trust Certificates shall be held and owned
upon the express condition that the provisions of this Section 6.6 are exclusive
in respect of the replacement or payment of mutilated, defaced, lost, stolen, or
destroyed certificates and shall, to the extent permitted by law, preclude any
and all other rights or remedies respecting such replacement or the payment in
respect thereto. Any duplicate certificate issued pursuant to this Section 6.6
shall constitute original interests in the Trust and shall be entitled in the
manner provided herein to equal and proportionate benefits with all other Trust
Interests issued hereunder in any moneys or property at any time held by the
Trustees for the benefit of the Trust Beneficiaries. The Trustees and the
Registrar and Transfer Agent shall not treat the original certificate as
outstanding.
6.7 RECORD DATE. The date of record for determining (a) entitlement to any
payments to holders of Trust Certificates, (b) entitlement of any holder of a
Trust Certificate to notice or (c) entitlement to vote shall be 15 Business Days
prior to a distribution date in the case of (a) above and, in all other cases,
may be fixed by the Managing Trustee but shall not be more than 30 days nor less
than 10 days before the date upon which any vote is to be taken or the date upon
which notice is to be given, as applicable, subject, in any such case, to any
terms of the Plan that provide otherwise.
6.8 INTEREST BENEFICIAL ONLY. The ownership of a beneficial interest
hereunder shall not entitle any beneficiary to any title in or to the Trust
Assets as such, or to any right to call for a partition or division of the same,
or to require an accounting except as specifically required by the terms hereof.
6.9 EXEMPTION FROM REGISTRATION. The parties hereto intend that the rights
of the Trust Beneficiaries arising under this Trust shall not be "securities"
under applicable laws, but none of the parties hereto represent or warrant that
such rights shall not be securities or shall be entitled to exemption from
registration under applicable securities laws. If such rights constitute
securities, the parties hereto intend for the exemption from registration
provided by Section 1145 of the Bankruptcy Code to apply to their issuance under
the Joint Plan.
6.10 VOTES BY BENEFICIARIES. In the event any vote of or consent from
holders of Trust Certificates is required to be taken under this Trust, the
Managing Trustee shall solicit the same by first class mail from registered
holders of Trust Certificates. The outcome of such vote shall be determined in
favor of the majority of holders of Trust Certificates actually voting, [based
upon the face amount of their Trust Certificates].
6.11 EFFECT OF DEATH, INCAPACITY, OR BANKRUPTCY OF BENEFICIARY. The death,
incapacity, bankruptcy or dissolution of a holder of a Trust Certificate during
the terms of this Trust shall not operate to terminate the Trust, nor shall it
entitle the representatives or creditors of a holder of a Trust Certificate to
an accounting, or to take any action in the courts or elsewhere for the
distribution of the Trust Assets or for a partition thereof; nor shall it
otherwise affect the rights and obligations of any holder of a Trust
Certificate.
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EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-10
<PAGE>
6.12 CONFLICTING CLAIMS. In the event the Managing Trustee becomes aware
of any disagreement or conflicting claims with respect to the Trust Assets, or
if the Trustee in good faith is in doubt as to any action which should be taken
under this Trust after consultation with the Supervisory Trustees, who, after a
vote are deadlocked, the Managing Trustee shall have the absolute right at her
election to do any or all of the following:
(i) To the extent of such disagreement or conflict, or to the extent
deemed by her necessary or appropriate in light of such disagreement or
conflict, withhold or stop all further performance under this Trust (save
and except the safekeeping of the Trust Assets) until the Managing Trustee
is satisfied that such disagreement or conflicting claims have been fully
and finally resolved; or
(ii) File a suit in interpleader or in the nature of interpleader in the
Bankruptcy Court and obtain an order requiring all persons and parties
involved to litigate in the Bankruptcy Court their respective claims arising
out of or in connection with this Trust; or
(iii) File any other appropriate motion for relief in the Bankruptcy
Court.
VII. MISCELLANEOUS
7.1 APPLICABLE LAW. The Trust created herein shall be construed,
regulated, and administered under the laws of the State of Texas and the United
States of America; provided that the Trust and any interpretation or enforcement
of the provisions of this Agreement shall be subject to the jurisdiction of the
Bankruptcy Court as contemplated by Section 8.1 hereof.
7.2 RELATIONSHIP CREATED. The only relationship created by this Trust is
the trustee-beneficiary relationship between the Trustee and the Trust
Beneficiaries. No other relationship or liability is created. Nothing contained
herein shall be construed so as to constitute the Trustees and the Trust
Beneficiaries or their successors in interest as creating any association,
partnership, or joint venture of any kind.
7.3 INTERPRETATION. The enumeration and headings contained in this Trust
are for convenience of reference only and are not intended to have any
substantive significance in interpreting the same. Unless the context otherwise
requires, whenever used in this Trust the singular shall include the plural and
the plural shall include the singular.
7.4 PARTIAL INVALIDITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
7.5 ENTIRE AGREEMENT. This Agreement (including the recitals hereof) and
the Joint Plan constitute the entire agreement by and among the parties, and
there are no representations, warranties, covenants, or obligations except as
set forth herein and in the Joint Plan. This Agreement and the Joint Plan
supersede all prior and contemporaneous agreements, understandings negotiations,
and discussions, written or oral, if any, of the parties hereto relating to any
transaction contemplated hereunder. Except as otherwise specifically provided
herein or in the Joint Plan, nothing in this Agreement is intended or shall be
construed to confer upon or to give any person other than the parties hereto and
the Trust Beneficiaries any rights or remedies under or by reason of this
Agreement.
7.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original document, but all
of which counterparts shall together constitute one and the same instrument.
7.7 NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and delivered in person or by first class mail,
postage and fees prepaid and shall be addressed (i) if to the Managing Trustee,
to Susan A. Brown, Trustee, [address] , or such other address as
such Managing Trustee will have furnished to the Trust Beneficiaries in writing
in accordance with Sections 3.3 and 5.7, (ii) if to any Trust Beneficiary, to
such address as such Trust Beneficiary will have furnished to the Trustee, in
writing in accordance with this Section 5.7, (iii) if to the Supervisory
Trustees, to , , and , or such
other respective addresses as the Supervisory Trustees will have furnished to
the Trustee in writing in accordance with this Section 5.7, or (iv) if to the
Debtor, to , or such other address as the Debtor will
have furnished to the Trustee in writing in
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-11
<PAGE>
accordance with this Section 5.7. All such notices or communications will be
deemed given when actually delivered or, if mailed, three (3) business days
after deposit in the U.S. Mail.
7.8 EFFECTIVE DATE. This Trust, and the transfer of Trust Assets to the
Trustee, shall become effective on the Effective Date of the Joint Plan.
7.9 TAX PROVISIONS.
7.9.1 INCOME TAX STATUS. For all purposes of the Tax Code, the Debtor
shall be deemed to have transferred the Trust Assets to the Trust
Beneficiaries and thereupon the Trust Beneficiaries shall be deemed to have
transferred the Trust Assets to the Trust. The Trustee shall ensure that,
for all federal income tax purposes, consistent valuations are used by the
Trustee and the creditors for the transferred Trust Assets. The Trust is
intended to be treated as a liquidating trust pursuant to Treasury
Regulations Section 301.7701-4(d), and as a grantor trust subject to the
provisions of Subchapter J, Subpart E of the Tax Code, owned by the Trust
Beneficiaries as grantors. Any items of income, deduction, credit, or loss
of the Trust shall be allocated for federal income tax purposes among the
Trust Beneficiaries Pro-Rata on the basis of their beneficial interests. The
Trustee is authorized to take any action that may be necessary or
appropriate to minimize any potential tax liability of the Trust
Beneficiaries arising out of the operations of the Trust.
7.9.2 TAX RETURNS AND REPORTS. In accordance with Treasury Regulation
Section 1.671-4(a), the Trustee shall cause to be prepared and filed, at the
cost and expense of the Trust, an annual information tax return (Form 1041)
with the IRS, with a schedule attached showing the item of income,
deduction, and credit attributable to the Trust and detailing the allocation
of such items of income, deduction, and credit among the Trust Beneficiaries
as required pursuant to the Form 1041 instructions for grantor trusts.
Copies of such Form 1041 and attached schedules will be mailed promptly to
each Trust Beneficiary. In addition, the Trustee shall cause to be prepared
and filed in a timely manner, such other state or local tax returns as are
required by applicable law by virtue of the existence and operation of the
Trust and shall pay any taxes shown as due thereon. Within thirty (30) days
after the end of each calendar year, the Trustee shall cause to be prepared
and mailed to a Trust Beneficiary such other information as may be requested
by such Trust Beneficiary in writing to enable such Trust Beneficiary to
complete and file his, her, or its federal, state and local income and other
tax returns.
7.9.3 WITHHOLDING. The Trustee may withhold from the amount
distributable from the Trust at any time to any Trust Beneficiary such sum
or sums as may be sufficient to pay any tax or taxes or other charge or
charges which have been or may be imposed on such Trust Beneficiary or upon
the Trust with respect to the amount distributable or to be distributed
under the income tax laws of the United States or of any state or political
subdivision or entity by reason of any distribution provided for any law,
regulation, rule, ruling, directive, or other governmental requirement.
7.9.4 TAX IDENTIFICATION NUMBERS. The Trustee may require any Trust
Beneficiary to furnish to the Trustee its Employer or Taxpayer
Identification Number as assigned by the Internal Revenue Service and the
Trustee may condition any distribution to any Trust Beneficiary upon receipt
of such identification number.
7.9.5 TAX YEAR. The taxable year of the Trust shall, unless otherwise
required by the Internal Revenue Code, be the calendar year.
7.10 AMENDMENT OF TRUST. This Trust may be amended, modified, terminated,
revoked, or altered only upon (i) the approval of the Supervisory Trustees and
(ii) Order of the Bankruptcy Court.
VIII. RETENTION OF JURISDICTION
8.1 As provided in the Joint Plan, the Bankruptcy Court has retained
jurisdiction over the Trust, the Trustee, and the Trust Assets, including,
without limitation, the determination of all controversies and disputes arising
under or in connection with this Trust. This provision shall not operate to
exclude other courts of competent jurisdiction from exercising jurisdiction over
the Trust, the Trust Assets, and the Trustee, to the extent not in conflict with
the jurisdiction of the Bankruptcy Court.
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
executed as of the day and year first above written.
I.C.H. CORPORATION, a Delaware
corporation
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-12
<PAGE>
By: ___________________________________
Susan A Brown, Co-Chief Executive
Officer
and
By: ___________________________________
Rodney D. Moore, Co-Chief Executive
Officer
MANAGING TRUSTEE
_______________________________________
Susan A. Brown, Trustee
SUPERVISORY TRUSTEES
_______________________________________
_______________________________________
_______________________________________
LONE STAR ASSET LIQUIDATING TRUST AGREEMENT
EXHIBIT A TO FIRST AMENDED JOINT PLAN OF REORGANIZATION
B-a-13
<PAGE>
EXHIBIT C
1. UNAUDITED CONSOLIDATED BALANCE SHEETS OF THE DEBTORS AS OF DECEMBER 31,
1995 AND 1994
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Cash and short-term investments..................................................................... $ 79,460 $ 16,733
Restricted cash and short-term investments.......................................................... 100,811
Net assets of discontinued operations:
Investments in and advances to subsidiaries held for sale......................................... 100,172 406,140
Investments in Facilities Management Installation, Inc., debtor in possession..................... 10,124 5,018
Additional consideration from sale of subsidiaries:
Debt securities of purchaser, at amortized cost................................................... 40,000
Other receivable.................................................................................. 10,000
Recoverable for intercompany tax settlements from subsidiaries sold................................. 7,849
Real estate, at lower of cost or fair value......................................................... 4,400 6,041
Fixed maturities, at fair value..................................................................... 42,501
Notes and accounts receivable....................................................................... 2,734 7,956
Recoverable on tax indemnification.................................................................. 24,600 24,600
Other assets........................................................................................ 1,884 2,163
--------- ---------
$ 382,034 $ 511,152
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Post petition liabilities not subject to compromise:
Accrued expenses and other liabilities............................................................ $ 2,741
Due to subsidiaries............................................................................... 1,245
---------
3,986
Liabilities subject to compromise:
Notes payable:
Unsecured, unaffiliated........................................................................... 375,162 $ 369,162
Unsecured, held by subsidiary..................................................................... 21,500
Secured, unaffiliated............................................................................. 181 232
Secured, held by subsidiary....................................................................... 143 183
Advances from Facilities Management Installation, Inc............................................... 6,305 6,305
Federal income taxes currently payable.............................................................. 14,334 59,279
Accrued expenses and other liabilities.............................................................. 30,723 19,153
--------- ---------
430,834 475,814
--------- ---------
Stockholders' equity (Deficit):
Preferred stock................................................................................... 199,997 199,997
Common stock...................................................................................... 48,755 48,983
Additional paid-in capital........................................................................ 125,872 126,583
Net unrealized investment gains (losses).......................................................... 2,897 (55,359)
Retained deficit.................................................................................. (422,001) (279,265)
--------- ---------
(44,480) 40,939
Notes receivable collateralized by common stock................................................... (1,795)
Treasury stock, at cost........................................................................... (4,320) (3,806)
--------- ---------
(48,800) 35,338
--------- ---------
$ 382,034 $ 511,152
--------- ---------
--------- ---------
</TABLE>
C-1
<PAGE>
2. UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Income:
Investment income....................................................................... $ 4,045 $ 10,873 $ 4,096
Income from subsidiaries:
Interest income....................................................................... 491 7,347
Administrative services............................................................... 39,964 106,589
Realized investment gains (losses)...................................................... (339) (6,829) (6,024)
Gain on sale of investment in Bankers Life Holding Corporation.......................... 297,041
Equity in earnings on investment in Bankers Life Holding Corporation.................... 29,117
Other income (expense).................................................................. 1,145 (4,350) 2,722
--------- --------- ---------
4,851 40,149 440,888
--------- --------- ---------
Expenses:
Administrative and general expenses:
Subsidiaries and related parties...................................................... 39,964 106,589
Other................................................................................. 13,019 10,582 20,385
Interest:
Subsidiaries.......................................................................... 1,019 3,409 4,554
Other................................................................................. 35,602 48,251 66,153
--------- --------- ---------
49,640 102,206 197,681
--------- --------- ---------
Operating earnings (loss) of parent only before reorganization items and provision
(credit) for federal income taxes........................................................ (44,789) (62,057) 243,207
--------- --------- ---------
Reorganization items:
Elimination of original issue discounts on notes payable and write off of deferred debt
issuance costs........................................................................ (9,212)
Professional fees....................................................................... (3,080)
Interest earned on accumulated cash during bankruptcy period............................ 1,124
---------
(11,168)
---------
Operating earnings (loss) of parent only before provision (credit) for income taxes....... (55,957) (62,057) 243,207
Income tax expense (credit)............................................................... 4,534 3,802 78,823
--------- --------- ---------
Earnings (loss) of parent only............................................................ (60,491) (65,859) 164,384
--------- --------- ---------
Discontinued operations:
Equity in earnings (loss) of subsidiaries............................................... (20,241) (271,581) 40,806
Loss on sales of subsidiaries........................................................... (62,004)
--------- --------- ---------
Earnings (loss) from discontinued operations.............................................. (82,245) (271,581) 40,806
--------- --------- ---------
Earnings (loss) before extraordinary items................................................ (142,736) (337,440) 205,190
Extraordinary loss, net of tax effect..................................................... (1,919)
--------- --------- ---------
Net earnings (loss)....................................................................... (142,736) (337,440) 203,271
Less dividends on preferred stock......................................................... (13,658) (28,784)
--------- --------- ---------
Net earnings (loss) applicable to common stock............................................ $(142,736) $(351,098) $ 174,487
--------- --------- ---------
--------- --------- ---------
</TABLE>
C-2
<PAGE>
EXHIBIT C
3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS ICH sold Southwestern Life, Union Bankers,
Constitution, and Marquette, as of December 14, 1995. ICH had previously sold
its wholly-owned subsidiary, Southeastern Title and Insurance Company, on
January 12, 1995, and its 98.8% ownership interest in Integrity National on
September 22, 1995. ICH is presently negotiating with unaffiliated parties, and
in certain cases has entered into definitive agreements, for the sale of its
Remaining Insurance Subsidiaries: BML, Modern American, Western and Philadelphia
American. The results of operations of ICH's insurance subsidiaries, as well as
those of FMI, have been accounted for as discontinued operations in ICH's
statement of earnings (loss) for the year ended December 31, 1995. ICH's
statements of earnings (loss) provided herein for prior years have been restated
to conform to the 1995 presentation. Subsequent to the sale of ICH's principal
subsidiaries, management has sought to maximize the value of ICH's remaining
assets and to pursue a course of orderly liquidation. Although ICH has not as
yet filed a Plan of Reorganization pending the resolution of Internal Revenue
Service ("IRS") audits of ICH's open income tax years for 1990 through 1995, it
is management's intention to do so. However, ICH has not changed its basis of
accounting from a going concern basis to a liquidation basis due to the
considerable uncertainty surrounding the net recoverable value of certain assets
and cannot determine the estimated settlement amounts of its liabilities as of
December 31, 1995, as a plan of reorganization has not been filed or confirmed
by the Bankruptcy Court.
Over the last three years, ICH's revenues, other than dividends from its
subsidiaries and a gain on the sale of its investment in Bankers Life and
Casualty Company ("BLCC"), have consisted of unaffiliated investment income,
income from subsidiaries (including interest on notes receivable and the
pass-through of management fees from its insurance subsidiaries to FMI),
realized investment gains (losses), and other miscellaneous income.
ICH's revenues have declined from $440.9 million in 1993, to $40.1 million
in 1994 and $4.9 million in 1995. Included in revenues in 1993 was a $297.0
million gain resulting from the sale of ICH's investment in BLCC. A substantial
portion of the remaining decline was attributable to a change in an internal
administrative procedure whereby beginning July 1, 1994, management fees due FMI
by ICH's subsidiaries were paid directly to FMI instead of being passed through
ICH. Such fees included in ICH's revenues in 1993 totaled $106.6 million and in
1994 totaled $40.0 million. Exclusive of such fees and the gain on the sale of
its investment in BLCC, ICH's revenues totaled $8.1 million in 1993, $0.1
million in 1994 and $4.9 million in 1995.
ICH's interest requirements and operating expenses over the past two years
have substantially exceeded its revenues, resulting in significant operating
losses on a separate company basis. Interest expense, primarily to unaffiliated
debt holders, totaled $36.6 million in 1995, as compared to $51.7 million in
1994 and $70.7 million in 1993. Operating expenses, excluding expenses
associated with ICH's reorganization and the expenses reflected as result of the
pass-through of FMI management fees, totaled $13.0 million in 1995, as compared
to $10.6 million in 1994 and $20.4 million in 1993. The excess of interest
expense and operating expenses over revenues resulted in operating losses,
before reorganization expenses and tax effects, totaling $44.8 million in 1995,
as compared to $62.1 million in 1994. Primarily as a result of the sale of its
investment in BLCC, ICH reported a pretax operating gain of $243.2 million in
1993.
Although not reflected as a component of revenues or operating earnings
(loss), ICH also received dividends from it subsidiaries totaling $21.5 million
in 1995, $47.8 million in 1994 and $43.7 million in 1993. Included in such
dividends were distributions to ICH of ICH's Senior Subordinated Notes due 1996
that had been held by subsidiaries totaling $21.5 million in 1995 and $9.0
million in 1994. The remaining dividends totaling $38.8 million in 1994 and
$43.7 million in 1993 were paid in cash. As a result of losses incurred by its
insurance subsidiaries in 1995 and 1994 as discussed below, the ability to
transfer funds to ICH in the form of dividends in 1995 was severely restricted
and the prospects for such subsidiaries being able to distribute a significant
amount of dividends in 1996 and in foreseeable future periods became remote.
As reported on the basis of generally accepted accounting principles
("GAAP"), ICH's subsidiaries incurred a net operating loss of $20.2 million in
1995, as compared to a net operating loss of $271.6 million in 1994. The loss in
1995 was primarily attributable to significant charges for income taxes
resulting from ICH's settlement of an IRS audit of income tax returns for the
period 1986 through 1989. Included in the operating loss in 1994 was a noncash
writedown of excess cost, or "goodwill," totaling $210.7 million resulting from
a change in ICH's accounting policy for assessing goodwill recoverability.
Primarily as a result of realized investment gains, ICH's subsidiaries reported
net operating earnings of $40.8 million in 1993. However, the ability of ICH's
insurance subsidiaries to pay dividends to its parent is not dependent upon such
reported GAAP results, but rather on statutory accounting practices ("SAP") as
prescribed or permitted by insurance regulatory authorities, which differ
significantly from GAAP. On the basis of such SAP reporting, ICH's insurance
subsidiaries reported net losses of $31.8 million in 1995 and $22.1 million in
1994, and net income, primarily resulting from realized capital gains, of $52.7
million in 1993.
FIRST AMENDED DISCLOSURE STATEMENT FOR THE FIRST
AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
C-3
<PAGE>
LIQUIDATING ACTIVITIES As previously discussed, ICH sold four of its
insurance subsidiaries on December 14, 1995, for a total sales price of $260.0
million. The consideration consisted of $210.0 million cash, $40.0 million in 7%
convertible subordinated notes of the purchaser due December 15, 2007, and
rights to PennCorp common stock with a value of $10.0 million (which on March 6,
1996, was collected in cash). Pursuant to the PennCorp Sales Transaction, $167.0
million of the cash proceeds were placed into interest-bearing escrow accounts
to satisfy ICH's obligations, if any, relative to certain tax, environmental,
legal and other indemnifications. On December 30, 1995, ICH contributed
approximately $64.9 million cash to its subsidiary, Modern American, to enable
Modern American to settle in full amounts due the IRS for additional taxes and
interest for the tax years 1986 through 1989, and, as a result, $67.0 million of
the funds held in escrow were released to ICH. At December 31, 1995, funds held
in the escrow accounts totaled $100.8 million. Of the escrowed amounts,
approximately $21.0 million has been identified in the Agreement as being
available to satisfy ICH's obligations with respect to additional income taxes
and interest which may be due for income tax years from 1990 through 1995. The
Agreement generally provides that funds from the escrow accounts can be
distributed to ICH upon the later of (1) August 31, 1997, (2) the disposal or
settlement of all claims by the Bankruptcy Court, or (3) the first day after
either the statute of limitations with respect to applicable federal income tax
matters have expired or ICH makes the final settlement payments to the IRS with
respect to its income tax obligations for open tax years through 1995.
Exclusive of amounts escrowed, ICH had cash and short-term investments
available to meet its continuing operational needs totaling $79.5 million at
December 31, 1995. As discussed above, on March 6, 1996, the $10.0 million
receivable for PennCorp common stock was collected in cash.
SALE OF SUBSIDIARIES. Subsequent to December 31, 1995, ICH has entered into
letters of intent with certain unaffiliated parties for the sale of Philadelphia
American, Modern American and Western, and has received an offer for the
existing insurance business of BML (see Note 3 of Notes to Financial
Statements). These letters of intent provide that certain assets as set forth
below will be distributed to ICH prior to their closing.
The sales of ICH's subsidiaries are subject to a number of uncertainties
which may impact the ultimate sales completion and proceeds. These uncertainties
include (1) the results of the purchasers' due diligence, (2) the purchasers'
ability to arrange financing and (3) receipt of regulatory approvals. The
ultimate realizable value of other assets retained by ICH will be dependent upon
finding qualified and capable purchasers.
FEDERAL INCOME TAX AND INDEMNIFICATION. ICH and its subsidiaries have been
under examination by the IRS for the tax years 1986 through 1992 and the IRS has
recently expanded its examination to include the years 1993 through 1995. In
1994, the IRS issued Notices of Proposed Deficiencies in the amount of $127.7
million to ICH's insurance subsidiaries and $0.2 million to ICH for the tax
years 1986 through 1989. In August 1995, ICH and its insurance subsidiaries
agreed to settle this matter by paying $33.8 million of additional income taxes
and $37.8 million of interest, which was paid by ICH's subsidiary, Modern
American, in December 1995. ICH contributed $64.9 million to Modern American for
payment of these taxes. ICH is indemnified by the third party seller of certain
former and presently owned subsidiaries relative to a portion of the additional
taxes and interest and is in the process of attempting to recover such amounts
under provisions of the indemnification. At December 31, 1995, ICH had recorded
a recoverable under such indemnity totaling $24.6 million; however, the actual
amount which will ultimately be recovered could be more or less than such
amount. ICH believes that it has a right to recover up to $37.3 million under
the indemnification agreement. Although the third party indemnitor has
recognized its obligation under the agreement, it has not agreed to any specific
amounts at the present time. In a separate matter, the third party indemnitor
has agreed to compensate ICH for certain tax loss carryback benefits which, with
interest, could total up to approximately $13.1 million. In view of the
uncertainties surrounding the indemnification agreement and the amounts to be
ultimately recovered, these tax loss carryback benefits have not been reflected
in the accompanying financial statements.
PROFITS INTEREST IN CFSB CORPORATION. CNC has agreed to share with ICH
certain economic benefits it receives in relation to CFSB, the holding company
James M. Fail organized to acquire Bluebonnet Savings Bank, FSB ("Bluebonnet").
Pursuant to an agreement dated January 25, 1993, and amended and restated
January 13, 1995, among CNC, Mr. Fail and CFSB, CNC has a 49% interest in (i)
dividends or other distributions to or for the benefit of Fail from CFSB
excluding amounts used for (a) interest and principal payments on certain debt,
(b) amounts specified for certain litigation settlements and (c) certain
dividend payments from Bluebonnet, (ii) proceeds from the sale or transfer of
CFSB common stock, other than to a related party or CNC, less certain amounts,
and (iii) benefits from CFSB's tax attributes. In accordance with a separate
agreement between CNC and ICH, ICH is entitled to receive 27.7% of the payments
CNC receives under CNC's agreement with CFSB and Fail, entitling ICH to 13.57%
of the benefits actually derived by CNC from CFSB.
Fail and certain of his affiliated entities are defendants in litigation
filed by the State of Arizona as receiver of Farm and Home Life Insurance
Company. Fail and certain other entities and the State of Arizona have reached a
settlement of this and related litigation pursuant to a settlement agreement
dated January 31, 1995, to which CFSB is a party (the "Arizona Settlement
Agreement"). The settlement has been approved by the Superior Court of the State
of Arizona
C-4
<PAGE>
("Arizona Court") but appealed by certain of the nonsettling respondents. The
settlement will be consummated upon the satisfaction of the conditions set forth
in the Arizona Settlement Agreement, including, among other things, certain
settlement orders becoming final and non-appealable. If the settlement should
occur, ICH expects to receive approximately $2.9 million in 1996 from its
agreement with CNC. This estimate is based on the distributions CFSB has
indicated it will make in accordance with the Arizona Settlement Agreement. If
the settlement does not occur, the ultimate outcome of this litigation or the
impact on CFSB, and on the value of ICH's indirect interest in CFSB, cannot
presently be determined. During 1995 and 1994, ICH received cash payments
totaling $133,000 and $277,000, respectively, from its indirect interest in
CFSB.
The value of ICH's indirect interest in CFSB is subject to considerable
uncertainty and no value is reflected in the accompanying GAAP financial
statements. The value is dependent upon, among other things, ICH's ability to
transfer its interest, the profitability of CFSB, and the decision of CFSB's
Board to declare dividends or take other actions.
REAL ESTATE. ICH owns various parcels of real estate with a carrying value
totaling $4,400,000, which consists of an office building, a 2,600 acre
residential and recreational development, an inn and golf course, and
undeveloped land. Management has recently begun actively marketing the
properties. Proceeds ultimately recovered on completion of the sales, net of
costs to sell, may be more or less than recorded in the accompanying financial
statements at December 31, 1995.
C-5
<PAGE>
EXHIBIT D
I.C.H. CORPORATION
PROJECTED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE BALANCE
SHEET AS OF ROLLFORWARD SHEET AS OF
12/31/95 TO 9/30/96 9/30/96
----------- ----------- -----------
<C> <S> <C> <C> <C>
ASSETS
1 Cash & Investments........................................................ 79,460 8,860 88,320
2 Restricted Cash & Investments............................................. 100,811 3,444 104,255
3 Investments in Subs held for Sale......................................... 100,172 98 100,270
4 Investments in FMI........................................................ 10,124 (552) 9,572
5 Debt Securities........................................................... 40,000 -- 40,000
6 Receivable from Sale of Sub............................................... 10,000 (10,000)
7 CFSB Interest............................................................. 18,000 18,000
8 Recoverable of 338H-10 from SFC........................................... 7,849 -- 7,849
9 Real Estate............................................................... 4,400 -- 4,400
10 Notes & Accounts Receivable............................................... 2,734 (1,543) 1,191
11 Recoverable on Tax Indemnification........................................ 24,600 -- 24,600
12 Federal Income Tax Refund................................................. 786 -- 786
13 Other Assets.............................................................. 1,098 1,526 2,624
----------- ----------- -----------
14 Total Assets.............................................................. 382,034 19,833 401,867
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES/CLAIMS
15 Post Petition Accrued Expense............................................. 3,986 (3,170) 816
16 Priority Tax Claims: Federal.............................................. 11,100 -- 11,100
Interco & Other........................................................... 3,234 2,281 5,515
Kentucky.................................................................. 2,310 -- 2,310
17 Retiree Benefits.......................................................... 5,565 -- 5,565
Liabilities subject to compromise:
18 Secured-Ozark (Class 1)................................................... 334 27 361
19 Secured-Sayyah (Class2) Disputed.......................................... --
20 Tenneco (Class 3)......................................................... 21,952 -- 21,952
Unsecured (Class 5):
21 11 1/4 due 1996........................................................... 266,425 -- 266,425
22 11 1/4 due 2003........................................................... 94,836 -- 94,836
23 Advances from FMI......................................................... 6,305 -- 6,305
24 Shaw/Rice Contract (Disputed)............................................. 5,775 -- 5,775
25 Sayyah (Disputed)......................................................... 4,575 -- 4,575
26 Castle.................................................................... 3,039 -- 3,039
27 Other..................................................................... 1,398 (937) 461
----------- ----------- -----------
28 Total Class 5............................................................. 382,353 (937) 381,416
----------- ----------- -----------
29 Total Liabilities/Claims.................................................. 430,834 (1,799) 429,035
----------- ----------- -----------
----------- ----------- -----------
STOCKHOLDERS' DEFICIT................................................................ 48,800 (21,632) 27,168
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
PROJ.
ADJ INVEST IN ADJ. FOR OPERATING BALANCE
SUB TO ADJ. FOR IRS TENNECO RESULTS 10/96 SHEET AS OF
MARKET(1) SETTLEMENT(2) SETTLEMENT(3) TO 12/96(4) 12/31/96
------------- ------------- ------------- ------------- -----------
<C> <C> <C> <C> <C> <C>
ASSETS
1 73,205 18,500 6,053 186,078
2 (69,255) 35,000
3 (10,861) 89,409
4 (308) 9,264
5 40,000
6 --
7 18,000
8 (7,849) --
9 (1,815) 2,585
10 (1,191) --
11 (24,600) -- --
12 (786) -- --
13 (2,155) 469
------------- ------------- ------------- ------ -----------
14 (10,861) 3,164 (6,100) (7,265) 380,805
------------- ------------- ------------- ------ -----------
------------- ------------- ------------- ------ -----------
LIABILITI
15 4,400 5,216
16 (11,100) --
(786) (4,729) --
(2,241) 69
17 -- 5,565
18 7 368
19 -- --
20 (21,952) -- --
21 -- 266,425
22 -- 94,836
23 -- 6,305
24 -- 5,775
25 (1,331) 3,244
26 -- 3,039
27 -- 461
------------- ------------- ------------- ------ -----------
28 (1,331) 380,085
------------- ------------- ------------- ------ -----------
29 -- (11,886) (21,952) (3,894) 391,303
------------- ------------- ------------- ------ -----------
------------- ------------- ------------- ------ -----------
STOCKHOLD 10,861 (15,050) (15,852) 3,371 10,498
------------- ------------- ------------- ------ -----------
------------- ------------- ------------- ------ -----------
</TABLE>
(FOOTNOTES CONTINUE ON FOLLOWING PAGE)
D-1
<PAGE>
- ----------------------------------
Note: Projected Balance Sheet includes assets and liabilities as shown on the
books of the Debtors and does not include any contingent and unliquidated
liabilities.
1 Adjusts ICH investment in BML, BML Agency and SWL to estimated market value
of such subsidiaries.
2 Change in Cash is $69,255 released from PennCorp Sales Transaction escrow
plus receipt of $3.95 million as a result of the Tax Settlement. The Federal
income tax refund of $786 and Federal tax liability of $11.1 million are
cancelled as a result of the Tax Settlement.
3 Reflects receipt of $18.5 million in cash, write-off of the $24.6 million
Recoverable in Tax Indemnification and elimination of Tenneco Claim of $21.9
million.
4 Includes collection of $7.8 million from former subsidiaries, payment of tax
liabilities due to former subsidiaries, accrual of management bonuses,
adjustment of Kentucky tax liability and other projected operating results.
D-2
<PAGE>
EXHIBIT E
I.C.H. CORPORATION
LIQUIDATION ANALYSIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHAPTER 7
------------------------------------------
PROJ. BALANCE EFFECT OF VALUE
SHEET AS OF CHAPTER 7 DISTRIBUTED IN
12/31/96 TRUSTEE CHAPTER 7
------------- --------- --------------
<C> <S> <C> <C> <C>
ASSETS
1 Cash & Investments.............................................................. 186,078 186,078
2 Restricted Cash & Investments................................................... 35,000 35,000
3 Investments in Subs............................................................. 89,409 89,409
4 Investments in FMI.............................................................. 9,264 9,264
5 Debt Securities................................................................. 40,000 40,000
6 CFSB Interest................................................................... 18,000 (9,000) 9,000
7 Real Estate..................................................................... 2,585 2,585
8 Other Assets.................................................................... 469 469
------------- --------- -------
9 Total Assets.................................................................... 380,805 (9,000) 371,805
------------- --------- -------
------------- --------- -------
LIABILITIES/CLAIMS
10 Post Petition Accrued Expense................................................... 5,216 5,216
11 Chapter 7 Trustee Exp & Compensation............................................ 3,318 3,318
12 Priority Tax Claims: Kentucky................................................... 69 69
13 Retiree Benefits................................................................ 5,565 5,565
Liabilities subject to compromise:
14 Secured-Ozark (Class 1)......................................................... 368 368
Class 5
15 11 1/4 due 1996................................................................. 266,425 266,425
16 11 1/4 due 2003................................................................. 94,836 94,836
17 Advances from FMI............................................................... 6,305 6,305
18 Shaw/Rice Contract Disputed..................................................... 5,775 5,775
19 Sayyah Disputed................................................................. 3,244 3,244
21 Castle.......................................................................... 3,039 3,039
21 Other........................................................................... 461 461
------------- --------- -------
22 Total Class 5................................................................... 380,085 380,085
------------- --------- -------
23 Total Liabilities/Claims........................................................ 391,303 3,318 394,621
------------- --------- -------
STOCKHOLDERS' DEFICIT................................................................ 10,498 12,318 22,816
------------- --------- -------
------------- --------- -------
Distributions:
Unsecured Creditors............................................................. 94.00
Preferred Class................................................................. --
Common Shareholder Class........................................................ --
</TABLE>
E-1
<PAGE>
EXHIBIT F
REORGANIZED I.C.H. CORPORATION
STATEMENTS OF FINANCIAL CONDITION (1)
IMMEDIATELY FOLLOWING EFFECTIVE DATE AND
FOR THE TWO YEARS ENDED FOLLOWING EFFECTIVE DATE
(IN THOUSANDS)
<TABLE>
<CAPTION>
IMMEDIATELY
FOLLOWING
EFFECTIVE DATE YEAR ONE YEAR TWO
-------------- --------- ---------
<S> <C> <C> <C>
Cash (2).................................................................................. $ 8,500.0 $ 8,595,4 $ 8,684.4
Perry Park (3)............................................................................ 2,585.0 2,585.0 2,585.0
-------------- --------- ---------
Total assets............................................................................ 11,085.0 11,180.4 11,269.4
-------------- --------- ---------
-------------- --------- ---------
Total liabilities......................................................................... -- -- --
Stockholders' equity...................................................................... 11,085.0 11,180.4 11,319.4
Total liabilities.......................................................................
-------------- --------- ---------
Stockholders' equity.................................................................. $11,085.0 $11,180.4 $11,319.4
-------------- --------- ---------
-------------- --------- ---------
</TABLE>
STATEMENTS OF OPERATIONS (1)
FOR THE TWO YEAR PERIOD FOLLOWING EFFECTIVE DATE
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ONE YEAR TWO
-------- --------
<S> <C> <C>
Investment income (4)........................................................... $701.3 $709.1
-------- --------
Total income.................................................................. 701.3 709.1
Compensation and benefits....................................................... 168.0 168.0
Occupancy and equipment......................................................... 52.0 43.5
Communications.................................................................. 95.5 95.5
Other........................................................................... 181.7 181.7
-------- --------
Total expenses................................................................ 497.2 488.7
Net gain (loss) on operations of Perry Park resort.............................. (75.0) (20.0)
-------- --------
Net income before taxes....................................................... 129.1 200.4
Income tax expense.............................................................. 33.6 61.5
-------- --------
Net income.................................................................... $ 95.4 $139.0
-------- --------
-------- --------
</TABLE>
- ------------------------
(1) The statements of financial condition and operations assume no operations of
Reorganized I.C.H. beyond the operating assets retained on the effective
date.
(2) Assumes the sale of BML to the Trust.
(3) Recorded at current net book value.
(4) Average rate of return assumed to be 8.25% annually.
F-1
<PAGE>
EXHIBIT 99.2
ICH CORPORATION
500 NORTH AKARD
DALLAS, TEXAS 75201
214. 954. 7111
NEWS RELEASE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
VOTING RECORD DATE ESTABLISHED FOR
ICH JOINT PLAN OF REORGANIZATION
DALLAS, TX--NOVEMBER 15, 1996--The Disclosure Statement to the First
Amended Joint Plan of Reorganization Under Chapter 11 proposed by ICH
Corporation ("ICH"), the Official Committee of Unsecured Creditors and the
Official Committee of Equity Security Holders was approved by the United
States Bankruptcy Court for the Northern District of Texas, Dallas Division.
The voting record date was established as November 15, 1996. All record
holders of claims against or interests in ICH on the record date will be
entitled to vote to accept or reject the Joint Plan. January 24, 1997 is set
as the voting deadline and the confirmation hearing to approve the Joint Plan
is scheduled to begin on January 31, 1997.
Under the Joint Plan, all assets of ICH, other than assets valued in the
aggregate at approximately $10.5 million which will remain at Reorganized ICH,
will be transferred to a Creditors Trust in exchange for and in full settlement
of all unsecured claims, including claims of holders of ICH's 11 1/4% Senior
Subordinated Notes due 1996 and 11 1/4% Senior Subordinated Notes due 2003.
Reserves are to be set aside for payment in full of all Administrative and
Priority Claims. Once the assets of the Trust are liquidated, creditors are
expected to receive distributions equal to approximately 96% of their claims
which amount would equal approximately 99.90% of the face value of the 11 1/4
Notes.
The assets which will remain at Reorganized ICH consist of the corporate
shell of Bankers Multiple Line Insurance Company, a multiple line insurance
company licensed in 50 states ("BML"), $2.5 million cash, certain real estate
located in Owen County, Kentucky and miscellaneous other assets. Reorganized
ICH will have the option for 90 days after the effective date of the Joint
Plan to sell BML to the Trust for $5 million. Preferred stockholders will be
allocated 55% of Reorganized ICH and the remaining 45% of the Reorganized ICH
will be allocated to the Common stockholders.
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Generally, preferred stockholders will be entitled to receive 0.2 shares
of Reorganized ICH Common Stock for each share of Preferred Stock held.
However, given the de minimus value of ratable distributions, holders who own
less than 14 shares of Preferred Stock will receive no shares of the
Reorganized ICH Common Stock and holders who own between 14 to 650 shares of
Preferred Stock may elect to receive a cash payment of $0.36 per share of
Preferred Stock in lieu of Reorganized ICH Common Stock. Also, holders of
more than 650 shares of Preferred Stock may elect to reduce their interest to
650 shares to receive a cash payment of $234 in lieu of Reorganized ICH
Common Stock.
Common stockholders entitled to receive shares of Reorganized ICH Common
Stock will be issued 0.0269 shares for each share of Common Stock held.
Holders who own less than 101 shares of Common Stock will receive no shares
of Reorganized ICH Common Stock and holders who own between 101 and 5,000
shares of Common Stock may elect to receive a cash payment of $0.05 per share
of Common Stock in lieu of receiving shares of Reorganized ICH Common Stock.
Holders of more than 5,000 shares of Common Stock also may elect to reduce
their interest to 5,000 shares and receive a cash payment of $250 in lieu of
Reorganized ICH Common Stock.
Effectiveness of the Joint Plan is subject to obtaining the requisite
votes of classes of impaired claims against and interest in ICH and the entry
of a final order of confirmation by the Bankruptcy Court.
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FOR FURTHER INFORMATION CONTACT:
Susan A. Brown (214) 954-7660
