Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Anacomp, Inc.'s Solicitation/Recommendation Statement
Dear Sirs:
Pursuant to Section 14(d)(4) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), Anacomp, Inc. (the "Company"), an Indiana
corporation, encloses its Solicitation/Recommendation Statement in response to
the Schedule 14(d)(1) filed by Questor Partners Fund, L.P. on April 19, 1996.
The Company's Exchange Act filing number is 1-8328.
Please direct any questions or comments to me at (212) 504-6754 or Richard
Knaub at (212) 504-6027.
Very truly yours,
/s/ Derek E. McNulty, Esq.
cc: George C. Gaskin, Esq.
Michael C. Ryan, Esq.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
---------------
In re: CHAPTER 11
CASE NOS. 96-15 THROUGH 96-19 (HSB)
KALVAR MICROFILM, INC., (JOINTLY ADMINISTERED)
ANACOMP, INC.,
ANACOMP INTERNATIONAL N.V., DISCLOSURE STATEMENT PURSUANT TO SECTION
FLORIDA A A C CORPORATION, and 1125 OF THE BANKRUPTCY CODE FOR THE
XIDEX DEVELOPMENT COMPANY, SECOND AMENDED JOINT PLAN OF
REORGANIZATION OF ANACOMP, INC. AND
CERTAIN OF ITS SUBSIDIARIES
Debtors.
Barry J. Dichter
Michael J. Sage
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
(212) 504-6000
Laura Davis Jones
Young, Conaway, Stargatt & Taylor
11th Floor
Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899
(302) 571-6642
ATTORNEYS FOR DEBTORS AND
DEBTORS-IN-POSSESSION
March 28, 1996
<PAGE>
DISCLOSURE STATEMENT, DATED MARCH 28, 1996
Solicitation of Votes
with Respect to the Second Amended
Joint Plan of Reorganization of
ANACOMP, INC. AND
CERTAIN OF ITS SUBSIDIARIES
THE DEBTORS BELIEVE THAT THE SECOND AMENDED JOINT PLAN OF
REORGANIZATION ATTACHED HERETO AS APPENDIX I IS IN THE BEST INTERESTS OF HOLDERS
OF CLAIMS AND INTERESTS. THE HOLDERS OF CLAIMS AND INTERESTS SOLICITED HEREBY
ARE URGED TO VOTE IN FAVOR OF THE PLAN. VOTING INSTRUCTIONS ARE SET FORTH ON
PAGES 98 TO 102 OF THIS DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT MUST BE
DULY COMPLETED, EXECUTED AND DELIVERED TO THE BALLOT AGENT NO LATER THAN 4:30
P.M., NEW YORK CITY TIME, ON MAY 8, 1996 (THE "VOTING DEADLINE").
------------------
THE HOLDERS OF CLAIMS AND INTERESTS SOLICITED HEREBY ARE ENCOURAGED TO
READ AND CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING THE PLAN
AND THE MATTERS DESCRIBED IN THIS DISCLOSURE STATEMENT UNDER "RISK FACTORS,"
PRIOR TO VOTING.
THIS DISCLOSURE STATEMENT HAS NOT BEEN SENT TO TRADE CREDITORS SINCE
THEY ARE NOT IMPAIRED, AND WILL BE PAID IN FULL, UNDER THE PLAN WITHOUT ANY NEED
TO FILE PROOFS OF CLAIM WITH THE BANKRUPTCY COURT. IN ADDITION, AS DESCRIBED
HEREIN, THE COMPANY HAS OBTAINED A COURT ORDER PERMITTING THE DEBTORS TO PAY
CURRENTLY AND IN THE ORDINARY COURSE OF BUSINESS THE PRE-PETITION CLAIMS OF
TRADE CREDITORS WHO CONTINUE TO PROVIDE THE DEBTORS WITH CUSTOMARY TRADE TERMS.
THIS DISCLOSURE STATEMENT HAS NOT BEEN SENT TO HOLDERS OF OLD COMMON STOCK SINCE
THEY ARE DEEMED TO HAVE REJECTED THE PLAN.
------------------
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN.
<PAGE>
-------------------
No person is authorized by the Debtors in connection with the Debtors'
Second Amended Joint Plan of Reorganization (the "Plan") or the solicitation of
acceptances for the Plan to give any information or to make any representation
other than as contained in this Disclosure Statement and the exhibits attached
hereto, and, if given or made, such information or representation may not be
relied upon as having been authorized by the Debtors. The delivery of this
Disclosure Statement will not under any circumstances imply that all of the
information herein is correct as of any time subsequent to the date hereof.
------------------
Each capitalized term used in this Disclosure Statement and not otherwise
defined herein shall have the meaning ascribed to such term in the Plan.
The summaries of the Plan and the related documents contained in this
Disclosure Statement are qualified in their entirety by reference to the Plan
itself. If there is any inconsistency between this Disclosure Statement and the
Plan and any operative documents Filed and to be Filed, the terms of the Plan
and the operative documents Filed and to be Filed shall control. The information
contained in this Disclosure Statement is included herein solely for the
purposes of soliciting acceptances of the Plan. If the Plan is not confirmed,
the Plan and this Disclosure Statement shall be deemed null and void, and
notwithstanding anything in the Plan or in this Disclosure Statement to the
contrary, nothing contained in the Plan or in this Disclosure Statement shall be
deemed (a) to constitute a waiver or release of any Claims by the Debtors or any
other Entity, (b) to prejudice in any manner the rights of the Debtors or any
other Entity, (c) to constitute any admission by the Debtors or any other
Entity, or (d) to constitute any admission or concession regarding any Claim or
Interest.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION.................................................................1
OVERVIEW OF THE PLAN.........................................................2
Introduction..............................................................2
Summary of Terms of New Senior Secured Notes..............................7
Summary of Terms of New Senior Subordinated Notes ........................9
Summary of Terms of New Warrants.........................................10
Corporate Reorganization.................................................11
Management Incentive Plan................................................11
Trade Claims.............................................................11
Releases.................................................................12
THE COMPANY.................................................................13
General..................................................................13
Present Business and New Operating Plan..................................14
Sales Force..............................................................22
Raw Materials and Suppliers..............................................22
Research and Development.................................................23
Facilities...............................................................24
Legal Proceedings........................................................25
DTSC Matters.............................................................25
AVAILABLE INFORMATION.......................................................26
CERTAIN EVENTS PRECEDING THE DEBTORS' CHAPTER 11 FILINGS....................26
POST-PETITION OPERATIONS....................................................28
Commencement of the Reorganization Case..................................28
Appointment of the Creditors' Committee..................................29
Plan Negotiations........................................................29
Request For Equity Committee.............................................29
Claims Process and Bar Dates.............................................30
Post-Petition Operations and Liquidity...................................30
Recent Litigation........................................................30
SELECTED FINANCIAL DATA FOR THE COMPANY.....................................32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................................34
Recent Developments......................................................34
Results of Operations - General..........................................34
Results of Operations - Products and Services............................38
Results of Operations - Other............................................42
Liquidity and Capital Resources..........................................43
PROJECTIONS OF CERTAIN FINANCIAL DATA.......................................46
PROJECTED CONSOLIDATED STATEMENTS OF OPERATIONS.............................48
PROJECTED CONSOLIDATED BALANCE SHEETS.......................................49
PROJECTED STATEMENTS OF CASH FLOWS..........................................50
Notes to the Projected Financial Statements..............................51
MANAGEMENT..................................................................54
Post-Restructuring Executive Officers and Directors......................54
Current Executive Officers and Directors.................................54
Initial Directors of Reorganized Anacomp.................................55
Director Compensation....................................................57
EXECUTIVE COMPENSATION......................................................57
Summary Compensation Table...............................................57
Employment Contracts.....................................................58
Termination of Employment and Change of Control Arrangements.............61
THE PLAN....................................................................61
Brief Explanation of Chapter 11..........................................61
Acceptance of the Plan...................................................62
Classification of Claims and Interests...................................63
Classification and Treatment of Claims and Interests Under the Plan......63
Treatment of Unclassified Claims.........................................63
Treatment of Trade Creditors and Employees Under the Plan................69
CONFIRMATION OF THE PLAN....................................................70
Chapter 7 Liquidation Analysis...........................................72
Liquidation of Anacomp...................................................73
LIQUIDATION PROCEEDS CALCULATION............................................74
APPLICATION OF PROCEEDS TO CLAIMS AND INTERESTS.............................76
Notes to Liquidation Analysis............................................76
Confirmation Without Acceptance of All Impaired Classes..................77
Conditions to Execution of the Plan......................................78
Means for Execution......................................................79
Effects of Plan Confirmation.............................................81
Distributions............................................................85
Miscellaneous Provisions.................................................91
CERTAIN RISK FACTORS........................................................94
Adverse Affect of Growth of Digital Technologies.........................94
New Operating Plan.......................................................94
Continuing Leverage; Future Refinancings.................................95
Securities Law Considerations............................................95
Market for Plan Securities...............................................97
Disruption of Operations.................................................97
THE SOLICITATIONS; VOTING PROCEDURES........................................97
Solicitations of Acceptances of the Plan.................................97
Voting on the Plan.......................................................98
Who May Vote.............................................................98
Voting Procedures for Holders of Impaired Claims and Interests
on the Record Date for Voting..........................................99
Beneficial Owners of Old Securities......................................99
Brokerage Firms, Banks and Other Nominees...............................100
Securities Clearing Agency..............................................100
Voting Deadline and Extensions..........................................100
Withdrawal or Change of Votes on the Plan...............................101
Ballot Agent............................................................101
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS..................................101
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE HOLDERS.....................102
Federal Income Tax Classification Matters...............................102
Federal Income Tax Consequences of Exchanges Required
by the Restructuring..................................................102
Classification as a "Security" for Federal Income Tax Purposes..........103
Exchange of Old Senior Notes for New Senior Secured Notes and Cash......104
Exchange of Old Senior Subordinated Notes for New
Senior Subordinated Notes and New Common Stock........................104
Exchange of Old 13.875% Subordinated Debentures for New
Common Stock and New Warrants.........................................106
Exchange of Old 9% Subordinated Debentures for New Common
Stock and New Warrants................................................106
Exchange of Old Preferred Stock for New Warrants; Exchange
of Old Common Stock For New Warrants..................................107
Cancellation of Old Warrants............................................107
Accrued but Unpaid Interest.............................................107
Issue Price.............................................................108
Original Issue Discount.................................................108
Amortizable Bond Premium................................................109
Market Discount.........................................................110
Disposition of Plan Securities..........................................110
Backup Withholding......................................................111
Adjustments.............................................................112
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY.....................113
Cancellation of Indebtedness............................................113
Subpart of Income Inclusion and Foreign Tax Credits.....................114
Limitation of Net Operating Loss Carryforwards
Following an Ownership Change.........................................115
EXPERTS....................................................................118
PRO FORMA UNAUDITED FINANCIAL INFORMATION..................................118
RECOMMENDATION AND CONCLUSION..............................................133
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................................F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS..................................F-11
<PAGE>
INTRODUCTION
This Disclosure Statement is submitted by Anacomp, Inc. (together with
Reorganized Anacomp, "Anacomp" or the "Company") and certain subsidiaries of
Anacomp that are debtors in the above-captioned Chapter 11 Cases (the
"Subsidiaries" and collectively with Anacomp, the "Debtors"). A copy of the
Debtors' Second Amended Plan of Reorganization, together with certain annexes
thereto (collectively, the "Plan") is attached hereto as Appendix I. The
Debtors, as proponents of the Plan, seek confirmation of the Plan under chapter
11 ("Chapter 11") of title 11 of the United States Code (the "Bankruptcy Code")
and submit this Disclosure Statement in connection with their solicitation of
acceptances of the Plan. The exhibits to the Plan will be Filed prior to the
hearing on confirmation of the Plan and are an integral part of the Plan.
The overall purpose of the restructuring embodied in the Plan (the
"Restructuring") is to achieve changes in Anacomp's capital structure which the
Company believes will enhance its long-term viability. Anacomp believes that the
Plan presents the best long-term solution to its present difficulties and that
the operations of the Company (including its relationship with suppliers and
customers) will be enhanced by the Restructuring. The Company expects the
consummation of the Plan, in conjunction with the continued implementation of
its new business strategy (as described below under "The Company," the "New
Operating Plan"), to result in (i) a reduction of approximately $173 million in
principal and accrued interest on its debt and liquidation amount of preferred
stock plus accrued dividends as of January 5, 1996; (ii) reduced debt service
obligations and adequate cash flow to fund such obligations and the Company's
operations; and (iii) a capital structure and cash flow intended to allow the
Company to invest in new technologies and to expand business opportunities into
new areas.
The terms of the Plan have been agreed upon by the Debtors, the
official committee of unsecured creditors appointed in the Chapter 11 Cases (the
"Creditors' Committee") and the Holders of Claims exceeding, in the aggregate,
two-thirds in dollar amount and one-half in number under the Old Senior Notes
and the Old Credit Facilities (the "Senior Secured Creditors"). Anacomp expects
that the Plan will be accepted by all Classes of impaired creditors, including
the Senior Secured Creditors, the Holders of the Old Senior Subordinated Notes,
the Holders of the Old 9% Subordinated Debentures and the Holders of the Old
13.875% Subordinated Debentures.
MANAGEMENT OF THE DEBTORS BELIEVES THAT THE PLAN IS IN THE BEST
INTEREST OF ALL HOLDERS OF CLAIMS AND INTERESTS. HOLDERS OF CLAIMS AND INTERESTS
SOLICITED HEREBY ARE URGED TO VOTE IN FAVOR OF THE PLAN BY DELIVERING THEIR
BALLOTS TO THE BALLOT AGENT NOT LATER THAN THE VOTING DEADLINE OF 4:30 P.M., NEW
YORK CITY TIME, ON MAY 8, 1996.
<PAGE>
OVERVIEW OF THE PLAN
Introduction
The following is an overview of certain material provisions of the Plan
and the Restructuring. This overview is qualified in its entirety by reference
to the provisions of the Plan itself. If there is an inconsistency between the
Plan and the exhibits thereto Filed and to be Filed, on the one hand, and this
Disclosure Statement, on the other hand, the terms of the Plan and the exhibits
thereto Filed and to be Filed shall control. For a more extensive discussion of
the Plan, see the discussion under the caption "The Plan."
Pursuant to the Plan, Holders of Claims and Interests will receive, in
full satisfaction of such Claims and Interests, the consideration set forth
below.
Claims and Interests:
CLASS 1: PRIORITY CLAIMS: Allowed Claims entitled to priority under the
Bankruptcy Code, other than an Administrative Claim or a Priority Tax Claim. The
Debtors do not anticipate any Class 1 Claims. Class 1 is unimpaired.
Treatment:
Each Holder of an Allowed Priority Claim will receive the Allowed amount of
such Claim, plus interest thereon to the extent applicable.
Claims and Interests:
CLASS 2: OLD CREDIT FACILITIES SECURED CLAIMS AND OLD SENIOR NOTES SECURED
CLAIMS: Claims under (a) the Old Credit Facilities ($66.3 million aggregate
principal amount outstanding and accrued interest outstanding as of January 5,
1996) and (b) 12.25% Series B Senior Notes due 1997 of the Company (the "Old
Senior Notes") ($53.8 million aggregate principal amount and accrued interest
outstanding as of January 5, 1996). The Debtors estimate that there are
approximately 15 Holders of Class 2 Claims. Class 2 is impaired.
Treatment:
Each Holder of an Allowed Class 2 Claim will receive its Pro Rata share of
(i) the Premium Amount ($2.75 million), (ii) the Cash Sweep Amount ($7.5
million) and (iii) the New Senior Secured Notes, and shall retain the Liens
securing its Claims. The principal amount of the New Senior Secured Notes shall
be an amount equal to $120 million minus the Cash Sweep Amount. The principal
economic terms of the New Senior Secured Notes are set forth on page 8 of the
Disclosure Statement.In addition, on the Effective Date, (a) the theretofore
unpaid fees and expenses of certain professionals of the Senior Secured
Creditors will be paid (subject to certain conditions specified in the Plan),
(b) the Citibank Agency Amount (approximately $1 million) will be paid to
Citibank, N.A., (c) undrawn letters of credit under the Old Credit Facilities
will be cash collateralized or replaced, and (d) each of the Senior Secured
Creditors will receive a payment of accrued and unpaid interest in the manner
provided in the Cash Collateral Order.
Claims and Interests:
CLASS 3: MISCELLANEOUS SECURED CLAIMS: Allowed Claims that are Secured
Claims other than Old Credit Facilities Secured Claims and Old Senior Notes
Secured Claims. The estimated amount of these Claims is $10.0 million and
consists exclusively of a security interest and lien upon certain collateral to
secure up to $10 million pursuant to the Trade Credit Security Agreement dated
as of October 7, 1993, between Anacomp and SKC America, Inc. ("SKC"). Class 3 is
unimpaired.
Treatment:
Each Holder of an Allowed Miscellaneous Secured Claim will at the Company's
option, either retain such rights to which such Claim entitles such Holder or be
treated in accordance with Section 1124(2) of the Bankruptcy Code.1
1 Section 1124(2) of the Bankruptcy Code provides that a claim is
unimpaired if the plan: (A) cures any such default that occurred before or after
the commencement of the case under this title, other than a default of a kind
specified in section 365(b)(2) of this title;
(B) reinstates the maturity of such claim or interest as such maturity
existed before such default;
(C) compensates 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) does not otherwise alter the legal, equitable, or contractual rights to
which such claim or interest entitles the holder of such claim or interest.
Claims and Interests:
CLASS 4: CARLISLE NOTE CLAIMS: Claims arising under, based Each Holder of
an Allowed Carlisle Note Claim upon or otherwise related to, the Carlisle Note
($2.6 will receive a New Carlisle Note in an amount million aggregate principal
amount and accrued interest equal to such Claim. outstanding as of January 5,
1996). Class 4 is impaired.
Treatment:
Each Holder of an Allowed Carlisle Note Claim will receive a New Carlisle
Note in an amount equal to such Claim.
Claims and Interests:
CLASS 5: OLD SENIOR SUBORDINATED NOTES CLAIMS: Claims under the Old Senior
Subordinated Notes ($224.9 million aggregate principal amount outstanding plus
unpaid accrued regular interest of $40.4 million outstanding as of January 5,
1996 and unpaid accrued interest on regular interest of $2.4 million outstanding
as of January 5, 1996). Holders of Old Senior Subordinated Notes Claims will not
receive payment of any interest accrued after November 1, 1994. Instead, all
accrued and unpaid interest through the Petition Date on Old Senior Subordinated
Notes has been taken into consideration in determining the amount of New Senior
Subordinated Notes that will be issued in exchange for Old Senior Subordinated
Notes on the Effective Date. The Debtors estimate that there are approximately
478 Holders of Class 5 Claims. Class 5 is impaired.
Treatment:
Each Holder of an Allowed Class 5 Claim will receive its Pro Rata share of
(i) the New Senior Subordinated Notes ($160 million), (ii) nine million two
hundred fifty thousand (9,250,000) shares of the New Common Stock (which is the
equivalent of approximately 41.12 shares of New Common Stock per $1,000
principal amount of Old Senior Subordinated Notes) and (iii) any consideration
payable to the Holders of Allowed Class 5 Claims, pursuant to Sections 5.6(b),
5.8(b) and/or 5.9(b) of the Plan, as a result of the rejection of the Plan by
Class 6 and/or Class 8. The principal economic terms of the New Senior
Subordinated Notes are set forth on page 10 of the Disclosure Statement.
Claims and Interests:
CLASS 6: OLD SUBORDINATED DEBENTURES CLAIMS: Claims under the (a) 9%
Convertible Subordinated Debentures due 1996 (the "Old 9% Subordinated
Debentures") ($10.5 million aggregate principal amount and accrued but unpaid
interest of $917,000 outstanding as of January 5, 1996) and (b) 13.875%
Convertible Subordinated Debentures due 2002 (the "Old 13.875% Subordinated
Debentures") ($23.2 million aggregate principal amount plus accrued but unpaid
regular interest of $3.1 million as of January 5, 1996) (collectively, the "Old
Subordinated Debentures"). The Debtors estimate that there are approximately
1,177 Holders of Old 13.875% Subordinated Debentures Claims. (The Debtors are
unable to estimate the number of Holders of Old 9% Subordinated Debentures
Claims, because the Old 9% Subordinated Debentures are bearer bonds). Class 6 is
impaired.
Treatment:
Each Holder of an Allowed Class 6 Claim will receive its Pro Rata share of
(i) seven hundred fifty thousand (750,000) shares of the New Common Stock, (ii)
two hundred fifty-nine thousand sixty-eight (259,068) New Warrants and (iii) any
consideration payable to the Holders of Allowed Class 6 Claims pursuant to
Sections 5.8(b) and/or 5.9(b) of the Plan, as a result of the rejection of the
Plan by Class 8. Specifically, each Holder of an Allowed Old 9% Subordinated
Debentures Claim will receive approximately 21.60 shares of New Common Stock and
7.46 New Warrants for each $1,000 principal amount of Old 9% Subordinated
Debentures, and each Holder of an Allowed Old 13.875% Subordinated Debentures
Claim will receive approximately 22.54 shares of New Common Stock and 7.78 New
Warrants for each $1,000 principal amount of Old 13.875% Subordinated
Debentures. If Class 6 does not accept the Plan, each Holder of a Class 6 Claim
will receive no consideration thereunder. The principal economic terms of the
New Warrants are set forth on page 11 of the Disclosure Statement.
Claims and Interests:
CLASS 7: GENERAL UNSECURED CLAIMS: Allowed General Unsecured Claims
including, without limitation, Trade Claims and Claims of present and former
employees of the Debtors. Claims in this Class aggregate approximately $32.0
million outstanding as of January 5, 1996. The Debtors estimate that there are
approximately 145 Holders of Class 7 Claims. Class 7 is unimpaired.
Treatment:
Each Holder of an Allowed General Unsecured Claim will receive (i) Cash
equal to the amount of such Claim, (ii) satisfaction by performance, (iii) other
payment or satisfaction as agreed by such Holder and the Company, or (iv) such
other treatment as will render such Claim unimpaired in accordance with Section
1124(2) of the Bankruptcy Code.
Claims and Interests:
CLASS 8: OLD PREFERRED STOCK: 8.25% Cumulative Convertible Redeemable
Exchangeable Preferred Stock of the Company (the "Old Preferred Stock") (an
aggregate of 485,750 shares outstanding with a liquidation preference of $24.3
million plus accrued but unpaid dividends of $1.5 million as of January 5,
1996). The Debtors estimate that there are approximately 103 Holders of Class 8
Interests. Class 8 is impaired.
Treatment:
Each Holder of an Allowed Class 8 Interest will receive its Pro Rata share
of sixty-two thousand one hundred seventy-six (62,176) New Warrants (which is
the equivalent of 2.56 New Warrants per $1,000 liquidation value of the Old
Preferred Stock). The principal economic terms of the New Warrants are set forth
on page 11 of the Disclosure Statement. Pursuant to the provisions of the Plan
regarding fractional shares, Holders of less than 4 shares of Old Preferred
Stock will receive no consideration. If either Class 6 or Class 8 rejects the
Plan, each Holder of a Class 8 Interest will receive no consideration
thereunder.
Claims and Interests:
CLASS 9: OLD COMMON STOCK: Shares of Common Stock, par value $.01 per
share, of the Company (the "Old Common Stock") (an aggregate of 46.2 million
shares issued and outstanding). The Debtors estimate that there are
approximately 21,881 Holders of Class 9 Interests. Class 9 is impaired, will not
be solicited and is deemed to have rejected the Plan.
Treatment:
Each Holder of an Allowed Class 9 Interest will receive its Pro Rata share
of forty-one thousand four hundred fifty (41,450) New Warrants (which is
equivalent to .0008 New Warrants per share of Old Common Stock). Pursuant to the
provisions of the Plan regarding fractional shares, Holders of less than 625
shares of Old Common Stock will receive no consideration. If either of Class 6
or Class 8 rejects the Plan, each Holder of a Class 9 Interest will receive no
consideration thereunder. The principal economic terms of the New Warrants are
set forth on page 11 of the Disclosure Statement.
Claims and Interests:
CLASS 10: CLAIMS FOR ISSUANCE OF OLD COMMON STOCK: Warrants Each Holder of
an Employee Option will to purchase Old Common Stock (the "Warrants"), employee
receive no consideration under the Plan. stock options and all other options
granted to employees of the Company (together with Warrants, "Employee Options")
to purchase Old Common Stock. The Debtors estimate that there are approximately
418 Holders of Class 10 Interests. Class 10 is impaired.
Treatment:
Each Holder of an Employee Option will receive no consideration under the
Plan.
Claims and Interests:
CLASS 11: INTERCOMPANY CLAIMS: Claims of non-Debtor subsidiaries of Anacomp
against any of the Debtors. Claims in this Class aggregate approximately $4.4
million. The Debtors estimate that there are approximately 5 Holders of Class 11
Claims. Class 11 is unimpaired.
Treatment:
Each Holder of an Intercompany Claim will, at the Company's option, either
retain such rights to which such Claim entitles such Holder or be treated in
accordance with Section 1124(2) of the Bankruptcy Code.
<PAGE>
SUMMARY OF TERMS OF NEW SENIOR SECURED NOTES
Principal Amount: Approximately $120 million less the Cash Sweep Amount
($7.5 million).
Interest: 11.625% per annum, payable semi-annually on
September 30 and March 31, beginning on September 30,
1996.
Maturity: Three and one-half years after the Effective Date.
Mandatory Redemption: Year 1 $34.2 million
Year 2 $34.2 million
Year 3 $34.2 million
Maturity Balance
The amounts payable in each year shall be payable on a
pro rata basis in two equal installments, beginning on
September 30, 1996. The amount of the first two (Year
1) installments shall, in each case, be reduced by
37.5% of the Cash Sweep Amount, and the amount of the
second two (Year 2) installments shall, in each case,
be reduced by 12.5% of the Cash Sweep Amount.
Collateral: First Lien on all of Reorganized Anacomp's domestic
account receivables, inventory, general intangibles,
plant, property and equipment; 100% of the stock of
Reorganized Anacomp's Domestic Subsidiaries; 100% of
the stock of Reorganized Anacomp's Foreign
Subsidiaries.
Optional Redemption: The New Senior Secured Notes shall be redeemable by
Reorganized Anacomp at any time prior to maturity at
100% of principal amount plus accrued interest.
Asset Sales: Lien to be released on receipt by Reorganized Anacomp
of net sale proceeds.
Ranking: The New Senior Secured Notes shall be senior to the New
Senior Subordinated Notes and all future Subordinated
Indebtedness of Reorganized Anacomp.
Registration: Provided that Class 2 shall have accepted the Plan, the
New Senior Secured Notes shall be registered pursuant
to the Shelf Registration Statement and freely
tradable.
THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE NEW
SENIOR SECURED NOTES INDENTURE, WHICH WILL BE FILED ON OR BEFORE
THE CONFIRMATION DATE.
<PAGE>
SUMMARY OF TERMS OF NEW SENIOR SUBORDINATED NOTES
Principal Amount: $160 million
Interest: 13.00% per annum, payable in cash semi-annually on June
30 and December 31; provided, however, that interest
shall be payable on June 30, 1996 (in the event that
the Plan shall have become effective by that date),
December 31, 1996 and June 30, 1997 in additional New
Senior Subordinated Notes.
Maturity: On the sixth anniversary of the Effective Date.
Collateral: None.
Optional Redemption: The New Senior Subordinated Notes shall be redeemable
by Reorganized Anacomp at any time prior to maturity at
an initial redemption price of 103% of principal amount
plus accrued interest, declining ratably to 101.5% in
year 5 and 100% thereafter.
Mandatory Redemption: None. Any outstanding New Senior Subordinated Notes
issued in lieu of cash interest shall be redeemed
before April 30 in the year that is five years after
the Effective Date at the rate then applicable to
optional redemptions.
Ranking: The New Senior Subordinated Notes shall be senior to
all future Subordinated Indebtedness of Reorganized
Anacomp and will be subordinated to the New Senior
Secured Notes to the same extent as the Old Senior
Subordinated Notes were subordinated to the Old Senior
Secured Notes and Old Credit Facilities.
Registration: Provided that Class 5 shall have accepted the Plan, the
New Senior Subordinated Notes shall be registered
pursuant to the Shelf Registration Statement and freely
tradable.
THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE NEW
SENIOR SUBORDINATED NOTES INDENTURE AND THE NEW SENIOR SECURED NOTES
INDENTURE, WHICH WILL BE FILED ON OR BEFORE THE CONFIRMATION DATE.
<PAGE>
SUMMARY OF TERMS OF NEW WARRANTS
Expiration Date: Five years after the Effective Date.
Exercise Rights: Each New Warrant entitles the Holder thereof to
purchase one share of New Common Stock at an exercise
price of $12.23 per share (which amount reflects a $400
million enterprise value for Reorganized Anacomp).
THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE NEW
WARRANTS AND THE NEW WARRANT AGREEMENT, WHICH WILL BE FILED ON OR BEFORE THE
CONFIRMATION DATE.
<PAGE>
Corporate Reorganization
As of the Effective Date, the Company will reorganize its corporate
structure (the "Corporate Reorganization") by merging the following
wholly-owned, inactive Domestic Subsidiaries into Reorganized Anacomp: Applied
Peripheral Systems, Inc., Cadren Systems Corporation, Data Management Labs,
Inc., Dysan International Sales Corporation, Dysan International Sales
Corporation II, Teksad Corporation, U.S. Video Corporation, Xidex Development
Company, Xidex International Sales Corporation, Xidex Magnetics International
Sales Corporation and Kalvar Microfilm, Inc. In addition, Computer Services
Corp., which is 97% owned by Anacomp, will also be merged into Reorganized
Anacomp. All of the Debtors, except Florida A A C and Anacomp International,
shall be substantively consolidated with, and merged into, Reorganized Anacomp.
Anacomp International will be liquidated and dissolved. Accordingly, following
confirmation of the Plan, Anacomp will have one domestic wholly-owned
subsidiary, Reorganized Florida A A C Corporation. Other than Anacomp
International, none of Anacomp's Foreign Subsidiaries will be affected by the
Plan. (Xidex GmbH, a German corporation, and a wholly-owned subsidiary of
Anacomp, is presently an obligor under the Multicurrency Revolver Loan
Agreement. Xidex GmbH's obligation will be satisfied through the issuance of the
New Senior Secured Notes.)
Management Incentive Plan
Upon or after the Effective Date, the Company will implement a stock option
plan for the benefit of the Company's post-Restructuring management (the
"Management Incentive Plan"). The Management Incentive Plan will provide for the
issuance of options to purchase up to 7 1/2% of the fully diluted New Common
Stock to be outstanding following consummation of the Restructuring. Such
options, if exercised, may dilute the New Common Stock issued on the Effective
Date pursuant to the Plan, depending on the option price.
Trade Claims
Holders of Trade Claims (vendors, suppliers, service providers, warranty,
obligations etc.) will be treated as if the Chapter 11 cases had never been
filed. To accomplish this, the Plan provides that Holders of Trade Claims will
retain all of their legal, equitable and contractual rights. Trade creditors
will not be required to file proofs of claims or take other action to enforce
their rights against the Company; provided, however, that if such Claim arises
from the rejection of an executory contract, a proof of claim must be filed.
After filing their petitions for relief under Chapter 11, the Debtors obtained
interim and final court orders permitting the Debtors to pay currently the
pre-petition Claims of those Trade Creditors who continue to provide the Company
with customary trade terms or who reinstate customary trade terms (collectively,
the "Trade Order").
Releases
All Claims against and Interests in the Debtors and all obligations of
borrowers or guarantors under the Old Credit Facilities and the Old Securities
will be released and discharged on the Effective Date in exchange for the
consideration provided under the Plan, except for Claims in Class 1, Class 3,
Class 7 and Class 10, and any Claims that may exist in favor of current or
former officers or directors or the Old Indenture Trustees for indemnification.
Various Persons are released under the Plan, including current and former
officers or directors. See "The Plan -- Effects of Plan Confirmation."
<PAGE>
THE COMPANY
General
Anacomp is the world's leading full-service provider of micrographics
systems, services and supplies and has over 15,000 customers in over 65
countries. "Micrographics" is the conversion of information stored in digital
form or on paper to microfilm or microfiche. Computer Output Microfilm (COM)
converts textual and graphical digital information at high speed directly from a
computer or magnetic tape to microfilm or microfiche.
Anacomp offers a full range of micrographics services and supplies,
including (i) micrographics processing services to customers on an outsourcing
basis through its 45 data service centers nationwide; (ii) micrographics systems
for users who perform their own data conversion; (iii) consumable supplies and
equipment for micrographics systems; and (iv) maintenance services for
micrographics equipment.
Anacomp also is a leading manufacturer and distributor of a wide range of
magnetics storage products including open reel tape, 3480 tape cartridges and
3490E tape cartridges.
The Company's fiscal 1995 revenue was $591.2 million. In fiscal 1995,
micrographics accounted for 78% of Anacomp's revenues and magnetics generated
22% of the Company's revenues in fiscal 1995. The table below sets forth
Anacomp's revenues by product and service line for the periods indicated:
<TABLE>
Year Ended September 30,
1993 1994 1995
(Dollars in Thousands)
------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Micrographics:
Services $125,226 21% $132,042 22% $132,314 22%
COM Systems 75,900 13 58,831 10 51,829 9
Equipment and Supplies 233,120 38 204,511 35 190,571 32
Maintenance 86,777 15 89,911 15 85,732 15
Magnetics 72,703 12 98,816 17 128,353 22
Other 6,482 1 8,488 1 2,390 0
-------- ---- -------- --- -------- ----
Total $590,208 100% $592,599 100% $591,189 100%
======== === ======== === ======== ===
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
With the appointment of P. Lang Lowrey III as President and Chief Operating
Officer on May 15, 1995, Anacomp undertook a three-month planning -+process to
reevaluate the Company's strategies in light of its current financial situation
and the micrographics industry's future. The stated objective of this planning
process was to transform Anacomp into a cash driven business focused on its
balance sheet and debt-to-equity ratio. As a result of this thorough analysis of
the Company and its markets, the Company adopted a new business strategy which
focused on (i) reducing costs by centralizing administrative functions, merging
numerous data service centers and offices, and reducing headcount; (ii)
outsourcing or exiting low-margin, non-strategic businesses; and (iii) investing
in high-margin products and services that are complementary to the Company's
core micrographics business.
The continuing development of local area computer networks and similar
systems based on digital technologies has resulted and will continue to result
in at least some Anacomp customers changing their use of micrographics from data
storage and retrieval to primarily data storage. The Company believes this is at
least part of the reason for the declines in the past two fiscal years in sales
of the Company's duplicate film, readers and reader/printers. Anacomp's service
centers also are producing fewer duplicate microfiche per original for
customers, reflecting this use of micrographics primarily for storage. The
rapidly changing data storage and management industry also has resulted in
intense price competition in certain of the Company's markets, particularly
micrographics services. Anacomp's operating income as a percent of revenue
(excluding restructuring and special charges) has decreased to 7% in fiscal 1995
from 13.4% in fiscal 1994, 15% in 1993 and 15.9% in 1992.
Present Business and New Operating Plan
Micrographics Services
At present, COM services generate most of the Company's micrographics
services revenues. The Company plans to generate additional revenue from a
multitude of additional customer services including (i) Compact Disc-Recordable
(CD-R) services, (ii) print and mail services, and (iii) archival services
offered through the Company's 45 data service centers in the United States.
Anacomp's data service centers, which generally operate 24 hours per day every
day of the year, receive on a daily basis thousands of magnetic tapes or direct
computer transmissions from more than 8,000 customers. The data service centers
then convert the information on these tapes to 16mm microfilm or to microfiche,
which is a 4" x 6" microfiche card capable of storing up to 1,000 pages of
computer output. Together these services comprise Anacomp's most profitable
business line. Anacomp's objective is to protect this highly profitable
business, while introducing complementary, high-growth services such as CD-R
output, print and mail, and archiving. The Company will market these new
services as additional, not replacement, services to its core micrographics
services. Pursuant to this strategy, Anacomp envisions selling each image it
processes up to four times:
Once to output the image to microfilm or microfiche for safe, long-term
storage.
Once to output the image to CD-R for short-term storage and frequent
retrieval.
Once to output the image to paper to be mailed directly to the clients'
customers.
Once to store the image for a customer at an Anacomp site for archival
purposes.
The Company believes these additional services can be added at minimal cost
by leveraging its existing production and sales infrastructure.
Anacomp currently has an estimated 25% market share of the approximately
$440 million COM services business. COM services have been facing increased
pricing pressure due to competitive market conditions. To combat declining
prices, Anacomp completed installation of the XFP 2000 COM systems in all of its
data centers in 1995, increasing the efficiency of COM production. Additionally,
<PAGE>
Anacomp will upgrade these systems with Anacomp-developed emulation
software for IBM and Xerox laser print streams, which expand the potential
market for COM services and command higher average prices than other COM output.
Anacomp believes that these technological improvements will partially offset the
declining pricing trends in COM services.
Anacomp also plans to use its existing data centers to expand into new
markets, specifically CD-R, print and mail, and archival services.
With CD-R services, Anacomp outputs the customer's data from magnetic tape
or computer file to a recordable compact disc. For most CD-R customers, Anacomp
simultaneously records their data onto microfilm or microfiche. Anacomp
introduced this service at a selected number of its U.S. data centers in fiscal
1995 and plans to expand this service during 1996.
Anacomp will introduce to its customers in fiscal 1996 print and mail
services, which involves outputting customer data to paper usually on
pre-printed forms then mailing the printed information directly to the
customer's clients. Anacomp will also introduce archival services, which
involves storing the customer's images at an Anacomp facility, to its customers
in 1996. Both of these services are highly compatible with Anacomp's existing
COM services business. Archival services present a highly profitable new market
for micrographics services since start-up costs will be held to a minimum by
using available space within current Anacomp facilities.
In addition, Anacomp offers External Facilities Management ("XFM")
services. In a typical XFM arrangement, Anacomp sells an XFP 2000 system to a
customer who then pays Anacomp to operate and manage the customer's COM output.
Anacomp charges the customer monthly fees based on the volume of COM products
produced and also receives additional income from supplies and maintenance
charges.
Customers and Distribution
Anacomp has a large customer base which has proved to be loyal to Anacomp
in the past. Anacomp's micrographics services customers include a majority of
the Fortune 500 companies, banks, insurance companies, financial service
companies, retailers, healthcare providers and government agencies, such as
Automatic Data Processing, Inc. ("ADP"), Citicorp, Electronic Data Systems Co.
("EDS"), General Electric Capital Corporation, The Home Depot, Inc. and IBM
(none of which accounted for more than 5% of Anacomp's micrographic services
revenues in fiscal year 1995). The typical service contract is exclusive, lasts
one year with a one-year automatic renewal period and provides for usage-based
monthly fees, subject to increase on 30 days' notice. Approximately 75% of
Anacomp's micrographics services customers are subject to contracts and more
than 95% of such contracts are renewed annually.
<PAGE>
Competitors
Data service center industry competition is primarily limited to service
centers within a 50-mile radius of a customer because of the emphasis on rapid
turnaround. Anacomp and First Image (which has 66 data service centers) are the
two largest national data service center organizations with approximately 25%
and 35% of the market, respectively. The remainder of the market is served by
numerous small data service centers.
COM Systems
General
Anacomp is the world's leading manufacturer and distributor of COM systems
(a $50 million market worldwide), offering a complete line of COM recorders,
processors, duplicators and related software. Anacomp's installed base of COM
systems, approximately 55% of those in use worldwide, is more than twice as
large as its nearest competitor, and related sales of COM services and supplies
to the installed base provide the Company with a recurring revenue stream that
constitutes a significant portion of its annual revenues.
The XFP 2000, which is manufactured by Anacomp, is the most advanced COM
recorder on the market and has enabled the Company to capture an estimated 75%
of all new COM systems sold or leased. The XFP 2000 is faster and more reliable
than previous COM recorders and, through its laser technology, has the
capability to generate precise reproductions of any image. The Company sold or
leased 153 new XFP 2000 systems in fiscal 1995 compared to 165 in 1994. Pursuant
to an OEM agreement entered into in 1990, Kodak is obligated to purchase an
additional 151 XFP 2000 systems by October 1997 or pay a cash penalty to
Anacomp. In 1996, Anacomp will introduce an XFP 2000 (DragonCOM) for the Asian
market which is capable of processing Chinese, Korean, Taiwanese, Japanese and
other ideographic languages utilizing the popular IBM Advanced Function
Presentation ("AFP") architecture. Anacomp intends to market the DragonCOM to
customers in Asia given the great demand for micrographics in Asian countries,
particularly China.
Anacomp also has developed two new software products that emulate IBM and
Xerox laser print streams. AFP software developed in conjunction with IBM
enables the XFP 2000 to process and image AFP formatted data streams used by IBM
high-speed mainframe laser printers. Xerox Compatibility Feature ("XCF")
software developed in partnership with Xerox enables the XFP 2000 to process the
same data stream used by Xerox high-speed, high-volume laser printers. Anacomp
believes these enhancement features will expand the potential market for COM
output both by the sale of upgrade kits and additional XFP 2000 systems.
To minimize the costs associated with the production of COM systems,
Anacomp has implemented a "just-in-time" philosophy for fiscal 1996. In 1996,
the Company introduced a print-for-pay usage plan for competing U.S. service
bureaus unwilling to purchase or lease XFP 2000 hardware. Under this plan, the
Company will place XFP 2000 systems with competing service bureaus for little or
<PAGE>
no up-front cost to replace older generation COM recorders. Anacomp will
generate revenues by charging the service bureau on a usage basis. Anacomp also
expects this program to generate additional supplies and maintenance revenues.
Anacomp had offered two host output digital products -- XSTAR hardware and
XSTAR software. The Company sold only one XSTAR hardware system in 1995 and
going forward will put more focus on XSTAR software. In addition, Anacomp seeks
to establish strategic alliances with leading technology companies in order to
gain access to digital technologies and reduce development time and expense.
Anacomp's technological leadership in micrographics, large customer base and
worldwide distribution network will continue to make it an attractive strategic
alliance partner.
Customers and Distribution
Principal customers for the Company's COM systems include information
intensive organizations such as banks, insurance companies, financial service
companies, retailers, healthcare providers, and government agencies, and
non-Anacomp COM data service centers. Recent purchasers of the XFP 2000 include
Aetna, American Airlines, Inc., AT&T Corp., Chemical Banking Corporation, CIGNA
Corporation, Cincinnati Bell Inc., EDS, GTE Corporation, NYNEX Corporation,
PepsiCo, Inc., the State of Washington, The Travelers Inc. and Westinghouse
Electric Corporation. While the majority of COM systems are sold outright, the
Company does offer customers three or five-year lease options.
International sales accounted for 41% of the Company's fiscal 1995 sales of
COM system units. In foreign markets, Anacomp sells COM systems through wholly
owned operating subsidiaries and, in countries in which Anacomp does not have a
subsidiary, through dealers and agents. In 1994, Kodak became the Company's
exclusive distributor in Asia (other than Japan) and Australia.
Competitors
The Company's primary competitors in the sale of COM systems are
Agfa-Gevaert AG ("Agfa") and Micrographic Technology Corporation ("MTC").
Anacomp manufactures, on a private label basis, the COM systems sold by Kodak
through an OEM agreement. In some instances, Anacomp and Kodak compete directly
for the same COM system sales. Competition is based principally on product
features, as well as on such factors as product quality, service and price.
Anacomp sells approximately 75% of all new COM systems sold worldwide. Anacomp's
large installed base is an important competitive advantage in the sale of new
COM systems because changing from one manufacturer's COM system to another is
difficult due to software conversion and operator training costs.
Micrographics Equipment and Supplies
General
Anacomp sells the most comprehensive line of micrographics supplies in the
world, offering original halide film, duplicate film, chemicals for microfilm
<PAGE>
processing, paper and toners for reader/printers, micrographics lamps and bulbs,
and other consumables. In addition to offering supplies, Anacomp designs,
manufactures and markets a complete line of microfilm/microfiche readers and
reader/printers. With the exception of proprietary wet and dry original halide
film used in its XFP series of COM systems, many of these products have become
only marginally profitable in recent years.
To increase profitability, Anacomp has signed an agreement to outsource the
manufacture of readers and reader/printers beginning in fiscal 1996 as demand
and margins for these products continue to decline. Additionally, the Company
will cease production of the DS 300 (a PC-connected workstation introduced in
1993 that scans, digitizes and electronically converts micrographic images on
demand) in 1996 after completing a build-out of inventory. These decisions
resulted in a significant one-time write-off in 1995. However, Anacomp will
continue to offer these types of products to its customers on a reseller basis
beginning in 1996.
Anacomp supplies proprietary wet and dry original halide film used in its
XFP series of COM systems and proprietary dry original halide film for its X
Series, an earlier generation of Anacomp COM systems. All original microfilm for
Anacomp's COM systems is manufactured for Anacomp by Kodak in what the Company
considers to be a proprietary package.
The proprietary film used in the XFP 2000 represents the only original COM
film segment that is currently growing. The Company also believes it can
maintain its market share of XFP 2000 dry film sales going forward because of
the complexity of the manufacturing process, Anacomp's patents on its
proprietary canister and the industry's interest in other segments of the film
business.
Anacomp is the world's largest supplier of duplicate microfilm, which is
used to create one or more additional copies of original microfiche and
microfilm masters. The Company's share of this estimated $80 million worldwide
market is approximately 69%, which includes sales to its own data centers. The
total market for duplicate film has declined as the ratio of duplicates to
masters declines and as customers convert to digital technologies.
The cost of producing all microfilm products has risen because of a
worldwide shortage of polyester, which is the principal raw material for
microfilm products. See "The Company -- Raw Materials and Suppliers."
Customers and Distribution
Anacomp sells its consumable supplies directly to more than 90% of its
worldwide installed base. In addition, the Company's indirect sales operation
sells supplies to dealers and distributors throughout the United States.
Original microfilm sales include film sold for Anacomp's COM systems and
for other manufacturers' COM systems, with film sold for Anacomp's systems
representing the vast majority of original microfilm sales. Beginning in October
<PAGE>
1994, Anacomp became the exclusive provider of duplicate film to First Image,
Anacomp's primary competitor in the data service center business and one of the
world's largest consumers of duplicate microfilm.
International sales in fiscal 1995 accounted for 29% of the Company's total
micrographics supplies and equipment revenues. In foreign markets, Anacomp
offers supplies through wholly owned operating subsidiaries and, in countries in
which Anacomp does not have a subsidiary, through a network of dealers and
distributors.
Competitors
For non-OEM sales of the XFP 2000, Anacomp has in the past been the
exclusive supplier for original microfilm because of the proprietary nature of
the canister in which the film is placed. Certain of Anacomp's competitors,
however, are considering introducing original microfilm canisters for use in the
XFP 2000. See "Recent Litigation." Anacomp competes in sales of non-proprietary
original COM microfilms with other manufacturers, including Agfa, Fuji Photo
Film Co., Ltd. ("Fuji"), Kodak and Minnesota Mining & Manufacturing Company
("3M"). Anacomp's worldwide market share for COM microfilms is approximately
55%.
Anacomp is the world's largest supplier of duplicate microfilm with an
estimated 70% share of the U.S. market and an estimated 65% share of the
non-U.S. market. Anacomp's primary competitor in the duplicate microfilm market
is Rexham Graphics Ltd. ("Rexham") with an estimated 31% share of the worldwide
duplicate film market.
Anacomp has an estimated 33% of the micrographics supplies and equipment
market in Europe and estimated 39% of the supplies and equipment market in the
Americas (excluding the United States) and Asia. In Europe, the Company's
primary competitors for micrographics supplies and equipment are Kalle Microfilm
Division of Hoechst AG ("Kalle"), A. Messerli AG and Rexham. Its primary
competitors in Japan are Kodak and Fuji.
Maintenance Services
General
Anacomp provides 24-hour a day maintenance services through approximately
800 service employees operating in various countries worldwide. In such
countries, Anacomp maintains approximately 2,190 of the COM recorders in use.
Increased maintenance margins usually result from incremental COM systems sold
to the same customer site because the Company is able to provide maintenance
without adding maintenance centers or a significant number of personnel. COM
maintenance services are facing increased pressure with the improved capacity
and efficiency of the XFP 2000 resulting in reduced maintenance revenues as
customers are able to process more volume on fewer COM systems. However, Anacomp
believes that operating margins will benefit from sales of additional XFP 2000
systems because XFP 2000 systems require less maintenance than older COM
systems. The Company also believes additional maintenance services for AFP and
XCF enhancement upgrades to the XFP 2000 should partially offset this decline.
Additionally, Anacomp plans to continue adding selected non-micrographics
products to its service base while restructuring its maintenance organization in
1996 to reduce costs.
<PAGE>
Customers and Distribution
Anacomp's maintenance services division encompasses the Company's
maintenance services operations in the United States as well as a field support
group for the Company's data service centers. This department consists of 516
field service engineers and managers who provide geographic coverage through ten
districts in the United States. Anacomp provides maintenance services primarily
to its installed base of COM systems, although the Company has begun to service
non-Anacomp COM systems and selected data processing products. As part of a
September 1993 agreement between Anacomp and First Image, Anacomp became First
Image's exclusive COM system maintenance provider nationally. Anacomp's standard
maintenance contract is an exclusive, two-year contract with an automatic
two-year renewal period. The prices under a standard maintenance contract are
fixed for nine months and thereafter are subject to up to 10% annual increases
upon 90 days' notice. Maintenance contracts on the XFP 2000 also provide for
incremental charges for every image over a certain number of images processed.
To reduce costs, Anacomp will reduce maintenance headcount and operating
expenses. In addition, Anacomp is reducing field support costs by consolidating
its hardware and software analysts. Anacomp also has consolidated its two U.S.
customer service centers for micrographics customers to its Poway, California
facility. The Company expects the synergies created by this consolidation to
improve customer support while also reducing costs.
International operations accounted for 38% of the Company's maintenance
revenues in fiscal 1995. COM systems sold directly in foreign markets are
maintained by Anacomp employees operating through Anacomp's foreign
subsidiaries. COM systems sold in foreign markets through distributors are
generally maintained by the employees of such distributors.
Competitors
Historically, competition in maintenance has been limited as most customers
tend to use the maintenance services of the vendor that installed their system,
though some customers choose to employ in-house maintenance staffs. Thus,
revenues are primarily a function of new COM system sales and the size of the
installed base.
Anacomp has the infrastructure to compete for service contracts on other
COM products or selected data processing products, and the Company is actively
seeking such business. In March 1992, Anacomp acquired the COM maintenance
service operations of TRW Inc. ("TRW"), the last major third party provider of
such services. The TRW operations were integrated into Anacomp's existing
maintenance organization. These operations expanded the Company's maintenance
service base and created new opportunities for COM system and supplies sales.
<PAGE>
Anacomp's COM maintenance market share is approximately 65% in the United
States, 50% in Europe and 15% in the Americas (excluding the United States) and
Asia.
Magnetics
General
Anacomp manufactures, sells and distributes a broad range of magnetics
products such as open reel tape, 3480 data tape cartridges, TK 50/52
"CompacTape" data tape cartridges and 3490E data tape cartridges. Anacomp is the
world's largest manufacturer of half-inch tape products, which includes 3480 and
3490E tape cartridges, open reel tape and CompacTape. However, with the
exception of 3490E cartridges, Anacomp has faced declining demand for these
products along with steady increases in raw material costs, particularly
polyester.
To address these overall trends, the Company plans to cut costs
aggressively in fiscal 1996. Anacomp also believes it can partially offset
expected cost increases with higher market prices in selected product lines,
particularly open reel tape and 3480 cartridges. Additionally, continued
synergies from Anacomp's acquisition in 1994 of Graham Magnetics along with the
Company becoming a distributor of Memorex branded magnetic media products is
projected to partially offset market trends.
Anacomp also is seeking new applications and markets based on its magnetics
coating capacity. In 1995, Anacomp introduced voice logging tape and
instrumentation tape. Voice logging tape is used by brokerage companies, "911"
emergency service providers and other entities to record telephone
conversations. Instrumentation tape is used by various government agencies to
measure and record sensitive data. Both of these products cost little to develop
since they use a slightly modified version of tape already manufactured for
other magnetics products. In 1996, Anacomp began to use magnetic coated media to
manufacture transfer tape, which is found on the back of transaction media
(similar to credit and phone cards). Each of these new products will cost little
to introduce and will absorb a substantial amount of fixed factory costs.
Anacomp is actively seeking partnerships that will enable the Company to
participate in the next generation of magnetic media products including
half-inch metal particle tape.
Due to decreasing demand and falling prices, Anacomp ceased production of
"cookies," which are the magnetic media used in manufacturing flexible (or
"floppy") diskettes. As a result, Anacomp closed its Omaha, Nebraska facility in
October 1995, absorbing a one-time shut-down charge in fiscal 1995.
To reduce costs, the Magnetics Group's senior management has been reduced
30% through the creation of a European organization and a U.S. & Asia/Pacific
organization. In October 1995, Anacomp closed its Bedford, Texas office,
reducing headcount significantly and consolidating the remaining functions into
existing Anacomp facilities in Atlanta, Georgia and Grand Prairie, Texas.
<PAGE>
Customers and Distribution
Anacomp primarily sells its magnetics products through its worldwide
distributor and dealer network and, to a lesser extent, through parts of its
196-person direct sales force. In addition, the Company also manufactures its
open reel, 3480 and 3490E tape products on an OEM basis for internationally
recognized brands. Anacomp markets its products under the "Dysan,"
"StorageMaster," "Memorex" and "Graham" trademarks.
Competitors
Anacomp has no significant competitors with respect to the manufacture of
open reel tape, and its worldwide market share is estimated at 92%. Anacomp
competes with 3M and BASF AG in the sale of open reel tape, 3480 and 3490E data
cartridges. Anacomp's worldwide market share for 3480 and 3490E data cartridges
is estimated to be 38% and 35%, respectively.
Sales Force
The Company employs 225 salespeople worldwide. The Company maintains three
separate domestic sales forces: (i) the U.S. Group, which employs 127
salespeople, is comprised of 10 regions responsible for sales of micrographics
and CD-R services, COM systems and related maintenance services, supplies and
equipment, sales of digital products and direct sales of magnetics products;
(ii) the Strategic Partners Group responsible for sales to competitive service
bureaus and government agencies as well as spearheading the Company's new
telemarketing efforts; and (iii) the Magnetics Division responsible for sales of
magnetics products primarily to dealers and distributors.
Anacomp employs 64 salespeople who sell to customers located abroad. In
countries in which Anacomp does not have a subsidiary, the Company sells through
approximately 100 distributors and agents.
Raw Materials and Suppliers
Polyester is the principal raw material used in the manufacture of
microfilm and magnetic media products. Anacomp believes that the recent
worldwide shortage of polyester is likely to continue, and that the cost of
polyester-based products will continue its recent increases over the next
several years. To date, Anacomp has had little success in its efforts to limit
the amount of the cost increases that its microfilm and magnetics polyester
vendors have imposed upon the Company. Anacomp is uncertain whether it can pass
along to its film customers all of the cost increases that it has experienced
and may in the future experience, and Anacomp's inability to do so could
adversely affect the Company's profitability.
In October 1993, SKC purchased Anacomp's Sunnyvale, California duplicate
microfilm facility and entered into a ten-year supply agreement (the "Supply
Agreement") with Anacomp pursuant to which SKC became the Company's sole
duplicate microfilm supplier. In connection therewith, SKC invested several
million dollars to consolidate and to enhance the Sunnyvale facilities in order
to improve both productivity and film quality. SKC's duplicate film production
is dedicated exclusively to Anacomp and, during fiscal 1995, Anacomp purchased
approximately 490 million square feet of duplicate microfilm from SKC, costing
approximately $40 million. In connection with the Supply Agreement, SKC also
<PAGE>
provided Anacomp with a $25 million trade credit facility (secured by up to $10
million of inventory sold to Anacomp by SKC) under which the Company is
currently in default. In connection with the Supply Agreement, the Company has
agreed to certain price increases in 1996 and to pay the following amounts to
SKC thereafter: (a) $400,000 in 1997; (b) $600,000 in 1998; (c) $800,000 in
1999; (d) $800,000 in 2000; and (e) $1,000,000 in 2001.
Pursuant to the Supply Agreement, SKC also provides Anacomp with a
substantial portion of its polyester requirements for its magnetic media
products. In fiscal 1995, Anacomp used more than 7.6 million pounds of
polyester, costing approximately $13.7 million, in its magnetic business. While
Anacomp could purchase certain of these magnetics polyester products from
vendors other than SKC, SKC is currently the sole available source for polyester
used by Anacomp to manufacture many magnetics products, including open reel
tape. SKC's inability or refusal to supply this polyester in the future might
force Anacomp to cease manufacturing open reel tape or other magnetics products,
which would negatively impact Anacomp's profitability and prevent Anacomp from
fulfilling its contractual obligations to its customers.
The Company's XFP 2000 COM recorder utilizes a proprietary, patented
original film canister, and the original film used in that canister is supplied
exclusively by Kodak. The Company also purchases from Kodak substantially all of
Anacomp's requirements for original microfilm for earlier-generation COM
recorders manufactured by Anacomp and others, although the Company has from time
to time purchased the original microfilm utilized in those older COM systems
from other vendors.
Research and Development
Anacomp plans to reduce engineering costs substantially by shifting away
from the research and development of various micrographics products. Anacomp
will finish the development of its DragonCOM product and its AFP print stream
emulation software, but will focus research and development on new digital
products. Additional research and development cost reductions are planned,
including the continued downsizing of the engineering staff located at the
Company's principal manufacturing facility in Poway, California. These cost
cutting initiatives will drastically cut overall engineering and research and
development costs in fiscal 1996 compared to previous years.
Anacomp owns various patents and licenses covering aspects of its products
and production processes, as well as proprietary trade secret information with
respect to such products and processes. While Anacomp believes that the
protection provided by these patents, licenses and proprietary information is
important to the Company, it also believes that of equal significance is the
knowledge and experience of its management and personnel and their abilities to
develop and market the Company's products and to provide value-added services in
connection with such products.
<PAGE>
Facilities
Anacomp maintains administrative offices at 11550 North Meridian Street in
Carmel, Indiana (a suburb of Indianapolis) and its executive offices at 2115
Monroe Drive in Atlanta, Georgia. In 1992, the Company opened a new
manufacturing and operations center in Poway, California, near San Diego. The
facility consolidated one-fourth of Anacomp's work force and ten separate
manufacturing facilities into one facility. Micrographics manufacturing,
engineering, micrographics, customer service and marketing, and product
maintenance facilities are all located in Poway. Additionally, Anacomp has
targeted certain sites in Europe and the United States for consolidation in
order to further reduce overhead and travel expenses.
Anacomp's magnetics manufacturing facilities are located in Graham, Texas
and Brynmawr, Wales. During 1994, Anacomp's Graham and Brynmawr facilities
received international recognition for quality standards, earning International
Standards Organization (ISO) 9002 certification. Anacomp's Poway facility earned
ISO 9002 certification in September 1995. The following table indicates the
square footage of Anacomp's facilities:
<TABLE>
Operating Other Corporate
Facilities Facilities Facilities Total
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
United States:
Leased............................ 702,448 343,349 76,115 1,121,912
Owned............................. 147,420 15,630 ------ 163,050
---------- ---------- -------- -----------
849,868 358,979 76,115 1,284,962
========== ========== ======== ===========
International:
Leased............................ 143,834 ------- ------ 143,834
Owned............................. 145,000 ------- ------ 145,000
---------- --------- -------- -------
288,834 ------- ------ 288,834
---------- --------- -------- -----------
Total.................... 1,138,702 353,979 76,115 1,573,796
========== ========= ======== ===========
</TABLE>
Other Facilities consists primarily of leased space from abandoned
facilities and property held for sale. Approximately 109,246 square feet of the
Other Facilities have been sublet to others and an additional 249,733 square
feet has been vacant since September 1995. Anacomp also leases standard office
space for its sales and service centers in a variety of locations. Anacomp
considers its facilities adequate for its present needs and does not believe
that it would experience any difficulty in replacing any of its present
facilities if any of its current agreements were terminated.
Pursuant to Section 365 of the Bankruptcy Code, the Company is considering
rejecting certain of its non-residential leases with respect to, primarily,
premises that are not currently being occupied by the Company.
<PAGE>
Legal Proceedings
The Company and the Subsidiaries are potential or named defendants in
several lawsuits and claims arising in the ordinary course of business. While
the outcome of such claims, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that such liability, to
the extent not provided for through insurance or otherwise, will not have a
material adverse effect on the financial statements of the Company. A list of
all lawsuits and administrative proceedings currently pending against the
Company or any of the Subsidiaries is annexed hereto as Schedule I. With respect
to environmental lawsuits or administrative proceedings, the location of the
relevant site is indicated in parentheses next to the caption of each lawsuit or
administrative proceeding. In all actions in which one of the Debtors has been
named as a defendant, the applicable Debtor is vigorously defending against such
contingent unliquidated claims and the Debtors are unable to include an estimate
of their potential liability (except with respect to the environmental claims,
for which the Debtors have estimated their contingent liability at $6.5
million). In any event, the Debtors believe that their ultimate liability in all
such actions will not be material and that they will have sufficient assets to
satisfy all of their obligations to such claimants.
DTSC Matters
The California Department of Toxic Substances Control (the "DTSC") filed a
civil complaint on January 5, 1996, in Alameda County Superior Court against
Anacomp, Inc. and Xidex Corporation that seeks civil penalties and injunctive
relief pursuant to the Hazardous Waste Control Law, Health and Safety Code
Section 25100, et seq., and California Code of Regulations, Title 22, Div. 4.5,
Section 66001, et seq., with respect to Anacomp's Sunnyvale, California facility
(the "Sunnyvale Facility"). The DTSC contends that: (a) Anacomp has not yet
completed regulatory closure of the Sunnyvale Facility, which (the DTSC
contends) is required by law; (b) the closure actions that are required include
collection and analysis of soil samples, evaluation of the risks associated with
the contaminants found, and, depending on those risks, removal, treatment and/or
disposal of contaminated soil and/or groundwater; and (c) Anacomp has not fully
complied with the requirement to demonstrate financial assurance for completing
the required closure activities for the Sunnyvale Facility.
An order of the California Regional Water Control Board, San Francisco Bay
Region (the "RWCB"; the DTSC and the RWCB are sometimes collectively referred to
herein as the "DTSC") is also in effect with respect to the Sunnyvale Facility
(the "RWCB Order"). The DTSC contends that: (a) Anacomp is obligated to
characterize and cleanup environmental contamination at the Sunnyvale Facility
pursuant to the RWCB Order; (b) Anacomp's consultants submitted a Remedial
Action Plan for addressing environmental contamination at the Sunnyvale Facility
that estimates potential environmental costs of as much as $998,000 for soil
cleanup and $1,842,000 for groundwater cleanup, for total cleanup costs of
$2,840,000; and (c) Anacomp's environmental cleanup liabilities for the
Sunnyvale Facility will total $3,453,900, and possibly as much as $5,008,155.
<PAGE>
The DTSC also contends that: (a) all expenditures necessary to comply with
environmental laws are administrative expenses that Anacomp is required to incur
during the pendency of the Chapter 11 Cases; and (b) to the extent Anacomp is
required to hire professionals to comply with these obligations, Anacomp must
seek Bankruptcy Court authorization for such expenditures, in addition to the
authorization already received to pay Holders of Trade Claims.
The Debtors do not necessarily agree (and in most cases strongly disagree)
with the contentions of the DTSC set forth above and in its civil complaint and
the RWCB Order, and specifically reserve the right to dispute such contentions.
The Debtors expect that they have sufficient liquidity to pay expenses that are
necessary to comply with state and federal environmental regulations and
requirements imposed on them by government regulatory agencies to take action in
response to existing or threatened environmental contamination, all to the
extent required under the Bankruptcy Code.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, which
include its form 10-K for fiscal year 1995, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at 7 World Trade Center, Room 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
CERTAIN EVENTS PRECEDING THE DEBTORS' CHAPTER 11 FILINGS
In August 1988, the Company acquired Xidex Corporation (the "Xidex
Acquisition") for approximately $400 million. Anacomp incurred substantial
indebtedness in order to finance the Xidex Acquisition and to refinance certain
existing indebtedness, including (i) a $175 million bank term loan due August
31, 1993 at 11.5%; (ii) a $125 million bank revolving credit facility due August
31, 1991 at 11.5% (collectively the "Original Bank Loans"); and (iii) the
issuance in a private placement of $250 million senior subordinated increasing
rate notes with an initial interest rate of 13% (the "Increasing Rate Notes").
As a result, the Company's capital structure became highly leveraged at a time
when its core business, micrographics, was maturing and the high-yield debt
market was becoming extremely volatile.
Subsequent to the Xidex Acquisition, the performance of certain of Xidex's
non-micrographics operations proved to be substantially below management's
expectations due to a variety of factors. Recognizing that these businesses
would not be part of long-term operations, Anacomp classified them as
discontinued operations for financial reporting purposes, while exploring
various restructuring alternatives. In March 1990, Anacomp sold Xidex's flexible
disk operations. The resulting sale and liquidation of the flexible disk
business and the restructuring of its other non-micrographics operations
resulted in a write-off of $173.5 million, which caused the Company's net worth
to fall below the minimum levels required by certain of its debt agreements.
<PAGE>
After obtaining various waivers, at a cost of $7.2 million, from its
various creditors, on October 29, 1990, the Company refinanced the Original Bank
Loans, the Increasing Rate Notes and certain other existing indebtedness by
entering into a revolving loan agreement and a term loan agreement and issuing
new notes totaling $529.9 million of new debt. The Company also incurred
additional debt on March 23, 1993 by entering into a $30 million multicurrency
revolving loan due October 1995.
Anacomp attempted to refinance certain of its existing indebtedness through
a public offering of $225 million of senior secured notes, filed with the
Commission on January 24, 1995. The new notes would have deferred an aggregate
of $153 million in scheduled principal payments in fiscal years 1995 through
1998, providing liquidity and enabling the Company to pursue an aggressive
growth strategy through additional acquisitions and product development.
However, Anacomp was unable to consummate the refinancing and announced the
withdrawal of the proposed offering on April 6, 1995.
As a result of the withdrawn offering and weaker than anticipated second
quarter results, including disappointing sales performance for the Company's new
products, the Company did not have sufficient cash available to make its $20.0
million scheduled principal payment due April 26, 1995 on the Old Credit
Facilities and Old Senior Notes and the $16.9 million scheduled interest payment
due May 1, 1995 on the Old Senior Subordinated Notes. Historically, the Company
has sold assets, drawn upon its various bank credit facilities and sought
extensions of debt amortization payments to meet the cash flow shortfalls it has
experienced. Accordingly, on April 19, 1995, the Company convened a meeting
where it sought permission from the Holders of Claims under the Old Credit
Facilities and Holders of Old Senior Notes (collectively, the "Senior Secured
Creditors") to reschedule all or a substantial portion of the $20.0 million
scheduled amortization payment due April 26, 1995. The Senior Secured Creditors
rejected this proposal. As a result, Anacomp defaulted on its obligations under
the Old Credit Facilities and Old Senior Notes and was thus contractually
prohibited from making interest payments on the Old Senior Subordinated Notes
and the Old Subordinated Debentures. Through the Petition Date, Anacomp
continued to pay "regular" interest on the Old Credit Facilities and the Old
Senior Notes. In addition, Anacomp paid default interest through the Petition
Date on certain amounts due under the Old Credit Facilities and the Old Senior
Notes.
On May 5, 1995, the Company retained Smith Barney Inc. ("Smith Barney") to
provide financial advice about various restructuring alternatives for the
Company. Pursuant to the terms of Smith Barney's agreement with the Company,
their retention by the Company ceased on the Petition Date. Also in May, the
Holders of claims under the Old Credit Facilities led by their agent Citibank
and counsel Weil, Gotshal & Manges and the Holders of the Old Senior Notes
represented by Milbank, Tweed, Hadley & McCloy requested that the Company agree
<PAGE>
to retain Ernst and Young LLP ("Ernst & Young") as their financial advisor to
evaluate the Company's financial condition and prospects going forward. The
Company agreed and granted Ernst & Young full access to the Company and its
management.
In June 1995, Holders of approximately $170.0 million of the Old Senior
Subordinated Notes informed the Company of their selection of Chanin and Company
("Chanin") to act as financial advisors and requested that the Company pay
certain fees and expenses of Chanin and Stroock & Stroock & Lavan ("Stroock"),
their legal advisor. The Company entered into fee and expense agreements with
Chanin and Stroock dated as of June 12, 1995 and August 2, 1995, respectively.
After their retention, the financial and legal advisors to the Old Senior
Subordinated Notes conducted business and legal due diligence, including
discussions with the Company's management concerning the business and operations
of the Company and its financial condition and prospects.
After months of discussions and negotiations with representatives of
Holders of Claims under the Old Credit Facilities, the Old Senior Notes, the Old
Senior Subordinated Notes and the Old Subordinated Debentures, the Company
reached an agreement in principle with an unofficial committee of Holders of the
Old Senior Subordinated Notes (the "Unofficial Senior Subordinated Committee")
providing for a proposed restructuring (the "Proposed Restructuring") and the
ultimate filing of the Chapter 11 Cases to implement such restructuring. The
members of the Unofficial Senior Subordinated Committee, which was represented
by Stroock and Chanin, were: Dabney Resnick, Inc., Franklin Resources, Magten
Asset Management Corp., Merrill Lynch Asset Management, Romulus Holdings, RH
Capital Associates and State Street Research.
POST-PETITION OPERATIONS
Commencement of the Reorganization Case
On the Petition Date, the Debtors Filed, together with their bankruptcy
petitions, a plan of reorganization to implement the Proposed Restructuring, and
on January 12, 1996, the Debtors Filed a disclosure statement with respect
thereto. Since the Petition Date, the Debtors have continued in possession of
their properties as debtors-in-possession, and are authorized to operate and
manage their businesses and to enter into all transactions that they could have
entered into in the ordinary course of their businesses had there been no
Chapter 11 filings. Pursuant to Sections 105 and 363 of the Bankruptcy Code, the
Debtors have sought and obtained numerous orders from the Bankruptcy Court
intended to facilitate the operations of the Company. Those orders authorized
the Debtors to, among other things: (i) utilize cash collateral and (ii) pay
certain prepetition Claims, including Claims of trade creditors, wages, salaries
and employee benefits. Accordingly, since the Petition Date, the Debtors have
continued to conduct their businesses substantially as they did prior to the
Petition Date.
<PAGE>
Appointment of the Creditors' Committee
On January 17, 1996, the Creditors' Committee was appointed by the Office
of the United States Trustee. The members of the Creditors' Committee are: State
Street Bank and Trust Company, as indenture trustee under the Old Senior
Subordinated Notes Indenture, IBJ Schroder Bank & Trust Company, as successor
trustee under the Old 9% Subordinated Debentures Indenture, United States Trust
Company of New York, as successor trustee under the Old 13.875% Subordinated
Debentures Indenture, Dabney Resnick Asset Management Fund Inc., Merrill Lynch
Phoenix Fund, Franklin Custodian Fund Inc. and Eastman Kodak Company. Subsequent
to the appointment of the Creditors' Committee, Trendex Capital Management was
admitted to the Creditors' Committee on an ex officio basis. Official committees
appointed under Section 1102 of the Bankruptcy Code have, among other rights,
the right to: (i) consult with the debtor concerning administration of the case,
(ii) investigate the acts, conduct, assets, liabilities and financial condition
of the debtor, as well as the operation of the debtor's business and any other
matter relevant to the Chapter 11 case or to the formulation of a plan of
reorganization and (iii) participate in the formulation and acceptance or
rejection of a plan of reorganization.
Plan Negotiations
Subsequent to the filing of the Chapter 11 Cases, the Company continued to
negotiate with its major creditor constituencies, including the Creditors'
Committee and the Senior Secured Creditors, in an attempt to reach a fully
consensual restructuring. In January 1996, the Senior Secured Creditors retained
The Blackstone Group as financial advisor to assist in the evaluation of the
Company's financial condition and a plan of reorganization. Upon the filing of
the Chapter 11 Cases, Smith Barney was not eligible to act as the Company's
financial advisor, and shortly thereafter, the Company retained Donaldson Lufkin
& Jenrette Securities Corporation ("DLJ") as its financial advisor. The
appointment of DLJ was approved by the Bankruptcy Court effective as of January
16, 1996. The Creditors' Committee retained Chanin as its financial advisor and
such retention was approved by the Bankruptcy Court effective as of January 17,
1996.
On February 15, 1996, the Company announced that it had reached an
agreement in principle with the Creditors' Committee and the Senior Secured
Creditors, which agreement forms the basis for the Restructuring and the Plan.
The Creditors' Committee and the Senior Secured Creditors have indicated their
support for the Plan.
Request For Equity Committee
A Holder of the Old Preferred Stock has Filed a motion seeking the
appointment of an official committee of equity security holders in the Chapter
11 Cases. The Debtors intend to oppose such motion.
<PAGE>
Claims Process and Bar Dates
With certain exceptions, the Bankruptcy Court established February 23, 1996
as the date by which claimants were required to File proofs of Claim or be
barred from asserting any Claim against the Debtors and from voting upon or
receiving distributions under the Plan ("Limited Bar Date"). Certain creditors
whose Claims were included in the following categories were not required to file
proofs of Claims: (i) Old Senior Subordinated Note Claims; (ii) Claims for
employee wages, salaries, medical insurance, sick pay, sick leave, long-term
disability, vacation benefits and other benefits earned in the ordinary course
of the Debtors' business; (iii) Old Subordinated Debentures Claims; (iv)
Carlisle Note Claim; (v) Intercompany Claims; (vi) Administrative Claims; (vii)
Trade Claims and (viii) Interests of Holders of Old Common Stock, Old Preferred
Stock, stock options or warrants. In addition, the Debtors have reached an
agreement with the Holders of Class 2 Claims extending the date by which such
Holders must File proofs of Claim.
Post-Petition Operations and Liquidity
While the Company has continued to conduct its business as it had prior to
the Petition Date, certain aspects of the Company's operations have been
adversely affected as a result of the bankruptcy filing. The revenues of the
Company's foreign subsidiaries have declined, reflecting a general skepticism
towards bankruptcy in the European marketplace, and equipment purchases, both
foreign and domestic, have been deferred as potential purchasers await the
outcome of the Chapter 11 Cases. The Company, however, has continued to maintain
sufficient liquidity to meet its post-petition operations.
Recent Litigation
Patent Litigation
For non-OEM sales of the XFP 2000, Anacomp has in the past been the
exclusive supplier for original microfilm because of the proprietary nature of
the canister in which the film is placed. Certain of Anacomp's competitors,
however, are considering introducing original microfilm canisters for use in the
XFP 2000. Anacomp has brought actions alleging patent infringement against Agfa,
Fuji and COM Products, Inc. seeking to protect the proprietary nature of
Anacomp's original microfilm canister. These actions are still in the
preliminary stages and there can be no assurance that Anacomp will prevail. An
unfavorable outcome, however, would likely have an adverse effect on Anacomp's
original microfilm sales and gross profit.
Customs' Claim
The United States Customs Service ("Customs") is seeking repayment of
certain drawback payments previously paid to Anacomp and Xidex. Customs alleges
Anacomp was improperly paid approximately $2.1 million in drawback refunds for
which Anacomp could not substantiate its eligibility during a recent Customs
audit. As a result, Customs liquidated the drawbacks primarily in May and June
1994, and has requested repayment. In addition, interest began accruing on the
<PAGE>
disputed drawback account on the date of liquidation. Anacomp is currently
protesting Customs' denial of these drawbacks with the United States Customs
Office in San Francisco, California and has requested an Application for Further
Review by the United States Customs Headquarters in Washington, D.C. If
Anacomp's protests are unsuccessful, the Company will consider appealing any
adverse Customs decision to the Court of International Trade. The Company has
fully reserved the disputed amount on its balance sheet.
In a related matter, on November 6, 1995, Intercargo Insurance Co. and Old
Republic Insurance Co. (collectively, the "Sureties"), as the parties
guaranteeing the Company's indebtedness to Customs, commenced an action in the
District Court for the Northern District of California (the "Court") seeking
equitable and legal relief in connection with certain custom bonds the Sureties
allegedly posted for import/export activities of Anacomp and Xidex.
The complaint requested that the Court order Anacomp to pay Customs the
full liquidated amount and to relieve the Sureties from their obligations under
the customs bonds. Anacomp disputes the Sureties' claim that the liquidated
drawback claims must be paid currently because Anacomp's aforementioned
administrative appeal of the action is still pending.
On December 13, 1995, the Sureties and Anacomp reached a settlement
agreement, which was approved by the Court. The terms of the settlement
agreement were filed under seal and were confidential. Assuming the Effective
Date is in April, 1996, Anacomp would be obligated to pay approximately $1
million into an escrow-type fund on the Effective Date.
<PAGE>
SELECTED FINANCIAL DATA FOR THE COMPANY
The historical financial statement data set forth below was derived, except
as otherwise noted, from the consolidated financial statements of the Company
audited by Arthur Andersen LLP. This table should be read in conjunction with
the Company's consolidated financial statements and notes thereto and
management's discussion thereof appearing elsewhere herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Company.
<TABLE>
Three Months Ended
Year Ended September 30 December 31
--------------------------------------------------------------- ---------------------
(unaudited)
--------- ----------- ------------ ------------ ----------- ---------------------
1991 1992 1993 1994 1995 1994 1995
--------- ----------- ------------ ------------ ----------- ---------- ---------
INCOME STATEMENT DATA (Dollars in thousands, except per share amounts and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $635,361 $628,940 $590,208 $592,599 $591,189 $151,812 $130,265
Cost of sales and services... 423,956 428,308 404,752 420,483 440,667 102,459 89,599
Selling, general and
administrative............. 105,861 100,330 96,822 92,539 109,127 31,460 24,447
Special and restructuring
charges (a)................ -- -- -- 169,584 -- --
Operating income (loss)...... 105,544 100,302 88,634 79,577 (128,189) 17,893 16,219
Interest expense............. 79,655 71,947 68,960 67,174 70,938 17,949 18,286
Income (loss) before
extraordinary credit and
cumulative effect of 18,105 18,221 11,691 6,955 (238,326) 281 1,053
accounting change (b)......
Net income (loss)............ 29,205 26,921 18,591 14,955 (238,326) 281 1,053
Income (loss) per share
(primary) before
extraordinary item and
cumulative effect of
accounting change (net
of preferred stock
dividends and discount
accretion)................ .38 .38 .22 .10 (5.22) (.01) .01
Weighted average shares
outstanding............... 41,689,577 42,712,865 42,749,933 47,335,723 46,061,818 45,843,459 47,682,725
SELECTED FINANCIAL RATIOS
AND OTHER DATA
Depreciation and amortization $31,551 $34,569 $33,006 $34,615 $35,998 $8,491 $6,843
EBITDA(c)..................... 137,095 134,871 121,640 114,192 77,393 26,384 23,062
Capital expenditures.......... 13,916 18,755 20,726 18,868 14,372 3,236 1,161
Ratio of EBITDA to interest
expense.................... 1.72 1.87 1.76 1.70 1.09 1.47 1.26
Ratio of total debt to
EBITDA..................... 3.75 3.54 3.61 3.61 5.04 -- --
Ratio of earnings to fixed
charges (d)............... 1.36x 1.41x 1.27x 1.21x *(d) 1.03x 1.11x<PAGE>
</TABLE>
<PAGE>
<TABLE>
Year Ended September 30 As of December 31
--------------------------------------------------------------- ---------------------
(unaudited)
--------- ----------- ------------ ------------ ----------- ---------------------
1991 1992 1993 1994 1995 1994 1995
--------- ----------- ------------ ------------ ----------- ---------- ---------
BALANCE SHEET DATA (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash......................... $19,811 $29,881 $24,922 $19,871 $19,415 $5,337 $27,209
Property, plant, and
equipment - net............ 70,609 67,872 66,399 66,769 44,983 57,750 38,719
Intangible assets (e)........ 318,575 310,333 296,426 279,607 160,315 276,969 157,884
Total assets................. 686,062 681,561 643,548 658,639 421,029 636,363 398,119
Total current liabilities (f) 139,824 150,522 152,727 163,091 188,957 158,586 180,228
Total debt (g)............... 514,749 477,303 439,093 411,847 389,900 395,807 376,371
Redeemable preferred stock... 24,191 24,287 24,383 24,478 24,574 24,502 23,897
Shareholders' equity (deficit) (25,017) 8,290 13,799 49,756 (188,243) 48,907 (187,825)
</TABLE>
- ------------------------------------
Notes:
(a) This item includes special charges of $136.9 million which represents a
write-off of goodwill of $108.0 million and $28.9 million of charges
associated with software costs which are not recoverable, as well as
restructuring charges of $32.7 million.
(b) The Company adopted Financial Accounting Standards No. 109, Accounting for
Income Taxes, in the first quarter of fiscal year 1994. The adoption
resulted in a one-time increase to income of $8.0 million reflecting the
cumulative effect on prior years of this accounting change. Prior to 1993,
the Company recognized tax benefits resulting from NOLs as an extraordinary
item in the Consolidated Statement of Operations.
(c) EBITDA represents earnings before interest income and expense, financial
restructuring costs, other income, income taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to net
income (as determined in accordance with GAAP) as a measure of the
Company's operating results or to cash flows (as determined in accordance
with GAAP) as a measure of the Company's liquidity. This item does not
include special and restructuring charges of approximately $169.6 million
incurred in 1995.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges
consist of interest expense on indebtedness, amortization of deferred debt
issuance costs, accretion of the original issue discount and the portion of
rental expense under operating leases that has been deemed by the Company
to be representative of an interest factor, all on a pre-tax basis. For the
year ended September 30, 1995, income before income taxes was inadequate to
cover fixed charges. The amount of the coverage deficiency was $203.3
million.
(e) Intangible assets represent primarily the excess of purchase price over net
assets of businesses acquired (goodwill). Goodwill is amortized on the
straight-line method over 15 to 40 years. Effective June 30, 1995, Anacomp
elected to modify its method of measuring goodwill impairment to a fair
value approach. This revised accounting policy resulted in a write-off of
$108.0 million of goodwill related to the micrographics business.
(f) Total current liabilities exclude current portion of long-term debt.
(g) Total debt does not include accrued but unpaid interest. As of September
30, 1995, the Company was in default on all its debt instruments and as a
result all debt is classified as current.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recent Developments
After months of discussions and negotiations with representatives of
Holders of Claims under the Old Credit Facilities, the Old Senior Notes, Old
Senior Subordinated Notes and the Old Subordinated Debentures, the Company
reached an agreement in principle with the Unofficial Senior Subordinated
Committee providing for a proposed restructuring and the ultimate filing of the
Chapter 11 Cases on January 5, 1996, with the U.S. Bankruptcy Court in Delaware.
Subsequent to the filing of the Chapter 11 Cases, the Company continued to
negotiate with its major creditor constituencies, including the Creditors'
Committee and the Senior Secured Creditors, in an attempt to reach a fully
consensual restructuring. On February 15, 1996, the Company announced that it
had reached an agreement in principle with the Creditors' Committee and the
Senior Secured Creditors, which agreement forms the basis for the Restructuring
and the Plan.
While the Creditors' Committee and the Senior Secured Creditors have
indicated their support for the Plan, there can be no assurance that the Plan
will be confirmed by the Bankruptcy Court or that all of the necessary votes
accepting the Plan will be obtained.
Results of Operations - General
First Three Months Fiscal 1996
Net income available to common stockholders increased to $513,000 for the
three months ended December 31, 1995 compared to a loss of $259,000 for the
three months ended December 31, 1994. The first quarter results were bolstered
by a $6.2 million gain on the sale of the Image Conversion Services Division
("ICS") which was effective November 1, 1995, and were reduced by $2.8 million
of financial restructuring costs. Operating income, i.e., income before
interest, other income, financial restructuring costs, and income taxes,
amounted to $16.2 million compared to $17.9 million for the same period of the
prior year.
Total revenues for the first quarter of $130.3 million represents a $21.5
million decrease from the first quarter of the prior year. Approximately $9.9
million of the decrease is due to the discontinuance and downsizing of product
lines including ICS ($3.2 million), flexible diskette media ($3.3 million),
reader and reader/printer products ($2.1 million) and source document film ($1.3
million). An additional $8.0 million of the decrease is due to reduced COM
systems revenues which is caused by fewer XFP 2000 sales in the current quarter
as well as the absence of revenue from sales of equipment for Anacomp data
centers under sale and leaseback arrangements which amounted to $3.5 million in
the first quarter of the prior year.
<PAGE>
Costs of services provided as a percent of services revenue were 55% in the
three months ended December 31, 1995, compared to 54% in the same period of the
prior year. Costs of equipment and supplies sold as a percent of equipment and
supplies sales were 78% for the three months ended December 31, 1995 compared to
75% in the same period of the prior year. The increase in cost of equipment and
supplies sold is primarily due to the relatively lower level of COM systems
sales which earn higher average gross margins.
Selling, general and administrative expenses were 19% of revenue in the
three months ended December 31, 1995 compared to 21% in the same period of the
prior year. This percentage decline represents a decrease of $7.0 million which
is consistent with the cost reductions included in Anacomp's New Operating Plan.
Fiscal Years 1995, 1994 and 1993
Revenues for the Company's core micrographics business have been declining
for the last several fiscal years. Anacomp incurred a loss of $238.3 million for
the year ended September 30, 1995 as compared to income of $15.0 million and
$18.6 million for the year ended September 30, 1994 and 1993, respectively.
Included in the fiscal 1995 loss are special charges of $136.9 million,
representing a write-off of goodwill of $108.0 million and $28.9 million of
costs associated with software investments (see notes 2 and 5 to the
accompanying Consolidated Financial Statements). Also included in the loss is a
$29.0 million deferred tax provision and $32.7 million of restructuring charges
which include severance costs, inventory write-downs, excess facilities and
other reserves. Further contributing to the overall loss was a decrease in
operating income of $38.2 million compared to the prior year and $6.0 million of
expenses associated with the March 1995 proposed refinancing and current
restructuring.
Operating income, i.e., income before special and restructuring charges,
interest, other income and income taxes, decreased $38.2 million in fiscal 1995
compared to fiscal 1994 and $9.1 million in fiscal 1994 compared to the previous
fiscal year. Both declines were largely attributable to a change in product mix
as the relatively less profitable magnetics products represented a greater
portion of total sales, as well as reduced supplies and COM services margins due
to lower selling prices.
Total revenues for fiscal 1995 decreased $1.4 million from the prior fiscal
year. Revenues from sales of magnetics products increased $29.5 million
resulting from the acquisition of Graham Magnetics in May 1994. In addition, the
acquisition of the COM services customer base of 14 data service centers from
National Business Systems, Inc. ("NBS") on January 3, 1994 contributed
incremental revenues of approximately $2.7 million to the fiscal 1995 results.
Offsetting these contributions were decreases in micrographics supplies, COM
systems, maintenance services and other revenues.
Anacomp's fiscal 1994 revenues totaled $592.6 million compared to
$590.2 million in fiscal 1993. The Graham acquisition contributed $22.4 million
to fiscal 1994 revenues and NBS contributed $9.1 million to fiscal 1994
revenues. Excluding the contributions from these two acquisitions, fiscal 1994
revenues decreased $29.1 million from fiscal 1993 principally due to decreased
sales of COM systems, duplicate film and retrieval devices.
<PAGE>
Selling, general and administrative expenses were 18.5% of revenues in
fiscal 1995 compared to 15.6% in fiscal 1994. The increase is due in part to the
acquisitions of Graham Magnetics and the NBS customer base and the impact of
amortization of the intangible assets recorded on those transactions. Also
contributing to the increase was a fiscal 1994 $4.7 million environmental
reserve adjustment resulting from the receipt of insurance proceeds related to
Environmental Protection Agency ("EPA") liabilities. In addition, the
sale-leaseback of data center equipment increased equipment rental costs by $2.5
million more than the reduction in depreciation costs compared to the prior
period, and this increase is reflected in selling, general and administrative
expenses.
Selling, general and administrative expenses were 16.4% of revenues in
1993. Selling, general and administrative costs in fiscal 1994 decreased $4.3
million compared to fiscal 1993 due in part to the receipt of insurance proceeds
related to the EPA liabilities described above.
Operating income before special and restructuring charges, interest, other
income, income taxes, extraordinary credit and cumulative effect of accounting
change as a percent of revenues were 7% in fiscal 1995, 13.4% in fiscal 1994,
and 15% in fiscal 1993. The decrease was largely attributable to a change in
product mix as the relatively less profitable magnetics products represented a
greater portion of total sales and a reduction in supplies and COM services
margins due to the drop in selling prices.
The Company has reclassified accreted interest on unfavorable lease
reserves from discontinued operations to interest expense in fiscal 1994 and
fiscal 1993 to conform with the fiscal 1995 presentation.
1995 Special Charges
Included in the operating results for fiscal 1995 are special charges
totaling $136.9 million including the write-off of a portion of goodwill related
to micrographics products. During the year, Anacomp announced several
significant events which are summarized as follows:
On April 6, 1995, the Company announced that it was withdrawing its
proposed offering of $225.0 million senior secured notes previously announced on
January 23, 1995.
On April 27, 1995, the Company announced that it had agreed with its Senior
Secured Creditors to make its current interest payment of $2.0 million on its
Senior Secured Debt while continuing to negotiate the rescheduling of all or a
substantial portion of the $20.0 million scheduled amortization payment due
April 26, 1995, which the Company failed to make, and the waiver of certain
financial covenant violations as of March 31, 1995. The Company also announced
that until an agreement was reached with its Senior Secured Creditors (and
Holders of Old Senior Subordinated Notes) the Company would not make its
upcoming $16.9 million interest payment on the Old Senior Subordinated Notes
scheduled for May, 1995 and would defer making dividend payments on the Old
Preferred Stock.
<PAGE>
On May 15, 1995, in connection with announcing a second quarter loss of
$8.2 million, the Company announced plans for a restructuring of its operations
which would include several cost cutting measures and personnel reductions.
These initiatives are expected to reduce expenses in excess of $20 million
annually. The Company also announced the appointment of a new president.
Anacomp's financial difficulties significantly constrained Anacomp's
ability to finance certain previously projected activities. In addition, in
1995, Anacomp failed to achieve its original projections of operating results
and experienced lower than expected sales of major new software products which
were first introduced in January 1995.
Based on the events discussed above and in connection with the change in
accounting procedures discussed in Note 1 to the accompanying Consolidated
Financial Statements, Anacomp determined that goodwill had been impaired and
measured the impairment based on the fair value approach discussed in Note 1. As
required by generally accepted accounting principles, this accounting change,
which amounted to a charge of $108.0 million, was recorded as a change in
estimate and was included in the results of operations for the quarter ended
June 30, 1995.
Over the last three years, Anacomp has invested and capitalized over $20.0
million related to the development of software to provide advanced capabilities
for the XFP 2000 related to the processing of Xerox and IBM print streams. These
software enhancements are referred to as the Xerox Compatibility Feature ("XCF")
and Advanced Function Presentation ("AFP") feature. XCF was introduced at the
beginning of the second quarter of fiscal 1995 and AFP at the beginning of the
fourth quarter of fiscal 1995. Initial sales of the XCF product have been
significantly below expectations. Based upon that experience, Anacomp has
updated its sales forecast for both products and has adjusted the carrying
amount of the software investment to net realizable value. That adjustment
resulted in a software write-off of $20.3 million (included on the balance sheet
under the category other assets) and the establishment of a $8.6 million reserve
(of which $7.7 million was outstanding at September 30, 1995) for future
payments to Pennant Systems for software license (included on the balance sheet
under the category accrued liabilities) and maintenance obligations which are
not recoverable based upon the revised sales forecasts.
Also included in the operating results for fiscal year 1995 are
restructuring charges of $32.7 million resulting from the Company's New
Operating Plan. The restructuring charges include severance costs of $5.9
million, inventory write-downs of $9.1 million, excess facility reserves of $7.7
million and other reserves of $10.0 million.
New Operating Plan
The Company's strategy for ongoing financial improvement is to eliminate
unprofitable product lines and outsource manufacturing for low-margin products
while continuing to offer similar products on an OEM or reseller basis. The New
<PAGE>
Operating Plan resulted in a determination to exit certain business or product
lines. Specifically, Anacomp: (i) sold its Image Conversion Services Division
("ICS"); (ii) closed its Omaha, Nebraska factory which produces the magnetic
media for flexible diskettes; and (iii) discontinued the manufacture of readers
and reader/printers. In view of the Company's New Operating Plan, the Company
also announced a Company-wide reduction in workforce. Costs relating to the
reduction in workforce, the closing of the Omaha factory and the discontinuance
of manufacturing of readers and reader/printers appear in the financial results
for the year under "Restructuring Charges."
The ICS division performs source document microfilm services at several
facilities around the country, generating approximately $21.5 million of
revenues in fiscal 1995. The sale of this division was consummated effective as
of October 31, 1995 for approximately $13.5 million with a net gain to the
Company of approximately $6.2 million. This gain will be included in fiscal year
1996's first quarter results. The net proceeds of the sale of ICS were applied
to payment of principal outstanding under the Old Credit Facilities and Old
Senior Notes.
The market price of the magnetic media manufactured in Anacomp's Omaha
factory has been decreasing significantly over the last several months. In
addition, Anacomp's primary customer continued to experience liquidity
shortfalls which placed this product line at increased business risk. As a
result, Anacomp announced the closure of this facility on July 28, 1995 and
recorded a loss of approximately $8.4 million in the fourth quarter including
equipment and inventory write-downs, severance and closedown expenses. The
closure was completed in the first quarter of fiscal 1996.
During the fourth quarter, Anacomp reached agreement with Eye Communication
Systems, Inc. ("Eye Com") to manufacture Anacomp's general requirements for
readers and certain reader/printers. In addition, Anacomp announced the
discontinuation of those reader/printer models that will not be manufactured by
Eye Com. During the first few months of fiscal year 1996, Anacomp will continue
to build the discontinued models to utilize remaining inventories; transfer
inventory and tooling to Eye Com which will manufacture selected reader and
reader/printer models; and generally exit the manufacturing process for these
products. Anacomp recorded a loss of $10.0 million in the fourth quarter of
fiscal 1995 resulting from the decision to discontinue manufacturing reader and
reader/printers reflecting equipment and inventory write-downs, severance and
closedown expenses.
Results of Operations - Products and Services
Micrographics Supplies and Equipment
Micrographics supplies and equipment revenues for the three months ended
December 31, 1995 decreased $5.3 million compared to the same period of the
prior year principally as a result of the discontinuance and downsizing of the
relevant product lines mentioned above under "Results of Operations -- General."
Sales of original film were down 3% as a result of lower volumes. Duplicate film
<PAGE>
sales were relatively unchanged compared to the prior period. Micrographics
supplies and equipment gross margins as a percent of revenue improved three
percentage points as a result of changes in product mix due primarily to the
sale and downsizing of product lines.
Micrographics supplies and equipment revenues, which accounted for 32% of
the Company's revenues in fiscal 1995, decreased 7% compared to fiscal 1994.
Original film sales decreased 6% on lower unit volumes while duplicate film
sales increased 3%. The duplicate film increase is due primarily to the
reacquisition of First Image Management Company ("First Image") as a duplicate
film customer and the addition of Eastman Kodak Company's ("Kodak") European
duplicate film business. Retrieval products sales decreased 13% compared to
fiscal 1994 and are expected to decrease further as a result of the decision to
exit the manufacturing of these products discussed above.
Micrographics supplies revenues decreased 8% in fiscal 1994, principally
due to reduced demand for duplicate film, readers and reader/printers. As the
Company's supplies and equipment business partly depends on sales of the
Company's COM systems to generate repeat business, revenues from this business
unit will be readily affected by the declines in COM systems sales.
Micrographics supplies and equipment operating margins as a percent of
revenue decreased 4% in fiscal 1995 as a result of lower average selling prices
and increased costs of production. Micrographics supplies and equipment
operating margins in fiscal 1994 were comparable to fiscal 1993. In fiscal 1993,
micrographics supplies operating margins were down 2% to 3%, due in part to
currency fluctuations affecting both revenues and costs as well as pricing
competition in certain product lines.
Micrographics Services
Micrographics services revenues decreased $1.3 million for the three months
ended December 31, 1995 compared to the same three months of fiscal 1995,
excluding the effect of the ICS sale. COM services volumes, which comprise over
90% of this category, decreased 5% and average selling prices decreased
approximately 3%. The decrease in average selling prices is the continuation of
a trend that the Company has experienced over recent periods. Gross margins as a
percent of revenue decreased as the reduction in selling prices exceeded
reductions in production costs.
Micrographics services revenues, which accounted for 22% of Anacomp's
revenues in fiscal 1995, were level compared to fiscal 1994 despite a 10%
increase in volume, 3% of which is attributable to the acquisition of the COM
services customer base of 14 data service centers from NBS. COM services
revenues were adversely affected by a decline in average selling prices
reflecting a continuation of market price erosion which the Company expects to
continue for at least the near future.
Micrographics services revenues increased 5% in fiscal 1994 and decreased
2% in fiscal 1993, on volume increases of 10% in fiscal 1994 and 13% in fiscal
1993. The increase in fiscal 1994 volume is the result of the NBS acquisition.
<PAGE>
Decreasing prices adversely affected Anacomp's micrographics services business
in fiscal 1994 and fiscal 1993.
Micrographics services operating margins as a percent of revenue decreased
5% in fiscal 1995 and 2% in fiscal 1994 as reductions in average selling prices
exceeded reductions in production costs. In fiscal 1993, reductions in operating
costs kept margins steady despite intense price competition.
Maintenance Services
Maintenance service revenues decreased $436,000 for the three months ended
December 31, 1995 compared to the same three months of fiscal 1995, primarily
due to the effect of replacing older generation COM systems with the XFP 2000
which has a capacity significantly greater than the previous generation COM
systems. Gross margins as a percent of revenue decreased slightly.
Maintenance services revenues, which accounted for 15% of the Company's
revenues in fiscal 1995, are derived principally from COM recorders and
duplicators. Such revenues decreased 5% in fiscal 1995 when compared to fiscal
1994 primarily due to the effect of replacing older generation COM systems with
the XFP 2000. In addition, reduced pricing and credits issued to a major
customer contributed to the decrease.
Maintenance revenues increased $3.1 million in fiscal 1994 and decreased
$4.8 million in fiscal 1993. The improvement in fiscal 1994 is largely the
result of the addition of a national data service center company to Anacomp's
customer base. Approximately one-half of the decline in fiscal 1993 was caused
by currency fluctuations. The remaining decline was caused in part by the
improved capacity and efficiency of the XFP 2000. The Company's maintenance
revenues are adversely affected by the replacement of older COM systems with XFP
2000 systems because fewer XFP 2000 systems are required to process the same
volume as older COM systems. Operating margins modestly decreased in fiscal 1995
and fiscal 1994 after remaining level in fiscal 1993.
COM Systems
COM systems revenues for the three months ended December 31, 1995 decreased
$8.0 million compared to the same period of the prior year. The Company sold or
leased 27 XFP 2000 COM systems to third party users in the current period
compared to 47 systems in the same period of the prior year. The Company
believes the reduced systems sales are, at least in part, due to customer
concerns about Anacomp's financial restructuring and also to the fact that the
first quarter of the prior year was particularly strong. Gross margins as a
percent of revenue were lower for the quarter compared to the prior period,
excluding the effect of the sale and leaseback revenues for which all profits
are deferred and recognized over the leaseback period, due to reduced
manufacturing levels and the resulting reduced manufacturing efficiencies.
<PAGE>
COM systems revenues, which accounted for 9% of the Company's revenues in
fiscal 1995, decreased $7.0 million with the sale or leasing of 153 XFP 2000
systems in fiscal 1995 compared to 165 systems in fiscal 1994. Also included in
COM systems revenues in fiscal 1995 is $3.5 million of sales of equipment for
use in Anacomp data centers under sale and leaseback arrangements compared to
$5.6 million in fiscal 1994.
COM systems revenues decreased 22% in fiscal 1994 because of the decline in
sales and operating leases of XFP 2000 COM systems from 274 systems in fiscal
1993 to 165 systems in fiscal 1994. This decline was partly the result of
reduced original equipment manufacturer ("OEM") shipments (25 systems in fiscal
1994 compared to 67 in fiscal 1993).
COM systems revenues increased slightly in fiscal 1993 after consideration
of currency effects.
COM systems operating margins improved in fiscal 1995 and fiscal 1994
despite reduced revenues as a result of higher average selling prices. Operating
margins in fiscal 1993 improved significantly both as a result of higher XFP
2000 volumes and the benefits from the facility consolidation that took place in
fiscal 1992.
Magnetics
Magnetics revenues decreased $4.2 million for the three months ended
December 31, 1995 compared to the same three months of fiscal 1995. The decline
is attributable to the closure of the Omaha, Nebraska factory which produced
flexible diskette media as well as decreased unit sales of open reel tape.
Magnetics gross margins as a percent of revenue decreased in the current period
principally due to increased costs of raw materials.
Magnetics revenues, which accounted for 22% of the Company's revenues in
fiscal 1995, increased $29.5 million, or 23% compared to fiscal 1994. The
increase is due to the contribution from the acquisition of Graham Magnetics in
May 1994. The acquisition of Graham in May 1994 was the primary reason for a 36%
increase in fiscal 1994 magnetics revenues over fiscal 1993. Graham manufactured
certain magnetics products at its facility in Graham, Texas. Anacomp has shifted
all its U.S. production of those products from its Omaha, Nebraska plant to the
Graham facility. The costs associated with this relocation were not significant.
The consolidation resulted in improved manufacturing efficiencies and overall
headcount reduction.
Magnetics revenues decreased $16.5 million in fiscal 1993. Almost half of
the decrease was due to the completion of a one-time OEM arrangement, which
contributed $9.7 million in revenues in fiscal 1992 and only $1.1 million in
fiscal 1993. In addition, Anacomp experienced decreased demand of 3480 and TK
50/52 cartridge tapes as well as open reel tape, as these products continued to
mature. Anacomp introduced the high-compression 3490E cartridge tape in
mid-1993, which contributed over $8.0 million of revenues in fiscal 1994.
<PAGE>
The revenues added in fiscal 1995 and fiscal 1994 from the Graham
acquisition resulted in increased operating profits in those years. The reduced
revenues in fiscal 1993 resulted in a significant reduction in operating
profits.
Other revenues decreased $6.0 million in fiscal 1995 compared to fiscal
1994 due to reduced revenues from Anacomp's A-New product.
Results of Operations -- Other
Interest
Interest expense and fee amortization in the current quarter includes $2.4
million of default interest and interest on unpaid scheduled interest on the Old
Credit Facilities and Old Senior Notes and the Old Senior Subordinated Notes as
required by the terms of the various debt agreements.
Interest expense and fee amortization in the prior period included $1.4
million of accelerated amortization of debt fees as a result of accelerated debt
paydowns that occurred during the first quarter of fiscal 1995.
Interest expense and fee amortization totaling $70.9 million in fiscal 1995
increased compared to 1994 due to $3.3 million of default interest and interest
on unpaid scheduled interest on the senior secured debt as well as the Old
Senior Subordinated Notes as required by the terms of the various debt
agreements.
The reduction in interest expense in fiscal 1994 resulted from lower debt
levels, partly offset by the increase in short-term interest rates. Interest
expense in fiscal 1993 declined as a result of debt repayments as well as
reduced interest rates.
Income Taxes
The Company adopted Financial Accounting Standards No. 109, Accounting for
Income Taxes, in the first quarter of fiscal year 1994. The adoption resulted in
a one-time increase to income of $8.0 million reflecting the cumulative effect
on prior years of this accounting change. In addition, the Company recorded a
deferred tax asset of $95.0 million representing the U.S. federal and state tax
savings from net operating loss carryforwards ("NOLs") and tax credits. The
Company also recorded a valuation allowance of $60.0 million, reducing the
deferred tax asset to $35.0 million. In determining the valuation allowance, the
Company assumed pre-tax income at present levels and considered the impact of
the reversal of temporary differences and the periods in which NOL carryforward
benefits expire.
Included in the provision for income taxes in fiscal 1995 is a deferred tax
provision of $29.0 million. The deferred tax provision includes U.S. tax on
undistributed foreign earnings of $9.0 million and the write-off of net deferred
tax assets of $20.0 million. This write-off results from the uncertainty
<PAGE>
regarding the financial restructuring currently in progress and, accordingly,
the uncertainty regarding the ultimate benefit to be derived from Anacomp's tax
loss carryforwards. The remaining components of the provision for income taxes
are taxes of $4.8 million on earnings of Anacomp's foreign subsidiaries and a
tax reserve adjustment of $1.2 million.
Income taxes as a percentage of income from operations were 55% in fiscal
1994 and 43% in fiscal 1993. In fiscal 1994 and fiscal 1993, income tax expense
was reduced $1.2 million and $3.7 million, respectively, as a result of the
favorable settlement and disposition of previously established tax reserves. The
effective tax rate is higher than the U.S. statutory rate because of
amortization of goodwill which is not deductible for tax purposes and generally
higher foreign tax rates. See note 14 to Anacomp's audited consolidated
financial statements included elsewhere herein.
Liquidity and Capital Resources
Post Effective Liquidity
The consummation of the transactions contemplated by the Plan will result
in a substantial net reduction in Reorganized Anacomp's total indebtedness.
Reorganized Anacomp will nonetheless remain highly leveraged after the Effective
Date. See "Risk Factors -- Continuing Leverage; Future Refinancing." The
management of Anacomp believes, however, that, assuming the Plan is consummated
in accordance with its terms and that the New Operating Plan is successfully
implemented, Reorganized Anacomp will have sufficient liquidity for the
reasonably foreseeable future to pay its post-reorganization indebtedness and
conduct its business as contemplated by the New Operating Plan.
Anacomp projects its cash balance to be approximately $50.0 million at
March 31, 1996. Pursuant to the Plan, on the Effective Date, the Company will
reduce the principal amount of the New Senior Secured Notes by the Cash Sweep
Amount.
Prior to the Chapter 11 filing, the Company was experiencing a liquidity
shortfall caused by continued declining revenues and a highly leveraged balance
sheet. Upon consummation of the Plan, the Company's pre-petition liquidity
problems will be solved by (i) deferring principal and interest payments that
were due under the Old Credit Facilities and the Old Senior Notes; (ii)
eliminating a significant portion of the payment obligations under the Old
Senior Subordinated Notes, all payment obligations under the Old Subordinated
Debentures and all payment obligations under the Old Preferred Stock and (iii)
generating cash flow sufficient to service all of the Company's new debt.
First Three Months Fiscal 1996
Anacomp's working capital at December 31, 1995, excluding the current
portion of long-term debt and accrued interest, amounted to $36.8 million
compared to $27.0 million at September 30, 1995. As discussed above,
substantially all of the accrued interest would be exchanged for new securities
under the amended Plan. As disclosed in the Condensed Consolidated Statements of
Cash Flows, net cash provided by operating activities increased to $9.2 million
<PAGE>
for the first three months compared to net cash used in operating activities of
$8.7 million in the comparable prior period primarily due to significant
reductions in receivables and inventories. Net cash provided by investing
activities increased to $12.4 million in the current period, compared to $10.7
million in the comparable prior period, primarily as a result of reduced capital
expenditures. Net cash used in financing activities in the current period
include the $13 million repayment of debt with proceeds from the sale of the ICS
Division.
The Company's cash balance as of December 31, 1995 was $27.2 million.
Anacomp has operated and anticipates that the Company will continue to operate
its business in the ordinary course during the pendency of the bankruptcy
proceeding. Through the utilization of cash available at the date the bankruptcy
proceeding was filed, and pursuant to an order of the Bankruptcy Court
permitting Anacomp to use cash collateral to pay expenses, Anacomp expects to
have sufficient liquidity to conduct its business without disruption and to pay
trade creditors in the ordinary course.
Fiscal 1995
Anacomp's working capital at September 30, 1995, excluding the current
portion of long-term debt, amounted to a $13.8 million deficit compared to $51.0
million at September 30, 1994. As disclosed in the Consolidated Statements of
Cash Flows, net cash provided by operating activities decreased to $19.9 million
for fiscal year ended September 30, 1995 compared to $52.7 million in the
comparable prior period, due primarily to the significant loss for the period.
Net cash provided by investing activities increased to $3.1 million in the
current period, compared to net cash used in investing activities of $23.6
million in the comparable prior period, primarily as a result of the
sale-leaseback of data service center equipment and reduced payments to acquire
companies. The Company's cash balance as of September 30, 1995 was 19.4 million.
Prior to the formulation of the New Operating Plan, the Company initiated
several cost cutting measures and personnel reductions which are expected to
reduce expenses in excess of $20 million annually. As part of the New Operating
Plan, the Company also announced additional Company-wide personnel reductions in
the fourth quarter of fiscal 1995. In addition, the Company sold its ICS
division for approximately $13.5 million; closed its Omaha, Nebraska magnetics
factory; and will discontinue the manufacture of readers and reader/printers. As
a result of these measures, the Company revised its forecasts on numerous
product lines and wrote off several investments on its year-end balance sheet.
The Company's cash balance as of September 30, 1995 was $19.4 million.
As part of the New Operating Plan, Anacomp has and will continue to reduce
capital expenditures by limiting research and development expenditures and costs
associated with manufacturing new products. This resulted in reduced capital
expenditures for fiscal 1995 of $12.3 million compared to $18.9 million in
fiscal 1994. The Company expects annual capital expenditures for plant, property
and equipment and acquisitions of lines of business to be approximately $15
million per year in the near future. The Company will expend in excess of $15
million per year to the extent acquisition opportunities arise in the Company's
current or related lines of business, subject to restrictions in the New Senior
Secured Notes Indenture and the New Senior Subordinated Notes Indenture.
<PAGE>
PROJECTIONS OF CERTAIN FINANCIAL DATA
As a condition to confirmation of a plan of reorganization, Section 1129 of
the Bankruptcy Code requires, among other things, that the Bankruptcy Court
determine that confirmation is not likely to be followed by liquidation or the
need for further financial reorganization of the debtor. In connection with the
development of the Plan and for the purposes of determining whether the Plan
satisfies this feasibility standard, the Company has analyzed the ability of
Reorganized Anacomp to meet its future obligations under the Plan and to have
sufficient liquidity and capital resources to conduct its business.
In this regard, the Company has prepared projections of Reorganized
Anacomp's statements of operations, cash flow and certain other items for a four
year period commencing with fiscal year 1996. Although the Plan is likely to
become effective in May, 1996, the following projections assume an Effective
Date of March 31, 1996. The Company believes that this discrepancy will not
materially alter the projections.
The following projections were not prepared with a view toward compliance
with published guidelines of the Commission or the American Institute of
Certified Public Accountants regarding projections or generally accepted
accounting principles. The projections necessarily rely on numerous assumptions,
all of which were made by the Company, with respect to industry performance,
general business and economic conditions, taxes and other matters, many of which
are beyond the Company's control. Such projections and assumptions are not
necessarily indicative of current values or future performance, which may be
significantly less favorable or more favorable than as set forth below. Although
the projections represent the best estimates of the Company, for which the
Company believes it has a reasonable basis as of the date hereof, of the results
of operations and financial position of the Company giving effect to the
Restructuring, they are only estimates, and actual results may vary considerably
from projections. Consequently, the inclusion of the projected information
herein should not be regarded as a representation by the Company, the Company's
advisors or any other person that the projected results will be achieved. The
Company's independent auditors have not examined or compiled the financial
projections presented herein and, accordingly, assume no responsibility for
them. The projections were prepared by the Company and have not been
independently verified or audited by any other party. The Company cannot and
does not make any representation or warranty with respect to the adequacy or
accuracy of the assumptions or the projections.
The Company does not generally publish its business plans and strategies or
make external projections of its anticipated financial positions or results of
operations. Accordingly, the Company does not intend to update or otherwise
revise the financial projections to reflect circumstances existing after the
date hereof or to reflect the occurrence of unanticipated events, even in the
event that the assumptions underlying the projections are shown to be in error,
except as required by applicable law, after the hearing on the confirmation of
the Plan even if the projections become false or misleading by reason of
subsequent events. The projections should not be relied on for any purpose
following the Confirmation Date. The projections should be read together with
the information contained in "The Company" and the Consolidated Financial
Statements of the Company and the related notes thereto included elsewhere in
this Disclosure Statement.
<PAGE>
<TABLE>
PROJECTED CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries
(Unaudited)
(Dollars in Thousands)
For the For the
Six Months Ending Years Ending September 30,
---------------------------- ----------------------------------------
March 31, September 30,
1996 1996 1997 1998 1999
- --------------------------------------- ------------ -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues............................ $261,002 $244,438 $494,984 $496,693 $464,768
Costs of Sales and Services......... 178,629 168,767 343,035 346,740 334,101
------- ------- ------- ------- -------
Gross Profit........................ 82,373 75,671 151,949 149,953 130,667
Sales, General and
Administrative................... 49,634 36,106 77,884 70,914 63,090
Amortization of Excess Reorg. Value. --- (36,580) (73,160) (73,160) (73,160)
------ ------- ------- ------- -------
Operating Income (Loss)............. 32,739 2,985 905 5,879 (5,583)
Interest Expense.................... 23,288 20,843 39,463 36,399 32,406
Interest Income and Other
(Expense), Net...................... 2,820 0 0 0 0
------ ------ ------- ------- -------
Income (Loss) Before Taxes
on Income......................... 12,271 (17,858) (38,558) (30,520) (37,989)
Reorganization Items................ 17,500 0 0 0 0
Income Tax Expense.................. 3,059 3,739 17,840 21,324 17,718
------ ------ ------ ------- -------
Net Income (Loss) Before
Extraordinary Item................ (8,288) (21,597) (56,398) (51,844) (55,707)
Extraordinary Item.................. 79,930 0 0 0 0
------ ------ ------ -------- -------
Net Income.......................... 71,642 (21,597) (56,398) (51,844) (55,707)
Preferred Stock Dividends........... 540 0 0 0 0
------ ------ ------ -------- -------
Net Income (Loss) to Common......... $71,102 ($21,597) ($56,398) ($51,844) ($55,707)
======= ======== ======== ======== ========
Earnings Per
Common Share...................... --- ($2.16) ($5.64) ($5.18) ($5.57)
======= ======== ======== ======== ========
Other Data:
Operating Income $32,739 $2,985 $905 $5,879 ($5,583)
Depreciation and Amortization..... 13,395 44,505 90,385 90,325 90,777
------ ------ ------ ------ ------
EBITDA............................ $46,134 $47,490 $91,290 $96,204 $85,194
======= ======= ======= ======= =======
</TABLE>
(See accompanying notes to the Projected Financial Statements.)
<PAGE>
<TABLE>
PROJECTED CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries
(Unaudited)
(Dollars in Thousands)
Pro forma as of As of September 30,
March 31, -------------------------------------------------------
1996 1996 1997 1998 1999
--------------- ------- ------- ------- -------
Assets
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash and Cash Equivalents......... $25,000 $31,876 $30,730 $20,374 $18,188
Accounts and Notes Receivable..... 76,677 76,671 75,859 76,124 70,924
Inventories....................... 44,507 44,493 41,522 40,690 36,046
Other Current Assets.............. 5,659 5,660 5,596 5,618 5,194
------- ------- ------- ------- -------
Total Current Assets................ 151,843 158,700 153,707 142,806 130,352
Property, Plant and Equipment,
less Depreciation Amortization.... 37,219 37,757 37,457 37,217 36,525
Long-term Receivables............... 9,801 9,799 9,703 9,735 9,111
Intangibles, net.................... 256,059 219,479 146,319 73,160 0
Other Assets........................ 13,172 12,210 10,285 8,360 6,435
-------- -------- -------- -------- --------
Total Assets $468,094 $437,945 $357,471 $271,278 $182,423
======== ======== ======== ======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts Payable.................. $49,429 $48,870 $43,664 $43,717 $42,517
Accrued Compensation.............. 14,143 16,332 16,172 16,225 15,185
Accrued Taxes and Interest........ 13,305 14,805 22,203 23,703 25,203
Other Accrued Liabilities......... 43,749 36,510 28,110 23,142 22,671
------- ------- ------- ------- -------
Total Current Liabilities........... 120,626 116,517 110,149 106,787 105,576
Long-Term Liabilities:
Long-Term Debt (incl. cur.
portion).......................... 263,927 260,443 242,568 210,803 178,289
Other Noncurrent Liabilities...... 4,968 4,008 2,496 1,592 488
------- ------- ------- ------- ------
Total Long-Term Liabilities......... 268,895 264,451 245,064 212,395 178,777
Preferred Stock..................... --- --- --- --- ---
Shareholders' Equity (Deficit)...... 78,573 56,977 2,258 (47,904) (101,930)
------- ------ ------- ------- --------
Total Liabilities & Shareholders'
Equity (Deficit) $468,094 $437,945 $357,471 $271,278 $182,423
======== ======== ======== ======== ========
(See accompanying notes to the Projected Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
PROJECTED STATEMENTS OF CASH FLOWS
Anacomp, Inc. and Subsidiaries
(Unaudited)
(Dollars in Thousands)
For Six Months Ending Year Ending September 30,
------------------------------ ---------------------------------------
March 31, September 30,
1996 1996 1997 1998 1999
------------ ------------- -------- --------- --------
Cash Flows From Operating
Activities
<S> <C> <C> <C> <C> <C>
Net Income (Loss)................. $71,102 ($21,597) ($56,398) ($51,844) ($55,706)
Depreciation & Amortization..... 13,395 44,505 90,385 90,325 90,777
Deferred Taxes and Other........ 17,565 0 1,680 1,680 1,680
Gain on Debt Exchange............ (79,930) 0 0 0 0
Gain on Disposition of Assets.... (6,620) 0 0 0 0
(Increase) Decrease in Working
Capital....................... (39,396) (5,048) (3,537) (3,153) 9,377
---------- --------- --------- -------- --------
Net Cash Provided by (Used in)
Operating Activities.......... (23,884) 17,860 32,130 37,008 46,128
Cash Flows From Investing
Activities
Proceeds from the Sale
of Assets...................... 13,554 0 0 0 0
Capital Expenditures............. (3,661) (7,500) (15,000) (15,000) (15,000)
---------- --------- --------- -------- --------
Net Cash Provided by (Used in)
Investing Activities........... 9,893 (7,500) (15,000) (15,000) (15,000)
Cash Flows From Financing
Activities
Principal Payments on Long
Term Debt...................... (12,972) (15,029) (31,642) (34,655) (35,604)
Non-Cash Interest and Other...... 32,548 11,544 13,366 2,290 2,290
---------- --------- --------- -------- --------
Net Cash Provided by (Used in)
Financing Activities........... 19,576 (3,486) (18,276) (32,365) (33,314)
Net Increase (Decrease) in Cash..... $5,585 $6,876 ($1,146) ($10,356) ($2,186)
========== ======= ========= =========== =========
Cash at the Beginning............ $19,415 $25,000 $31,876 $30,730 $20,374
Cash at the Ending............... 25,000 31,876 30,730 20,374 18,188
Supplemental Cash Flow
Disclosure
Cash Interest.................... --- $9,298 $26,096 $34,108 $30,115
Cash Income Taxes................ --- 3,739 16,160 19,644 16,038
(See accompanying notes to the Projected Financial Statements.)
</TABLE>
<PAGE>
Notes to the Projected Financial Statements
Anacomp, Inc. and Subsidiaries
(Unaudited)
The following are the principal assumptions used in the preparation of the
Projected Financial Statements:
(A) General Assumptions
The projections included herein assume that Anacomp implements the
Restructuring on the terms set forth herein with an Effective Date of
March 31, 1996. The Company recognizes that the Plan is likely to
become effective in April 1996, but believes this discrepancy will not
materially alter the projections. The projections also assume that the
Debtors' balance sheet cash on the last Business Day of the month
immediately preceding the Effective Date, determined in accordance
with generally accepted accounting principles, will be $50 million,
and that the Debtors will make payments on the Effective Date as
follows: (a) approximately $7 million to SKC in respect of amounts
necessary to pay post-petition interest and cure monetary defaults
under the Supply Agreement; (b) $2.75 million to the Holders of
Allowed Class 2 Claims in respect of the Premium Amount; (c) $7.5
million to the Holders of Allowed Class 2 Claims in respect of the
Cash Sweep Amount; (d) approximately $375,000 to the Holders of
Allowed Class 2 Claims in respect of the Cash Collateral Amount; (e)
approximately $1 million to Citibank, N.A. in respect of the Citibank
Agency Amount; (f) approximately $1.6 million to the Holders of
General Unsecured Claims (other than SKC) in respect of amounts due
and owing on the Effective Date; and (g) approximately $5 million to
the professionals for the Debtors, the Creditors' Committee, the
Holders of the Class 2 Claims and the Old Indenture Trustees.
(B) Revenues
The Company has projected a 14% overall decline in revenues between
September 30, 1995 and September 30, 1996 and an additional 8% overall
decline in revenues between September 30, 1996 and September 30, 1999,
consisting of an estimated 30% decline in revenues in the Company's
existing products and services offset by estimated revenues in excess
of $51 million per year by 1999 from the introduction of new products
and services, including among others, print/mail and CD-R services,
digital output systems, non-COM maintenance and new magnetics products.
The Company has projected a one time increase in revenues of $10.3
million in 1998 due to contractual minimum requirements of an OEM
Supply Agreement of the Company. Also included is a $4 million
non-performance payment due to the Company under the contract.
<PAGE>
(C) Gross Profit
Gross Profit decreases as a percent of revenues due to many factors
which include, among others, lower prices, lower volume, increased
competitive pressure and lower demand for existing products and
services. The Company plans to partially offset the negative effects
of the above factors through increased efficiency, higher margin
products, and discontinuing product lines which are no longer
profitable.
The Company has projected a one time increase in gross profit of $7.2
million in 1998 due to contractual minimum requirements of an OEM
Supply Agreement of the Company. Also included is a $4 million
non-performance payment under the contract.
(D) Sales, General and Administrative Expenses
Sales, General and Administrative expenses decrease through 1999 due
to: (i) the elimination of certain executive positions; (ii) the
planned consolidation of corporate offices; (iii) reduced expenditures
for engineering and product support; and (iv) the reduction of
management, sales, and support staff as consolidations occur and the
maturation of the product lines continue.
(E) Interest Expense
Assumed interest expense includes: (i) interest expense on the New
Senior Secured Notes (assumed at 11 5/8%); (ii) interest expense on the
New Senior Subordinated Notes (assumed at 13%); and (iii) amortization
of discount from issuance of the New Senior Subordinated Notes at a
discount.
(F) Interest Income and Other Expenses, Net
On October 31, 1995 the Company sold its Image Conversion Service
Division for approximately $13.6 million which resulted in a net gain
to the Company of approximately $6.2 million. A substantial portion of
the proceeds from the sale ($12.7 million) were used to reduce the
principal balance on the Old Credit Facilities and the Old Senior
Notes.
(G) Income Taxes
The projections assume that Reorganized Anacomp will be a taxpaying
entity after the Effective Date with limited use of its NOL
carryforward existing after the Effective Date. The combined federal,
state, and foreign statutory tax rate is assumed at 41% throughout the
projected period. The difference between the statutory and the
effective rate is primarily due to the inability to deduct the
amortization of intangibles and double taxation of foreign income.
<PAGE>
(H) Reorganization Items
Reorganization expenses directly attributed to the Restructuring are
assumed to be $17.5 million and have been classified as Reorganized
Items in the accompanying Projected Statement of Operations for the six
months ended March 31, 1996.
(I) Accounting for Restructuring
The projections give effect to the restructuring as if it occurs on
March 31, 1996. Pursuant to SOP 90-7, "fresh start" accounting
principles require assets and liabilities be stated at fair values. The
Reorganization Value in excess of amounts allocated to the fair value
of identifiable assets (i.e., the goodwill value of the Company) is
$256.1 million. This is reflected on the unaudited Projected
Consolidated Balance Sheets as an intangible asset. On the unaudited
Projected Consolidated Statements of Operations, the intangible asset
is being amortized over a three and a half year period. As detailed in
footnote (M) of the Pro Forma Consolidated Balance Sheet as of December
31, 1995, beginning on page 122 of this Disclosure Statement, the
estimated Reorganization Value, including identifiable assets, is $350
million.
(J) Earnings per Share
Earnings per share for the six months ended September 30, 1996 and for
the three years ended 1999 has been computed based on 10,000,000 Shares
of New Common Stock issued in connection with the Restructuring. For
purposes of the projections, management incentive options and warrants
issued in connection with the Restructuring are assumed not to have a
dilutive impact.
(K) Working Capital
The working capital is assumed to vary according to sales of the
Company.
(L) Capital Expenditures and Business Acquisitions
Capital expenditures are projected to be $10.0 million per year and
business acquisitions are projected to be $5.0 million through 1999,
although actual capital expenditures and business acquisitions may
exceed such amounts. For projection purposes, 100% of the business
acquisition purchase price is capitalized as part of property, plant
and equipment and amortized over 5 years.
<PAGE>
MANAGEMENT
Post-Restructuring Executive Officers and Directors
On the Effective Date, the initial board of directors of Reorganized
Anacomp shall consist of the following individuals: P. Lang Lowrey III, Talton
R. Embry, Jay P. Gilbertson, Darius W. Gaskins Jr., Richard D. Jackson, George
A. Poole Jr. and Lewis Solomon. Also on the Effective Date, the executive
officers of Reorganized Anacomp shall be the individuals identified below.
Subject to any requirement of Bankruptcy Court approval under Section 1129(a)(5)
of the Bankruptcy Code, such persons designated as directors and officers of
Reorganized Anacomp shall assume their offices on the Effective Date and shall
continue to serve in such capacity thereafter, pending further action of the
board of directors or shareholders of Reorganized Anacomp in accordance with the
Amended Anacomp Articles, the Amended Anacomp Bylaws and applicable state law.
Current Executive Officers and Directors
The current executive officers and directors of the Company and their ages
(as of March 1, 1996) and positions are listed below:
<TABLE>
Name Age Position
<S> <C> <C>
P. Lang Lowrey III...... 43 President, Chief Executive Officer and Director
Donald L. Viles......... 49 Executive Vice President and Chief Financial Officer
William C. Ater......... 56 Vice President and Chief Administrative Officer
K. Gordon Fife.......... 51 Vice President-- Tax
Hasso Jenss............. 53 President-- European Group
Thomas W. Murrel........ 56 President-- Anacomp Worldwide Operations Group
Michael H. Riley........ 49 President-- Strategic Partners Group
Gary M. Roth............ 53 President-- International Group
Thomas R. Simmons....... 49 President-- U.S. Group
Peter Williams.......... 43 President-- Magnetics Group
Paul G. Roland.......... 61 Chairman of the Board
Clark A. Johnson........ 64 Director
Richard E. Neal......... 70 Director
Roger S. Palamara....... 49 Director
Frederick W. Zuckerman.. 61 Director
</TABLE>
<PAGE>
The Company has experienced several recent changes in senior management. On
May 15, 1995, P. Lang Lowrey III replaced Mark Woods as President and Chief
Operating Officer and memb Parcel 033 D00800101 er of the Board of Directors.
In addition, Louis P. Ferrero's contract as Chief Executive Officer expired
effective September 30, 1995. Mr. Ferrero left his position as Chairman of the
Board on November 9, 1995. Mr. Lowrey was appointed Chief Executive Officer,
effective October 1, 1995. Mr. Roland was elected Chairman of the Board
effective November 9, 1995. Prior to his appointment as President, Mr. Lowrey
served as Vice President -- Magnetics Group from November 1992 to May 1995. He
served from October 1990 to October 1992 as Vice President -- Worldwide
Marketing Division. He was Vice President -- MultiproduX Division from December
1987 through September 1990. In connection with the development of the New
Operating Plan, Anacomp reorganized its corporate structure, forming six new
divisions with the president of each division reporting to Mr. Lowrey.
The directors of Anacomp are indicated above. Currently, there are no
vacancies on the Board. The directors of Kalvar Microfilm, Inc. are P. Lang
Lowrey III, Jack R. O'Donnell and Donald L. Viles. The directors of Florida A A
C Corporation are William C. Ater, P. Lang Lowrey III and Donald L. Viles. The
directors of Xidex Development Company are George C. Gaskin, P. Lang Lowrey III
and Donald L. Viles. The managing directors of Anacomp International, N.V. are
K. Gordon Fife and the Curacao Corporation, N.V.
Initial Directors of Reorganized Anacomp
Talton R. Embry has been Chairman and Chief Investment Officer of Magten
Asset Management Corporation, which is an investment advisory, firm since 1978.
Mr. Embry is also a director of Capsure Holdings Corp., Varco International
Inc., TSX Corporation, Combined Broadcasting, Inc., BDK Holdings, Inc.,
Thermadyne Holdings Corp. and Revco Drug Stores. Mr. Embry and Sam Zell were
elected on July 27, 1992, as Co-Chairmen of the Board of Directors of Revco Drug
Stores.
On September 9, 1993, Magten Asset Management Corp. and Talton R. Embry,
without admitting or denying the allegations in a complaint by the Securities
and Exchange Commission consented to the entry of judgments enjoining them from
violating (and, in the case of Mr. Embry, aiding and abetting violations of)
anti-fraud and other provisions of the Securities and Exchange Act of 1934, the
Investment Advisor's Act of 1940 and the Investment Company Act of 1940. The
action, Securities and Exchange Commission v. Talton R. Embry and Magten Asset
Management Corp., 93 Civ. 6294 (LMM) (filed September 9, 1993 S.D.N.Y.), was
filed in the United States District Court for the Southern District of New York
on September 9, 1993, and the final judgment were entered on September 14, 1993.
<PAGE>
The Commission's complaint alleged principally that Mr. Embry failed to
advise his clients of certain personal and proprietary trades relevant to the
clients' holdings and to comply with certain reporting requirements. As part of
the settlement, Mr. Embry made a $1 million payment for the benefit of certain
of Magten's clients.
At the same time, Mr. Embry, without admitting or denying the allegations
in an order filed by the Commission, settled a parallel SEC administrative
action against Mr. Embry. The administrative proceeding, the Matter of Talton R.
Embry, Administrative Proceeding File No. 3-8153, was commenced by the
Commission on September 16, 1993. In the settlement, Mr. Embry agreed to the
appointment, for a period of five years, of an independent consultant approved
by the SEC to oversee Mr. Embry's personal securities transactions and to
conduct biannual compliance audits of Magten. Gerald Rath, Esq. of the firm of
Bingham Dana & Gould, Boston, Massachusetts, has been appointed and approved as
the independent consultant.
On February 26, 1996, Magten and the Maryland Securities Commissioner
entered into a consent order whereby Magten paid a fine of $1,500. The Maryland
Securities Commissioner alleged that Magten effected investment advisory
transactions in Maryland prior to its registration as a Maryland investment
adviser. Magten is currently registered as an investment adviser in Maryland,
and its activities are not restricted.
Darius W. Gaskins, Jr. has been a partner of High Street Associates, Inc.
since 1991. In addition, he served as President and Chief Executive Officer of
the Burlington Northern Railroad from 1985 to 1989. Mr. Gaskins also serves as a
director of UNR Industries, Inc. and Northwestern Steel and Wire Company.
Jay P. Gilbertson has been the chief financial officer of HBO & Company
since April 1993. From December 1991 until April 1993, he served as corporate
controller of HBO & Company. HBO & Company delivers financial, clinical and
strategic management software solutions, as well as a wide range of outsourcing,
education and installation services to heathcare organizations in the United
States, United Kingdom, Canada, Australia and New Zealand.
Richard D. Jackson has been the Vice Chairman of First Financial Management
Corporation since February 1995. From 1993 to 1995, he served as Chief Operating
Officer and Senior Executive Vice President of First Financial Management
Corporation. From 1990 to 1993, Mr. Jackson served as Vice Chairman and Chief
Executive Officer of the Georgia Federal Bank.
P. Lang Lowrey III was elected Director, President and Chief Operating
Officer of Anacomp, Inc. in May 1995 and subsequently assumed the duties of
Chief Executive Officer, effective October 1, 1995. Prior to that, he served as
Vice President -- Magnetics Group from November 1992 to May 1995. He served from
October 1990 to October 1992 as Vice President -- Worldwide Marketing Division.
<PAGE>
George A. Poole, Jr. currently serves as a director of Rock Island Foods,
Inc.; FCC Receivables Corp.; Bucyrus-Erie Company; Spieckels Industries, Inc.;
and U.S. Home Corporation.
Lewis Solomon has been the Chairman of the Board and Chief Executive
Officer of Silent Radio, Inc. since March 1986. Silent Radio, Inc. provides and
designs information services and manufacturers and markets visual communications
systems. Mr. Solomon is also a director of ICTV, Inc., Microelectronic
Packaging, Inc., Candicopia, Inc., Anadigics, Inc., Terayon Corp., and TSX
Corporation.
Director Compensation
Directors who are not employees of Reorganized Anacomp will receive $1,000
for each directors' meeting attended, $500 for each committee meeting attended
and an annual retainer of $12,000. Employee directors receive no fees. Directors
of Reorganized Anacomp will receive 5,000 stock options for their first year of
service.
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, as to the Company's
Chief Executive Officer and the other four most highly compensated executive
officers, all compensation awarded to, earned by, or paid to said individuals
(the "Named Executive Offices") for all services rendered in all capacities to
the Company and its subsidiaries for the fiscal years ended September 30, 1995,
1994 and 1993, except as may otherwise be specifically noted.
<TABLE>
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------------------
Long-Term
---------
Compensation
------------
Annual Compensation Awards
------------------------------ ------
Other Annual Stock
Fiscal Salary Bonus Compensation Options All Other
Name and Principal Position Year ($) ($) ($)(1) (#)(2) Compensation
- ------------------------------------------------------------------------------------------- -------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Louis P. Ferrero, 1995 500,000 $ 0 --- 0 $1,844,253 (3)(4)
--------- ------------ ------------ ---------------- -------------- ---------------------
Chairman and Chief 1994 500,000 260,061 --- 0 53,122 (5)
--------- ------------ ------------ ---------------- -------------- ---------------------
Executive Officer 1993 500,000 347,735 --- 300,000 68,012 (5)
(Separated as of 9/30/95)
- ------------------------------------------------------------------------------------------- -------------- ---------------------
P. Lang Lowrey, III 1995 289,692 87,750 --- 375,000 0
--------- ------------ ------------ ---------------- -------------- ---------------------
Vice President, 1994 147,500 180,836 --- 0 0
Magnetics Group
--------- ------------ ------------ ---------------- -------------- ---------------------
President and Chief Operating 1993 147,500 130,243 --- 80,000 0
--------- ------------ ------------ ---------------- -------------- ---------------------
Officer (as of 5/15/95); Chief
Executive Officer (as of 10/1/95)
- ------------------------------------------------------------------------------------------- -------------- ---------------------
J. Mark Woods, 1995 246,808 30,000 --- 0 949,000 (6)
--------- ------------ ------------ ---------------- -------------- ---------------------
President and Chief 1994 250,000 229,500 --- 0 1,000 (5)
--------- ------------ ------------ ---------------- -------------- ---------------------
Operating Officer 1993 250,000 219,250 --- 200,000 1,000 (5)
--------- ------------ ------------ ---------------- -------------- ---------------------
(Separated as of 5/15/95)
- ------------------------------------------------------------------------------------------- -------------- ---------------------
Thomas R. Simmons 1995 206,500 66,374 --- 0 1,680 (7)
--------- ------------ ------------ ---------------- -------------- ---------------------
Vice President, Direct 1994 147,500 137,011 --- 0 2,082(5)(7)
--------- ------------ ------------ ---------------- -------------- ---------------------
Sales Division-- East 1993 147,500 153,892 --- 100,000 1,000 (5)
- ------------------------------------------------------------------------------------------- -------------- ---------------------
Jack R. O'Donnell, 1995 224,000 31,954 --- 0 0
--------- ------------ ------------ ---------------- -------------- ---------------------
Executive Vice President, 1994 160,000 170,331 --- 0 0
--------- ------------ ------------ ---------------- -------------- ---------------------
Treasurer and Chief 1993 160,000 161,080 --- 50,000 0
--------- ------------ ------------ ---------------- -------------- ---------------------
Financial Officer
- ------------------------------------------------------------------------------------------- -------------- ---------------------
Hasso Jenss, 1995 172,771 72,006 --- 0 0
--------- ------------ ------------ ---------------- -------------- ---------------------
Vice President, 1994 109,224 87,553 --- 0 0
--------- ------------ ------------ ---------------- -------------- ---------------------
European 1993 --- --- --- --- ---
--------- ------------ ------------ ---------------- -------------- ---------------------
Micrographics
- ------------------------------------------------------------------------------------------- -------------- ---------------------
</TABLE>
(1) The aggregate amount of perquisites and other personal benefits,
securities or property, given to each Named Executive Officer valued on
the basis of aggregate incremental cost to the Company did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus for each
such officer during fiscal 1995, 1994 and 1993.
(2) All such options will be canceled by the Plan.
<PAGE>
(3) $1,829,717 of this amount represents a severance payout to Mr. Ferrero
pursuant to the terms of his employment agreement, the terms of which are
set forth below in the Employment Contracts section of this Disclosure
Statement, as well as a $30,000 consulting fee for consulting services
rendered for the period October through December 1995. Mr. Ferrero's
outstanding loan of $1,087,000 was repaid to the Company out of this
payout and substantially all of the balance of the severance payment was
withheld for federal tax purposes.
(4) $54,536 of this amount represents the imputed interest in 1995 ($52,122
in 1994 and $67,012 in 1993) on Mr. Ferrero's loan from the Company. The
interest is calculated on the basis of the applicable federal rate
computed by the Internal Revenue Service.
(5) These figures include the following contributions made by the Company
to the Anacomp Savings Plus Plan for fiscal 1994 and fiscal 1993: for
Mr. Ferrero, Mr. Woods and Mr. Simmons, $1,000 each per year.
(6) This amount represents a severance payout to Mr. Woods pursuant to the
terms of his employment agreement, the terms of which are set forth below
in the Employment Contracts section of this Disclosure Statement.
(7) $1,680 represents the imputed interest in 1995 ($1,082 in 1994) on Mr.
Simmons' loan from the Company. The interest is calculated on the basis
of the applicable federal rate computed by the Internal Revenue Service.
Employment Contracts
With the exception of Mr. Jenss, all of the Named Executive Officers are
party to employment agreements with the Company. Set forth below is a brief
description of each such agreement.
Louis P. Ferrero. As of October 1, 1992, Mr. Ferrero entered into a
three-year Employment Agreement with the Company which expired on September 30,
1995. For fiscal year 1995, Mr. Ferrero's compensation plan included a base
salary of $500,000 and a minimum annual bonus equal to 1.7% of the Company's net
before-tax income. The Board of Directors decided not to renew Mr. Ferrero's
Employment Agreement effective September 30, 1995. Pursuant to such Agreement,
Mr. Ferrero was entitled to a severance allowance equal to his prior twenty-four
months' compensation, including bonuses and benefits, if the Agreement was not
renewed. The value of Mr. Ferrero's outstanding loan from the Company
($1,087,000) was subtracted from his severance allowance. Beginning October 1,
1995, the Company retained Mr. Ferrero as a consultant at a rate of $10,000 per
month for a period of three months. Mr. Ferrero's Employment Agreement further
provided that he will not compete with the Company for a period of thirty-six
months following any termination of service.
P. Lang Lowrey III. Mr. Lowrey entered into a three-year Employment
Agreement with the Company which expired on September 30, 1992. Such Agreement
<PAGE>
was renewed for a third one-year term which expired on September 30, 1995.
However, the Agreement was amended effective May 14, 1995, in light of Mr.
Lowrey's promotion to President, Chief Operating Officer and Director, and his
base salary was increased to $350,000 as of that date.
Due to his promotion to Chief Executive Officer, effective September 24,
1995, Mr. Lowrey entered into an Amended and Restated Employment Agreement with
the Company which expires on September 30, 1996. Such Agreement was further
amended on November 30, 1995. Mr. Lowrey's compensation plan for fiscal year
1996 is comprised of a base salary of $450,000 and (i) an annual incentive bonus
equal to one-half of one percent of the Company's pre-tax income for the year,
and (ii) an annual stock-based bonus in the amount of $50,000 for each $1.00
increase in the closing sales price of the Company's Common Stock for the year,
calculated by averaging the closing sales price of the Common Stock for the ten
trading days ending on the last trading day of the fiscal year. Both bonuses may
be paid to Mr. Lowrey in shares of the Company's Common Stock in lieu of cash.
Mr. Lowrey also will be paid a monthly bonus in cash equal to .0005 multiplied
by the Company's monthly EBITDA as defined in the Agreement.
Mr. Lowrey's Employment Agreement further provides that, in the event of a
merger or consolidation where the Company is not the surviving company, or a
transfer of all or substantially all of the Company's assets if the surviving or
controlling company does not agree to be bound by the terms of the Employment
Agreement, or a change in control of the Company or a discontinuation of the
business by the Company, Mr. Lowrey will receive a severance allowance equal to
his prior twenty-four months' compensation, including bonuses and benefits
(collectively, the "Severance Allowance"; approximately $985,000 as of April 1,
1996). It is likely that a change of control under Mr. Lowrey's Employment
Agreement will occur as a result of the Restructuring, entitling Mr. Lowrey to
receive the Severance Allowance if he deems his employment with the Company to
be terminated as a result of such change in control and resigns. If Reorganized
Anacomp agrees to be bound by Mr. Lowrey's Employment Agreement, Mr. Lowrey may
nonetheless elect to treat the Employment Agreement as terminated and receive
the Severance Allowance. In addition, Mr. Lowrey is entitled to the Severance
Allowance if he is terminated by mutual agreement or without cause by the
Company, if he deems a termination to have occurred due to a demotion, transfer,
reduction in compensation or intentional interference by the Company with the
performance of his duties, if his Employment Agreement is not renewed at the end
of its current term or any extension thereof, or if Mr. Ferrero is replaced as
the Chairman of the Board of Directors by someone other than Mr. Lowrey. At the
time of Mr. Ferrero's resignation, Mr. Lowrey reserved (and the Board
acknowledged) Mr. Lowrey's right under the Employment Agreement to resign and
receive his Severance Allowance at any time thereafter.
Pursuant to his Employment Agreement, Mr. Lowrey received a retention bonus
equal to $200,000 in November, 1995, in order to induce him to serve as Chief
Executive Officer of the Company, to continue his employment for one year from
October 1, 1995, and to accept a temporary transfer to Poway, California. If Mr.
Lowrey receives at any time an incentive bonus in cash (as opposed to shares of
the Company's Common Stock pursuant to (i) or (ii) above), then the amount of
the retention bonus due will first be offset against the incentive bonus. If Mr.
Lowrey's employment is terminated so that the Severance Allowance vests, then
<PAGE>
the amount of the retention bonus will first be offset against the Severance
Allowance.
Mr. Lowrey also entered into a covenant not to compete with the Company for
a period of one year following any termination of service. In consideration for
entering into a covenant not to compete with the Company, Mr. Lowrey was granted
options to acquire up to 375,000 shares of the Company's Common Stock.
J. Mark Woods. On May 15, 1995, Mr. Woods' employment was terminated
without cause by the Company. Pursuant to his Employment Agreement, Mr. Woods
was entitled to a severance allowance equal to his prior twenty-four months'
compensation, including bonuses and benefits. Such Agreement further provides
that Mr. Woods will not compete with the Company for a period of two years
following any termination of employment.
Thomas R. Simmons. Mr. Simmons entered into a three-year Employment
Agreement with the Company which expired on September 30, 1995, and which was
subsequently renewed for a one-year term expiring on September 30, 1996. He has
also entered into a covenant not to compete with the Company for a period of two
years following any termination of employment. Mr. Simmons' compensation plan
for fiscal year 1996 includes a base salary of $206,500 and up to $88,500 in
bonus payments. One-half of the bonus is based on the U.S. Group's attaining
certain revenue and profit goals. If achieved, this bonus would be paid monthly
and adjusted at fiscal year end. The other half of the bonus is paid at year-end
only if the Company meets 100% of its profit objectives for the year.
Mr. Simmons' Employment Agreement provides that, in the event of a merger
or consolidation or a transfer of substantially all of the Company's assets or a
change in control of the Company, Mr. Simmons will receive a severance allowance
equal to his prior twelve months' compensation if he is subsequently terminated
without cause or if he deems a termination to have occurred due to a demotion,
transfer or reduction in compensation. Mr. Simmons is also entitled to such
severance allowance if he is terminated without cause by the Company or if he
deems a termination to have occurred due to a demotion, transfer or reduction in
compensation.
Jack R. O'Donnell. Mr. O'Donnell entered into a three-year Employment
Agreement with the Company which expired on February 28, 1995, and which was
subsequently renewed for a one-year term expiring on February 28, 1996. He has
also entered into a covenant not to compete with the Company for a period of two
years following any termination of employment.
Mr. O'Donnell's Employment Agreement provides that, in the event of a
merger or consolidation or a transfer of substantially all of the Company's
assets or a change in control of the Company, Mr. O'Donnell will receive a
severance allowance equal to his prior twenty-four months' compensation if he is
subsequently terminated without cause or if he deems a termination to have
occurred due to a demotion, transfer or reduction in compensation. Mr. O'Donnell
is also entitled to such severance allowance if he is terminated without cause
by the Company or if he deems a termination to have occurred due to a demotion,
<PAGE>
transfer or reduction in compensation. Effective December 31, 1995, Mr.
O'Donnell's employment with the Company was terminated without cause. Pursuant
to his Employment Agreement, Mr. O'Donnell received a severance allowance equal
to his prior twenty-four months' compensation, including bonuses and benefits.
Mr. O'Donnell and the Company also entered into a two-month consulting agreement
commencing January 1, 1996 pursuant to which Mr. O'Donnell was paid $16,000 and
continued as the Company's chief financial officer for that period.
Termination of Employment and Change of Control Arrangements
As discussed above, the Employment Agreements of Mr. Lowrey and Mr. Simmons
provide for certain payments in the event of a termination of employment or a
change of control of the Company. Mr. Jenss is entitled to termination pay and
other benefits as provided by applicable German labor laws.
THE PLAN
The Plan provides for the reorganization of the Debtors on the Effective
Date following confirmation of the Plan. The Plan is attached to this Disclosure
Statement as Appendix I. The following summaries of the material provisions of
the Plan do not purport to be complete and are subject, and are qualified in
their entirety by reference, to all the provisions of the Plan, including the
definitions therein of certain terms used below. Each capitalized term used
herein and not otherwise defined herein shall have the meaning ascribed to such
term in the Plan.
Brief Explanation of Chapter 11
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself and its creditors and shareholders. Upon
filing a petition for relief under Chapter 11, the Bankruptcy Code generally
provides for an automatic stay of all attempts to collect claims or enforce
liens that arose prior to the filing.
Consummation of a plan of reorganization is the principal objective of a
Chapter 11 case. In general, a plan of reorganization divides the Claims against
and Interests in a debtor into separate classes and allocates plan of
reorganization distributions among those classes. If the legal, equitable and
contractual rights of a class are unaffected by the plan of reorganization, it
is considered "unimpaired." All unimpaired classes are deemed to have accepted
the plan of reorganization and therefore are not entitled to vote thereon. All
classes of Claims and Interests that do not receive or retain any property under
the plan of reorganization on account of such Claims and Interests are deemed to
have rejected the plan of reorganization under Section 1126(g) of the Bankruptcy
Code. All other classes of Claims and Interests are considered "impaired" and
are entitled to vote on the plan of reorganization.
Under the Bankruptcy Code, acceptance of the plan of reorganization is
determined by class, and therefore it is not required that each holder of an
<PAGE>
impaired claim or interest vote in favor of the plan of reorganization in order
for the Bankruptcy Court to confirm the plan of reorganization. If each impaired
class does not vote to accept the plan of reorganization, the Bankruptcy Court
may confirm the plan of reorganization in certain circumstances, but only if at
least one impaired class of claims votes to accept the plan of reorganization
and certain other statutory tests are satisfied. See " -- Acceptance of the
Plan" and " -Confirmation of the Plan." Many of these tests are designed to
protect the interests of creditors and equity holders who do not vote or who
vote not to accept the plan of reorganization but who will nonetheless be bound
by the plan's provisions if it is confirmed by the Bankruptcy Court. Under
Section 1109(b) of the Bankruptcy Code, all parties in interest, including
creditors and equity security holders of the Company and the Subsidiaries will
have the right to appear and be heard on any issue in the Chapter 11 Cases.
Acceptance of the Plan
Except as discussed below under " -- Confirmation Without Acceptance of All
Impaired Classes," as a condition to confirmation, Section 1129(a) of the
Bankruptcy Code requires that (i) each impaired class of claims or interests
that receives or retains property under a plan of reorganization votes to accept
the plan of reorganization and (ii) the plan of reorganization meets the other
requirements of Section 1129(a). As explained above, classes of claims and
interests that do not receive or retain any property under a plan of
reorganization on account of such claims and interests are deemed to have
rejected the plan of reorganization and are not entitled to vote, and classes of
claims or interests that are not impaired under a plan of reorganization are
deemed to have accepted the plan of reorganization and are not entitled to vote.
Therefore, acceptances of the Plan are being solicited only from those Holders
who hold Claims or Interests in an impaired Class that is receiving a
distribution under the Plan, except for the Holders of Old Common Stock, who
will not be solicited and whose Class will be deemed to have rejected the Plan.
An impaired Class of Claims will be deemed to have accepted the Plan if Holders
of at least two-thirds in dollar amount and a majority in number of the Holders
of Claims of such Class who cast timely Ballots vote to accept the Plan. An
impaired Class of Interests will be deemed to have accepted the Plan if Holders
of at least two-thirds in amount of the Interests in such Class who cast timely
Ballots vote to accept the Plan. Holders of Claims or Interests who fail to vote
or who abstain on the Plan are not counted for purposes of determining either
acceptance or rejection of the Plan by any impaired Class of Claims or
Interests.
If at least one impaired class of claims votes to accept a plan of
reorganization (not counting the votes of insiders), the plan of reorganization
may be confirmed despite rejection by the other impaired classes if the
"cramdown" provisions of Section 1129(b) of the Bankruptcy Code are satisfied.
The "cramdown" provisions of Section 1129(b) essentially provide that a plan of
reorganization may be confirmed over the rejection of an impaired class of
claims or interests if the plan of reorganization "does not discriminate
unfairly" and is "fair and equitable" with respect to such rejecting impaired
class. A discussion of the provisions of Section 1129(b) is set forth below. See
" -- Confirmation Without Acceptance of All Impaired Classes."
<PAGE>
Classification of Claims and Interests
Section 1123 of the Bankruptcy Code provides that a plan of reorganization
shall designate classes of a debtor's claims and interests. The Plan divides the
Claims and Interests into Classes and sets forth the treatment offered each
Class. Section 101(4) of the Bankruptcy Code defines "claim" as a right to
payment, whether or not such right is "reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured" or a "right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, disputed, undisputed, secured or unsecured."
Section 1122 of the Bankruptcy Code requires that each class of claims and
interests contain only claims or interests which are substantially similar to
each other. The Debtors believe that they have classified all Claims and
Interests in compliance with the provisions of Sections 1122 and 1123. It is
possible, however, that a Holder of a Claim or Interest may challenge the
Debtors' classification of Claims and Interests and that the Bankruptcy Court
may find that a different classification is required for the Plan to be
confirmed. In such event, it is the present intent of the Debtors, to the extent
permitted by the Bankruptcy Court, to modify the classifications in the Plan as
required by the Bankruptcy Court and to use the acceptances received in the
Solicitations for the purpose of obtaining the approval of the Class or Classes
of which the accepting Holder is ultimately deemed to be a member.
Classification and Treatment of Claims and Interests Under the Plan
The following describes the Plan's classification of those Claims against
and Interests in the Debtors that are required to be classified under the
Bankruptcy Code, and the treatment that the Holders of such Allowed Claims or
Allowed Interests (each as defined in the Plan) shall receive under the Plan.
All distributions referred to below that are scheduled for the Effective Date
will be made on the Effective Date or as soon as practicable thereafter.
Treatment of Unclassified Claims
The Bankruptcy Code does not require classification of certain priority
claims against a debtor. In this case, these unclassified claims include
Administrative Claims and Priority Tax Claims.
Administrative Claims. An "Administrative Claim" is a Claim or expense
allowed under Section 503(b) of the Bankruptcy Code that is entitled to priority
under Section 507(a)(1) of the Bankruptcy Code, including amounts required to be
paid in connection with any assumption of executory contracts and unexpired
leases. Under the Plan, Holders of Administrative Claims based on liabilities
incurred in the ordinary course of the Debtors' businesses shall not be required
to File any request for payment of such Claims, and such Administrative Claims
shall be assumed and paid by Reorganized Anacomp pursuant to the terms and
conditions of the particular transaction giving rise to such Administrative
Claim without any further action by the Holders of such Claims or the need for
Bankruptcy Court approval.
<PAGE>
All Professionals retained by any Debtor and any other Entities requesting
compensation or reimbursement of expenses pursuant to Sections 327, 328, 330,
331, or 503(b) of the Bankruptcy Code for services rendered before the Effective
Date (including, without limitation, any compensation requested by any
Professional or any other Entity for making a substantial contribution in these
Chapter 11 Cases) shall File and serve on Reorganized Anacomp an application for
final allowance of compensation and reimbursement of expenses no later than
thirty (30) days after the Effective Date. Objections to applications of
Professionals for compensation or reimbursement of expenses must be Filed and
served on Reorganized Anacomp and the Professionals to whose application the
objections are addressed no later than fifteen (15) days after service of the
related application. Any professional fees and reimbursements or expenses
incurred by Reorganized Anacomp subsequent to the Effective Date may be paid by
Reorganized Anacomp without application to the Bankruptcy Court.
Priority Tax Claims. A "Priority Tax Claim" is a tax claim of governmental
units to the extent such claims are entitled to priority under Section 507(a)(8)
of the Bankruptcy Code. Unless otherwise agreed to by a Holder of a Priority Tax
Claim and any Debtor or Reorganized Anacomp, each Holder of an Allowed Priority
Tax Claim shall receive, at such Debtor's or Reorganized Anacomp's option, (a)
Cash, in the full amount of such Allowed Priority Tax Claim, on the Effective
Date or (b) deferred payments of Cash in the full amount of such Allowed
Priority Tax Claim, payable in equal annual principal installments beginning the
first anniversary of the Effective Date and ending on the earlier of the sixth
anniversary of the Effective Date or the sixth anniversary of the date of the
assessment of such Claim, together with interest on the unpaid balance of such
Allowed Priority Tax Claim at an annual rate equal to the Treasury Rate or such
other rate as may be set by the Bankruptcy Court at the Confirmation Hearing.
The foregoing treatment of Allowed Priority Tax Claims is consistent with the
provisions of Section 1129(a)(9)(C) of the Bankruptcy Code, and the Holders of
Allowed Priority Tax Claims are not entitled to vote on the Plan. Pursuant to
Section 1123(a)(1) of the Bankruptcy Code, Priority Tax Claims are not
designated as a Class of Claims for purposes of the Plan. The Indiana Department
of Revenue has Filed a Claim labeled as a "priority claim" in the amount of
$791,230.16. The Debtors intend to object to such Claim in the event that they
are unable to reach a satisfactory resolution of the same with such claimant.
Class 1 -- Priority Claims. Class 1 consists of all Priority Claims. A
Priority Claim is any Allowed Claim entitled to priority under Section 507(a) of
the Bankruptcy Code, other than an Administrative Claim or a Priority Tax Claim,
against any Debtor. At the Company's option, each Holder of an Allowed Priority
Claim in Class 1 shall be entitled to receive the Allowed amount of such Claim
in full in Cash on the later of (i) the Effective Date, (ii) the date such Claim
becomes an Allowed Priority Claim and (iii) the date that such Claim would be
paid in accordance with any terms and conditions of any agreements or
understandings relating thereto between the Company and the Holder of such
Claim. To the extent payment is not made on the Effective Date, the Allowed
Class 1 Claims shall include interest at the interest rate provided in the
agreement, if any, between the Creditor and the Debtor, or if no interest rate
is provided, at the Treasury Rate from the later of: (i) the Effective Date; or
(ii) the date payment was first due, to the date of payment. Allowed Claims in
Class 1 are not impaired under the Plan and therefore Holders of Claims in Class
<PAGE>
1 will be deemed to have accepted the Plan. The Company estimates that there are
no Class 1 Claims.
Class 2 -- Old Credit Facilities Secured Claims and Old Senior Notes
Secured Claims. Class 2 consists of all Claims (a) related to, based upon or
arising under or in connection with the Old Credit Facilities, that is a Secured
Claim against property of the Debtors, the Domestic Subsidiaries and/or the
Foreign Subsidiaries or any guarantee by any Debtor of such Claim, and (b)
related to, based upon or arising under or in connection with the Old Senior
Notes, that is a Secured Claim against property of the Debtors, the Domestic
Subsidiaries and/or the Foreign Subsidiaries or any guarantee by any Debtor of
such Claim. Each Holder of an Allowed Class 2 Claim will receive its Pro Rata
share of (i) the Premium Amount ($2.75 million), (ii) the Cash Sweep Amount
($7.5 million) and (iii) the New Senior Secured Notes, and shall retain the
Liens securing its Claims. The principal economic terms of the New Senior
Secured Notes are set forth on page 8 of the Disclosure Statement. In addition,
on the Effective Date, (a) the theretofore unpaid fees and expenses of certain
professionals of the Senior Secured Creditors will be paid (subject to certain
conditions specified in the Plan), (b) the Citibank Agency Amount (approximately
$1 million) will be paid to Citibank, N.A., (c) undrawn letters of credit under
the Old Credit Facilities will be Cash collateralized by the Letter of Credit
Cash Amount or replaced by the New LC Facility, and (d) each of the Senior
Secured Creditors will receive a payment of accrued and unpaid interest in the
manner provided in the Cash Collateral Order. The aggregate amount of the Claims
in Class 2 will be deemed to be an Allowed Claim on the Effective Date of
approximately $122.8 million, which amount does not include amounts in respect
of post-petition non-default contract rate interest, professional fees, costs
and other expenses or draws on letters of credit and which amount includes,
without limitation, amounts in respect of principal, default interest and
"make-whole" provisions. The Company estimates that there are approximately 15
Holders in Class 2.
Class 3 -- Miscellaneous Secured Claims. Class 3 consists of Allowed Claims
against the Debtors that are wholly or partially secured by a valid Lien, which
has been properly perfected as required by applicable law, on property of the
Debtors, to the extent of the value of the interest of the Holder of such Claim
in such property of the Debtors, or that is subject to setoff under Section 553
of the Bankruptcy Code, other than an Old Credit Facilities Secured Claim and an
Old Senior Notes Claim. The Plan provides that at Reorganized Anacomp's option,
each Holder of an Allowed Miscellaneous Secured Claim shall either (a) retain
unaltered the legal, equitable and contractual rights to which such Allowed
Miscellaneous Secured Claim entitles the Holder thereof or (b) be treated in
accordance with Section 1124(2) of the Bankruptcy Code. Allowed Claims in Class
3 are not impaired under the Plan and therefore Holders of Claims in Class 3
will be deemed to have accepted the Plan. The Company believes that there will
be only one Holder of an Allowed Class 3 Claim, SKC, and that such Claim will
aggregate $10 million.
Class 4 -- The Carlisle Note. Class 4 consists of all Claims against the
Debtors arising under, based upon or otherwise related to, the Carlisle Note,
including all Allowed Claims for principal, interest, fees, expenses, or other
<PAGE>
amounts payable under or with respect to the Carlisle Note. The Plan provides
that each Holder of an Allowed Class 4 Claim shall receive a New Carlisle Note
in an amount equal to such Allowed Class 4 Claim. Allowed Claims in Class 4 are
impaired under the Plan and therefore Holders of such Claims are entitled to
vote on the Plan. The Company estimates that the amount of Class 4 Claims will
aggregate approximately $2.6 million.
Class 5 -- Old Senior Subordinated Notes. Class 5 consists of all Claims
against the Debtors arising under, based upon or otherwise related to the Old
Senior Subordinated Notes. Each Holder of an Allowed Class 5 Claim will receive
its Pro Rata share of (i) the New Senior Subordinated Notes ($160 million), (ii)
nine million two hundred fifty thousand (9,250,000) shares of the New Common
Stock (which is the equivalent of approximately 41.12 shares of New Common Stock
per $1,000 principal amount of Old Senior Subordinated Notes) and any
consideration payable to the Holders of Allowed Class 5 Claims, pursuant to
Sections 5.6(b), 5.8(b) and/or 5.9(b) of the Plan, as a result of the rejection
of the Plan by Class 6 and/or Class 8. The principal economic terms of the New
Senior Subordinated Notes are set forth on page ___ of the Disclosure Statement.
The aggregate amount of the Claims in Class 5 will be deemed to be an Allowed
Claim on the Effective Date of approximately $267.7 million. Anacomp has been
paying all amounts due the Old Senior Subordinated Notes Indenture Trustee on a
current basis and intends to pay all amounts then owing to such trustee on the
Effective Date. Accordingly, the distributions to the Holders of Allowed Class 5
Claims will not be reduced by such trustee's Indenture Trustee Charging Lien.
Allowed Claims in Class 5 are impaired under the Plan and therefore Holders of
Claims in Class 5 are entitled to vote on the Plan. The Company estimates that
there are approximately 478 Holders in Class 5.
Class 6 -- Old Subordinated Debentures. Class 6 consists of all Claims
against the Debtors arising under, based upon or otherwise related to (i) the
Old 9% Subordinated Debentures and all Claims arising under, based upon or
otherwise related to the Anacomp Debenture Guarantee and (ii) the Old 13.875%
Subordinated Debentures. The Plan provides that if Class 6 accepts the Plan,
each Holder of an Allowed Class 6 Claim will receive its Pro Rata share of (i)
seven hundred fifty thousand (750,000) shares of the New Common Stock (which is
the equivalent of approximately 19.86 shares of New Common Stock per $1,000 of
Old Subordinated Debentures Claims), (ii) two hundred fifty-nine thousand
sixty-eight (259,068) New Warrants (which is the equivalent of approximately
6.86 New Warrants per $1,000 of Old Subordinated Debentures Claims) and (iii)
any consideration payable to the Holders of Allowed Class 6 Claims pursuant to
Sections 5.8(b) and/or 5.9(b) of the Plan, as a result of the rejection of the
Plan by Class 8. Specifically, each Holder of an Allowed Old 9% Subordinated
Debentures Claim will receive approximately 21.60 shares of New Common Stock and
7.46 New Warrants for each $1,000 principal amount of Old 9% Subordinated
Debentures, and each Holder of an Allowed Old 13.875% Subordinated Debentures
Claim will receive approximately 22.54 shares of New Common Stock and 7.78 New
Warrants for each $1,000 principal amount of Old 13.875% Subordinated
Debentures. If Class 6 does not accept the Plan, each Holder of a Class 6 Claim
will receive no consideration thereunder. The principal economic terms of the
New Warrants are set forth on page 11 of the Disclosure Statement. The aggregate
amount of the Claims in Class 6 will be deemed to be an Allowed Claim on the
Effective Date of approximately $37.7 million. Anacomp has been paying all
amounts due the Old 9% Subordinated Debentures Indenture Trustee and the Old
13.875% Subordinated Debentures Indenture Trustee on a current basis and intends
<PAGE>
to pay all amounts then owing to such Old Indenture Trustees on the Effective
Date. Accordingly, the distributions to the Holders of Allowed Class 6 Claims
will not be reduced by such Old Indenture Trustees' Indenture Trustee Charging
Liens. Allowed Claims in Class 6 are impaired under the Plan and therefore
Holders of Claims in Class 6 are entitled to vote on the Plan. The Company
estimates that there are approximately 1,177 Holders of Old 13.875% Subordinated
Debentures Claims. (The Debtors are unable to estimate the amount of Holders of
Old 9% Subordinated Debentures Claims because the Old 9% Subordinated Debentures
are bearer bonds.)
Class 7 -- General Unsecured Claims. Class 7 consists of any Claim
(including, without limitation, any Trade Claim, Rejection Claim and Claims by
present or former employees of the Debtors) that is not a Carlisle Note Claim,
an Old 13.875% Subordinated Debentures Claim, an Old 9% Subordinated Debentures
Claim, an Old Senior Subordinated Notes Claim, an Intercompany Claim, an
Administrative Claim, a Priority Claim, an Old Credit Facilities Secured Claim,
an Old Senior Notes Secured Claim or a Miscellaneous Secured Claim. The Plan
provides that to the extent any Allowed General Unsecured Claim has not been
paid or satisfied by performance in full prior to the Effective Date,
Reorganized Anacomp (i) shall pay, on the Effective Date, if such Allowed
General Unsecured Claim is then matured, such Allowed General Unsecured Claim in
full in Cash or satisfy such Allowed General Unsecured Claim by performance, or
(ii) shall pay or satisfy such Allowed General Unsecured Claim by performance,
in accordance with its respective terms, if such Allowed General Unsecured Claim
is not matured prior to the Effective Date, (iii) shall pay or satisfy such
Allowed General Unsecured Claim as otherwise agreed by the Holder of the Allowed
General Unsecured Claim and Reorganized Anacomp, or (iv) provide such other
treatment as will render such Allowed General Unsecured Claim unimpaired in
accordance with Section 1124(2) of the Bankruptcy Code, provided that
Reorganized Anacomp shall pay any Allowed General Unsecured Claim which is
subject to approval by the Bankruptcy Court as reasonable pursuant to Section
1129(a)(4) of the Bankruptcy Code upon entry of a Final Order of the Bankruptcy
Court allowing such General Unsecured Claim and approving such General Unsecured
Claim as reasonable. Claims in Class 7 are not impaired under the Plan and
therefore Holders of Claims in Class 7 will be deemed to have accepted the Plan.
The Company estimates that there are approximately 145 Holders of Class 7 Claims
and the amount of Class 7 Claims will aggregate approximately $32.0 million,
after reconciliation for post-petition payment of pre-petition Claims under the
Trade Order.
Class 8 -- Old Preferred Stock. Class 8 consists of all shares of 8.25%
Cumulative Convertible Redeemable Exchangeable Preferred Stock of Anacomp issued
and outstanding, or held in treasury immediately prior to the Effective Date,
including any and all accrued but unpaid dividends. The Plan provides that if
Class 6 and Class 8 accept the Plan, each Holder of an Allowed Class 8 Interest
will receive its Pro Rata share of sixty-two thousand one hundred seventy-six
(62,176) New Warrants (which is the equivalent of 2.56 New Warrants per $1,000
liquidation value of the Old Preferred Stock). The principal economic terms of
the New Warrants are set forth on page 11 of the Disclosure Statement. Pursuant
<PAGE>
to the provisions of the Plan regarding fractional shares, Holders of less than
4 shares of Old Preferred Stock will receive no consideration. If either Class 6
or Class 8 rejects the Plan, the Holders of Class 8 Interests shall not receive
or retain any property on account of their Class 8 Interests. Allowed Interests
in Class 8 are impaired under the Plan and therefore Holders of Claims in Class
8 are entitled to vote on the Plan. The Company estimates Class 8 Interests
consist of an aggregate of 485,750 shares of Old Preferred Stock with an
aggregate liquidation value of $24.3 million plus accrued dividends of
approximately $1.5 million and that there are approximately 103 Holders of Class
8 Interests.
Class 9 -- Old Common Stock. Class 9 consists of all shares of Old Common
Stock of Anacomp issued and outstanding immediately prior to the Effective Date.
Class 9 is not being solicited and is deemed to have rejected the Plan. The Plan
provides that if Class 6 and Class 8 accept the Plan, each Holder of an Allowed
Class 9 Interest as of the Distribution Record Date shall receive on the
Effective Date, in full satisfaction of its Allowed Interest, its Pro Rata share
of forty-one thousand four hundred fifty (41,450) New Warrants, which is the
equivalent of .0008 New Warrants per share of Old Common Stock. Pursuant to the
provisions of the Plan regarding fractional shares, Holders of less than 625
shares of Old Common Stock will receive no consideration. If either of Class 6
or Class 8 rejects the Plan, Holders of Class 9 Interests shall not receive or
retain any property on account of their Class 9 Interests. The Company estimates
that Class 9 Interests consist of an aggregate of 46.2 million shares of Old
Common Stock and that there are approximately 21,881 Holders of Class 9
Interests.
Class 10 -- Claims for Issuance of Old Common Stock. Class 10 consists of
all Employee Options and all other options or rights to acquire Old Common
Stock, including, without limitation, all claims arising out of the rejection of
Employee Options and other options to acquire Old Common Stock, to the extent
they constitute executory contracts, and any Claim that has the same priority as
the Old Common Stock pursuant to Section 510(b) of the Bankruptcy Code,
including, without limitation, any Claim for the issuance of Old Common Stock in
connection with an acquisition or otherwise. The Plan provides that Holders of
Employee Options shall not receive or retain any property under the Plan and,
pursuant to Section 1126(g) of the Bankruptcy Code, will be deemed to have
rejected the Plan. All Employee Options and all other options to acquire Old
Common Stock shall be canceled, annulled and extinguished on the Effective Date.
The Company estimates that the Class 10 consists of Employee Options and other
options exercisable for an aggregate of approximately 18.1 million shares of Old
Common Stock and that there are approximately 418 Holders of Class 10 Interests.
Class 11 -- Intercompany Claims. Class 11 consists of Claims held by
any non-Debtor Domestic Subsidiary or Foreign Subsidiary against any Debtor that
arose on or before the Petition Date. The Plan provides that, at Reorganized
Anacomp's option, each Holder of an Allowed Class 11 Claim shall either (a)
retain unaltered the legal, equitable and contractual rights to which such
Allowed Class 11 Claim entitles the Holder thereof or (b) be treated in
accordance with Section 1124(2) of the Bankruptcy Code. Claims between Debtors
shall be eliminated in accordance with the substantive consolidation provisions
<PAGE>
of the Plan. Allowed Claims in Class 11 are not impaired under the Plan and
therefore Holders of Claims in Class 11 will be deemed to have accepted the
Plan. The Company estimates that the amount of Class 11 Claims will aggregate
approximately $4.4 million and that there are approximately 5 Holders of
Intercompany Claims.
Treatment of Trade Creditors and Employees Under the Plan
Provisions for Trade Creditors. The Debtors intend that all Claims of their
trade creditors will be treated and paid as if the Chapter 11 Cases had not been
filed. Trade Claims will be unimpaired and paid in full by Reorganized Anacomp
in the ordinary course of business. The Plan's treatment of Trade Claims (Class
7 under the Plan) is intended to maximize the preservation of working capital by
encouraging the maintenance of existing trade credit terms. Notwithstanding
provisions of the Bankruptcy Code that may defer payment of pre-petition Claims
until the effectiveness of the Plan, the Company sought and obtained immediate
approval of the Bankruptcy Court, pursuant to the Trade Order, to make payments
of Trade Claims to creditors holding such Claims who, following commencement of
the Chapter 11 Cases, continued to provide the Company with customary trade
terms or who reinstated such terms.
If the Plan is confirmed, Holders of Trade Claims will not be required to
file proofs of claim with the Bankruptcy Court and no bar date will apply as to
such Trade Claims. On and after the Effective Date, all Trade Claims not already
paid will be paid in full in the ordinary course of business of the Company. If
the Company disputes any Trade Claim, such dispute will be determined, resolved
or adjudicated, as the case may be, in the manner in which such dispute would
have been determined, resolved or adjudicated if the Chapter 11 Cases had not
been commenced, and will survive the Effective Date and the consummation of the
Plan as if the Chapter 11 Cases had not been commenced.
Provisions for Employees. The Company also intends that accrued wages,
vacation time, health related benefits, deferred compensation, expense
reimbursements, field management and executive/administrative management
incentive plans and similar employee benefits will not be affected. These Claims
will be treated and paid as if the Chapter 11 Cases had not been filed. The
employee agreements currently in place will not be rejected or changed by the
Company. The Plan provides for the assumption of all of such employee agreements
in their entirety. To ensure the continuity of the Company's work force and to
further accommodate the unimpaired treatment of accrued obligations to
employees, the Company obtained immediate approval of the Bankruptcy Court to
honor payroll checks outstanding as of the date of filing (or to issue
replacement checks), to permit employees to utilize paid vacation time accrued
prior to the date of the bankruptcy filing (so long as they remain employees of
the Company) and to continue paying medical and other benefits under all
applicable insurance plans. Employee Claims and benefits not paid or honored
prior to the Effective Date of the Plan will be paid or honored upon the
Effective Date of the Plan or as soon thereafter as such payment or other
obligation becomes due or performable. All Employee Options will be canceled
under the Plan.
<PAGE>
CONFIRMATION OF THE PLAN
In order for the Plan to be confirmed, the Bankruptcy Code requires that
the Bankruptcy Court determine that the Plan complies with certain requirements
set forth in Section 1129(a) of the Bankruptcy Code. Section 1129(a) requires
that: (i) the Plan comply with all applicable provisions of the Bankruptcy Code,
including requirements as to the classification of Claims and Interests,
specification of the treatment of impaired and unimpaired classes, provision of
equal treatment within each class, provision for adequate means of
implementation, inclusion of required charter provisions and provision for the
selection of the officers and directors; (ii) the Company and the Subsidiaries
comply with all applicable provisions of the Bankruptcy Code, including
requirements for disclosure and solicitation of acceptances; (iii) the Plan be
proposed in good faith; (iv) all payments made by the Company and the
Subsidiaries for services and expenses in or in connection with the Chapter 11
Cases or in connection with the Plan and incident to the Chapter 11 Cases be
subject to the approval of the Bankruptcy Court as reasonable; (v) all necessary
information regarding directors, officers and insiders be disclosed; (vi) any
rate change subject to the jurisdiction of any governmental regulatory
commission be approved or subject to approval by such commission; (vii) the Plan
satisfy the Best Interests Test of Section 1129(a)(7) of the Bankruptcy Code,
which requires that with respect to each impaired class, each Holder of a Claim
or Interest either (a) accepts the Plan or (b) receives at least as much
pursuant to the Plan as such Holder would receive in a liquidation of the
Company and the Subsidiaries under Chapter 7 of the Bankruptcy; (viii) the Plan
be accepted by each impaired class and, in any case, that at least one impaired
class of Claims accept the Plan (without considering votes by insiders); (ix)
the Plan provide for payment in full of all allowed administrative and priority
claims in the manner set forth in the Bankruptcy Code; (x) the Plan satisfy the
Feasibility Test of Section 1129(a)(11) of the Bankruptcy Code; that is, that
there is a reasonable probability that the Debtors will be able to perform their
obligations under the Plan and continue to operate their businesses without
liquidation or further financial reorganization (see " -- Feasibility Test");
(xi) all statutory fees be paid by the Company and the Subsidiaries; and (xii)
the Plan provide for continued payment of all retiree benefits, if any.
The Debtors believe that the Plan will meet all such tests except the test
set forth in Section 1129(a)(8), which requires that all impaired classes accept
the plan of reorganization. The Debtors believe that it is possible that one or
more Classes junior to Class 5 (Old Senior Subordinated Notes Claims) may reject
the Plan. In addition, Class 9 and Class 10 are deemed to have rejected the
Plan. Accordingly, the Debtors intend to seek confirmation of the Plan under the
"cramdown" procedures of Section 1129(b) of the Bankruptcy Code, which permit
the confirmation of a plan of reorganization over the objection of one or more
classes if certain additional tests are met. Although the Debtors believe that
the Plan will meet such tests, there can be no assurance that the Bankruptcy
Court will reach the same conclusion. See "Confirmation Without Acceptance Of
All Impaired Classes."
Right to Vote. Classes 2, 4, 5, 6 and 8 will receive or retain property
under, and are impaired by, the Plan. These Classes are entitled to vote to
accept or reject the Plan. Class 9 is not being solicited and is therefore
deemed to have rejected the Plan. Class 10 will not retain or receive any
<PAGE>
property under the Plan and, therefore, will be deemed to have rejected the
Plan. Section 1129(b) is discussed below in " -- Confirmation Without Acceptance
of All Impaired Classes."
Feasibility Test. Under the Feasibility Test as set forth in Section
1129(a)(11) of the Bankruptcy Code, in order to confirm the Plan, the Bankruptcy
Court must find that confirmation of the Plan is not likely to be followed by
liquidation or the need for further financial reorganization of Reorganized
Anacomp. For the Plan to meet the Feasibility Test, the Bankruptcy Court must
determine that Reorganized Anacomp has a reasonable probability ("more likely
than not") of performing its obligations under the Plan, including performing
its obligations under the debt instruments issued under the Plan.
Management has analyzed the ability of Reorganized Anacomp to meet its
obligations under the Plan. As part of this analysis, Management has prepared
projections of the Company's financial performance for the four-year period
ending September 30, 1999. See "Projections of Certain Financial Data." Based on
this analysis, Management believes that the Plan provides a feasible means of
reorganization and operation from which there is a reasonable expectation that,
subject to the risks disclosed in this Disclosure Statement, Reorganized Anacomp
will be able to make all payments required to be made pursuant to the Plan.
There can be no assurance that the Bankruptcy Court will agree with such
determination. Holders of Claims and Interests in impaired Classes are cautioned
that financial projections are inherently imprecise and there can be no
assurance that Reorganized Anacomp's actual performance will match the financial
projections. Confirmation of the Plan does not constitute a guaranty that
Reorganized Anacomp will perform all of its obligations under the Plan.
Best Interests Test. In order to confirm the Plan, the Bankruptcy Court
must independently determine that the Best Interests Test under Section
1129(a)(7) of the Bankruptcy Code is satisfied with respect to each member of an
impaired Class. The Best Interests Test requires that each member of an impaired
Class of Claims or Interests either (i) accept the Plan or (ii) receive under
the Plan property of a value not less than the value of the distribution that
such non-accepting member would receive if the Debtors were liquidated under
Chapter 7 of the Bankruptcy Code. Management believes that recoveries under the
Plan are equal to or better than those in a liquidation under Chapter 7, and
that the Plan therefore satisfies the Best Interests Test. However, there can be
no assurance that the Bankruptcy Court will agree with the Company's
determination. See " -- Chapter 7 Liquidation Analysis."
If confirmed, the Plan will be binding on all Holders of Old Securities and
all Holders of other Claims and Interests, regardless of whether such Holders
voted to accept the Plan.
Chapter 7 Liquidation Analysis
The Plan cannot be confirmed unless the Bankruptcy Court determines that
the Best Interests Test under Section 1129(a)(7) of the Bankruptcy Code is
satisfied with respect to each impaired Class of Claims or Interests. If all
holders of Claims or Interests in an impaired Class of Claims or Interests vote
to accept the Plan, the Best Interests Test does not apply to that Class. As to
each holder of a Claim or Interest in an impaired Class who does not vote to
<PAGE>
accept the Plan, the Best Interests Test will have been satisfied if the Plan
provides to each such dissenting or non-voting Holder a recovery that has a
value that is at least as great as the recovery which such Holder would receive
if the assets of the Company were liquidated in a hypothetical case under
Chapter 7 of the Bankruptcy Code.
The first step in determining the value of the distributions that creditors
and Interest holders would receive in a Chapter 7 liquidation is to determine
the "liquidation value" of the Company. The Company believes the liquidation
value would consist of the aggregate proceeds realized from a sale of the
Company's lines of business, the Company's current cash balance, and the cash
flow generated by the Company and the Subsidiaries during the liquidation
period, and would be reduced by the costs and expenses of liquidation, the
losses incurred by the Company and the Subsidiaries during the liquidation
period and other administrative costs and expenses of a Chapter 7 case. The
aggregate net amount of the claims of secured creditors (to the extent of the
value of their collateral) and the amount of any priority claims would then be
distributed from this aggregate net amount. Any remaining proceeds would be
available for distribution to Holders of unsecured Claims and Interests. The
costs of liquidation under Chapter 7 would include the fees of the Chapter 7
trustee and the professionals retained by the trustee and asset disposition
expenses. The liquidation itself could trigger certain priority claims, such as
claims for severance pay, and could accelerate other priority payments that
otherwise would be due in the ordinary course of business. Those priority claims
would be paid in full before the balance would be made available to pay
unsecured claims or to make distributions in respect of Interests.
In applying the Best Interests Test, the Bankruptcy Court would ascertain
the hypothetical recoveries in a Chapter 7 liquidation by Holders of impaired
Claims and Interests in impaired Classes. These hypothetical Chapter 7
liquidation recoveries would then be compared with the distributions offered to
each impaired Class of Claims or Interests under the Plan in order to determine
if the Plan satisfies the Best Interests Test.
In applying the Best Interests Test, it is possible that Claims and
Interests in the Chapter 7 case may not be classified according to the seniority
of such Claims and Interests as provided in the Plan. In the absence of a
contrary determination by the Bankruptcy Court, all pre-petition unsecured
claims which have the same rights upon liquidation and would be treated as one
Class for the purposes of determining the potential distribution of the
liquidation proceeds resulting from the Company's Chapter 7 case. The
distributions from the liquidation proceeds would be calculated ratably
according to the amount of the Claim held by each creditor. Therefore, creditors
who claim to be third-party beneficiaries of any contractual subordination
provisions might be required to seek to enforce such contractual subordination
provisions in bankruptcy court or otherwise. Section 510 of the Bankruptcy Code
specifies that such contractual subordination provisions are enforceable in a
Chapter 7 liquidation case to the same extent they are enforceable under
applicable nonbankruptcy law. The Company believes that the proceeds resulting
from a Chapter 7 liquidation that would be distributed to unsecured creditors
would be distributed in a way that recognizes the contractual subordination
provisions which benefit Holders of Claims under the Old Credit Facilities, the
Old Senior Notes, the Old Senior Subordinated Notes and the Carlisle Note.
<PAGE>
The Company believes that the most likely outcome of Chapter 7 liquidation
proceedings would be the application of the rule of absolute priority of
distributions. Under that rule, no junior creditor may receive any distribution
until the allowed claims of all senior creditors are paid in full, and no
Interest holder may receive any distribution until all allowed claims are paid
in full.
The liquidation analysis presented herein assumes that all assets of the
Company would be liquidated in the context of a Chapter 7 case and sets forth
the value as of December 31, 1995 of the proceeds of such liquidation. The
assumptions utilized in the analysis considered the estimated liquidation value
of the respective business lines of the Company and the estimated amount of the
Claims that would be allowed, together with an estimate of certain
administrative costs and expenses that would likely result during the
liquidation process.
While the Company believes that the assumptions utilized in the
liquidation analysis are reasonable, the validity of such assumptions may be
affected by the occurrence of events and the existence of conditions not now
contemplated or by other factors, many of which would be beyond the control of
the bankruptcy court, the Company and the trustee. The actual liquidation values
of the Company would likely vary from that presented herein.
The liquidation analysis does not attempt to account for the timing of the
receipt of proceeds from liquidated assets. Accordingly, the analysis also does
not provide discounted values of the anticipated recoveries by creditors caused
by possible delays in the liquidation process.
Liquidation of Anacomp
Assuming the Company liquidates its assets through sales of its business
lines on a going concern basis, the Company estimates that its liquidation value
would be approximately $270.2 million. The table below details the computation
of the Company's liquidation value for purposes of demonstrating that the Plan
satisfies the requirements of Section 1129(a)(7) of the Bankruptcy Code.
The Company's assets include tangible assets such as inventory,
receivables, and fixed assets and intangible assets such as goodwill. Goodwill
represented 39.6% of the Company's total assets at March 31, 1996. Due to the
large percentage of intangible assets, the Company has elected to present the
liquidation analysis assuming sales of its business lines on a going concern
basis rather than a liquidation of its tangible assets. The Company believes
that sales of business lines would yield far greater proceeds than sales of
assets as the values of the business lines would include credit for intangible
value such as customer lists, Company relationships, the installed customer
base, and the various trade names that the Company operates under.
<PAGE>
LIQUIDATION PROCEEDS CALCULATION
(Dollars in thousands)
Liquidation Value
-----------------
Estimated Value of Business Lines (a) $260,285
Less: 20% Discount for Distressed Sale (b) 52,057
-------
Estimated Sale Proceeds of Operating Subsidiaries 208,228
Plus: Cash and Cash Equivalents of the Company (c) 50,000
Plus: Estimated Cash Flow During Liquidation Period (d) 25,000
-------
Gross Liquidation Value 283,228
Less: Trustee Fees (e) 7,000
Less: Chapter 7 Professional Fees (f) 6,000
Net Liquidation Proceeds (g) $270,228
========
(a) The Company's Estimated Value of Business Lines is based on comparable
acquisition multiples of revenue and operating income, discounted cash
flow analyses, historical financial information, current market
valuations of similar companies in the Company's opinion, and certain
economic, industry and Company specific information which was deemed
relevant, and is less than the "going concern" or "fair market value"
of the Company as a whole.
(b) A Chapter 7 liquidation requires that businesses be sold on an
expeditious basis. Based on the foregoing, the value of the business
lines is reduced by 20% in recognition of the distress manner of the
liquidation as mentioned above.
(c) At March 31, 1996.
(d) Based on current Company cash flow projections which were then
discounted by 55% to approximate the results of operations during a
Chapter 7 liquidation.
(e) Trustee's Fees: Bankruptcy Code Section 326 limits the allowed fees of
a court appointed trustee to 3% of the net cash value after $3 million
(and a greater percentage of the first $3 million) which is yielded
through the liquidation and distributed to creditors. For the purpose
of this analysis, the Company assumes that the Bankruptcy Courts would
approve trustee's fees of approximately $7 million.
(f) Chapter 7 Professional Fees and Other Administrative Expenses:
Attorneys, accountants and appraisers retained by the trustee would
generate significant fees and expenses during the liquidation. Other
<PAGE>
administrative expenses include other costs of preserving and realizing
upon assets, including such costs as rent, insurance, personnel and
security. The Company estimates that such fees and expenses would equal
approximately $500,000 per month for 12 months.
(g) Does not contemplate any avoidance actions due to the likelihood that
such actions would impair the value of the operating businesses, the
availability of "ordinary course of business" defenses and the payment
in full to unsecured creditors.
<PAGE>
<TABLE>
APPLICATION OF PROCEEDS TO CLAIMS AND INTERESTS
Estimated at March 31, 1996
(Dollars in thousands)
Total Estimated Liquidation Proceeds Available for Distribution: $270,228
Estimated Amount Proceeds
of Claim Available to Liquidation
Satisfy Claim Percentage
------------------- ---------------------- -------------------
Claims under Old Credit Facilities and Old Senior Notes
<S> <C> <C> <C>
(Class 2).......................................... $120,000 $120,000 100.0%
Miscellaneous Secured Claims (Class 3) ................ 10,000 10,000 100.0
Priority Claims (Class 1) (a).......................... 0 0 0
Unsecured Claims: (b)
Carlisle Note (Class 4)............................ 2,600 1,207 46.4
Old Senior Subordinated Notes (Class 5)............ 267,600 124,201 46.4
Old Subordinated Debentures (Class 6).............. 37,800 0 0.0
General Unsecured Claims (Class 7)................. 32,000 13,029 40.7
Intercompany Claims (Class 11)..................... 4,400 1,791 40.7
------------------- ---------------------- -------------------
Total Unsecured Claims 344,400 140,228 40.7
Interests (Classes 8, 9 and 10) N.A. 0 0
</TABLE>
Notes to Liquidation Analysis
(a) Priority Claims: Priority Claims consist of Priority Tax Claims and
priority severance Claims by the Company's employees. In a Chapter 7
liquidation these claims would be paid, in full, out of the net
liquidation proceeds, after payments of all secured Claims, before the
balance of such proceeds would be made available to pay unsecured
Claims or to make any distribution to equity holders in respect of
their Interests. This liquidation analysis assumes that a Claim Filed
by the Indiana Department of Revenue in the amount of $791,230.10, to
which the Debtors intend to object in the event a satisfactory
resolution of such claim cannot be reached with such claimant, would be
disallowed in full.
(b) The recoveries set forth in this table with respect to unsecured
creditors give effect to the subordination provisions contained in the
Old Subordinated Debentures Indentures.
Confirmation Without Acceptance of All Impaired Classes
In the event Holders of impaired Claims or Interests do not vote to accept
the Plan, the Company will seek to use the cramdown provisions of Section
1129(b) of the Bankruptcy Code to obtain confirmation of the Plan. To confirm
<PAGE>
the Plan over the objection of any Class, all the tests of Section 1129(a) must
be satisfied (except the requirement in Section 1129(a)(8) that all impaired
Classes accept the plan of reorganization), and the Bankruptcy Court must
determine that the Plan "does not discriminate unfairly" and is "fair and
equitable" with respect to each Class to be crammed down.
No Unfair Discrimination
A plan or reorganization "does not discriminate unfairly" if with respect
to a nonaccepting Class (i) the legal rights of such Class are treated in a
manner that is consistent with the treatment of other Classes whose legal rights
are similarly situated to those of such Class, and (ii) no Class senior to the
Class receives payments in excess of that which it is legally entitled to
receive. The Company believes the Plan does not discriminate unfairly as to any
Holders in any Class. In particular, notwithstanding that the Plan provides that
Classes 6 and 8 will receive no distribution under the Plan if, in the case of
Class 6, Class 6 rejects the Plan and, in the case of Class 8, if Class 6 or
Class 8 rejects the Plan, the Company believes that the Plan does not
discriminate unfairly with respect to such Classes. With respect to Class 6, the
Company believes that such Class has no entitlement to any distribution under
the Plan in light of the subordination provisions in the Old Subordinated
Debentures in favor of the Holders of the Senior Subordinated Note Claims and
the fact that the Holders of the Senior Subordinated Note Claims are not being
paid in full under the Plan, and because the Company believes that the
enterprise value of the Company does not exceed the aggregate amount of the
Claims of the Holders of Claims in Classes senior to Class 6. Similarly, with
respect to Class 8, the enterprise value of the Company does not exceed the
aggregate amount of the Claims of the Holders of Claims in Classes senior to
Class 8. The distribution to Classes 6 and 8 are accordingly derived from
consideration to which Class 5 is entitled. Such consideration would not be
payable to Classes 6 and 8 if a "cram down" were required.
Fair and Equitable Test
The Bankruptcy Code establishes different "fair and equitable" tests for
secured creditors, unsecured creditors and equity Holders, as follows:
(a)......Secured Creditors: either (i) each impaired secured creditor
retains its liens securing its secured claim and receives on account of its
secured claim deferred cash payments having a present value equal to the amount
of its allowed secured claim, (ii) each impaired secured creditor realizes the
"indubitable equivalent" of its allowed secured claim, or (iii) the property
securing the claim is sold free and clear of liens with such liens to attach to
the proceeds, and the liens against such proceeds are treated in accordance with
clause (i) or (ii) of this subparagraph (a).
(b)......Unsecured Creditors: either (i) each impaired unsecured creditor
receives or retains under the plan of reorganization property of a value equal
to the amount of its allowed claim, or (ii) the Holders of claims and interests
that are junior to the claims of the nonaccepting class do not receive any
property under the plan of reorganization on account of such claims and
interests.
<PAGE>
(c)......Equity Holders: either (i) each equity Holder will receive or
retain under the plan of reorganization property of a value equal to the greater
of (a) the fixed liquidation preference or redemption price, if any, of such
stock or (b) the value of the stock, or (ii) the Holders of Interests that are
junior to the nonaccepting class will not receive any property under the plan of
reorganization.
The Plan satisfies the "fair and equitable test" with respect to Class
treatment. Each Holder of an Old Credit Facilities Claim and an Old Senior Notes
Claim retains its Liens securing its secured Claim and will receive on account
of its secured claims deferred cash payments having a present value equal to the
amount of its Allowed Secured Claims. The Plan satisfies the "fair and equitable
test" with respect to Classes 6 and 8, because, in the event that either Class
rejects the Plan, the Holders of Interests that are junior to such Classes will
not receive any property under the Plan on account of such Interests. With
respect to Classes 9 and 10, the Plan satisfies the "fair and equitable" test
because no Holders of Interests junior to such Classes will receive any property
under the Plan.
Accordingly, because all other requirements for confirmation will be
satisfied, the Company believes that the Plan can be confirmed over the
rejections of Classes 2, 4, 6 and 8.
Conditions to Execution of the Plan
Conditions to Confirmation. The Plan provides that the following condition
must occur or be duly waived by the Debtors, the Creditors' Committee (if Class
5 shall have accepted the Plan) and the Collateral Agent (if Class 2 shall have
accepted the Plan): The provisions of the Plan and all exhibits thereto shall be
reasonably satisfactory to the Creditors' Committee (if Class 5 shall have
accepted the Plan) and the Collateral Agent (if Class 2 shall have accepted the
Plan).
Conditions to Effectiveness. The Plan provides that the Plan shall not be
consummated and the Effective Date shall not occur unless and until each of the
following conditions has been satisfied or waived jointly by the Debtors, the
Collateral Agent (if Class 2 shall have accepted the Plan) and the Creditors'
Committee (if Class 5 shall have accepted the Plan): (i) the statutory fees
owing to the United States Trustee shall have been paid in full; (ii) if the
requirement that the provisions of the Plan and all exhibits thereto shall be
reasonably satisfactory to the Creditors' Committee and the Collateral Agent as
a condition to the occurrence of the Confirmation Date has been duly waived, the
Plan and all exhibits thereto shall be reasonably satisfactory to the Creditors'
Committee (if Class 5 shall have accepted the Plan) and the Collateral Agent (if
Class 2 shall have accepted the Plan); (iii) the Confirmation Order shall have
become a Final Order and (iv) all actions and documents necessary to implement
the provisions of the Plan shall have been effected, executed or duly provided
for in a manner reasonably satisfactory to the Collateral Agent (if Class 2
shall have accepted the Plan) and the Creditors' Committee (if Class 5 shall
have accepted the Plan).
<PAGE>
Means for Execution
Substantive Consolidation. The Plan contemplates the substantive
consolidation of the Chapter 11 Cases into a single proceeding with respect to
confirmation, consummation and implementation of the Plan. Pursuant to the
Confirmation Order, on the Confirmation Date: (i) all assets, and all proceeds
thereof, and all liabilities of the Consolidated Debtors will be merged or
treated as though they were merged with and into the assets and liabilities of
Reorganized Anacomp; (ii) all Consolidated Claims, and Claims among the
Consolidated Debtors and the Merged Subsidiaries, will be eliminated; (iii) any
obligation of any Consolidated Debtor, and all guarantees thereof executed by
one or more of the Consolidated Debtors, and any Claims filed or to be filed in
connection with any such obligation and guarantee will be deemed one Claim
against Reorganized Anacomp; (iv) each and every Claim filed in the individual
Chapter 11 Case of any of the Consolidated Debtors will be deemed filed against
Reorganized Anacomp; and (v) for purposes of determining the availability of the
right of set-off under Section 553 of the Bankruptcy Code, the Consolidated
Debtors shall be treated for purposes of the Plan as one entity so that, subject
to the other provisions of Section 553 of the Bankruptcy Code, debts due to any
of the Consolidated Debtors may be set off against the debts of any of the
Consolidated Debtors.
The Company believes that the substantive consolidation of the Debtors is
appropriate under the circumstances of the Chapter 11 Cases because none of the
Debtors other than Anacomp have any significant assets or liabilities, no
creditors will be prejudiced by substantive consolidation and consolidation will
facilitate the administration of the cases.
Extinguishment of Guarantees. Except as otherwise provided in the Plan, on
the Effective Date, (i) all Claims based upon guarantees of collection, payment
or performance made by any of the Debtors as to the obligations of each other,
including, without limitation, the Anacomp Debentures Guarantee, and (ii) all
Claims arising under the Anacomp Guarantee, shall be discharged, released and of
no further force and effect.
Cancellation of Old Securities, Instruments and Agreements Relating to
Impaired Claims and Interests. Except as expressly provided in the Plan or in
the Confirmation Order, on the Effective Date, all securities, instruments and
agreements governing any Claims and Interests impaired under the Plan shall be
deemed canceled and terminated, and the obligations of the Debtors relating to,
arising under, in respect of or in connection with such securities, instruments
and agreements shall be discharged.
Effectiveness of Securities, Instruments and Agreements. On the Effective
Date, all securities, instruments and agreements entered into or issued pursuant
to the Plan, including, without limitation, (i) the Plan Securities, (ii) the
New Senior Secured Notes Indenture, (iii) the New Senior Subordinated Notes
Indenture, (iv) the New Senior Secured Notes Security and Pledge Agreement, (v)
the New LC Facility, (vi) the New Management Incentive Plan, (vii) the New
Warrant Agreement, (viii) the Registration Rights Agreement and (ix) any
<PAGE>
security, instrument or agreement entered into in connection with any of the
foregoing, shall become effective and binding in accordance with their
respective terms and conditions upon the parties thereto and shall be deemed to
become effective simultaneously.
The Debtors intend to qualify the New Senior Secured Notes Indenture and
the New Senior Subordinated Notes Indenture under the Trust Indenture Act of
1939.
Corporate Action. As of the Effective Date, Reorganized Anacomp shall be
deemed to have adopted the Amended Anacomp Articles and Amended Anacomp Bylaws
which shall thereupon be effective and it shall file the Amended Anacomp
Articles. The Amended Anacomp Articles shall, among other things, contain
appropriate provisions consistent with the Plan and other Plan Documents (a)
governing the authorization of the New Common Stock and the New Warrants, (b)
prohibiting the issuance of nonvoting equity securities as required by Section
1123(a)(6) of the Bankruptcy Code, and (c) implementing such other matters as
Reorganized Anacomp believes are necessary and appropriate to effectuate the
terms and conditions of the Plan, including the merger of the Merged
Subsidiaries. Except as specifically provided in the Plan, the adoption of the
Amended Anacomp Articles and the Amended Anacomp Bylaws, the selection of
directors and officers for Reorganized Anacomp, the distribution of Cash, the
issuance and distribution of the New Common Stock and the New Warrants and the
adoption, execution and delivery of all contracts, instruments, indentures,
modifications and other agreements related to any of the foregoing, and other
matters provided for under the Plan involving corporate action to be taken by or
required of Reorganized Anacomp shall be deemed to have occurred and be
effective on the Effective Date as provided in the Plan, and shall be authorized
and approved in all respects without any requirement of further action by
shareholders, officers or directors of Reorganized Anacomp. To the extent
required by law, the board of directors of Reorganized Anacomp shall take such
action as may be necessary from time to time to approve the issuance of the Plan
Securities and such other action, if any, as may be required to meet the
requirements of the Plan or any of the Plan Securities issued thereto.
No Payment of Disputed Claims. No payments or distributions shall be made
with respect to any portion of a Disputed Claim unless and until such Claim or
Interest has become an Allowed Claim or Allowed Interest, as the case may be.
Payments and distributions to each Holder of a Disputed Claim to the extent it
ultimately becomes an Allowed Claim shall be made in accordance with the
provisions of the Plan with respect to the class of Claims to which such Allowed
Claim belongs.
Retiree Benefits. On and after the Effective Date, to the extent required
by Section 1129(a)(13) of the Bankruptcy Code, Reorganized Anacomp will continue
to pay all retiree benefits (if any), as the term "retiree benefits" is defined
in Section 1114(a) of the Bankruptcy Code, maintained or established by the
Debtors prior to the Confirmation Date.
Effects of Plan Confirmation
Discharge. Except as otherwise provided in the Plan or in the Confirmation
Order (including, without limitation, the Debtors' continuing obligations to
<PAGE>
indemnify current and former officers and directors of the Debtors), on the
Effective Date: (i) the rights afforded in the Plan and the payments and
distributions to be made thereunder shall discharge all existing debts and
Claims of any kind, nature, or description whatsoever against the Debtors, any
of their assets or properties or any property dealt with under the Plan to the
extent permitted by Section 1141 of the Bankruptcy Code; (ii) all existing
Claims against the Debtors shall be and shall be deemed to be discharged; (iii)
all obligations of the Debtors, directly or as guarantors, under the Old
Indentures, the Old Credit Facilities, the Old Securities and the Old Collateral
Documents, shall be deemed released, discharged and satisfied; and (iv) all
Holders of Claims and Interests shall be precluded from asserting against the
Debtors, any of their assets or properties, or any property dealt with under the
Plan any other or further Claim based upon any act or omission, transaction, or
other activity of any kind or nature that occurred prior to the Confirmation
Date, whether or not such Holder filed a proof of Claim.
Except as otherwise provided in the Plan, any consideration distributed to
Creditors under the Plan shall be in exchange for and in complete satisfaction,
discharge and release of all Claims of any nature whatsoever against the Debtors
or any of their assets or properties; and, except as otherwise provided herein,
upon the Effective Date, the Debtors shall be deemed discharged and released to
the extent permitted by Section 1141 of the Bankruptcy Code from any and all
Claims, including but not limited to demands and liabilities that arose before
the Confirmation Date, and all debts of the kinds specified in Section 502(g),
502(h) or 502(i) of the Bankruptcy Code, whether or not (a) a proof of Claim
based upon such debt is filed or deemed filed under Section 501 of the
Bankruptcy Code; or (b) the Holder of a Claim based upon such debt has accepted
the Plan. Except as provided in the Plan and in the Bankruptcy Code, the
Confirmation Order shall be a judicial determination of discharge of all
liabilities of all of the Debtors. As provided in Section 524 of the Bankruptcy
Code, such discharge shall void any judgment against any of the Debtors at any
time obtained to the extent it relates to a Claim discharged, and operates as an
injunction against the commencement or continued prosecution of any action
against the Debtors, Reorganized Anacomp, Reorganized Florida A A C or any of
their respective properties, to the extent it relates to a Claim discharged.
Revesting. Except as otherwise provided in the Plan (including any Plan
Document) or any other indentures, instruments or agreements to be executed and
delivered pursuant to the Plan or the Confirmation Order, upon the Effective
Date, all property of the Consolidated Estates, wherever situated, shall vest in
Reorganized Anacomp and shall be retained by Reorganized Anacomp or distributed
to Creditors or Interest Holders as provided in the Plan. On the Effective Date,
all property of the Consolidated Estates, whether retained by Reorganized
Anacomp or distributed to Creditors or Interest Holders, shall be free and clear
of all Claims, Liens, Encumbrances and interests, except the Claims, Liens,
Encumbrances and interests of Creditors and Interest Holders expressly provided
for in the Plan (included in any Plan Document).
Retention of Jurisdiction. Notwithstanding occurrence of the Effective Date
or substantial consummation of the Plan, the Bankruptcy Court will retain and
have jurisdiction from and after the Confirmation Date of all matters arising
<PAGE>
in, arising under, and related to the Chapter 11 Cases and the Plan for, among
other things, the following purposes: (a) to hear and determine any and all
adversary proceedings, applications or contested matters pending on the
Effective Date or brought after the Effective Date; (b) to hear and determine
any and all applications for substantial contribution and for compensation and
reimbursement of expenses Filed in accordance with the Plan.; (c) to hear and
determine Rejection Claims, disputes arising from the assumption and assignment
of executory contracts and unexpired leases, and Disputed Claims which are
Impaired Claims or which are held by Holders of Unimpaired Claims; (d) to hear
and determine, pursuant to the provisions of Section 505 of the Bankruptcy Code,
all issues related to the liability of a Debtor for any tax incurred prior to
the Effective Date; (e) to enforce the provisions of the Plan and to determine
any and all disputes arising under the Plan; (f) to enter and implement such
orders as may be appropriate in the event Confirmation is for any reason stayed,
reversed, revoked, modified or vacated; (g) to modify any provision of the Plan
to the extent permitted by the Bankruptcy Code and to correct any defect, cure
any omission or reconcile any inconsistency in the Plan or the Confirmation
Order as may be necessary to carry out the purposes and intent of the Plan; (g)
to enter such orders as may be necessary or appropriate in furtherance of
consummation and implementation of the Plan; (h) to determine the allowance of
Claims and Interests as provided in the Plan; and (i) to enter an order closing
the Chapter 11 Cases.
Failure of Court to Exercise Jurisdiction. If the Bankruptcy Court abstains
from exercising, or declines to exercise, jurisdiction or is otherwise without
jurisdiction over any matter arising in, arising under, or related to the
Chapter 11 Cases, no provision of the Plan shall prohibit or limit the exercise
of jurisdiction by any other court having jurisdiction with respect to such
matter.
Releases. On the Effective Date, Reorganized Anacomp shall be deemed to
release unconditionally, and hereby is deemed to release unconditionally on such
date (i) each present or former officer, director, shareholder, employee,
consultant, attorney, accountant and other representatives of the Debtors, the
Domestic Subsidiaries and the Foreign Subsidiaries, (ii) the Creditors'
Committee or the Unofficial Senior Subordinated Committee and, solely in their
capacity as members or representatives of the Creditors' Committee or the
Unofficial Senior Subordinated Committee, as applicable, each consultant,
attorney, accountant, other representative or member (and each of such member's
respective officers, directors, shareholders, employees, consultants, attorneys,
accountants and other representatives) of the Creditors' Committee or the
Unofficial Senior Subordinated Committee, as applicable, and (iii) the Holders
of Old Senior Notes Secured Claims and Old Credit Facilities Secured Claims and,
solely in their capacity as representatives of such Holders, each of such
Holder's respective officers, directors, shareholders, employees, consultants,
attorneys, accountants and other representatives (the Entities specified in
clauses (i), (ii) and (iii) are referred to collectively as the "Releasees"),
from any and all claims, obligations, suits, judgments, damages, rights, causes
of action and liabilities whatsoever, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or otherwise, based in
whole or in part upon any act or omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way relating to
<PAGE>
the Chapter 11 Cases or the Plan, except that no Releasees shall be released
from acts or omissions which are the result of willful misconduct.
On the Effective Date, each Holder of a Claim shall be deemed to have
released unconditionally, and hereby is deemed to release unconditionally on
such date, the Releasees, from any and all rights, claims, causes of action,
obligations, suits, judgments, damages and liabilities whatsoever which any such
Holder may be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or otherwise, based in
whole or in part upon any act or omission, transaction, event or other
occurrence taking place on or before the Effective Date in any way relating to
Anacomp, the Debtors, the Chapter 11 Cases or the Plan, except that no Releasees
shall be released from acts or omissions which are the result of willful
misconduct.
If and to the extent that the Bankruptcy Court concludes that the Plan
cannot be confirmed with any portion of the foregoing releases, then the Debtors
reserve the right to amend the Plan so as to give effect as much as possible to
the foregoing releases, or to delete them.
No Liability for Solicitation or Participation. As specified in Section
1125(e) of the Bankruptcy Code, Entities who solicit acceptances or rejections
of the Plan and/or who participate in the offer, issuance, sale or purchase of
securities offered or sold under the Plan, in good faith and in compliance with
the applicable provisions of the Bankruptcy Code, are not liable, on account of
such solicitation or participation, for violation of any applicable law, rule or
regulation governing the solicitation of acceptances or rejections of the Plan
or the offer, issuance, sale or purchase of securities in connection therewith.
Limitation of Liability. Neither the Debtors, Reorganized Anacomp,
Reorganized Florida A A C, nor any of their employees, officers, directors,
agents, or representatives, nor any professional persons employed by any of
them, nor any Creditors' Committee or the Unofficial Senior Subordinated
Committee, or any of their members, agents, representatives, or professional
advisors, shall have or incur any liability to any Entity for any act taken or
omission made in good faith in connection with or related to formulating,
implementing, confirming or consummating the Plan, or any contract, instrument,
release or other agreement or document created in connection with the Plan.
To the extent that the foregoing provision exceeds the exculpation from
liability provided in Section 1125(e) of the Bankruptcy Code, the Debtors are
not aware of the existence of any possible claims against the Entities benefited
thereby. Moreover, the Debtors do not intend such provision to provide broader
exculpation with respect to potential violations of the federal securities laws
than as provided in Section 1125(e) of the Bankruptcy Code.
General Injunction. Except as provided in the Plan or in the Confirmation
Order, from and after the Effective Date, all Entities who received or are
Holders of Plan Securities and all Holders of Claims against the Estates are
permanently restrained and enjoined after the Confirmation Date (i) from
commencing, continuing, or taking any act, to enforce against any of the Debtors
<PAGE>
or any Foreign Subsidiary or Domestic Subsidiary or any right, claim or cause of
action arising under or related to any Old Security or the Old Credit Facilities
Note, (ii) from enforcing, attaching, collecting or recovering by any manner or
means, any judgment, award, decree or order against any Debtor or any Foreign
Subsidiary or Domestic Subsidiary or any right, claim or cause of action arising
under or related to any Old Security or the Old Credit Facilities Note, (iii)
from creating, perfecting or enforcing any encumbrance of any kind against any
Debtor or any Foreign Subsidiary or Domestic Subsidiary or any right, claim or
cause of action arising under or related to any Old Security or the Old Credit
Facilities Note, (iv) from asserting any setoff, right of subrogation,
indemnification, contribution or recoupment of any kind against any obligation
due any Debtor or any Foreign Subsidiary or Domestic Subsidiary any right, claim
or cause of action arising under or related to any Old Security or the Old
Credit Facilities Note and (v) from performing any act, in any manner, in any
place whatsoever, that does not conform to or comply with the provisions of the
Plan and orders of the Bankruptcy Court; provided, however, that each Holder of
a Claim may, to the extent permitted by and in accordance with the provisions of
the Plan, commence or continue any action or proceeding to determine the amount
of its Claim in the Bankruptcy Court or any other court of competent
jurisdiction, and all Holders of Claims shall be entitled to enforce their
rights under the Plan and the Plan Documents.
Section 346 Injunction. In accordance with Section 346 of the Bankruptcy
Code, for purposes of any state or local law imposing a tax, income will not be
realized by the Estates, the Debtors, Reorganized Anacomp or Reorganized Florida
A A C by reason of the forgiveness or discharge of indebtedness resulting from
the Chapter 11 Cases. As a result, each state or local taxing authority is
permanently enjoined and restrained, after the Confirmation Date, from
commencing, continuing or taking any act to impose, collect or recover in any
manner any tax against any Debtor, Reorganized Anacomp or Reorganized Florida A
A C arising by reason of the forgiveness or discharge of indebtedness of any
such Entity under the Plan.
Termination of Claims of Contractual Subordination Against Holders of Old
Senior Subordinated Notes Claims. Provided that (i) the Plan has been accepted
by Class 5 under Section 1126(c) of the Bankruptcy Code, (ii) the Bankruptcy
Court shall have entered the Confirmation Order and (iii) the Effective Date
shall have occurred, all rights, actions or causes of action between or among
Holders of "senior indebtedness" (as defined in the Old Senior Subordinated
Notes Indenture) and Holders of Old Senior Subordinated Notes Claims based upon
any claimed right to contractual subordination shall be satisfied, terminated,
void and of no further force or effect as of the Effective Date so that,
notwithstanding any such rights, actions or causes of action, each Holder of Old
Senior Subordinated Notes Claims shall have the rights and benefits of the
distributions provided in the Plan.
Termination of Claims of Contractual Subordination Against Holders of Old
Subordinated Debentures Claims. Provided that (i) the Plan has been accepted by
Class 6 under Section 1126(c) of the Bankruptcy Code, (ii) the Bankruptcy Court
shall have entered the Confirmation Order and (iii) the Effective Date shall
have occurred, all rights, actions or causes of action between or among Holders
of "senior indebtedness" (as defined in the Old 9% Subordinated Debentures
<PAGE>
Indenture and the Old 13.875% Subordinated Debentures Indenture) and Holders of
Old Subordinated Debentures Claims based upon or in any way relating to any
claimed right to contractual subordination shall be satisfied, terminated, void
and of no further force or effect as of the Effective Date so that,
notwithstanding any such rights, actions or causes of action, each Holder of Old
Subordinated Debentures Claims shall have the rights and benefits of the
distributions provided in the Plan.
Distributions
Generally. Except as otherwise provided in the Plan, any distribution
required by the Plan to be made on the Effective Date in respect of a Claim or
Interest that is Allowed as of the Effective Date will be deemed made on the
Effective Date if made on the Effective Date or as promptly thereafter as
practicable, but in any event no later than the later to occur of: (i) 45 days
after the Effective Date or (ii) the date on which such Claim or Interest
becomes Allowed and any other conditions to distribution with respect to such
Claim or Interest shall have been satisfied.
Distributions to Holders of Allowed Old Credit Facilities Secured Claims.
All distributions provided for in the Plan on account of Allowed Old Credit
Facilities Secured Claims will be made by the Disbursing Agent to the Collateral
Agent for further distribution to individual Holders of such Claims. Within five
days after the Distribution Record Date, The First National Bank of Chicago, as
agent under the Multicurrency Revolver Loan Agreement, shall provide the
information necessary to calculate such distribution with respect to the
Multicurrency Revolver Loan Agreement in writing to the Disbursing Agent, and
within eight days after the Distribution Record Date, the Collateral Agent shall
provide such information received from The First National Bank of Chicago,
together with the information necessary to calculate such distribution with
respect to the other Old Credit Facilities, in writing to the Disbursing Agent.
Notwithstanding any provision in the Plan to the contrary, the Old Credit
Facilities and the Old Collateral Documents will continue in effect to the
extent necessary to allow the Collateral Agent to receive and make distributions
pursuant to the Plan, and the Collateral Agent will remain entitled to any
limitation of liability, exculpation or indemnification provisions between or
among the Holders of Allowed Old Credit Facilities Secured Claims under the Old
Credit Facilities and the Old Collateral Documents.
Distributions to Holders of Allowed Debt Security Claims. All distributions
provided for in the Plan on account of Allowed Debt Security Claims will be
made, at the option of Reorganized Anacomp, to the respective Old Indenture
Trustees or the Disbursing Agent, for further distribution to individual Holders
of Allowed Debt Security Claims. Any such distribution made by an Old Indenture
Trustee will be made pursuant to the applicable Old Indenture or other
disbursing agent agreement entered into by Reorganized Anacomp and the
applicable Old Indenture Trustee. Notwithstanding any provision in the Plan to
the contrary, the Old Indentures will continue in effect after the Effective
Date to the extent necessary to allow the Old Indenture Trustees to receive and
make distributions pursuant to the Plan on account of Allowed Debt Security
Claims. Any actions taken by any Old Indenture Trustee after the Effective Date
<PAGE>
that are not for this purpose will be null and void as against the Debtors and
Reorganized Anacomp, and Reorganized Anacomp will have no obligations to any Old
Indenture Trustee for any fees, costs or expenses incurred in connection with
any such actions.
Distributions to Holders of Other Claims and Interests. The Disbursing
Agent will make all distributions required under the Plan, except for
distributions made by the Collateral Agent or the Old Indenture Trustees. The
Disbursing Agent will serve without bond, and may employ or contract with other
Entities to assist in or make the distributions required by the Plan.
Compensation for Services Related to Distribution. In consideration for
providing services related to distributions pursuant to the Plan, the Collateral
Agent, the Old Indenture Trustees, the Disbursing Agent, Cedel and Euroclear, as
the case may be, will receive from Reorganized Anacomp, without further
Bankruptcy Court approval, reasonable compensation for such services and
reimbursement of reasonable out-of-pocket expenses incurred in connection with
such services. These payments will be made on terms agreed to with Reorganized
Anacomp, and will not be deducted from distributions to be made pursuant to the
Plan to Holders of Allowed Claims and Allowed Interests.
Delivery of Distributions and Undeliverable or Unclaimed Distributions.
Distributions to Holders of Allowed Claims and Holders of Allowed Interests
will be made as follows: (a) with respect to Allowed Old Credit Facilities
Secured Claims, by the Collateral Agent, (b) with respect to Allowed Debt
Security Claims other than Allowed Old 9% Subordinated Debentures Claims, if
made by an Old Indenture Trustee, in accordance with the applicable Old
Indenture and, if made by the Disbursing Agent, at the addresses supplied in the
letter of transmittal provided by or on behalf of the Holders of such Claims;
(c) with respect to Old 9% Subordinated Debentures Claims, Anacomp will publish
notice of the availability of the distribution under the Plan in the manner
provided in Section 1105 of the Old 9% Subordinated Debentures Indenture and
distributions will be made by the Disbursing Agent upon presentation of a letter
of transmittal and original certificate to Cedel, Euroclear or the Disbursing
Agent, (d) with respect to all other Allowed Claims, by the Disbursing Agent (i)
at the addresses set forth on the respective proofs of Claim Filed by Holders of
such Claims; (ii) at the addresses set forth in any written notices of address
change delivered to the Disbursing Agent after the Limited Bar Date; or (iii) at
the addresses reflected in the applicable Debtor's records if no proof of Claim
has been Filed and the Disbursing Agent has not received a written notice of a
change of address, (e) with respect to Allowed Class 8 Interests and Allowed
Class 9 Interests, by the Disbursing Agent (i) at the addresses supplied by the
Old Transfer Agent, (ii) at the addresses set forth on the respective proofs of
Interests Filed by Holders of such Interests; (iii) at the addresses set forth
in any written notices of address change delivered to the Disbursing Agent, or
(iv) at the addresses reflected in the applicable Debtor's records if no proof
of Interest has been Filed and the Disbursing Agent has not received a written
notice of a change of address.
<PAGE>
If any Allowed Claim Holder's or Allowed Interest Holder's distribution is
returned to the Disbursing Agent as undeliverable, no further distributions will
be made to such Holders unless and until the Disbursing Agent is notified in
writing of such Holder's then-current address. Undeliverable distributions will
remain in the possession of the Disbursing Agent until such time as a
distribution becomes deliverable. Undeliverable Cash (including dividends or
other distributions on account of undeliverable New Common Stock) will be held
in segregated bank accounts in the name of the Disbursing Agent for the benefit
of the potential claimants of such funds. Undeliverable Cash will be invested by
the Disbursing Agent in a manner consistent with Reorganized Anacomp's
investment and deposit guidelines. Undeliverable Plan Securities will be held by
the Disbursing Agent for the benefit of the potential claimants of such
securities.
Pending the distribution of the New Common Stock, the Disbursing Agent will
cause all of the New Common Stock held by it in its capacity as Disbursing Agent
to be: (1) represented in person or by proxy at each meeting of the stockholders
of Reorganized Anacomp; and (2) voted proportionately with the votes cast by the
other stockholders of Reorganized Anacomp, taken as a whole.
Any Holder of an Allowed Claim or an Allowed Interest that does not assert
a claim pursuant to the Plan for an undeliverable distribution to be made by the
Disbursing Agent, the Collateral Agent or the Old Indenture Trustees, as the
case may be, within two years after the Effective Date will have its claim for
such undeliverable distribution discharged and will be forever barred from
asserting any such claim against the Debtors, Reorganized Anacomp or their
property. In such cases: (i) any Cash held for distribution on account of such
claims for undeliverable distributions (including Cash interest, maturities,
dividends and other distributions on undelivered Plan Securities, as the case
may be) shall be property of Reorganized Anacomp, free of any restrictions
thereon (except as otherwise provided in any Plan Document); (ii) any New Senior
Secured Notes and New Senior Subordinated Notes held for distribution on account
of such claims for distributions shall be canceled and of no further force or
effect; (iii) any New Common Stock held for distribution on account of such
claims for distributions shall either be canceled or held as treasury shares as
Reorganized Anacomp may determine is appropriate; and (iv) any New Warrants held
for distribution on account of such claims for distributions shall be canceled.
If an Old Indenture Trustee or the Disbursing Agent, as applicable,
determines that an individual Holder of an Allowed Debt Security Claim is no
longer entitled to a distribution pursuant to the applicable Old Indenture, the
Plan, the Confirmation Order or applicable foreign law with respect to the Old
9% Subordinated Debentures Claims, such individual Holder's claim for such
distribution will be discharged, and such individual Holder will be forever
barred from asserting any such claim for a distribution against the Debtors,
Reorganized Anacomp or their respective property. In such cases: (i) any Cash
held for distribution on account of such claims for undeliverable distributions
(including Cash interest, maturities, dividends and other distributions on
undelivered Plan Securities, as the case may be) shall be property of
Reorganized Anacomp, free of any restrictions thereon (except as otherwise
provided in any Plan Document); (ii) any New Senior Subordinated Notes held for
<PAGE>
distribution on account of such claims for distributions shall be canceled and
of no further force or effect; (iii) any New Common Stock held for distribution
on account of such claims for distributions shall either be canceled or held as
treasury shares as Reorganized Anacomp may determine is appropriate; and (iv)
any New Warrants held for distribution on account of such claims for
distributions shall be canceled.
Distribution Record Date.
The Collateral Agent will have no obligation to recognize the transfer of,
or the sale of, any participation in any Allowed Old Credit Facilities Secured
Claim occurring after the close of business on the Distribution Record Date, and
will be entitled for all purposes herein to recognize and distribute only to
those Holders of Allowed Old Credit Facilities Secured Claims who are Holders of
such Claims, or participants therein, as certified by such Holders in writing to
the Collateral Agent by the close of business on the Distribution Record Date.
As of the close of business on the Distribution Record Date, the respective
transfer registers for the Old Securities (as applicable) will be closed, and
the Disbursing Agent, the Old Indenture Trustees and their respective agents
will have no obligation to recognize the transfer of any Old Debt Securities,
any Old Common Stock or any Old Preferred Stock occurring after the close of
business on the Distribution Record Date and will be entitled for all purposes
herein to recognize and deal only with those Holders of record as of the close
of business on the Distribution Record Date.
Means of Cash Payments. Except as otherwise specified herein, Cash payments
made pursuant to the Plan will be in U.S. dollars by checks drawn on a domestic
bank selected by Reorganized Anacomp, or by wire transfer from a domestic bank,
at the option of Reorganized Anacomp.
Fractional Plan Securities.
Notwithstanding any other provisions of the Plan, principal amounts of the
New Senior Secured Notes and the New Senior Subordinated Notes will be initially
issued only in denominations of $1,000 and integral multiples thereof. When any
distribution on account of an Allowed Claim would otherwise result in the
issuance of New Senior Secured Notes or New Senior Subordinated Notes with an
aggregate principal amount that is not an integral multiple of $1,000, the
actual distribution of such notes will be rounded to the next higher or lower
integral multiple of $1,000, as follows: (a) aggregate principal amounts that
exceed an integral multiple of $1,000 by $500 or more will be rounded to the
next higher integral multiple of $1,000 and (b) aggregate principal amounts that
exceed an integral multiple of $1,000 by less than $500 will be rounded to the
next lower integral multiple of $1,000. If, as a result of such rounding, the
sum of such principal amounts differs from the aggregate principal amount of
such New Senior Secured Notes or New Senior Subordinated Notes to be distributed
pursuant to the Plan, as applicable, the aggregate principal amount of the New
Senior Secured Notes or the New Senior Subordinated Notes will be adjusted
upward or downward to provide for the distribution of the applicable New Senior
Secured Notes or New Senior Subordinated Notes in an aggregate principal amount
<PAGE>
equal to such sum. No consideration will be provided in lieu of principal
amounts that are rounded down.
Notwithstanding any other provision of the Plan, only whole numbers of
shares of New Common Stock and whole numbers of New Warrants will be issued.
When any distribution on account of an Allowed Claim or an Allowed Interest
would otherwise result in the issuance of a number of shares of New Common Stock
or a number of New Warrants that is not a whole number, the actual distribution
of shares of such stock or warrants will be rounded to the next higher or lower
whole number as follows: (i) fractions equal to or greater than 1/2 will be
rounded to the next higher whole number and (ii) fractions less than 1/2 will be
rounded to the next lower number. The total number of shares of New Common Stock
and New Warrants to be distributed to a Class of Claims or Interests will be
adjusted as necessary to account for the rounding provided for herein. If, as a
result of such rounding, the amount of shares of New Common Stock or the amount
of New Warrants to be distributed to a particular Class differs from the
aggregate number of shares of New Common Stock or New Warrants to be distributed
pursuant to the Plan to that Class, the aggregate number of shares of New Common
Stock or the amount of New Warrants specified with respect to such Class will be
adjusted upward or downward to provide for the distribution of New Common Stock
or New Warrants, as the case may be, in an aggregate number of shares or New
Warrants equal to such sum. No consideration will be provided in lieu of
fractional shares or warrants that are rounded down.
Surrender of Canceled Instruments or Securities.
As a condition precedent to receiving any distribution pursuant to the Plan
on account of an Allowed Claim or an Allowed Interest evidenced by the notes,
instruments, securities or other documentation canceled pursuant to the Plan,
the Holder of such Claim or Interest will tender the applicable notes,
instruments, securities or other documentation evidencing such Claim or Interest
to the Collateral Agent, the Disbursing Agent, Cedel, Euroclear or one of the
Old Indenture Trustees, as applicable. Any Cash or Plan Securities to be
distributed pursuant to the Plan on account of any such Claim or Interest will,
pending such surrender, be treated as an undeliverable distribution under the
Plan.
Except as otherwise provided in the Plan, each Holder of an Allowed Claim
or an Allowed Interest will tender such Old Security to the Disbursing Agent,
Cedel, Euroclear or one of the Old Indenture Trustees, as applicable, together
with a letter of transmittal to be provided to such Holders by the Disbursing
Agent, Cedel, Euroclear or the Old Indenture Trustees as promptly as practicable
following the Effective Date. The letter of transmittal will include, among
other provisions, customary provisions with respect to the authority of the
Holder of the applicable Old Security to act and the authenticity of any
signatures required thereon. All surrendered Old Securities will be marked as
canceled by the Disbursing Agent, Cedel, Euroclear or one of the Old Indenture
Trustees, as applicable, and delivered to Reorganized Anacomp.
<PAGE>
In addition to any requirements under the applicable Old Indenture, any
Holder of a Claim or Interest evidenced by an Old Security that has been lost,
stolen, mutilated or destroyed will, in lieu of surrendering such Old Security,
deliver to the Disbursing Agent or one of the Old Indenture Trustee, as
applicable: (i) evidence satisfactory to such Entity of such loss, theft,
mutilation or destruction and (ii) such security or indemnity as may be required
by such Entity to hold such Entity harmless from any damages, liabilities or
costs incurred in treating such individual as a Holder of an Old Security.
Any Holder of an Old Security that fails to surrender or be deemed to have
surrendered such Old Security within two years after the Effective Date will
have its claim for a distribution pursuant to the Plan on account of such Old
Security discharged and will be forever barred from asserting any such claim
against the Debtors, Reorganized Anacomp or their respective property. In such
cases: (i) any Cash held for distribution on account of such claims for
undeliverable distributions (including Cash interest, maturities, dividends and
other distributions on undelivered Plan Securities, as the case may be) shall be
property of Reorganized Anacomp, free of any restrictions thereon (except as
otherwise provided in any Plan Document); (ii) any New Senior Secured Notes and
New Senior Subordinated Notes held for distribution on account of such claims
for distributions shall be canceled and of no further force or effect; (iii) any
New Common Stock held for distribution on account of such claims for
distributions shall either be canceled or held as treasury shares as Reorganized
Anacomp may determine is appropriate; and (iv) any New Warrants held for
distribution on account of such claims for distributions shall be canceled.
Fees and Expenses of Senior Lenders. On the Effective Date, Reorganized
Anacomp will reimburse in Cash, without prior Bankruptcy Court Approval, the
Holders of the Old Senior Notes Secured Claims and the Holders of the Old Credit
Facilities Secured Claims, as part of their Secured Claims, for certain
reasonable legal and other professional fees, costs and other expenses incurred
by such Holders, to the extent not theretofore paid to or on behalf of such
Holders and upon submission of billing statements to the Debtors and the
Creditors' Committee as provided in the Plan.
Setoff. Reorganized Anacomp may, but shall not be required to, set off
against any Allowed Claim and the distributions to be made pursuant to the Plan
on account of such Claim, claims of any nature that the Debtors or Reorganized
Anacomp may have against the Holder of such Allowed Claim; provided, however,
that neither the failure to effect such a setoff nor the allowance of any Claim
against the Debtors or Reorganized Anacomp shall constitute a waiver or release
by the Debtors or Reorganized Anacomp of any claim that the Debtors or
Reorganized Anacomp may possess against such Holder.
Indenture Trustee Charging Liens. In full satisfaction of Allowed Claims
secured by Indenture Trustee Charging Liens, the Old Indenture Trustees will
receive from Reorganized Anacomp Cash equal to the amount of such Claims, and
any Indenture Trustee Charging Liens will be released. Distributions received by
Holders of Allowed Claims pursuant to the Plan will not be reduced on account of
payment of Allowed Claims secured by Indenture Trustee Charging Liens.
Notwithstanding any other provisions of the Plan, upon: (a) submission of
<PAGE>
appropriate documentation to Reorganized Anacomp and the Creditors' Committee
regarding fees and expenses incurred by an Old Indenture Trustee in connection
with the Chapter 11 Cases through the Effective Date that are secured by an Old
Indenture Trustee Charging Lien and (b) the failure of Reorganized Anacomp or
the Creditors' Committee to object on the grounds of reasonableness, as
determined under the terms of the applicable Old Indenture, to the payment of
such fees and expenses within 10 Business Days after receipt of such
documentation, such Old Indenture Trustee will be deemed to hold an Allowed
Claim for such fees and expenses, which Reorganized Anacomp will pay in Cash
within 30 days after the receipt of the documentation regarding the fees and
expenses of such Old Indenture Trustee, without further Bankruptcy Court
approval.
De Minimis Distributions. Notwithstanding any provision to the contrary
contained in the Plan, no distribution of less than twenty-five dollars ($25) in
Cash or less than five (5) shares of New Common Stock or five (5) New Warrants
shall be made to any Holder of an Allowed Claim or Allowed Interest, unless such
Holder shall have requested such distribution in writing from Reorganized
Anacomp before the second anniversary of the Effective Date. Such undistributed
amount will be retained by Reorganized Anacomp, and in the case of undistributed
New Common Stock, held as treasury shares.
Miscellaneous Provisions
Executory Contracts and Unexpired Leases. The term "executory contract" is
not defined in the Bankruptcy Code. Generally, an "executory contract" is a
contract for which substantial performance remains due from both parties; one
commonly used definition is that an executory contract is one where the
obligations of each party are so far unperformed that the failure of either
party to complete performance would constitute a material breach excusing the
performance of the other party.
All executory contracts and unexpired leases of the Debtors shall be
assumed by Reorganized Anacomp as of the Effective Date, unless (a) rejected
pursuant to an order entered on or prior to the Effective Date, or (b) a motion
to reject any such executory contract or unexpired lease is pending before the
Bankruptcy Court on the Effective Date, or (c) assumed pursuant to an order
entered on or prior to the Effective Date.
If the rejection of an executory contract or unexpired lease by the Debtors
results in damages to the other party or parties to such contract or lease, a
Claim for such damages, if not previously evidenced by a filed proof of Claim or
barred by a Final Order, shall be forever barred and shall not be enforceable
against any of the Debtors or Reorganized Anacomp, or their properties or
agents, successors or assigns, unless a proof of Claim relating thereto is filed
with the Bankruptcy Court within thirty (30) days after the later of (a) the
entry of a Final Order authorizing such rejection and (b) the Confirmation Date,
or within such shorter period as may be ordered by the Bankruptcy Court.
Each executory contract and unexpired lease to be assumed pursuant to the
Plan shall be reinstated and rendered unimpaired in accordance with Sections
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1124(2) and 365(b)(1) of the Bankruptcy Code. In connection therewith, the
Debtors shall cure or provide adequate assurance that they will cure any
monetary default (other than of the kind specified in Section 365(b)(2) of the
Bankruptcy Code), by payment of the default amount in Cash on the Effective Date
or on such other terms as the parties to such executory contract or unexpired
lease may otherwise agree, compensate, or provide adequate assurance that the
Debtors will promptly compensate, parties other than the Debtors to such
contract or lease for any actual pecuniary loss to such parties resulting from
such default and provide adequate assurance of future performance under such
contract or lease. In the event of a dispute regarding: (a) the amount of any
cure payments, (b) the ability of Reorganized Anacomp or any of the assignees to
provide "adequate assurance of future performance" (within the meaning of
Section 365 of the Bankruptcy Code) under the contract or lease to be assumed,
or (c) any other matter pertaining to assumption, the cure payments or
performance required by Section 365(b)(1) of the Bankruptcy Code shall be made
following the entry of a Final Order resolving the dispute and approving the
assumption.
Indemnification Obligations. Notwithstanding any provision of the Plan to
the contrary, all obligations of the Debtors or any Foreign Subsidiary or
Domestic Subsidiary to indemnify or hold harmless current or former officers or
directors or the Old Indenture Trustees, and all Claims of such officers,
directors of any of the Debtors, or the Old Indenture Trustees, under the Bylaws
of the Debtors, the Old Indentures or other applicable law, corporate documents
or agreements, shall expressly survive confirmation of the Plan and be binding
on and enforceable against Reorganized Anacomp irrespective of whether
indemnification is owed in connection with an event occurring before, on or
after the Petition Date.
Federal Income Tax Considerations. For a discussion of certain federal
income tax consequences of the Plan that should be considered by Holders, see
"Certain Federal Income Tax Considerations."
Risk Factors. For a discussion of certain risk factors concerning the Plan
that should be considered by Holders, see "Certain Risk Factors."
Modification of the Plan. The Company reserves the right to amend or modify
the terms of the Plan in accordance with the provisions of Section 1127 of the
Bankruptcy Code or to waive certain conditions to the Plan, if and to the extent
the Company determines, with the consent of the Creditors' Committee (unless
Class 5 shall have rejected the Plan) and the Collateral Agent (unless Class 2
shall have rejected the Plan), that such amendments or modifications are
necessary or desirable in order to complete the Restructuring. Under the
Bankruptcy Code, such amendments or modifications may be approved by the
Bankruptcy Court at confirmation without resolicitation of votes if the
Bankruptcy Court determines that, after notice as required by the Bankruptcy
Code and the Bankruptcy Rules, that the proposed modification does not adversely
change the treatment of any Claim or Interest of a Holder who has not accepted
the modification in writing. Except for modifications to Section 12.1
("Releases"), the Company will give Holders of Claims and Interests such notice
of such amendments or waivers as may be required by applicable law and will
provide notice of all amendments and waivers to counsel to the Creditors'
Committee. The Company reserves the right to use acceptances of the Plan to
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confirm any amendment to Section 12.1 of the Plan. The Company also reserves the
right to use acceptance of the Plan to confirm any other amendment of the Plan
to the extent permitted by law.
After the Confirmation Date, the Company may, with the consent of the
Creditors' Committee (in the event that Class 5 shall have accepted the Plan),
ask the Bankruptcy Court to remedy any defects or omissions or reconcile any
inconsistencies in the Plan or the Confirmation Order as may be necessary to
carry out the purposes and intent of the Plan, so long as the Holders of Claims
and Interests are not adversely affected and prior notice is served in
accordance with the Bankruptcy Code and the Bankruptcy Rules.
Withdrawal of the Plan. The Company reserves the right to revoke and
withdraw the Plan at any time prior to confirmation, in which case the Plan will
be deemed to be null and void. In such event, nothing contained in the Plan will
be deemed to constitute a waiver or release of any claims by or against the
Company or any other person or to prejudice in any manner the rights of the
Company or any other person or entity in any further proceedings involving the
Company or to be deemed to be an admission by the Company of any facts.
<PAGE>
CERTAIN RISK FACTORS
In considering whether or not to accept the Plan, Holders of Claims and
Interests should carefully consider the following factors, together with all of
the other information contained in this Disclosure Statement.
Adverse Affect of Growth of Digital Technologies
Revenues for Anacomp's micrographics services and products have been
adversely affected for each of the past five fiscal years and could in the
future be substantially adversely affected by, among other things, the
increasing use of digital technology. Micrographics represented 78% of the
Company's fiscal 1995 revenues and is expected to remain the Company's primary
source of revenues for the foreseeable future. The effect of digital and other
technologies on the demand for micrographics depends, in part, on the extent of
technological advances and cost decreases in such technologies. The recent trend
of technological advances and attendant price declines in digital systems and
products is expected to continue. As a result, in certain instances, potential
micrographics customers have deferred, and may continue to defer, investments in
micrographics systems (including the Company's XFP 2000 system) and the
utilization of micrographics data service centers while evaluating the abilities
of digital and other technologies.
The continuing development of local area computer networks and similar
systems based on digital technologies has resulted and will continue to result
in at least some Anacomp customers changing their use of micrographics from data
storage and retrieval to primarily data storage. The Company believes this is at
least part of the reason for the declines in the past two fiscal years in sales
of the Company's duplicate film, readers and reader/printers. Anacomp's service
centers also are producing fewer duplicate microfiche per original for
customers, reflecting this use of micrographics primarily for storage. The
rapidly changing data storage and management industry also has resulted in
intense price competition in certain of the Company's markets, particularly
micrographics services. Anacomp's operating income as a percent of revenue
(excluding restructuring and special charges) has decreased to 7% in fiscal 1995
from 13.4% in fiscal 1994, 15% in 1993 and 15.9% in 1992.
New Operating Plan
The Company has developed a New Operating Plan in light of the changes in
the Company's business. The Company's ability to meet its obligations in the
future is dependent on Reorganized Anacomp achieving a substantial portion of
its new Operating Plan. In order for Reorganized Anacomp to meet its obligations
under the New Senior Secured Notes, it must achieve a significant portion of its
projected gross revenues. The Company believes that it will achieve at least a
significant portion of its projected gross revenues even if its business
contracts more substantially than projected, but there can be no assurance that
Reorganized Anacomp will in fact achieve such results.
<PAGE>
Continuing Leverage; Future Refinancings
While the Restructuring will significantly reduce the Company's debt
obligations, the Company will remain leveraged after the Effective Date. The
Company had approximately $465 million in indebtedness (including accrued
interest, Old Preferred Stock and undeclared Old Preferred Stock dividends but
excluding General Unsecured Claims) outstanding as of January 5, 1996. After
giving effect to the Plan, the Company's estimated aggregate indebtedness would
total approximately $287 million. The Company's management believes that,
following the confirmation of the Plan, the Company will have sufficient cash
flow from operations to pay interest on all of its outstanding debt as those
payments become due. However, the Company's ability to meet its debt service
obligations will depend on a number of factors, including its ability to
implement the New Operating Plan. See "The New Operating Plan."
Securities Law Considerations
The Company has not filed a registration statement under the Securities Act
or any other federal or state securities laws with respect to any of the Plan
Securities that they may be deemed to be offering by virtue of the Company's
solicitation of acceptances of the Plan pursuant to this Disclosure Statement.
The Company is relying on Section 1145(a) of the Bankruptcy Code ("Section
1145(a)") to exempt from registration under the Securities Act and any
applicable state securities laws the offer of any Plan Securities that may be
deemed to be made pursuant to the Plan. Generally, Section 1145(a)(1) exempts
the offer and sale of securities pursuant to a plan of reorganization from such
registration requirements if the following conditions are satisfied: (i) the
securities are issued by a debtor (or its affiliate or successor) under a plan
of reorganization; (ii) the recipients of the securities hold a claim against,
an interest in, or a claim for an administrative expense against, the debtor;
and (iii) the securities are issued entirely in exchange for the recipient's
claim against or interest in the debtor, or are issued "principally" in such
exchange and "partly for cash or property." The Company believes that the Plan
Securities issued pursuant to the Plan will satisfy the requirements of Section
1145(a)(1).
The Plan Securities may be resold by the holders thereof without
restriction, except for any such holder that is deemed to be an "underwriter"
with respect to the Plan Securities as defined in Section 1145(b)(1) of the
Bankruptcy Code. Generally, Section 1145(b)(1) defines an "underwriter" as any
person who (i) purchases a claim against, or an interest in, a debtor with a
view towards distribution of any security to be received in exchange for such
claim or interest, (ii) offers to sell securities issued pursuant to a
bankruptcy plan for the holders of such securities, (iii) offers to buy
securities issued pursuant to a bankruptcy plan from persons receiving such
securities, if the offer to buy is made with a view towards distribution of such
securities, or (iv) is an issuer within the meaning of Section 2(11) of the
Securities Act. Section 2(11) of the Securities Act provides that the term
"issuer" includes all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with, an
issuer of securities. Under Rule 405 of Regulation C under the Securities Act,
the term "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the policies of a person, whether through the
<PAGE>
ownership of voting securities, by contract or otherwise. Accordingly, an
officer or director of a reorganized debtor (or its affiliate or successor)
under a plan of reorganization may be deemed to "control" such debtor (and
therefore be an underwriter for purposes of Section 1145), particularly if such
management position is coupled with the ownership of a significant percentage of
a debtor's (or its affiliate's or successor's) voting securities. Any entity
that is an "underwriter" but not an "issuer" with respect to an issue of
securities is, however, entitled to engage in exempt "ordinary trading
transactions" within the meaning of Section 1145(b).
Holders of such securities who are deemed to be "underwriters" within the
meaning of Section 1145(b)(1) of the Bankruptcy Code or who may otherwise be
deemed to be "underwriters" of, or to exercise "control" over, the Company
within the meaning of Rule 405 of Regulation C under the Securities Act should,
assuming all other conditions of Rule 144A are met, be entitled to avail
themselves of the safe harbor resale provisions thereof. Rule 144A, promulgated
under the Securities Act, provides a non-exclusive safe harbor exemption from
the registration requirements of the Securities Act for resales to certain
"qualified institutional buyers" of securities which are "restricted securities"
within the meaning of the Securities Act, irrespective of whether the seller of
such securities purchased its securities with a view towards reselling such
securities under the provisions of Rule 144A. Under Rule 144A, a "qualified
institutional buyer" is defined to include, among other Persons (e.g., "dealers"
registered as such pursuant to Section 15 of the Exchange Act and "banks" as
defined in Section 3(a)(2) of the Securities Act), any entity which purchases
securities for its own account or for the account of another qualified
institutional buyer and which (in the aggregate) owns and invests on a
discretionary basis at least $100 million in the securities of unaffiliated
issuers. Subject to certain qualifications, Rule 144A does not exempt the offer
or sale of securities which, at the time of their issuance, were securities of
the same class of securities then listed on a national securities exchange
(registered as such under Section 6 of the Exchange Act) or quoted in a U.S.
automated interdealer quotation system (e.g., NASDAQ).
To the extent that Rule 144A is unavailable, holders may, under certain
circumstances, be able to sell their securities pursuant to the more limited
safe harbor resale provisions of Rule 144 under the Securities Act. Generally,
Rule 144 provides that if certain conditions are met (e.g., two-year holding
period with respect to "restricted securities," volume limitations, manner of
sale, availability of current information about the issuer, etc.), (a) any
person who resells "restricted securities" and (b) any "affiliate" of the issuer
of the securities sought to be resold will not be deemed to be an "underwriter"
as defined in Section 2(11) of the Securities Act. Under paragraph (k) of Rule
144, the aforementioned conditions to resale will no longer apply to restricted
securities sold for the account of a holder who is not an affiliate of the
Company at the time of such resale and who has not been such during the
three-month period next preceding such resale, so long as a period of at least
three years has elapsed since the later of (i) the Effective Date and (ii) the
date on which such holder acquired his or its securities from an affiliate of
the Company.
Within 45 days after the Effective Date, or such later date as may be
required to prepare the necessary financial statements, the Company, at its
expense, will file the Shelf Registration Statement with respect to the New
Senior Secured Notes (in the event that Class 2 shall have accepted the Plan),
the New Senior Subordinated Notes (in the event that Class 5 shall have accepted
the Plan) and the New Common Stock. The Company will use its best efforts to
file the Shelf Registration Statement as expeditiously as possible after the
Effective Date and to have such Shelf Registration Statement declared effective
as soon as practicable after such filing and to keep such Shelf Registration
Statement continuously effective until the third anniversary of the effective
date thereof, except as otherwise provided in the Registration Rights Agreement.
No securities other than the New Senior Secured Notes, the New Senior
Subordinated Notes and the New Common Stock shall be included in the Shelf
Registration Statement unless the holders of a majority of the outstanding New
Common Stock consent to such inclusion. The Company will also, if necessary,
supplement or make amendments to the Shelf Registration Statement.
Market for Plan Securities
There is no existing market for the Plan Securities and there can be no
assurance that an active trading market for the Plan Securities will develop.
The Plan Securities will not be listed on any exchange. Accordingly, no
assurance can be given that a Holder of Plan Securities will be able to sell
such Plan Securities in the future or as to the price at which such Plan
Securities might trade. The liquidity of the market for such Plan Securities and
the prices at which such Plan Securities trade will depend upon the number of
Holders thereof, the interest of securities dealers in maintaining a market in
such Plan Securities and other factors beyond the Company's control.
Disruption of Operations
The Chapter 11 Cases could adversely affect the Company's relationships
with its employees, customers and suppliers. If such relationships are adversely
affected for a material time, the Company's operations could be materially
affected. Weakened operating results could adversely affect the Company's
ability to consummate the Restructuring.
THE SOLICITATIONS; VOTING PROCEDURES
Solicitations of Acceptances of the Plan
The Company hereby solicits acceptances of the Plan under Chapter 11 of the
Bankruptcy Code from Holders of Claims and Interests in Classes 2, 4, 5, 6 and
8.
Under the Plan, Claims and Interests have been separated into 11 Classes,
and each Class has been determined to be either impaired or unimpaired by the
Plan's terms. See "Summary of Distributions Under the Plan." A class of Claims
or Interests that is unimpaired is deemed to have accepted the Plan under
Section 1126(f) of the Bankruptcy Code and a class of Claims or Interests that
does not receive or retain any property under the plan of reorganization is
deemed to have rejected the plan of reorganization under Section 1126(g) of the
<PAGE>
Bankruptcy Code. Under Section 1126(c)-(d) of the Bankruptcy Code, an impaired
class of Claims will be deemed to accept if Holders of at least two-thirds in
dollar amount and a majority in number of the Claims who cast timely Ballots
vote to accept the Plan, and an impaired class of Interests will be deemed to
accept if Holders of at least two-thirds in amount of the Interests who cast
timely Ballots vote to accept the Plan. Acceptances of the Plan are being
solicited only from Holders who hold Claims or Interests in an impaired class
and who are receiving distributions under the Plan. Holders of Class 9 Interests
are not being solicited and are therefore deemed to have rejected the Plan. Only
those Holders who vote to accept or reject the Plan will be counted for purposes
of determining acceptance or rejection of the Plan. Therefore, the Plan could be
accepted by any impaired class of Claims with the affirmative vote of
significantly less than two-thirds in dollar amount and a majority in number of
the total class of Claims, or by any impaired class of Interests with the
affirmative vote of significantly less than two-thirds in amount of the total
class of Interests.
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT AND BECOMES EFFECTIVE,
EACH HOLDER OF A CLAIM OR INTEREST WILL RECEIVE THE CONSIDERATION OFFERED IN THE
PLAN WHETHER OR NOT SUCH HOLDER ACCEPTED THE PLAN. MOREOVER, UPON CONFIRMATION,
THE PLAN WILL BE BINDING ON ALL HOLDERS OF CLAIMS AGAINST OR INTERESTS IN THE
COMPANY REGARDLESS OF WHETHER SUCH HOLDERS VOTED TO ACCEPT THE PLAN.
Voting on the Plan
This Disclosure Statement and the appropriate Ballot are being distributed
to all Holders of Claims and Interests who are entitled to vote on the Plan.
There is a separate Ballot designated for each impaired voting class in order to
facilitate vote tabulation; however, all Ballots are substantially similar in
form and substance and the term "Ballot" is used without intended reference to
the Ballot of any specific class of Claims or Interests.
Who May Vote
Holders of Claims or Interests in the following classes are receiving or
retaining property under, and are impaired by, the Plan, are being solicited for
their vote, and therefore may vote on the Plan:
Class 2 Claims under the Old Credit Facilities and Claims of
Holders of Old Senior Notes
Class 4 Claims of Holder of Carlisle Note
Class 5 Claims of Holders of Old Senior Subordinated Notes
Class 6 Claims of Holders of Old Subordinated Debentures
Class 8 Interests of Holders of Old Preferred Stock
Only Holders of Claims or Interests on the record date for voting are
eligible to vote on the Plan. See " -- Beneficial Owners" below. The record date
for voting is March 28, 1996 (the "Voting Record Date").
Voting Procedures for Holders of Impaired Claims and Interests on the Record
Date for Voting
If you are a Holder of impaired Claims or Interests on the Voting Record
Date, you will receive the Ballot relating to Claims or Interests you hold of
record. Registered Holders may include brokerage firms, commercial banks, trust
companies or other nominees. If such entities hold Old Securities, but do not
hold Old Securities for their own account, they should provide copies of this
Disclosure Statement and the appropriate Ballot to their customers and to
beneficial owners. For further instructions, see " -- Beneficial Owners of Old
Securities" below. Any beneficial owner who has not received a Disclosure
Statement or Ballot should contact its brokerage firm or nominee or the Ballot
Agent.
Holders of Impaired Claims and Interests on the Voting Record Date who vote
on the Plan should complete and sign the Ballot in accordance with the
instructions thereon, being sure to check the appropriate box entitled "Accept
the Plan" or "Reject the Plan." Each Holder must vote all Old Securities
beneficially owned in a particular class in the same way (i.e., all "accept" or
all "reject") even if such Old Securities are owned through more than one broker
or bank.
Ballots must be delivered to the Ballot Agent, at its address set forth on
the back cover of this Disclosure Statement. The method of such delivery is at
the election and risk of the Holder, except that Ballots sent by facsimile will
not be counted for purposes of the voting tabulation. If such delivery is by
mail, it is recommended that Holders use an air courier with a guaranteed next
day delivery or registered mail, properly insured, with return receipt
requested. In all cases, sufficient time should be allowed to assure timely
delivery.
You may receive multiple copies of this Disclosure Statement, especially if
you own Old Securities through more than one broker or bank. If you submit more
than one Ballot for a class or issue of Old Securities because you beneficially
own such Old Securities through more than one broker or bank, be sure to
indicate in Item 3 of the Ballot(s) the names of ALL broker-dealers or other
intermediaries who hold Old Securities for you.
Beneficial Owners of Old Securities
Any Holder holding Old Securities on the Voting Record Date for voting in
its own name can vote by completing and signing the enclosed Ballot and
returning it directly to the Ballot Agent on or before the Voting Deadline using
the enclosed pre-addressed envelope.
Any Holder holding Old Securities on the Voting Record Date for voting
through a Nominee can vote by either (i) completing the beneficial owner Ballot
and returning it to the brokerage firm, commercial bank, trust company or other
nominee that is the registered Holder of such Holder's Old Securities early
enough to permit such registered Holder to transcribe the information from the
beneficial owner Ballot onto a Master Ballot and return the Master Ballot to the
<PAGE>
Ballot Agent before the Voting Deadline, or (ii) if the Ballot has been executed
by the registered Holder, by completing the Ballot and returning it directly to
the Ballot Agent by the Voting Deadline.
By submitting a vote for or against the Plan, you are certifying that you
are on the Voting Record Date the Holder of the Old Securities being voted or an
authorized signatory for such Holder. Your submission of a Ballot will also
constitute a request that you (or in the case of an authorized signatory, the
beneficial owner) be treated as the record Holder of such securities for
purposes of voting on the Plan.
Brokerage Firms, Banks and Other Nominees
A nominee which is the registered Holder of an Old Security for a
beneficial owner, or is a participant in a securities clearing agency and is
authorized to vote in the name of such securities clearing agency pursuant to an
omnibus proxy (as described below) and is acting for a beneficial owner, can
vote on behalf of such beneficial owner by (i) distributing a copy of this
Disclosure Statement and all appropriate Ballots to such beneficial owner, (ii)
collecting all such Ballots, (iii) completing a Master Ballot compiling the
votes and other information from the Ballots collected, and (iv) transmitting
such completed Master Ballot to the Ballot Agent by the Voting Deadline. A proxy
intermediary acting on behalf of a brokerage firm or bank may follow the
procedures outlined in the preceding sentence to vote on behalf of such
beneficial owner. A nominee which is the registered Holder of an Old Security
for one or more beneficial owners also may arrange for such beneficial owners to
vote by executing the appropriate Ballot and by distributing a copy of the
Disclosure Statement and such executed Ballot to such beneficial owners for
voting and returning such Ballot to the Ballot Agent.
Securities Clearing Agency
The Depository Trust Company, as nominee Holder of certain Old Securities,
will execute an omnibus proxy in favor of its respective participants. As a
result of the omnibus proxy, each such participant will be authorized to vote
the Old Securities owned by it and held in the name of such securities clearing
agency.
Voting Deadline and Extensions
In order to be counted for purposes of voting on the Plan, all of the
information requested on the applicable Ballot must be provided. Ballots must be
received by the Ballot Agent at its address set forth on the back cover of this
Disclosure Statement no later than 4:30 p.m., New York City time, on May 8,
1996, the Voting Deadline, unless extended pursuant to an order of the
Bankruptcy Court.
If the Bankruptcy Court orders the extension of the Voting Deadline, the
Company will notify the Ballot Agent of any extension by oral or written notice
and will make a public announcement thereof, each not later than 9:00 a.m., New
York City time, on the next Business Day after the previously scheduled Voting
Deadline.
<PAGE>
Withdrawal or Change of Votes on the Plan
A Ballot may be withdrawn or a vote changed only with the approval of the
Bankruptcy Court.
Ballot Agent
Logan & Company, Inc. has been appointed as Ballot Agent for the Plan.
Questions and requests for assistance in completing and transmitting ballots may
be directed to the Ballot Agent. Requests for additional copies of this
Disclosure Statement, the Ballots or the Master Ballots should be directed to
the Ballot Agent.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax consequences of
the Restructuring to the Company and its subsidiaries, and to the Holders of the
Old Senior Notes, the Old Senior Subordinated Notes, the Old 13.875%
Subordinated Debentures, the Old 9% Subordinated Debentures, the Old Preferred
Stock, the Old Common Stock and the Warrants. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder, and administrative and judicial interpretations and practice, all as
in effect on the date hereof and all of which are subject to change, with
possible retroactive effect. Due to the lack of definitive judicial or
administrative authority in a number of areas, substantial uncertainty may exist
with respect to some of the tax consequences described below. No opinion of
counsel has been obtained, and the Company does not intend to seek a ruling from
the Internal Revenue Service (the "Service") as to any of such tax consequences
and there can be no assurance that the Service will not challenge one or more of
the tax consequences of the Restructuring described below.
The following discussion is limited to Holders that hold Old Securities and
Plan Securities (collectively, "Securities") as capital assets and does not
address all matters that may be relevant to particular classes of Holders that
are subject to special rules under the Code, including, without limitation,
financial institutions, securities dealers, broker-dealers, tax-exempt entities,
insurance companies, foreign persons, Holders that hold their Securities as part
of a "straddle" or a "conversion transaction" (as defined in the Code) and
Holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation. Consequently, such Holders may be subject
to special rules not discussed below. In addition, the tax treatment of the
Holders of the Old Credit Facilities, the Carlisle Note and Employee Options,
and employees of the Company who receive as compensation New Common Stock or
options to acquire New Common Stock in connection with the Restructuring or
post-Restructuring operations of the Company, is not described below.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE RESTRUCTURING ARE COMPLEX. ALL
HOLDERS OF THE OLD SECURITIES SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE RESTRUCTURING AND THE OWNERSHIP AND
DISPOSITION OF THE PLAN SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE TAX LAWS.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE HOLDERS
Federal Income Tax Classification Matters
Classification of New Senior Secured Notes and New Senior Subordinated
Notes as Debt or Equity for Federal Income Tax Purposes
Whether an instrument constitutes debt or equity for federal income tax
purposes is an inherently factual question, and no single characteristic is
determinative. The New Senior Secured Notes and the New Senior Subordinated
Notes likely will be treated as debt for federal income tax purposes, and the
following discussion assumes such treatment. However, there can be no assurance
that the Service would not challenge the treatment of the New Senior Secured
Notes or the New Senior Subordinated Notes or a portion of them as debt, or that
a court would not sustain such a challenge. If it were determined that all or a
portion of the New Senior Secured Notes or the New Senior Subordinated Notes
constitute equity for federal income tax purposes, then some or all of the (a)
original issue discount ("OID") or interest on such debt would not be deductible
by the Company and could be taxed as dividend income to the Holder; and (b)
payments of principal on such debt could be treated as redemption distributions
under Code Section 302, which could result in either capital gain, reduction of
basis, or dividend income to the Holders.
Federal Income Tax Consequences of Exchanges Required by the Restructuring
In General
The exchanges contemplated by the Restructuring will qualify as a
reorganization under Section 368(a)(1)(E) of the Code, except with respect to
the exchange of Old 9% Subordinated Debentures for New Common Stock and New
Warrants of the Company. Accordingly, if a Holder tenders Old Securities (other
than the Old 9% Subordinated Debentures) that qualify as "tax securities" (as
defined below) and pursuant to the Plan receives Plan Securities that qualify as
"tax securities" and/or New Common Stock, then the Holder generally will not
recognize gain or loss on the exchange, except (as described below) to the
extent a portion of the Plan Securities received is allocable to accrued
interest that the Holder has not previously included in taxable income ("accrued
but untaxed interest"). However, the New Warrants will not qualify as tax
securities. Accordingly, Holders of Old 13.875% Subordinated Debentures may
recognize gain and Holders of Old Common Stock and Old Preferred Stock may
recognize gain or loss with respect to the New Warrants received therefor. In
addition, the exchange of Old 9% Subordinated Debentures for New Common Stock
and New Warrants will not qualify as a reorganization under Section 368(a)(1)(E)
of the Code because the Old 9% Subordinated Debentures were issued by Anacomp
International, N.V., a wholly-owned subsidiary of the Company. Accordingly,
<PAGE>
Holders tendering Old 9% Subordinated Debentures for New Common Stock and New
Warrants will generally recognize gain or loss on the exchange.
Classification as a "Security" for Federal Income Tax Purposes
Whether a debt instrument constitutes a "security" within the meaning of
federal income tax law is relevant to determining whether and the extent to
which a Holder of such a debt instrument will recognize gain or loss in the
Restructuring. For ease of discussion, a debt instrument which so qualifies will
be referred to herein as a "tax security." Whether a debt instrument is
classified as a tax security depends on an overall evaluation of the nature of
the debt instrument at the time it is issued (or subsequently amended), with the
term of the debt instrument usually regarded as the most important factor. Under
current law, debt instruments with a five-year term or less generally have not
qualified as tax securities, whereas debt instruments with a ten-year term or
more generally have qualified as tax securities.
The New Senior Secured Notes will have a term of three and one-half years,
subject to a pro rata redemption schedule. The Company believes that it is
unlikely that the New Senior Secured Notes will qualify as tax securities. All
of the other debt instruments involved in the Restructuring have a stated term
of at least six years. The Company believes that it is likely, although not free
from doubt, that all the debt instruments (except for the New Senior Secured
Notes) involved in the Restructuring will qualify as tax securities.
The following discussion assumes that the New Senior Secured Notes will not
be treated as tax securities, but that all of the other debt instruments
involved in the Restructuring will be treated as tax securities. Holders are
urged to consult their tax advisors regarding the classification of the debt
instruments involved in the Restructuring as tax securities and the resulting
tax consequences if the New Senior Secured Notes are treated as tax securities,
or if the other debt instruments involved in the Restructuring are not treated
as debt securities.
Exchange of Old Senior Notes for New Senior Secured Notes and Cash
Assuming that either the Old Senior Notes or the New Senior Secured Notes
are not treated as tax securities, the exchange of an Old Senior Note for a New
Senior Secured Note and cash will constitute a taxable event for federal income
tax purposes. The Holder of an Old Senior Note will recognize loss or gain, as
applicable, generally equal to the difference between the Holder's tax basis in
such Old Senior Note and the sum of the issue price of the New Senior Secured
Note and cash received therefor, to the extent such issue price or cash is not
allocable to accrued but untaxed interest. See "Accrued But Unpaid Interest,"
below. The issue price of the New Senior Secured Notes should be equal to their
principal amount unless the New Senior Secured Notes are treated as traded on an
established market within the 60-day period ending 30 days after the Effective
Date, in which case their issue price should be equal to their fair market
value. See "Issue Price," below.
Any such gain or loss recognized by a Holder will be capital gain or loss
except to the extent of any accrued market discount which, to the extent of any
gain, will generally be treated as ordinary income, as described below under the
heading, "Market Discount." Such capital gain or loss will be long-term capital
<PAGE>
gain or loss if the holding period with respect to the Old Senior Note exceeds
one year. To the extent that a portion of a New Senior Secured Note or cash
received in exchange for an Old Senior Note is allocable to accrued but untaxed
interest, the Holder will recognize ordinary interest income. See "Accrued But
Unpaid Interest," below. The Holder's tax basis in the New Senior Secured Note
received will be equal to its issue price. The holding period of the New Senior
Secured Note received will begin on the day after the Effective Date.
If either the Old Senior Notes or the New Senior Secured Notes are treated
as "traded on an established market" at any time during the 60-day period ending
30 days after the Effective Date, and the principal amount of the New Senior
Secured Notes exceeds their issue price by more than a de minimis amount, they
will be treated as issued with OID. See "Original Issue Discount," below.
Exchange of Old Senior Subordinated Notes for New Senior Subordinated Notes
and New Common Stock
Assuming that the Old Senior Subordinated Notes and the New Senior
Subordinated Notes are treated as tax securities, then a Holder of an Old Senior
Subordinated Note that receives a New Senior Subordinated Note and New Common
Stock will not recognize any gain or loss, except to the extent that a portion
of the New Senior Subordinated Note and New Common Stock received is allocable
to accrued but untaxed interest. See "Accrued But Unpaid Interest," below. In
general, a Holder's aggregate tax basis in such New Senior Subordinated Note and
New Common Stock received (and not allocable to accrued but untaxed interest)
will equal the Holder's adjusted tax basis in the Old Senior Subordinated Note
surrendered. Such aggregate tax basis will be allocated between the New Senior
Subordinated Note and New Common Stock in accordance with their relative fair
market values.
The Company believes that the fair market value of the New Senior
Subordinated Notes should be deemed to be equal to their issue price (as
described below under "Issue Price"), and that the fair market value of the New
Common Stock should be equal to its trading price on the Effective Date.
However, if the Old Senior Subordinated Notes are treated as traded on an
established market within the 60-day period ending 30 days after the Effective
Date and the New Senior Subordinated Notes are not so treated during such
period, then the fair market value of the New Senior Subordinated Notes will be
equal to the difference between the trading price of the Old Senior Subordinated
Notes and the trading price of the New Common Stock. If the Old Senior
Subordinated Notes are treated as traded on an established market within the
60-day period ending 30 days after the Effective Date, the Company's
determination of the appropriate allocation will be binding on each Holder
unless a Holder explicitly discloses any contrary treatment on a statement
attached to its timely filed federal income tax return for the taxable year that
includes the Effective Date.
A Holder's holding period in the New Common Stock and the New Senior
Subordinated Note received (and not allocable to accrued but untaxed interest)
will include its holding period for the Old Senior Subordinated Note
surrendered. The Holder's tax basis in that portion of the New Senior
<PAGE>
Subordinated Note and New Common Stock received which is allocable to accrued
but untaxed interest will be equal to the amount of interest deemed received in
the exchange, and the Holder's holding period in such portion of such property
will begin on the day after the Effective Date.
Because the Company may issue additional notes ("Additional Notes") in lieu
of paying cash interest on the New Senior Subordinated Notes, a New Senior
Subordinated Note received in the exchange will be treated as issued with OID.
Accordingly, each Holder thereof will include such OID into income on a constant
yield basis over the entire term of such Note, regardless of the timing of cash
payments, and such Holder will not recognize income upon the receipt of an
Additional Note. See "Original Issue Discount," below. The holding period of an
Additional Note received by a Holder will include its holding period for the Old
Senior Subordinated Note surrendered in exchange for the New Senior Subordinated
Note, except with respect to the portion of each such Additional Note that is
allocable to accrued but untaxed interest on the Old Senior Subordinated Notes,
for which portion the Holder's holding period will begin on the day after the
Effective Date. The portion of each Additional Note that is allocable to accrued
but untaxed interest on the Old Senior Subordinated Notes will be proportionate
to the portion of each New Senior Subordinated Note that is allocable to accrued
but untaxed interest.
Exchange of Old 13.875% Subordinated Debentures for New Common Stock and
New Warrants
Assuming that the Old 13.875% Subordinated Debentures exchanged in the
Restructuring are tax securities, a Holder of an Old 13.875% Subordinated
Debenture that exchanges such an Old 13.875% Subordinated Debenture for New
Common Stock and New Warrants will recognize gain to the extent that a portion
of the New Common Stock and New Warrants received is allocable to accrued but
untaxed interest. Such gain or loss will be ordinary interest income. See
"Accrued But Unpaid Interest," below.
In addition, a Holder will recognize gain (but not loss) equal to the fair
market value of the portion of the New Common Stock and the New Warrants that is
not allocable to accrued but untaxed interest less the Holder's tax basis in the
Old 13.875% Subordinated Debentures, but not in excess of an amount equal to the
fair market value of the portion of the New Warrants received in the
Restructuring that is not allocable to accrued but untaxed interest. Such gain
will be capital gain and will be long-term capital gain if the holding period
with respect to the Old 13.875% Subordinated Debenture exceeds one year, except
to the extent of any accrued (but not recognized) market discount, which will be
treated as ordinary income, as described below under the heading, "Market
Discount."
In general, a Holder's tax basis in the New Common Stock received (and not
allocable to accrued but untaxed interest) will equal the Holder's adjusted tax
basis in the Old 13.875% Subordinated Debentures surrendered less the fair
market value of the New Warrants received (and not allocable to accrued but
untaxed interest), plus any capital gain recognized by the Holder on the
exchange. The Holder's holding period in the New Common Stock received (that is
<PAGE>
not allocable to accrued but untaxed interest) will include its holding period
for the Old 13.875% Subordinated Debentures surrendered. The Holder's tax basis
in that portion of the New Common Stock which is allocable to accrued but
untaxed interest will be equal to the amount of interest deemed received in the
exchange, and the Holder's holding period in such portion will begin on the day
after the Effective Date.
The Holder's tax basis in the New Warrants received will be equal to the
fair market value of the New Warrants. The Holder's holding period in the New
Warrants received will begin on the day following the Effective Date.
Exchange of Old 9% Subordinated Debentures for New Common Stock and New Warrants
The exchange of an Old 9% Subordinated Debenture for New Common Stock and
New Warrants will constitute a taxable event for federal income tax purposes.
The Holder of an Old 9% Subordinated Debenture will recognize gain or loss as
applicable, equal to the difference between the fair market value of the New
Common Stock and New Warrants received therefor that is not allocable to accrued
but untaxed interest and the Holder's tax basis in such Old 9% Subordinated
Debenture. Any such gain or loss will be capital gain or loss except to the
extent of any accrued (but not recognized) market discount which, to the extent
of such gain, will be treated as ordinary income, as described below under the
heading, "Market Discount." Such capital gain or loss will be long-term capital
gain or loss if the holding period with respect to the Old 9% Subordinated
Debenture exceeds one year. To the extent that a portion of the New Common Stock
and New Warrants received in exchange for an Old 9% Subordinated Debenture is
allocable to accrued but untaxed interest, the Holder will recognize ordinary
interest income. See "Accrued But Unpaid Interest," below. The Holder's tax
basis in the New Common Stock and the New Warrants received will be equal to
their fair market value as of the Effective Date. The holding period of the New
Common Stock and New Warrants received will begin on the day following the
Effective Date.
Exchange of Old Preferred Stock for New Warrants; Exchange of Old Common Stock
for New Warrants
The exchange of Old Preferred Stock or Old Common Stock for New Warrants
should be treated as a taxable exchange. Accordingly, Holders of Old Preferred
Stock or Old Common Stock should recognize gain or loss equal to the difference
between the fair market value as of the Effective Date of the New Warrants
received less the Holder's basis in the Old Common Stock or Old Preferred Stock
exchanged therefor. Such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the shares of Old Common Stock or Old
Preferred Stock were held for more than one year. A Holder's basis in the New
Warrants received should be equal to their fair market value as of the Effective
Date and the Holder's holding period in the New Warrants should begin on the
date following the Effective Date.
<PAGE>
Cancellation of Old Warrants
Upon cancellation of the Old Warrants, a Holder will generally recognize a
loss equal to the Holder's tax basis in its Old Warrant. Any such loss will
generally be a capital loss and will be a long-term capital loss if the Old
Warrant was held for more than one year.
Accrued but Unpaid Interest
The Plan provides that the consideration received by Holders of the Old
Senior Notes, the Old Senior Subordinated Notes and the Old Subordinated
Debentures is allocated first to the principal amount of such Old Security and
will be allocated second, to the extent of consideration received in excess of
principal, to any accrued but unpaid interest. It is unclear whether this
allocation will be respected for federal income tax purposes. The legislative
history to the Bankruptcy Tax Act of 1980 states that both the creditor and the
debtor would be bound by such an allocation, and therefore provides some support
that the allocation should be respected. However, regulations issued by the
Service require, in general, that payments made on a debt instrument be
allocated first to accrued but unpaid OID or interest.
Issue Price
The "issue price" of a debt instrument issued in the Restructuring may be
relevant in determining a holder's gain or loss on an exchange, and whether the
debt instrument is issued with OID. The issue price of such a debt instrument
will depend on whether a substantial amount of the debt instruments, or the
property for which the debt instrument is exchanged, is treated as "traded on an
established market" at any time during the 60-day period ending 30 days after
the Effective Date.
In general, a debt instrument (or the property exchanged therefor) will be
treated as traded on an established market if (a) it is listed on (i) the New
York Stock Exchange or certain other qualifying national securities exchanges,
(ii) certain qualifying interdealer quotation systems, (iii) certain qualifying
foreign securities exchanges, or (b) it appears on a system of general
circulation that provides a reasonable basis to determine fair market value, or
(c) price quotations are readily available from dealers, brokers or traders.
The Old 13.875% Subordinated Debentures are currently listed on the New
York Stock Exchange. No other debt instrument involved in the Restructuring is
listed on a qualifying national or foreign securities exchange. To the best
knowledge of the Company, no Old Securities that are debt instruments (other
than the Old 13.875% Subordinated Debentures) are or will be listed on a system
of general circulation and no price quotations for such Old Securities will
otherwise be readily available during the 60-day period ending 30 days after the
Effective Date. Thus, the Company believes that none of such Old Securities
(other than the Old 13.875% Subordinated Debentures) exchanged for debt
instruments issued in the Restructuring should be treated as traded on an
established market. However, the New Senior Secured Notes and the New Senior
Subordinated Notes will be freely tradable upon issuance. It is unclear whether
the New Senior Secured Notes and the New Senior Subordinated Notes will be
traded on an established securities market during the 60-day period ending 30
days after the Effective Date.
<PAGE>
If a substantial amount of any debt instrument issued in the Restructuring
is traded on an established market (or exchanged for property so traded) within
the 60-day period ending 30 days after the Effective Date, then the issue price
of the debt instrument issued in the Restructuring will equal its fair market
value (or the fair market value of the property so traded). If a substantial
amount of any such debt instrument issued in the Restructuring is not so traded
(or exchanged for property so traded) within such period, then the issue price
of such debt instrument should equal its principal amount.
Original Issue Discount
In general, a debt instrument is considered for federal income tax purposes
to be issued with OID if the "stated redemption price at maturity" of the
instrument exceeds the instrument's "issue price" by more than a de minimis
amount (0.25 percent of the stated redemption price at maturity multiplied by
the number of complete years from the issue date to the maturity date).
The stated redemption price at maturity of a debt instrument is the
aggregate of all payments due to the Holder under such debt instrument at or
before its maturity date, other than stated interest that is actually and
unconditionally payable in cash or property (other than debt instruments of the
issuer) at fixed intervals of one year or less during the entire term of the
instrument at certain specified rates ("qualified stated interest"). Under this
definition, the New Senior Subordinated Notes will be issued with OID because
the Company will pay interest in Additional Notes for the first two interest
periods, and therefore no interest payable with respect to them will be treated
as qualified stated interest and all such interest will be included in their
stated redemption price at maturity. As a result, the stated redemption price of
the New Senior Subordinated Notes will exceed their issue price by more than the
de minimis amount. All of the interest payable with respect to the New Senior
Secured Notes should be treated as qualified stated interest and therefore such
debt instruments will be issued with OID only if their principal amount exceeds
their issue price by more than the de minimis amount. See "Issue Price," above.
In general, OID with respect to a debt instrument is includible in income
on the constant yield method, based on the original yield to maturity of the
debt instrument calculated by reference to its issue price, regardless of the
taxpayer's method of accounting and regardless of when interest on the debt
instrument is actually paid in cash. Accordingly, the holder of a debt
instrument issued with OID may be required to take OID into income prior to the
receipt of cash payments with respect to that debt instrument.
The Company will be required to furnish annually to the Service and to each
U.S. Holder information regarding the amount of OID attributable to that year
with respect to the New Senior Subordinated Notes (and any other debt instrument
that is issued in the Restructuring with OID).
<PAGE>
If a Holder's tax basis as of the Effective Date in the New Senior
Subordinated Notes (or in the New Senior Secured Notes, if they are treated as
issued with OID as described under "Exchange of Old Senior Notes for New Senior
Secured Notes") exceeds their issue price, the debt instrument will be treated
as having been acquired with "acquisition premium" and the Holder may reduce its
OID accruals with respect to such debt instrument by the proportion of the
aggregate amount of OID remaining to be accrued that is represented by the
amount of such excess.
A Holder's adjusted tax basis in a New Security issued with OID will at any
time be equal to the sum of its issue price and the amount of previously accrued
OID with respect to that New Security, reduced by the sum of all prior payments
made under the New Security, except qualified stated interest.
Amortizable Bond Premium
If the tax basis of an exchanging Holder's New Senior Secured Note or New
Senior Subordinated Note exceeds the stated redemption price at maturity of such
debt instrument, then such debt instrument will not be treated as issued with
OID and such excess may be deductible by the Holder as "amortizable bond
premium" under Section 171 of the Code on a constant yield method over the term
of such Note, subject to certain limitations. Such deductions are available only
if the Holder makes (or has made) a timely election under Section 171 of the
Code.
If the Holder of such a debt instrument makes an election to amortize bond
premium, the tax basis of the debt instrument must be reduced by the amount of
the aggregate amortization deductions allowable for the bond premium. Any such
election to amortize bond premium would apply to all debt instruments held or
subsequently acquired by the electing Holder and cannot be revoked without
permission from the Service.
Market Discount
In general, a debt instrument is considered to have been acquired with
"market discount" if its holder's adjusted tax basis is less than (i) the sum of
all remaining payments to be made on the debt instruments, excluding qualified
stated interest or, (ii) in the case of a debt instrument issued with OID, its
adjusted issue price by more than a de minimis amount (equal to 0.25 percent of
the sum of all remaining payments to be made on the debt instrument, excluding
qualified stated interest, multiplied by the number of remaining whole years to
maturity).
Any gain recognized by a holder on the sale, exchange, redemption or other
taxable disposition of a debt instrument acquired with market discount is
treated as ordinary income to the extent of the market discount that accrued
thereon while it was considered to be held by such holder (unless the holder of
the debt instrument elects to include market discount in income as it accrues).
In addition, the holder could be required to defer the deduction of a portion of
the interest paid on any indebtedness incurred or continued to purchase or carry
a debt instrument acquired with market discount. Market discount generally
<PAGE>
accrues ratably over the term of a debt instrument unless the holder elects to
accrue such discount under a constant yield method. To the extent that a debt
instrument acquired with market discount is exchanged in a tax-free transaction
for other property, any market discount that accrued but was not recognized with
respect to the debt instrument is carried over to the property received therefor
and any gain recognized on the subsequent sale, exchange, redemption or other
disposition of such property is treated as ordinary income to the extent of the
accrued but unrecognized market discount with respect to the exchanged debt
instrument.
Disposition of Plan Securities
Generally, any sale or redemption of a New Senior Secured Note or a New
Senior Subordinated Note will result in capital gain or loss equal to the
difference between (i) the amount of any cash and the fair market value of any
property received in exchange therefor (except to the extent allocable to
accrued but untaxed interest) and (ii) such Holder's tax basis in such Plan
Securities. However, if such Plan Securities were received by a Holder in
exchange for Old Securities that are treated as tax securities with respect to
which the Holder had accrued but had not recognized market discount, a portion
of the gain on the disposition of such Plan Securities may be treated as
ordinary income as described above. With respect to a New Senior Subordinated
Note, if a Holder has received Additional Notes in lieu of cash payments of
interest on such New Senior Subordinated Note and separately disposes of such
New Senior Subordinated Note or Additional Note, the tax basis, and amounts
allocable to accrued but untaxed interest, generally will be allocated among the
New Senior Subordinated Note and such Additional Notes in proportion to their
respective principal amounts.
In general, any gain or loss recognized on a subsequent sale or exchange of
the New Common Stock received in the Restructuring will be capital gain or loss.
However, if the Old 13.875% Subordinated Debentures or Old Senior Subordinated
Notes are treated as tax securities with respect to which the Holder accrued but
had not recognized market discount, a portion of the gain on the disposition of
the New Common Stock received in exchange therefor may be treated as ordinary
income as described above.
In general, any gain or loss recognized on a subsequent sale or exchange of
the New Warrants received in the Restructuring will be capital gain or loss and
such gain or loss will be long-term capital gain or loss if the New Warrant was
held for more than one year. If the New Warrants are not exercised and lapse, a
Holder generally will recognize a capital loss equal to the Holder's tax basis
in the New Warrant, and such loss will be a long-term capital loss if the New
Warrant was held for more than one year. However, if the Old 13.875% Debentures
are treated as tax securities with respect to which the Holder accrued but had
not recognized market discount, a portion of the gain on the sale or exchange of
such New Warrants received in exchange therefor (or the Common Stock received
upon their exercise) may be treated as ordinary income, as described above under
"Market Discount."
The exercise of the New Warrants will not be a taxable event to the Holder.
The Holder's tax basis in the New Common Stock received upon such exercise will
<PAGE>
be equal to the Holder's tax basis in the New Warrants plus the amount paid by
the Holder to exercise the New Warrant.
Backup Withholding
A noncorporate Holder of Old Securities or Plan Securities may be subject
to backup withholding at the rate of 31 percent with respect to "reportable
payments," which include payments in respect of dividends, interest or accrued
OID, and the proceeds of a sale, exchange or redemption of Old Securities or
Plan Securities. The payor will be required to deduct and withhold the
prescribed amounts if (a) the payee fails to furnish a taxpayer identification
number ("TIN") to the payor in the manner required, (b) the Service notifies the
payor that the TIN furnished by the payee is incorrect, (c) there has been a
failure of the payee to certify under penalty of perjury that the payee is not
subject to withholding under Section 3406(a)(1)(C) of the Code, or (d) the payee
is notified by the Service that he or she failed to report properly payments of
interest and dividends and the Service has notified the Company that he or she
is subject to backup withholding.
Amounts paid as backup withholding do not constitute an additional tax and
will be credited against the Holder's federal income tax liabilities, so long as
the required information is provided to the Service. The Company will report to
the Holders of Old Securities and Plan Securities and to the Service the amount
of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payments on such securities to any
noncorporate Holder other than an "exempt recipient."
Adjustments
The conversion ratio and exercise price of the New Warrants are subject to
adjustments under certain circumstances. If such adjustments to the conversion
ratio and/or exercise price of the New Warrants are made, Holders of the New
Warrants could be treated as having received a constructive distribution under
Section 301 and Section 305(c) of the Code that may be treated as a dividend
distributed by the Company and taxable as ordinary income (regardless of whether
the Holder ever exercises the New Warrant). In general, a Holder's basis in a
New Warrant will include the amount of any such deemed taxable dividend.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY
Cancellation of Indebtedness
In connection with the Restructuring, the amount of the Company's aggregate
outstanding indebtedness will be substantially reduced. A taxpayer generally
realizes cancellation of debt ("COD") income for federal income tax purposes
equal to the amount of any indebtedness that is discharged or canceled during
the taxable year. In the case of an exchange such as that contemplated by the
Restructuring, where outstanding indebtedness is canceled in exchange for newly
issued indebtedness (such as the New Senior Subordinated Notes) and other
property (such as the New Common Stock), the amount of such COD income is, in
general, equal to the excess of the adjusted issue price (including accrued but
unpaid interest) of the indebtedness satisfied over the sum of the issue price
of the new debt instruments and the fair market value of the other property
issued therefor. If the discharge is granted by a court in a Chapter 11
proceeding or is pursuant to a plan approved by such court, however, such income
is excluded from the taxpayer's taxable income under Code Section 108(a).
Consequently, any COD income attributable to the Restructuring will be excluded
from the Company's taxable income.
However, Code Section 108(b) provides, in general, that certain tax
attributes of a debtor, including any net operating loss carryforwards, must be
reduced by the amount of the debtor's COD income that is excluded under Code
Section 108(a). To the extent that the amount excluded exceeds these tax
attributes, the debtor's tax basis in its property is reduced by the amount of
such excluded COD income, except that such reduction is limited to the excess of
the aggregate tax basis of the property held by the debtor over the aggregate
liabilities of the debtor immediately after the transaction.
As a result of the Restructuring, and assuming an aggregate issue price for
each of the debt instruments issued in the Restructuring equal to its aggregate
principal amount, the Company estimates that it will realize approximately $80
million of COD income in connection with the Restructuring, which will reduce
the net operating loss carryforwards of the Company and its domestic
consolidated subsidiaries (the "NOLs") from approximately $218 million to
approximately $138 million. However, to the extent Plan Securities are treated
as traded on an established market (or exchanged for property that is traded on
an established market), their aggregate issue price may be significantly less
than their estimated issue price, in which case the Company's realized COD
income may be significantly more than $80 million.
Subpart F of Income Inclusion and Foreign Tax Credits
Under the controlled foreign corporation provisions of the Code, United
States shareholders are required to include currently in income their pro rata
share of the dividends, interest, the excess of gains over losses from the sale
or exchange of stocks, securities, and commodities interests, and certain other
passive and other income received by a controlled foreign corporation ("CFC"),
<PAGE>
as well as their pro rata share of any increase in the CFC's earnings invested
in U.S. property and the CFC's excess passive assets. If the assets of a CFC
serve at any time, directly or indirectly, as security for the performance of an
obligation of a United States person (as defined in Code section 957(c)), the
CFC will be considered a pledgor or guarantor of that obligation and such
obligation shall be considered an investment in U.S. property. The pledge of
stock of a CFC will be considered as an indirect pledge of the assets of a CFC
if (i) at least 66 2/3 percent of the total combined voting power of all classes
of stock entitled to vote is pledged, and (ii) such pledge is accompanied by one
or more negative covenants or similar restrictions on the shareholder(s)
effectively limiting the corporation's discretion with respect to the
disposition of assets and the incurrence of liabilities other than in the
ordinary course of business.
At the request of the Holders of the New Senior Secured Notes, the Company
is pledging as collateral, for the Company's issuance of the New Senior Secured
Notes, 100% of the stock of the Foreign Subsidiaries. This pledge will be
accompanied by the appropriate negative covenants and, thus, should be
considered as an investment in U.S. property. Consequently, the Company should
be required to include in its gross income approximately $20 million, which
would be attributable to the Foreign Subsidiaries' investments in U.S. property.
As a result of such inclusion, the Company's NOLs would be reduced from $138
million to approximately $118 million.
Generally, such income would be foreign source income to the Company for
purposes of computing its foreign tax credit under Code section 901. However,
the Company has an overall foreign loss as defined in Code section 904(f)(2). In
general, an overall foreign loss occurs when a taxpayer's foreign source
deductions exceed its foreign source income for a taxable year and such excess
is used to offset U.S. source taxable income earned by the taxpayer. Because the
Company had an overall foreign loss in a prior year, the income (or a portion
thereof) recognized by the Company on account of the Foreign Subsidiaries'
investment in U.S. property, which generally would be characterized as foreign
source income, could be recharacterized as U.S. source income and, thus, may
reduce the Company's ability to utilize foreign tax credits.
Limitation of Net Operating Loss Carryforwards Following an Ownership Change
Section 382 of the Code generally limits a corporation's use of its NOLs
(and may limit a corporation's use of certain built-in losses recognized within
a five-year period) if the corporation undergoes an "ownership change." Section
383 of the Code applies similar limitations to capital loss carryforwards and
tax credits. In general, an ownership change occurs when the percentage of the
corporation's stock owned by certain "5 percent shareholders" increases by more
than 50 percentage points over the lowest percentage owned at any time during
the applicable "testing period" (generally the shorter of (i) the three-year
period preceding the testing date or (ii) the period of time since the most
recent ownership change of the corporation). A 5 percent shareholder for these
purposes includes, very generally, an individual or entity that directly or
indirectly (and taking into account certain attribution rules) owns 5 percent or
more of the value of the corporation's stock during the relevant period, and may
<PAGE>
include one or more groups of shareholders that in the aggregate own less than 5
percent of the value of the corporation's stock.
The Company estimates that it will have NOL carryforwards as of December
31, 1995 of approximately $218 million, although there can be no assurance that
the Service will concur in the reporting positions on which the Company's NOL
calculations are based. These NOLs are expected to be reduced to approximately
$118 million as a result of the COD income and the inclusion of income from the
Foreign Subsidiaries realized in the Restructuring.
As a result of the Restructuring, the Company will undergo an "ownership
change" within the meaning of Code Section 382. Consequently, the ability of the
Company to use its NOL carryforwards, as well as any losses arising in the
taxable period ending on the Effective Date of the Restructuring, will become
subject to an annual limitation under Code Section 382 (the "Section 382
limitation").
In general, for a corporation that undergoes an ownership change, the
Section 382 limitation is equal to the fair market value of the corporation's
equity immediately before the ownership change, multiplied by the federal
long-term tax exempt rate (5.31 percent for ownership changes occurring in
March, 1996). However, the Company intends to determine its Section 382
limitation under the provisions of Section 382(l)(6) of the Code, which applies
to any ownership change that occurs pursuant to a plan of reorganization in a
bankruptcy proceeding under title 11 of the United States Code to which Code
Section 382(l)(5) is inapplicable. The Company believes that Section 382(l)(5)
of the Code is inapplicable to the Restructuring, and in any case will elect to
have such Section not apply. Under Section 382(l)(6) of the Code, the fair
market value of the Company's equity for purposes of Code Section 382 will
include the increase in its value resulting from the cancellation of creditors'
claims in the Restructuring (but generally only to the extent of the COD
realized by the Company in the Restructuring).
Taking into account Code Section 382(l)(6), the Company believes that its
value for purposes of Section 382 will be approximately $80 million on the
Effective Date and therefore, based on a federal tax-exempt rate of 5.31% (which
is the rate that is effective for ownership changes occurring in March, 1996),
its Section 382 limitation should not be less than approximately $4.2 million
annually. No assurances are given, however, as to the Company's actual annual
limitation. Unused portions of each year's Section 382 limitation amount may be
carried forward to increase the next year's Section 382 limitation amount until
a corporation's NOLs expire unused. Based on current earnings projections, the
Company believes that a substantial amount of its NOLs may expire unused.
However, the Company may authorize the use of other tax planning techniques to
utilize a portion of the remaining NOLs before they expire.
Applicable High Yield Discount Obligations
In general, OID is not deductible until paid with respect to any debt
instrument issued by a corporate debtor which is an "applicable high yield
discount obligation" (an "AHYDO"). Under the "AHYDO" rules contained in Sections
<PAGE>
163(e) and (i) of the Code, if a corporate debt obligation with a term of more
than five years has "significant" OID (as defined in the Code), and has a yield
to maturity of 5% or more in excess of the "applicable federal rate" (generally
the U.S. Treasury note rate for instruments of similar maturities), interest
deductions in respect of OID accruing on such instrument will be deferred until
amounts in respect of such OID are paid in cash. Moreover, to the extent the
yield to maturity of an AHYDO exceeds the applicable federal rate in effect for
the month that includes the Effective Date plus 6 percent, the deduction for a
ratable portion of the OID is disallowed (the "Disqualified OID").
The New Senior Secured Notes will not be AHYDOs and it is not expected that
the New Senior Subordinated Notes will be AHYDOs. However, if the New Senior
Subordinated Notes are treated as traded on an established securities market
within the 60-day period ending 30 days after the Effective Date, it is possible
that the New Senior Subordinated Notes could be AHYDOs. Accordingly, in that
event, the Company would not be permitted to deduct any OID in respect of the
New Senior Subordinated Notes until such OID is paid. In addition, the Company
will be denied OID deductions in respect of a ratable portion of the Company's
OID equal to any Disqualified OID.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE RESTRUCTURING ARE COMPLEX. THE
FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF SUCH HOLDER'S PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. ALL HOLDERS OF THE OLD SECURITIES SHOULD
CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE TRANSACTIONS CONTEMPLATED BY THE RESTRUCTURING AND THE OWNERSHIP AND
DISPOSITION OF THE PLAN SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE TAX LAWS.
<PAGE>
EXPERTS
The consolidated balance sheets of the Company and its subsidiaries as of
September 30, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended September 30, 1995, included herein and in the Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto appearing herein
or therein, and are included herein and therein in reliance upon the authority
of said firm as experts in giving said reports. Reference is made to said
reports which include an explanatory paragraph with respect to the uncertainties
discussed in Note 2 to the financial statements.
PRO FORMA UNAUDITED FINANCIAL INFORMATION
The unaudited Pro Forma Consolidated Statement of Operations for the year
ended September 30, 1995, the unaudited Pro Forma Consolidated Statement of
Operations for the three months ended December 31, 1995 and the unaudited Pro
Forma Consolidated Balance Sheet as of December 31, 1995 have been prepared
giving effect to the sale of the Image Conversion Services (ICS) Division and
the Consummation of the Plan, including the costs related thereto (collectively,
the "Pro Forma Adjustments"), in accordance with AICPA Statement of Position
90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code ("SOP 90-7"). The Company proposes to account for the Restructuring using
the principles of fresh start reporting as required by SOP 90-7. Pursuant to
such principles, in general, the Company's assets and liabilities will be
revalued. The Reorganization Value of the Company plus liabilities excluding
debt is the value assigned to total assets. In accordance with 90-7, specific
identifiable assets and liabilities will be adjusted to fair market value. Any
portion of the Reorganization Value plus liabilities, excluding debt not
attributable to specific identifiable assets, will be reported as Reorganization
Value in excess of identifiable assets and will be amortized over a three and a
half year period. For purposes of the Pro Forma Unaudited Financial Information,
the fair value of specific identifiable assets and liabilities other than debt
is assumed to be the historical book value of those assets and liabilities. The
fair value of long-term debt is based on the negotiated fair values adjusted to
present values using discount rates ranging from 11 5/8% to 15%. The difference
between the revalued assets and the revalued liabilities will be recorded as
stockholders' equity with retained earnings restated to zero. The unaudited pro
forma consolidated financial information should be read in conjunction with
"SELECTED CONSOLIDATED FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" and the Company's Consolidated
Financial Statements and related notes thereto contained elsewhere in this
Disclosure Statement. See "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS."
THE PRO FORMA UNAUDITED FINANCIAL INFORMATION CONTAINED HEREIN IS
PRELIMINARY AND SUBJECT TO RECONCILIATION.
<PAGE>
The unaudited Pro Forma Consolidated Statement of Operations for the three
months ended December 31, 1995 was prepared as if the Pro Forma Adjustments had
occurred on October 1, 1995. The unaudited Pro Forma Consolidated Balance Sheet
as of December 31, 1995 was prepared as if the Pro Forma Adjustments had
occurred on December 31, 1995.
The unaudited Pro Forma Consolidated Statement of Operations for the year
ended September 30, 1995 was prepared as if the Pro Forma Adjustments had
occurred on October 1, 1994.
Other than the Pro Forma Adjustment to exclude the operating results of the
ICS division, no changes in revenues and expenses have been made to reflect the
results of any modification to operations that might have been made had the Plan
been confirmed on the assumed effective dates of the Confirmation of the Plan
for presenting pro forma results. The unaudited pro forma consolidated financial
information assumes that (i) Claims under the Old Credit Facilities and Old
Senior Notes, principal amount of $119.8 million, are exchanged for New Senior
Secured Notes and $2.75 million in cash; (ii) the Old Senior Subordinated Notes,
principal amount of $224.9 million plus accrued interest, are exchanged for New
Senior Subordinated Notes with a principal amount of $160 million and shares of
New Common Stock; (iii) the Old Subordinated Debentures, aggregate principal
amount of $33.7 million plus accrued interest, are exchanged for New Common
Stock and New Warrants; (iv) the Old Preferred Stock and accrued but unpaid
dividends are canceled and Holders thereof receive New Warrants; and (v) the Old
Common Stock is canceled and Holders thereof receive New Warrants. The unaudited
pro forma consolidated financial information does not purport to be indicative
of the results which usually would have been obtained had such transactions in
fact been completed as of the date hereof and for the periods presented or that
may be obtained in the future.
<PAGE>
<TABLE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
Anacomp, Inc. and Subsidiaries
Pro Forma
(Unaudited) (Dollars in thousands) Historical Adjustments Pro Forma
- ---------------------------------- ---------- ----------- ---------
ASSETS
Current assets:
<S> <C> <C> <C>
Cash................................ $27,209 $18,459
(2,750)(i)
(6,000)(h)
Receivables, net of reserves........ 83,631 83,631
Inventories......................... 46,765 46,765
Prepaid expenses and other.......... 6,825 0 6,825
--------- --------- -----------
Total current assets 164,430 (8,750) 155,680
Property and equipment (net).......... 38,719 38,719
Long term receivables................. 10,039 0 10,039
Excess of purchase price over
net assets of businesses acquired 0
and other intangibles 157,884 (157,884) (l)
Other assets.......................... 27,047 (11,919) (c) 15,128
Reorganization value in excess
of identifiable assets 0 265,127 (m) 265,127
--------- ----------- -----------
$398,119 $86,574 $484,693
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of long-term debt.. $376,391 ($342,171) (d) $ 34,200
Accounts payable................... 49,242 49,242
Accrued compensation, benefits and 14,507 0 14,507
withholdings.......................
Accrued income taxes............... 10,618 0 10,618
Accrued interest................... 52,569 (49,436) (d) 3,133
Other accrued liabilities.......... 53,292 (1,547) (f) 51,745
--------- ----------- -----------
Total current liabilities 556,599 (393,154) 163,445
--------- ----------- -----------
Long-term debt, net of current........ 0 236,865 (d) 236,865
Other noncurrent liabilities.......... 5,448 0 5,448
--------- ----------- -----------
Total noncurrent liabilities 5,448 236,865 242,313
---------- ----------- -----------
Redeemable preferred stock............ 23,897 (23,897) (f) 0
--------- ----------- -----------
Stockholders' equity (deficit):
Common stock.......................... 463 (463) (g) 100
100 (e)
Capital in excess of par value........ 183,425 78,835 (e) 78,835
25,444 (f)
463 (g)
(317,108) (j)
533 (k)
(157,884) (l)
265,127 (m)
Cumulative translation adjustment..... 533 (533) (k) 0
Retained earnings (deficit)........... (372,246) (6,000) (h) 0
317,108 (j)
61,138 (i)
------------ ------------ ----------
Total Stockholders' equity (deficit) (187,825) 266,760 78,935
------------ ------------ ----------
$398,119 $86,574 $484,693
============ ============ ==========
(See accompanying notes to the Pro Forma Consolidated Balance Sheet.)
</TABLE>
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
Notes to Pro Forma Consolidated Balance Sheet
as of December 31, 1995
(unaudited, Dollars in thousands, except per share amounts)
The following notes set forth the explanations and assumptions used in preparing
the unaudited Pro Forma Consolidated Balance Sheet. The pro forma adjustments
are based on estimates by the Company's management using information currently
available.
(a) Intentionally left blank.
(b) Intentionally left blank.
(c) For financial reporting purposes, old deferred financing costs of
$11,919 applicable to the old debt securities is being written off to
the extraordinary gain as discussed in (i).
(d) Represents changes in the current portion of long-term debt and related
accrued interest as a result of the confirmation of the Plan. In
accordance with SOP 90-7, the Company's liabilities will be recorded at
their estimated fair values as of the Effective Date. The fair value of
long-term debt is based on the negotiated face values adjusted to
present values using discount rates ranging from 11 5/8% to 15%.
The change in debt consists of the following:
<TABLE>
Current Portion
Accrued of Long-Term Long-Term
Interest Debt Debt Total
------------- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Historical $52,569 $376,371 $ -- $428,940
------- -------- -------- --------
Old Revolving Loan (27,913) (27,913)
Old Multicurrency Revolving Loan (26,107) (26,107)
Old Term Loan (11,798) (11,798)
Old Series B Senior Notes (53,298) (53,298)
Old Senior Subordinated Notes (220,506) (220,506)
Old 9% Subordinated Debentures (10,479) (10,479)
Old 13.875% Subordinated Debentures (21,218) (21,218)
Installment Note and other (5,052) 5,052 --
Accrued Interest (48,797) (48,797)
New Senior Secured Notes due 1999 34,200 84,916 119,116
New 13% Senior Subordinated Notes due 2002 146,258 146,258
(Face Value $160,000)
Reclassification - See Note (n) (639) 639 --
----- --- --
Pro Forma adjustments (49,436) (342,171) 236,865 (154,742)
-------- --------- ------- ---------
Pro Forma balance $3,133 $34,200 $236,865 $274,198
======== ========= ========== ==========
</TABLE>
<PAGE>
Market values of securities have been estimated solely for the purpose of
the foregoing computations. The present values of the Company's installment note
and other debt are assumed to be equal to their respective face values. The
estimated present value of the Company's other long-term debt obligations (which
do not constitute or purport to reflect actual market values) were established
by the Company. Based on the foregoing, an adjustment of $13,742 was made to
reduce the face value of the new Senior Subordinated Notes to their estimated
present value. The adjustment will be amortized into interest expense over the
terms of the New Senior Subordinated Notes.
(e) Reflects issuance of 10,000,000 shares of New Common Stock (par value
$.01) at an estimated market price of $78,935 under the terms of the
Restructuring.
Capital in Excess
Common Stock of Par Value Total
------------ ----------------- -----
To Holders of Old Senior
Subordinated Notes and Old
Subordinated Debentures $100 $78,835 $78,935
(f) Reflects the cancellation of Old Preferred Stock at historical
carrying value.
Historical carrying value...................... $23,897
-------
Accrued dividends.............................. 1,547
Capital in excess of par value adjustment......
$25,444
=======
(g) Reflects the transfer from common stock to capital in excess of par
value of $463, resulting from the cancellation of 46,287,660 shares of
Old Common Stock.
(h) Reflects certain non-recurring fees and expenses incurred in connection
with the Disclosure Statement.
(i) The extraordinary gain, net of taxes, resulting from the Restructuring
Fresh Start reporting has been estimated as follows:
Historical carrying value of old debt securities......... $376,371
Historical carrying value of related accrued interests... 49,436
Write off of old deferred financing costs................ (11,919)
Market value of securities exchanged for the Old Debt:
Plan Securities (Face Value $279,755).................. (266,013)
New Common Stock (New shares issued 10,000,000)........ (78,935)
Installment note and other............................. (5,052)
Senior Restructuring Premium........................... (2,750)
------
61,138
Tax provision............................................ ---------
Extraordinary gain....................................... $61,138
=========
The Company believes that it will not recognize any gain for tax purposes due to
any cancellation of indebtedness resulting from the Restructuring. The gain
related to cancellation of debt will result in a reduction of the Company's net
operating loss carryforwards.
<PAGE>
(j) In accordance with SOP 90-7, this adjustment reflects the elimination
of the accumulated deficit against capital in excess of par value.
(k) In accordance with SOP 90-7 this adjustment reflects the elimination of
deferred translation against capital in excess of par value.
(l) Reflects the write-off of "Excess of Purchase Price Over Net Assets of
Businesses Acquired and other intangibles" of $157,884. For fresh start
reporting purposes, any portion of the Reorganization Value not
attributable to specific identifiable assets will be reported as
"Reorganization Value in excess of identifiable assets. " See note (m).
(m) An estimated Reorganization Value of $350,000, which represents the
value of the total assets of the Company less liabilities, excluding
debt, is being used to implement Fresh Start Reporting. The
Reorganization Value in excess of identifiable assets is calculated
below.
Reorganization Value...................................... $350,000
Plus: Current liabilities excluding debt (Pro Forma)...... 129,245
Noncurrent liabilities excluding debt (Pro Forma)... 5,448
---------
484,693
Less: Current assets (Pro Forma).......................... (155,680)
Noncurrent tangible assets (Pro Forma).............. (63,886)
---------
Reorganization value in excess of identifiable assets..... $265,127
=========
Total Stockholders' equity, in accordance with SOP 90-7, does not
purport to present the fair market value of the New Common Stock. The
reorganization value was estimated by the Company based on the range
provided by the Financial Advisor. Based on the valuation analysis
described below, the Financial Advisor estimated a range of
Reorganization Value of between approximately $300,000 and $400,000.
The Company used a Reorganization Value of $350,000.
The valuation methodologies considered by the Financial Advisor are
described below:
Discounted Cash Flow - The Financial Advisor calculated the present
value of the after tax unlevered cash flows of the Company using
projections prepared by the Company for fiscal years 1996 through 1999.
The Financial Advisor estimated the weighted average cost of capital
based on the estimated cost of capital of a group of selected publicly
traded companies. The Financial Advisor also estimated a terminal value
based on the normalized fiscal 1999 after tax unlevered cash flow, the
weighted average cost of capital and estimated rates of decline which
was included in the present value calculation of the Company's net
operating loss carryforward which was included in the estimated range
of the reorganization value. The weighted average cost of capital used
in the analysis ranged from 12% to 14.5%.
Selected Publicly Traded Company Market Multiples - The Financial
Advisor reviewed the market multiples of a group of selected publicly
<PAGE>
traded companies. The Financial Advisor reviewed valuation multiples of
revenues, EBITDA, EBIT, net income and book value.
Selected Acquisition Transaction Multiples - The Financial Advisor
reviewed the acquisition multiples of a group of selected acquisition
transactions. The Financial Advisor reviewed acquisition multiples of
revenues, EBITDA, EBIT and net income.
The Financial Advisor believes that the discounted cash flow analysis
is the most appropriate methodology for valuing the Company. The
Financial Advisor reviewed the selected publicly traded company market
multiples and selected acquisition transaction multiples and believes
they are less appropriate methodologies for valuing the Company due to
the lack of directly comparable publicly traded companies or directly
comparable acquisition transactions.
The Company's estimate of its Reorganization Value is based upon a
number of assumptions, including the assumptions upon which the
projections are based. Many of these assumptions are beyond the
Company's control, and there may be material variations between such
assumptions and the actual facts. Moreover, such estimates should not
be relied upon for, nor is it intended as an estimate of, the market
price of the Company's securities at any time in the future. The market
price of the Company's securities will fluctuate with changes in
interest rates, market conditions, the condition and prospects,
financial and otherwise, of the Company and other factors which
generally influence the price of securities.
A Holder of the Old Preferred Stock has asserted that the Company has
underestimated its Reorganization Value. In particular, the financial
advisor to such Holder has Filed an affidavit in which such advisor
asserts, among other things, that: (a) "It is my opinion that the
holders of the Senior Subordinated Notes, with the active assistance of
Anacomp's management, are attempting to steal the reorganization value
that rightfully should be distributed to its Preferred and Common
Stockholders. The Senior Subordinated Noteholders and management have
done this by placing an egregiously low value of approximately $355
million...on the Debtors" and (b) "there is between $67 million and
$256.3 million of value for the Equityholders of Anacomp."
The Company strongly disputes such contentions.
(n) Represents reclassification of a $639,000 payment from principal to
interest, relating to the application of proceeds of the sale of
Anacomp's airplane, in accordance with the terms of a consensual
agreement between the Company and the Senior Creditors.
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Unaudited)(Dollars in thousands, except per Pro Forma
share amounts) Historical Adjustments Pro Forma
- -------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Services provided......................... $50,928 ($1,402) (a) $49,526
Equipment and supplies.................... 79,337 (101) (a) 79,236
----------------- ------------------ ------------------
Total revenues......................... 130,265 (1,503) 128,762
----------------- ------------------ ------------------
Operating costs and expenses:
Costs of services provided............. 27,838 (1,078) (a) 26,760
Costs of equipment sold................ 61,761 (80) (a) 61,681
Selling, general and administrative...... 24,447 (332) (a) 40,622
16,507 (h)
---------------- ------------------ ------------------
114,046 15,017 129,063
----------------- ------------------ ------------------
Income (loss) before interest, other income,
income taxes, and reorganization items 16,219 (16,520) (301)
----------------- ------------------ ------------------
Interest income............................. 501 --- 501
Interest expense and fee amortization....... (18,286) 7,749 (b) (10,537)
Financial Restructuring Costs............... (2,801) 2,801 (c) ---
Other Income............................... 6,620 (6,200) (a) 420
----------------- ------------------ ------------------
(13,966) 4,350 (9,616)
----------------- ------------------ ------------------
Income (loss) before reorganization items
and income taxes......................... 2,253 (12,170) (9,917)
Reorganization items........................ 0 0 (d)
Provision (benefit) for income taxes........ 1,200 ----- 1,200
----------------- ------------------ ------------------
Net income (loss)........................... 1,053 (12,170) (e) (11,117))
Preferred stock dividends and discount
accretion................................ 540 (540) (g) 0
----------------- ------------------ ------------------
Net income (loss) available to common
Stockholders per share...................... $513 $(11,630) $(11,117)
================= ================== ==================
Net income (loss) available to
common Stockholders per share............ $(1.11)
=================
Weighted average common shares outstanding.. 10,000,000 (f)
==================
(See accompanying notes to the Pro Forma Consolidated Statement of Operations.)
</TABLE>
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
Notes to Pro Forma Consolidated Statement of Operations
For the three months ended December 31, 1995
(unaudited, dollars in thousands)
The following notes set forth the explanations and assumptions used in preparing
the unaudited Pro Forma Consolidated Statement of Operations. The pro forma
adjustments are based on estimates by the Company's management using information
currently available.
(a) The Company sold its ICS division during the three-month period ended
December 31, 1995 at a net gain to the Company of $6,200. The pro forma
adjustments represent the exclusion of the division's operating activities,
revenues and expenses, and the one-time gain during the period.
(b) Net reduction of interest expense as a result of the Restructuring has been
estimated as follows:
Interest expense on new debt:
New Senior Secured Notes (Face Value $119,755)........... $3,480*
New 13% Senior Subordinated Notes (Face Value $160,000).. 5,200
Interest on other debt and trade credit arrangements..... 1,284
Interest accretion of new debt discount.................. 573
--------
Subtotal.............................................. 10,537
Reversal of actual interest expense during the
three month period ended December 31, 1995............ (18,286)
---------
Pro forma adjustment..................................... $7,749
=========
* Computed based on an interest rate of 11 5/8%.
In accordance with SOP 90-7, all debt obligations have been adjusted to
estimated fair value. The debt premium/discount is being amortized over the
term of the applicable debt obligation.
(c) Represents $2,801 of costs incurred during the three month period ended
December 31, 1995 related to the Restructuring which is being excluded from
the pro forma results for the period.
(d) Reorganization fees directly attributable to the Restructuring totaling
$6,000 have been excluded from pro forma operating results for the period
ended December 31, 1995.
<PAGE>
(e) The Restructuring adjustments shown on the unaudited Pro Forma Consolidated
Statement of Operations excluded the extraordinary gain to be recognized in
connection with the Plan and fresh start reporting required by SOP 90-07.
The extraordinary gain, net of taxes, resulting from the Restructuring has
been estimated as follows:
Historical carrying value of Old Securities.............. $376,371
Historical carrying value of related accrued interests... 49,436
Write off of old deferred financing costs................ (11,919)
Market value of securities exchanged for the old debt:
Plan Securities (Face Value $279,755).................. (266,013)
New Common Stock (10,000,000 shares)................... (78,935)
Installment note and other................................ (5,052)
Senior Restructuring Premium.............................. (2,750)
--------------
61,138
Tax provision............................................. --
Extraordinary gain........................................ $61,138
==============
The Company believes that it will not recognize a tax provision due to any
cancellation of indebtedness resulting from the Restructuring. The gain
related to cancellation of debt will result in a reduction of the Company's
net operating loss carryforwards.
Market values of securities have been estimated solely for the purpose of
estimating the extraordinary gain detailed above. These estimates should
not be relied upon for, nor are they intended as estimates of the market
prices of the Company's securities at any time in the future. The market
prices of the Company's securities will fluctuate with changes in interest
rates, market conditions, the condition and prospects, financial and
otherwise, of the Company and other factors which generally influence the
price of securities. For purposes of the Pro Forma Unaudited Financial
Information, the New Warrants are assumed to have no value.
(f) Pro forma loss per common share is computed based upon 10,000,000 average
shares of New Common Stock assumed to be outstanding during the three
months ended December 31, 1995 as if the Confirmation of the Plan had
occurred on October 1, 1995.
(g) Reflects elimination of preferred dividend requirement based on the
cancellation of the Old Preferred Stock under the terms of the
Restructuring.
(h) In accordance with SOP 90-7, the excess Reorganization Value plus
liabilities, excluding debt, over amounts allocated to the fair value of
identifiable assets (which is assumed to be the historical book value of
those assets) has been reflected on the unaudited Pro Forma Consolidated
Balance Sheet as an intangible asset. The adjustment shown on the unaudited
Pro Forma Consolidated Statement of Operations reflects the amortization of
the intangible asset over a three and half year period.
<PAGE>
Amortization Quarterly
Amount Period Amortization
---------- ------------ ------------
New Intangible Assets....... $265,127 3.5 Years $18,938
Historical Intangible
Assets Amortization....... 2,431
---------------
$16,507
===============
<PAGE>
<TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
Anacomp, Inc. and Subsidiaries
(Unaudited)(Dollars in thousands, except per Pro Forma
share amounts) Historical Adjustments Pro Forma
Revenues:
<S> <C> <C> <C>
Services provided......................... $219,881 ($20,357) (a) $199,524
Equipment and supplies.................... 371,308 (1,164) (a) 370,144
----------------- ------------------ -----------------
Total revenues......................... 591,189 (21,521) 569,668
----------------- ------------------ -----------------
Operating costs and expenses:
Costs of services provided............. 161,211 (17,585) (a) 143,626
Costs of equipment sold................ 279,456 (737) (a) 278,719
Selling, general and administrative...... 109,127 (1,691) (a) 173,305
65,869 (h)
Special and restructuring charges........ 169,584 169,584
----------------- ------------------ -----------------
719,378 45,856 765,234
----------------- ------------------ -----------------
Income (loss) before interest, other income,
income taxes, and reorganization items (128,189) (67,377) (195,566)
----------------- ------------------ -----------------
Interest income............................. 2,000 2,000
Interest expense and fee amortization....... (70,938) 29,906 (b) (41,032)
Other expenses.............................. (6,199) 5,987 (c) (212)
----------------- ------------------ -----------------
(75,137) 35,893 (39,244)
----------------- ------------------ ------------------
Income (loss) before reorganization items
and income taxes......................... (203,326) (31,484) (234,810)
Reorganization items........................ 0 0 (d)
Provision (benefit) for income taxes........ 35,000 35,000
----------------- ------------------ -----------------
Net income (loss)........................... (238,326) (31,484) (e) (269,810)
Preferred stock dividends and discount
accretion................................ 2,158 (2,158) (g) 0
----------------- ------------------ -----------------
Net income (loss) available to common
Stockholders per share...................... ($240,484) ($29,326) ($269,810)
================= ================== ==================
Net income (loss) available to
common Stockholders per share............ ($26.98)
==================
Weighted average common shares outstanding.. 10,000,000 (f)
==================
(See accompanying notes to the Pro Forma Consolidated Statement of Operations.)
</TABLE>
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
Notes to Pro Forma Consolidated Statement of Operations
For the year ended September 30, 1995
(unaudited, Dollars in thousands)
The following notes set forth the explanations and assumptions used in preparing
the unaudited Pro Forma Consolidated Statement of Operations. The pro forma
adjustments are based on estimates by the Company's management using information
currently available.
(a) The Company sold its ICS division subsequent to September 30, 1995 at a net
gain to the Company of $6,200. The pro forma adjustments represent the
exclusion of the division's operating activities, revenues and expenses
during the year ended September 30, 1995.
(b) Net reduction of interest expense as a result of the Restructuring has
been estimated as follows:
Interest expense on new debt:
New Senior Secured Notes (Face Value $120,027)............ $13,953*
New 13% Senior Subordinated Notes (Face Value $160,000)... 20,800
Interest on other debt and trade credit arrangements...... 3,989
Interest accretion of new debt discount................... 2,290
---------
Subtotal................................................ 41,032
Reversal of actual interest expense during the
period ended September 30, 1995......................... (70,938)
---------
Pro forma adjustment...................................... $29,906
=========
* Computed based on an interest rate of 11 5/8%.
In accordance with SOP 90-7, all debt obligations have been adjusted to
estimated fair value. The debt premium/discount is being amortized over the
term of the applicable debt obligation.
(c) Represents $5,987 of costs incurred during fiscal 1995 related to the
Restructuring which is being excluded from the pro forma results for the
period ended September 30, 1995.
(d) Reorganization fees directly attributable to the Restructuring totaling
$6,000 have been excluded from pro forma operating results for the period
ended September 30, 1995.
(e) The Restructuring adjustments shown on the unaudited Pro Forma Consolidated
Statement of Operations excluded the extraordinary gain to be recognized in
connection with the Plan and fresh start reporting required by SOP 90-07.
The extraordinary gain, net of taxes, resulting from the Restructuring has
been estimated as follows:
<PAGE>
Historical carrying value of Old Securities.............. $389,900
Historical carrying value of related accrued interests... 37,550
Write off of old deferred financing costs................ (12,721)
Market value of securities exchanged for the old debt:
Plan Securities (Face Value $280,027).................. (266,285)
New Common Stock (10,000,000 shares)................... (77,818)
Installment note and other............................... (5,897)
Cash used to reduce debt:
Proceeds from the sale of ICS division................. (12,700)
Senior Restructuring Premium............................. ( 2,750)
--------------
49,279
Tax provision............................................ --
--------------
Extraordinary gain....................................... $49,279
==============
The Company believes that it will not recognize any gain for tax purposes
due to any cancellation of indebtedness resulting from the Restructuring.
The gain related to cancellation of debt will result in a reduction of the
Company's net operating loss carryforwards.
Market values of securities have been estimated solely for the purpose of
estimating the extraordinary gain detailed above. These estimates should
not be relied upon for, nor are they intended as estimates of, the market
prices of the Company's securities at any time in the future. The market
prices of the Company's securities will fluctuate with changes in interest
rates, market conditions, the condition and prospects, financial and
otherwise, of the Company and other factors which generally influence the
price of securities. For purposes of the Pro Forma Unaudited Financial
Information, the New Warrants are assumed to have no value.
(f) Pro forma loss per common share is computed based upon 10,000,000 average
shares of New Common Stock assumed to be outstanding during the year ended
September 30, 1995 as if the Confirmation of the Plan had occurred on
October 1, 1994.
(g) Reflects elimination of preferred dividend requirement based on the
cancellation of the Old Preferred Stock under the terms of the
Restructuring.
(h) In accordance with SOP 90-7, the excess Reorganization Value plus
liabilities, excluding debt, over amounts allocated to the fair value of
identifiable assets (which is assumed to be the historical book value of
those assets) has been reflected on the unaudited Pro Forma Consolidated
Balance Sheet as an intangible asset. The adjustment shown on the unaudited
Pro Forma Consolidated Statement of Operations reflects the amortization of
the intangible asset over a three and a half year period.
<PAGE>
Amortization Annual
Amount Period Amortization
New Intangible Assets....... $273,474 3.5 Years $78,135
Historical Intangible
Assets Amortization...... 12,266
-------------
$65,869
=============
<PAGE>
RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the
Debtors believe that the Confirmation and consummation of the Plan is preferable
to all other alternatives. Consequently, the Debtors urge all Holders of Claims
and Interests solicited hereby to vote to ACCEPT the Plan, and to duly complete
their Ballots and/or Master Ballots such that they will be ACTUALLY RECEIVED on
or before 4:30 p.m., New York City Time, on May 8, 1996.
Dated: March 28, 1996
Respectfully submitted,
ANACOMP, INC.
(for itself and on behalf of
each of its Subsidiary Debtors)
By: /s/ P. Lang Lowrey
Name: P. LANG LOWREY
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
COUNSEL:
BARRY J. DICHTER
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6000
LAURA DAVIS JONES
YOUNG, CONAWAY, STARGATT & TAYLOR
11TH FLOOR
RODNEY SQUARE NORTH
P.O. BOX 391
WILMINGTON, DELAWARE 19899
(302) 571-6642
ATTORNEYS FOR DEBTORS AND
DEBTORS-IN-POSSESSION
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Unaudited Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) -- December 31, 1995
and September 30, 1995.............................................. F-2
Condensed Consolidated Statements of Operations -- December 31, 1995
and September 30, 1995.............................................. F-3
Condensed Consolidated Statements of Cash Flows -- December 31, 1995
and September 30, 1995.............................................. F-4
Condensed Consolidated Statements of Stockholders' Equity -- Three Months
Ended December 31, 1995 and 1994..................................... F-5
Notes to Condensed Consolidated Financial Statements (Unaudited)......... F-6
Audited Financial Statements
Report of Independent Public Accountants................................ F-11
Consolidated Balance Sheets-- September 30, 1995 and 1994............... F-12
Consolidated Statements of Operations -- Years Ended September 30, 1995, 1994
and 1993............................................................ F-13
Consolidated Statements of Cash Flows -- Years Ended September 30, 1995, 1994
and 1993............................................................ F-14
Consolidated Statements of Stockholders' Equity (Deficit) -- Years Ended
September 30, 1995, 1994, 1993 and 1992............................. F-16
Notes to Consolidated Financial Statements.............................. F-17
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Anacomp, Inc. and Subsidiaries (Debtor-in-Possession,
Effective January 5, 1996. See Note 3.)
<TABLE>
<CAPTION>
- ------------------------------------------------------ ----------------- -----------------
(Dollars in thousands,
except per share amounts) Dec. 31, 1995 Sept. 30, 1995
- ------------------------------------------------------ ----------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 27,209 $ 19,415
Accounts and notes receivable, less allowances
for doubtful accounts of
$7,331 and $7,367, respectively 78,102 90,091
Current portion of long-term receivables 5,529 6,386
Inventories 46,765 53,995
Prepaid expenses and other 6,825 5,306
------- -------
Total current assets 164,430 175,193
------- -------
Property and equipment, at cost less accumulated
depreciation and amortization
38,719 44,983
Long-term receivables, net of current portion 10,039 12,322
Excess of purchase price over net assets of businesses
acquired and other intangibles, net 157,884 160,315
Other assets 27,047 28,216
-------- -------
$398,119 $421,029
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $376,371 $389,900
Accounts payable 49,242 57,368
Accrued compensation, benefits and withholdings 14,507 20,891
Accrued income taxes 10,618 9,365
Accrued interest 52,569 40,746
Other accrued liabilities 53,292 60,587
------- -------
Total current liabilities 556,599 578,857
------- -------
Noncurrent liabilities 5,448 5,841
------- -------
Redeemable preferred stock, $.01 par value, 500,000
issued, 485,750 and 500,000 outstanding,
respectively (aggregate preference value of
$24,288 and $25,000, respectively) 23,897 24,574
------- -------
Stockholders' equity (deficit):
Common stock, $.01 par value, authorized
100,000,000 shares, 46,287,660
and 46,187,625 issued, respectively 463 462
Capital in excess of par value 183,425 182,725
Cumulative translation adjustment 533 1,329
Accumulated deficit (372,246) (372,759)
--------- ---------
Total stockholders' equity (deficit) (187,825) (188,243)
--------- ---------
$398,119 $421,029
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
================================================================================
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Anacomp, Inc. and Subsidiaries (Debtor-in-Possession,
Effective January 5, 1996. See Note 3.)
<TABLE>
<CAPTION>
- --------------------------------------------------- -----------------------------------
(Dollars in thousands,
except per share amounts) Three months ended
-----------------------------------
Dec. 31, 1995 Dec. 31, 1994
- --------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Revenues:
Services provided $50,928 $54,880
Equipment and supply sales 79,337 96,932
------- -------
130,265 151,812
Operating costs and expenses:
Costs of services provided 27,838 29,437
Costs of equipment and supplies sold 61,761 73,022
Selling, general and administrative expenses 24,447 31,460
------- -------
114,046 133,919
------- -------
Income from operations before interest, other income,
financial restructuring costs, and income taxes 16,219 17,893
------- -------
Interest income 501 475
Interest expense and fee amortization (18,286) (17,949)
Financial restructuring costs (see Note 4) (2,801) --
Other income (see Note 5) 6,620 162
------- -------
(13,966) (17,312)
------- -------
Income before income taxes 2,253 581
Provision for income taxes 1,200 300
------- -------
Net income 1,053 281
Preferred stock dividends and discount accretion 540 540
------- -------
Net income (loss) available to common stockholders $513 $(259)
======= =======
Earnings (loss) per common and common equivalent share:
Net income (loss) available to common stockholders $.01 $(.01)
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
================================================================================
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Anacomp, Inc. and Subsidiaries (Debtor-in-Possession,
Effective January 5, 1996. See Note 3.)
<TABLE>
<CAPTION>
- ----------------------------------------------------- -----------------------------------
Three months ended
-----------------------------------
(Dollars in thousands) Dec. 31, 1995 Dec. 31, 1994
- ----------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,053 $281
Adjustments to reconcile net income to net
cash provided by (used in)
operating activities:
Depreciation and amortization 8,017 11,515
Loss on disposition of other assets 56 72
Gain on sale of ICS division (6,202) --
Change in assets and liabilities, net of
acquisitions:
Decrease (increase) in accounts and
long-term receivables 10,868 (912)
Decrease (increase) in inventories and
prepaid expenses 5,057 (5,294)
Increase in other assets (810) (3,588)
Decrease in accounts payable and accrued
expenses (8,727) (9,828)
Decrease in other noncurrent liabilities (70) (906)
------- --------
Net cash provided by (used in) operating
activities 9,242 (8,660)
------- --------
Cash flows from investing activities:
Proceeds from sale of ICS division 13,554 --
Proceeds from sale of other assets -- 14,519
Purchases of property, plant and equipment (1,161) (3,236)
Payments to acquire companies and customer rights -- (542)
------- --------
Net cash provided by investing activities 12,393 10,741
------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 238
Proceeds from revolving line of credit
and long-term borrowings -- 20,000
Principal payments on long-term debt (13,705) (36,209)
Preferred dividends paid -- (516)
------- --------
Net cash used in financing activities (13,705) (16,487)
------- --------
Effect of exchange rate changes on cash (136) (128)
------- --------
Increase (decrease) in cash and cash equivalents 7,794 (14,534)
Cash and cash equivalents at beginning of period 19,415 19,871
------- --------
Cash and cash equivalents at end of period $ 27,209 $ 5,337
========== ==========
Supplemental disclosures of cash flow
information
Cash paid during the period for:
Interest $ 3,486 $ 22,294
Income taxes $ 606 $ 2,508
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Anacomp, Inc. and Subsidiaries (Debtor-in-Possession,
Effective January 5, 1996. See Note 3.)
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------- -------------- -------------- ------------- -------------- --------------
Capital in Cumulative Retained
Common Stock excess of Translation earnings
(Dollars in thousands) par value Adjustment (deficit) Total
- ------------------------------------------- -------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 $ 462 $ 182,725 $ 1,329 $(372,759) $(188,243)
Preferred stock conversion 1 700 -- -- 701
Preferred stock dividends -- -- -- (516) (516)
Accretion of redeemable preferred stock
discount -- -- -- (24) (24)
Translation adjustments for period -- -- (796) -- (796)
Net income for the period -- -- -- 1,053 1,053
BALANCE AT DECEMBER 31, 1995 $ 463 $ 183,425 $ 533 $(372,246) $(187,825)
- ------------------------------------------- -------------- -------------- ------------- -------------- --------------
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------- -------------- -------------- ------------- -------------- --------------
Capital in Cumulative Retained
Common Stock excess of Translation earnings
(Dollars in thousands) par value Adjustment (deficit) Total
- ------------------------------------------- -------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1994 $ 457 $181,843 $ (269) $(132,275) $ 49,756
Exercise of stock options -- 14 -- -- 14
Shares issued for purchases under the
Employee Stock Purchase Plan 1 223 -- -- 224
Preferred stock dividends -- -- -- (516) (516)
Accretion of redeemable preferred stock
discount -- -- -- (24) (24)
Translation adjustments for period -- -- (972) -- (972)
Graham Stock Issuances 1 143 -- -- 144
Net income for the period -- -- -- 281 281
BALANCE AT DECEMBER 31, 1994 $ 459 $182,223 $ (1,241) $(132,534) $ 48,907
- ------------------------------------------- -------------- -------------- ------------- -------------- --------------
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Anacomp, Inc. and Subsidiaries (Debtor-in-Possession, Effective January 5,
1996. See Note 3)
NOTE 1. ADJUSTMENTS:
The condensed consolidated financial statements included herein have been
prepared by Anacomp, Inc. ("Anacomp" or the "Company") and its wholly-owned
subsidiaries without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations; however, the Company believes that the disclosures are
adequate to make the information presented not misleading. The condensed
consolidated financial statements included herein should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Report on Form 10-K as of September 30, 1995.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments necessary to present fairly the consolidated
financial condition, results of operations, and changes in financial position
and stockholders' equity of Anacomp and its subsidiaries for interim periods.
Certain amounts in the prior interim consolidated financial statements have been
reclassified to conform to the current period presentation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The condensed consolidated financial statements include the accounts of
Anacomp, Inc. and its wholly-owned subsidiaries. Material intercompany
transactions have been eliminated.
Foreign Currency Translation
Substantially all assets and liabilities of Anacomp's international
operations are translated at the period-end exchange rates; income and expenses
are translated at the average exchange rates prevailing during the period.
Translation adjustments are accumulated in a separate section of stockholders'
equity. Foreign currency transaction gains and losses are included in net
income.
Segment Reporting
Anacomp operates in a single business segment -- providing equipment,
supplies and services for information management, including storage, processing
and retrieval.
Significant Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Other Intangibles
Other intangibles, net of accumulated amortization, of $20.4 million
represent the purchase of the rights to provide microfilm or maintenance
services to certain customers and are being amortized on a straight-line basis
over 10 years. These unamortized costs are evaluated for impairment each period
by determining their net realizable value.
Research and Development
The costs associated with research and development programs are expensed as
incurred.
Deferred software costs are the capitalized costs of software products to
be sold with COM systems in future periods. The unamortized costs are evaluated
for impairment each period by determining their net realizable value. Such costs
are amortized over the greater of the estimated units of sale or under the
straight-line method not to exceed five years. Unamortized deferred software
costs remaining as of December 31, 1995 total $5.7 million and are included in
"Other Assets" on the accompanying Condensed Consolidated Balance Sheets.
Income Taxes
Beginning in 1995, Anacomp's practice is to repatriate the income of its
foreign subsidiaries as it is earned. Accordingly, deferred tax is recorded on
foreign income as it is earned.
Consolidated Statements of Cash Flows
Anacomp considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. These temporary
investments, primarily repurchase agreements and other overnight investments,
are recorded at cost, which approximates market.
Revenue Recognition
Revenues from sales of products and services or from lease of equipment
under sales-type leases are recorded based on shipment of products or
performance of services. Under sales-type leases, the present value of all
payments due under the lease contracts is recorded as revenue, cost of sales is
charged with the book value of the equipment plus installation costs, and future
interest income is deferred and recognized over the lease term. Revenue from
maintenance contracts is recognized in earnings on a pro rata basis over the
period of the agreements.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by methods approximating the first-in, first-out basis.
The cost of the inventories is distributed as follows:
- ----------------------------------- --------------------- ----------------------
(Dollars in thousands) Dec. 31, 1995 Sept. 30, 1995
- --------------------------------------------------------- ----------------------
Finished goods $ 36,025 $ 38,702
Work in process 4,262 4,955
Raw materials and supplies 6,478 10,338
$ 46,765 $ 53,995
- --------------------------------------------------------- ----------------------
Debt Issuance Costs
================================================================================
The Company capitalizes all costs related to its issuance of debt and
amortizes those costs using the effective interest method over the life of the
related debt instruments. Remaining debt issuance costs of $11.9 million at
December 31, 1995 are included in "Other Assets" in the accompanying Condensed
Consolidated Balance Sheets. During the three months ended December 31, 1995,
the Company amortized $800,000 of debt issuance costs which are included in
"Interest Expense and Fee Amortization" in the accompanying Condensed
Consolidated Statement of Operations.
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization
of property and equipment are generally provided under the straight-line method
for financial reporting purposes over the shorter of the estimated useful lives
or the lease terms. Tooling costs are amortized over the total estimated units
of production, not to exceed three years.
Goodwill
Excess of purchase price over net assets of businesses acquired
("goodwill") is amortized on the straight-line method over the estimated periods
of future demand for the product acquired. Goodwill related to magnetics
products, net of accumulated amortization, of $5.3 million is being amortized
over 15 years. Goodwill, net of accumulated amortization, of $132.2 million is
related to the micrographics business which includes supplies, COM systems,
micrographics services and maintenance services and is primarily being amortized
over 40 years. When factors indicate that goodwill should be evaluated for
impairment, Anacomp historically has evaluated goodwill based on comparing the
unamortized balance of goodwill to undiscounted operating income over the
remaining goodwill amortization period. Effective June 30, 1995, Anacomp elected
to modify its method of measuring goodwill impairment to a fair value approach.
If it is determined that impairment has occurred, the excess of the unamortized
goodwill over the fair value of the goodwill applicable to the business unit
will be charged to operations. For purposes of determining fair value, the
Company values the goodwill using a multiple of cash flow from operations based
on consultation with its investment advisors. Anacomp has concluded that fair
value is a better measurement of the value of goodwill considering the Company's
highly leveraged financial position.
NOTE 3. RECENT DEVELOPMENTS:
After months of discussions and negotiations with representatives of
Holders of Claims under the Old Credit Facilities, the Old Senior Notes, the Old
Senior Subordinated Notes and the Old Subordinated Debentures, the Company
reached an agreement in principle with an unofficial committee of Holders of the
Old Senior Subordinated Notes (the "Unofficial Senior Subordinated Committee")
providing for a proposed restructuring and the ultimate filing of the Chapter 11
Cases (which occurred on January 5, 1996 in the United States Bankruptcy Court
in Delaware) to implement such restructuring.
Subsequent to the filing of the Chapter 11 Cases, the Company continued to
negotiate with its major creditor constituencies, including the Creditors'
Committee and the Senior Secured Creditors, in an attempt to reach a fully
consensual restructuring. In January 1996, the Senior Secured Creditors retained
The Blackstone Group as financial advisor to assist in the evaluation of the
Company's financial condition and a plan of reorganization. Upon the filing of
the Chapter 11 Cases, Smith Barney has not been eligible to act as the Company's
financial advisor, and shortly thereafter, the Company retained Donaldson Lufkin
& Jenrette Securities Corporation ("DLJ") as its financial advisor. The
appointment of DLJ was approved by the Bankruptcy Court effective as of January
16, 1996. The Creditors' Committee retained Chanin as its financial advisor and
such retention was approved by the Bankruptcy Court effective as of January 17,
1996.
On February 15, 1996, the Company announced that it had reached an
agreement in principle with the Creditors' Committee and the Senior Secured
Creditors, which agreement forms the basis for the Restructuring and the Plan.
The Creditors' Committee and the Senior Secured Creditors have indicated their
support for the Plan.
Under Chapter 11 of the Bankruptcy Code, certain claims against the Debtor
in existence prior to the filing of the petitions for relief under the U.S.
bankruptcy laws are stayed while the Debtor continues business operations as
Debtor-in-Possession. Under AICPA Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company is required to adjust liabilities subject to compromise to the
amount of the claim allowed by the court. This will result in a write-off of
certain deferred debt issuance costs and debt discounts of approximately $17.6
million on the date of the bankruptcy filing. These adjustments will be
reflected in the Company's results for the quarter ended March 31, 1996. In
addition, SOP 90-7 requires the Company to report interest expense during the
bankruptcy proceedings only to the extent that it will be paid during the
proceeding or that it is probable to be an allowed priority, secured or
unsecured claim.
The Company will adjust its interest expense on a prospective basis
according to these guidelines. The difference between the reported interest
expense and the stated amount of interest will be disclosed in future filings.
NOTE 4. FINANCIAL RESTRUCTURING COSTS:
The Company has been engaged in continuous efforts since May 1995 to
formulate a restructuring plan to satisfy its various investor constituencies.
Costs directly related to these activities of $2.8 million for the three months
ended December 31, 1995 are included as "Financial restructuring costs" in the
accompanying Condensed Consolidated Statements of Operations.
NOTE 5. SALE OF ICS DIVISION:
Effective November 1, 1995, Anacomp sold its Image Conversion Services
Division ("ICS") for approximately $13.5 million, which resulted in a net gain
to the Company of $6.2 million. The proceeds from this sale were used to reduce
the principal balance on certain senior debt. The ICS Division performed source
document microfilm services at several facilities around the country generating
approximately $20.0 million of revenues per year.
NOTE 6. INCOME TAXES:
Income tax expense is reported for the three months ended December 31,
1995, based on the actual effective tax for the interim period as the Company
believes this rate is the best estimate of the effective tax rate for the year
ended September 30, 1996. Also for the three months ended December 31, 1995, the
U.S. Federal tax rate is zero since the U.S. tax provision of $1.3 million was
offset by a corresponding reduction to the valuation allowance. At December 31,
1995, the Company had U.S. Federal net operating loss carryforwards ("NOLs") of
approximately $218.0 million available to offset future taxable income.
NOTE 7. EARNINGS (LOSS) PER SHARE:
The computation of earnings (loss) per common and common equivalent share
is based upon the weighted average number of common shares outstanding during
the periods plus (in the periods in which they have a dilutive effect) the
effect of common shares contingently issuable, primarily from stock options and
exercise of warrants.
The fully diluted per share computation reflects the effect of common
shares contingently issuable upon the exercise of warrants in periods in which
such exercise would cause dilution. Fully diluted earnings (loss) per share also
reflect (in the periods in which they have a dilutive effect) additional
dilution related to stock options due to the use of the market price at the end
of the period, when higher than the average price for the period.
Fully diluted earnings (loss) per share are the same as primary earnings
per share for the periods presented.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Anacomp, Inc.:
We have audited the accompanying consolidated balance sheets of Anacomp, Inc.
(an Indiana corporation) and subsidiaries as of September 30, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
September 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Anacomp, Inc. and subsidiaries
as of September 30, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1995,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company experienced a net loss in 1995, is currently
in default under substantially all of its debt agreements, and in addition, on
January 5, 1996, the Company filed a prenegotiated voluntary petition for relief
under Chapter 11 of the U.S. Bankruptcy Code. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. In the event a
plan of reorganization is accepted, continuation of the business thereafter is
dependent on the Company's ability to achieve sufficient cash flow to meet its
restructured debt obligations. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
As explained in Note 1 to the financial statements, effective June 30, 1995, the
Company changed its method of accounting for the measurement of goodwill
impairment.
Indianapolis, Indiana Arthur Andersen LLP
November 10, 1995, except with respect to Note 2
and the second paragraph of Note 22 as to which the
date is January 5, 1996.
<PAGE>
CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts) Year Ended September 30, 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................$ 19,415 $ 19,871
Accounts and notes receivable, less allowances for doubtful
accounts of $7,367 and $3,550, respectively............................. 90,091 117,441
Current portion of long-term receivables.................................... 6,386 8,021
Inventories................................................................. 53,995 63,375
Prepaid expenses and other.................................................. 5,306 5,421
-------- --------
Total current assets............................................................ 175,193 214,129
Property and equipment, at cost less accumulated depreciation and
amortization of $96,898 and $100,574, respectively.......................... 44,983 66,769
Long-term receivables, net of current portion................................... 12,322 16,383
Excess of purchase price over net assets of businesses acquired
and other intangibles, net.................................................. 160,315 279,607
Deferred tax asset, net of valuation allowance of $108,400 and
$57,000, respectively....................................................... ---- 29,000
Other assets.................................................................... 28,216 52,751
-------- --------
421,029 $ 658,639
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt........................................... 389,900 $ 45,222
Accounts payable............................................................ 57,368 82,790
Accrued compensation, benefits and withholdings............................. 20,891 16,573
Accrued income taxes........................................................ 9,365 9,000
Accrued interest............................................................ 40,746 19,701
Other accrued liabilities................................................... 60,587 35,027
-------- --------
Total current liabilities....................................................... 578,857 208,313
-------- --------
Long-term debt, net of current portion.......................................... ---- 366,625
Other noncurrent liabilities.................................................... 5,841 9,467
-------- --------
Total noncurrent liabilities.................................................... 5,841 376,092
-------- --------
Commitments and contingencies (see Note 15)
Redeemable preferred stock, $.01 par value, issued and outstanding 24,574 24,478
500,000 shares (aggregate preference value of $25,000)...................... -------- ---------
Stockholders' equity (deficit):
Common stock, $.01 par value; authorized 100,000,000 shares;
46,187,625 and 45,728,505 issued, respectively.......................... 462 457
Capital in excess of par value.............................................. 182,725 181,843
Cumulative translation adjustment........................................... 1,329 (269)
Accumulated deficit......................................................... (372,759) (132,275)
-------- --------
Total Stockholders' equity (deficit)............................................ (188,243) 49,756
$421,029 $ 658,639
========= ==========
</TABLE>
See notes to consolidated financial statements.
================================================================================
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts) Year ended September 30, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Services provided....................................................$219,881 $223,511 $213,302
Equipment and supply sales........................................... 371,308 369,088 376,906
------- -------- --------
591,189 592,599 590,208
------- -------- --------
Operating costs and expenses:
Costs of services provided........................................... 161,211 156,214 141,998
Costs of equipment and supplies sold................................. 279,456 264,269 262,754
Selling, general and administrative expenses......................... 109,127 92,539 96,822
Special charges (see Note 1)......................................... 136,889 ---- ----
Restructuring charges (see Note 3)................................... 32,695 ---- ----
------- -------- --------
719,378 513,022 501,574
------- -------- --------
Income (loss) from operations before interest,
other income, income taxes,
extraordinary credit, and cumulative
effect of accounting change..........................................(128,189) 79,577 88,634
------- -------- --------
Interest income.......................................................... 2,000 3,144 3,042
Interest expense and fee amortization.................................... (70,938) (67,174) (68,960)
Financial restructuring costs (see Note 5)............................... (5,987) ---- ----
Other expense............................................................ (212) (192) (2,225)
------- -------- --------
(75,137) (64,222) (68,143)
------- -------- --------
Income (loss) before income taxes, extraordinary credit,
and cumulative effect of accounting change........................... 203,326) 15,355 20,491
Provision for income taxes............................................... 35,000 8,400 8,800
------- --------- ---------
Income (loss) before extraordinary credit and
cumulative effect of accounting change............................... (238,326) 6,955 11,691
Extraordinary credit-- reduction of income taxes arising from
utilization of tax loss carryforwards................................ ---- ---- 6,900
Cumulative effect on prior years of a change in accounting
for income taxes..................................................... ---- 8,000 ----
Net income (loss)........................................................ (238,326) 14,955 18,591
--------- -------- --------
Preferred stock dividends and discount accretion......................... 2,158 2,158 2,158
--------- -------- --------
Net income (loss) available to common stockholders.......................$(240,484) $12,797 $16,433
========== ======= =======
Earnings (loss) per common and common equivalent share:
Income (loss), net of preferred stock dividends
and discount accretion...........................................$ (5.22) $ .10 $ .22
Extraordinary credit................................................. ---- ---- .17
Cumulative effect on prior years of a change in
accounting for income taxes...................................... ---- .17 ----
--------- -------- --------
Net income (loss) available to common stockholders...................$ (5.22) $ .27 $ .39
========== ====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................$ (238,326) $ 14,955 $ 18,591
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................................... 43,375 40,649 38,208
Cumulative effect of a change in accounting for
income taxes................................................. ---- (8,000) ----
Provision (benefit) for losses on accounts receivable........... 2,742 (695) (892)
Provision for inventory valuation............................... 10,956 ---- ----
Deferred taxes.................................................. 29,000 6,000 ----
Special charges (See Note 1).................................... 136,889 ---- ----
Loss (gain) on disposition of assets............................ 6,308 776 (721)
Change in assets and liabilities net of effects from acquisitions:
Decrease in accounts and long-term receivables.................. 30,948 3,040 1,215
Decrease (increase) in inventories and prepaid expenses......... (1,612) 15,254 1,308
Increase in other assets........................................ (8,207) (11,349) (5,329)
Increase (decrease) in accounts payable
and accrued expenses......................................... 11,465 (3,623) 1,125
Decrease in other noncurrent liabilities........................ (3,626) (4,323) (7,613)
---------- ---------- -----------
Net cash provided by operating activities.................... 19,912 52,684 45,892
---------- ---------- -----------
Cash flows from investing activities:
Proceeds from sale of assets...................................... 18,777 7,805 15,956
Purchases of property, plant and equipment........................ (14,372) (18,868) (20,726)
Proceeds from notes receivable.................................... ---- ---- 1,343
Payments to acquire companies and customer rights................. (1,262) (14,565) (1,114)
---------- ---------- -----------
Net cash provided by (used in) investing activities.......... 3,143 (25,628) (4,541)
---------- ---------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants............... 743 1,484 2,262
Proceeds from revolving line of credit and 22,529 39,000 39,799
long-term borrowing...........................................
Principal payments on long-term debt.............................. (45,859) (71,095) (77,958)
Preferred dividends paid.......................................... (1,031) (2,062) (2,062)
Payments related to the issuance of debt and equity............... ---- ---- (7,707)
---------- ---------- -----------
Net cash used in financing activities........................ (23,618) (32,673) (45,666)
---------- ---------- -----------
Effect of exchange rate changes on cash............................... 107 566 (644)
---------- ---------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Decrease in cash and cash equivalents................................. (456) (5,051) (4,959)
Cash and cash equivalents at beginning of year........................ 19,871 24,922 29,881
------- ---------- ----------
Cash and cash equivalents at end of year.............................. $19,415 $ 19,871 $ 24,922
======= ========== ==========
</TABLE>
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest....................................................... $ 39,426 $ 57,781 $ 59,552
Income taxes................................................... 4,128 2,007 3,468
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
During 1995, 1994, and 1993 the Company acquired companies and rights to provide
future services. In conjunction with these acquisitions, the purchase price
consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash paid................................................... $ 1,262 $ 14,565 $ 1,114
Credit memos issued..................................... ---- 3,085 150
Notes payable issued.................................... ---- 4,290 3,170
Stock issued............................................ ---- 17,201 ----
---------- ----------- -----------
Total fair value of acquisitions........................ $ 1,262 $ 39,141 $ 4,434
========== =========== ===========
- -----------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Capital in Cumulative
Year ended September 30, Common excess of transaction
(Dollars in thousands) 1995, 1994 and 1993 stock par value adjustment Deficit Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1992..................... 397 $ 161,198 $ 8,200 $(161,505) $ 8,290
Common stock issued for purchases under the
Employee Stock Purchase Plan.................... 4 1,253 ---- ---- 1,257
Exercise of stock options......................... 5 997 ---- ---- 1,002
Preferred stock dividends......................... ---- ---- ---- (2,062) (2,062)
Accretion of redeemable preferred stock discount.. ---- ---- ---- (96) (96)
Translation adjustments for year.................. ---- ---- (12,944) ---- (12,944)
Other............................................. ---- (239) ---- ---- (239)
Net income for the year........................... ---- ---- ---- 18,591 18,591
----- ------- -------- --------- --------
BALANCE AT SEPTEMBER 30, 1993..................... 406 163,209 (4,744) (145,072) 13,799
Common stock issued for purchases under the
Employee Stock Purchase Plan.................... 3 872 ---- ---- 875
Exercise of stock options......................... 3 606 ---- ---- 609
Preferred stock dividends......................... ---- ---- ---- (2,062) (2,062)
Accretion of redeemable preferred stock discount.. ---- ---- ---- (96) (96)
Translation adjustments for year.................. ---- ---- 4,475 ---- 4,475
NBS stock issuance................................ 20 7,380 ---- ---- 7,400
Graham stock issuance............................. 25 9,776 ---- ---- 9,801
Net income for the year........................... ---- ---- ---- 14,955 14,955
----- ------- -------- --------- --------
BALANCE AT SEPTEMBER 30, 1994..................... 457 181,843 (269) (132,275) 49,756
Common stock issued for purchases under the
Employee Stock Purchase Plan.................... 3 689 ---- ---- 692
Exercise of stock options......................... 1 50 ---- ---- 51
Preferred stock dividends......................... ---- ---- ---- (2,062) (2,062)
Accretion of redeemable preferred stock discount.. ---- ---- ---- (96) (96)
Translation adjustments for year.................. ---- ---- 1,598 ---- 1,598
Graham stock issuance............................. 1 143 ---- ---- 144
Net loss for the year............................. ---- ---- ---- (238,326) (238,326)
----- ------- ------- --------- --------
BALANCE AT SEPTEMBER 30, 1995..................... $462 $182,725 $1,329 $(372,759) $(188,243)
===== ======== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Anacomp, Inc. and Subsidiaries
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The consolidated financial statements include the accounts of Anacomp, Inc.
("Anacomp" or the "Company") and its wholly-owned subsidiaries. Material
intercompany transactions have been eliminated. Certain amounts in the prior
year consolidated financial statements have been reclassified to conform to the
current presentation.
Foreign Currency Translation
Substantially all assets and liabilities of Anacomp's international
operations are translated at the year-end exchange rates; income and expenses
are translated at the average exchange rates prevailing during the year.
Translation adjustments are accumulated in a separate section of stockholders'
equity. Foreign currency transaction gains and losses are included in net
income.
Segment Reporting
Anacomp operates in a single business segment: providing equipment,
supplies and services for information management, including storage, processing
and retrieval.
Significant Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Revenue Recognition
Revenues from sales of products and services or from lease of equipment
under sales-type leases are recorded based on shipment of products or
performance of services. Under sales-type leases, the present value of all
payments due under the lease contracts is recorded as revenue, cost of sales is
charged with the book value of the equipment plus installation costs, and future
interest income is deferred and recognized over the lease term. Revenues from
maintenance contracts are deferred and recognized in earnings on a pro rata
basis over the period of the agreements.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by methods approximating the first-in, first-out basis.
The cost of the inventories is distributed as follows:
(Dollars in thousands)September 30, 1995 1994
- ---------------------------------- ---------------------- ---------------------
Finished goods.................... $ 38,702 $ 41,661
Work in process................... 4,955 5,903
Raw materials and supplies........ 10,338 15,811
------------ ------------
$ 53,995 $ 63,375
============ ============
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization
of property and equipment are generally provided under the straight-line method
for financial reporting purposes over the shorter of the estimated useful lives
or the lease terms. Tooling costs are amortized over the total estimated units
of production, not to exceed three years.
Debt Issuance Costs
The Company capitalizes all costs related to its issuance of debt and
amortizes those costs using the effective interest method over the life of the
related debt instruments. Remaining debt issuance costs of $12.7 million and
$18.4 million at September 30, 1995 and 1994, respectively, are included in
"Other Assets" in the accompanying Consolidated Balance Sheets. During the
fiscal years 1995, 1994 and 1993, the Company amortized $5.7 million, $5.3
million and $5.0 million of debt issuance costs which are included in "Interest
Expense and Fee Amortization" in the accompanying Consolidated Statement of
Operations.
Goodwill
Excess of purchase price over net assets of businesses acquired
("goodwill") is amortized on the straight-line method over the estimated periods
of future demand for the product acquired. Goodwill related to magnetics
products of $5.4 million and $5.2 million, net of accumulated amortization of
$575,334 and $132,375, at September 30, 1995 and 1994, respectively, is being
amortized over 15 years. Goodwill related to the micrographics business, which
includes supplies, COM systems, micrographics services and maintenance services,
is primarily being amortized over 40 years. When factors indicate that goodwill
should be evaluated for impairment, Anacomp historically has evaluated goodwill
based on comparing the unamortized balance of goodwill to undiscounted operating
income over the remaining goodwill amortization period. Effective June 30, 1995,
Anacomp elected to modify its method of measuring goodwill impairment to a fair
value approach. If it is determined that impairment has occurred, the excess of
the unamortized goodwill over the fair value of the goodwill applicable to the
business unit will be charged to operations. For purposes of determining fair
value, the Company values the goodwill using a multiple of cash flow from
operations based on consultation with its investment advisors. Anacomp has
concluded that fair value is a better measurement of the value of goodwill
considering the Company's highly leveraged financial position and the
circumstances discussed in Note 4.
As discussed in Note 4, Anacomp has recently revised its projected
operating results through 1999. This revision along with applying Anacomp's
revised goodwill accounting policy resulted in a write-off of $108.0 million of
goodwill related to the micrographics business for the year ended September 30,
1995. This write-off is reflected in "Special Charges" in the accompanying
Consolidated Statement of Operations.
Other Intangibles
Other intangibles of $21.3 million and $25.2 million, net of accumulated
amortization of $16.1 and $12.0 million, at September 30, 1995 and 1994,
respectively, represent the purchase of the rights to provide microfilm or
maintenance services to certain customers and are being amortized on a
straight-line basis over 10 years. These unamortized costs are evaluated for
impairment each period by determining their net realizable value.
Research and Development
The costs associated with research and development programs are expensed as
incurred, and amounted to $2.2 million in 1995, $3.0 million in 1994 and $2.5
million in 1993.
Deferred software costs are the capitalized costs of software products to
be sold with COM systems in future periods. The unamortized costs are evaluated
for impairment each period by determining their net realizable value. Such costs
are amortized over the greater of the estimated units of sale or under the
straight-line method not to exceed five years. Due to lower than expected sales
of new software products introduced in 1995 and certain other matters as
discussed in Note 2, Anacomp recently revised its projected future sales and
operating results of software products through 1999. As a result, during 1995
Anacomp wrote off $20.3 million of deferred software costs and established a
reserve of $8.6 million (of which $7.7 million was outstanding at September 30,
1995) for future payments to Pennant Systems for software royalty and system
support obligations which are not recoverable based on these revised
projections. These charges are reflected in "Special Charges" in the
accompanying Consolidated Statement of Operations. Unamortized deferred software
costs remaining as of September 30, 1995 total $7.7 million and are included in
"Other Assets" on the accompanying Consolidated Balance Sheets.
Sale-Leaseback Transactions
Anacomp entered into sale-leaseback transactions of $19.3 million in 1995,
$11.9 million in 1994 and $9.9 million in 1993 relating to COM systems installed
in the Company's data service centers. Part of the proceeds were treated as
fixed asset sales and the remainder as sales of equipment. Revenues of $3.5
million, $5.6 million and $4.7 million were recorded for the years ended
September 30, 1995, 1994 and 1993, respectively. All profits were deferred and
are being recognized over the applicable leaseback periods.
Accrued Lease Reserves
Other noncurrent liabilities include reserves established for unfavorable
facility lease commitments, vacant facilities and related future lease costs.
Total obligations recorded for these unfavorable lease commitments and future
lease and related costs at their estimated amounts were $7.5 million and $12.5
million at September 30, 1995 and 1994, respectively. The current portion of
these obligations was $2.0 million and $3.4 million as of September 30, 1995 and
1994, respectively, and is included in "Other accrued liabilities" in the
accompanying Consolidated Balance Sheets.
Income Taxes
In general, Anacomp's practice has been to reinvest the earnings of its
foreign subsidiaries in those operations and to repatriate those earnings only
when it was advantageous to do so. During 1995, Anacomp changed its practice
whereby the Company now intends to repatriate these earnings in the foreseeable
future. As a result, Anacomp recorded deferred taxes of $8.8 million on all
undistributed foreign earnings.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). FAS 109 mandates the liability method for computing deferred income taxes
and requires that the benefit of certain loss carryforwards be estimated and
recorded as an asset unless it is "more likely than not" that the benefit will
not be realized. Another principal difference is that changes in tax rates and
laws will be reflected in income from continuing operations in the period such
changes are enacted.
Anacomp adopted FAS 109 in the first quarter of fiscal 1994. Under FAS 109,
the Company recorded a significant deferred tax asset in 1994 to reflect the
benefit of loss carryforwards that could not be recognized under prior
accounting rules. The recording of this asset reduced goodwill and increased
income as discussed in more detail in Note 14. During 1995, the deferred tax
asset was reduced to zero as a result of the events described in Note 2.
Consolidated Statements of Cash Flows
Anacomp considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. These temporary
investments, primarily repurchase agreements and other overnight investments,
are recorded at cost, which approximates market.
<PAGE>
NOTE 2. FINANCIAL RESTRUCTURING DEVELOPMENTS:
For the year ended September 30, 1995, the Company reported a $238.3
million net loss. The Company is highly leveraged, and certain recent
developments have had a material adverse effect on the Company's short-term
liquidity and the Company's ability to service its debts.
Although revenues for the Company's core micrographic business had been
declining over the last several fiscal years, the Company believed that these
declines would stabilize. However, based on weaker than anticipated results,
including disappointing sales performance for the Company's new products, the
Company did not have sufficient cash available to make both its $20.0 million
scheduled principal payment due April 26, 1995 on its senior secured debt and
the $17.0 million scheduled interest payment due May 1, 1995 on its 15% Senior
Subordinated Notes. The Company sought an agreement with its senior secured
Creditors to reschedule its April 26, 1995 principal payment but was unable to
obtain such an agreement. As a result of the foregoing, the Company has ceased
making principal payments on its senior and subordinated debt and interest
payments on its subordinated debt. Prior to the bankruptcy filing discussed
below, Anacomp continued to make monthly interest payments to its senior secured
Creditors.
The Company has been engaged in continuous efforts since May 1995 to
formulate a restructuring plan to satisfy its various investor constituencies.
Such efforts have included the retention of various financial advisers to assist
in the restructuring process and the development by the Company of a new
business plan and strategy to address the Company's current financial situation
and disappointing recent financial performance.
On August 14, 1995, the Company presented a restructuring proposal to
certain of the Company's senior secured Creditors and Holders of its 15% Senior
Subordinated Notes. After months of discussions and negotiations with
representatives of Holders of Claims under the Revolving Loan, Multi-currency
Revolving Loan, and Term Loan ("Old Credit Facilities") and with unofficial
committees representing Holders of the Series B Senior Notes ("Old Senior
Notes"), the 15% Senior Subordinated Notes ("Old Senior Subordinated Notes") and
the 13.875% and 9% Convertible Subordinated Debentures ("Old Subordinated
Debentures"), the Company reached an agreement in principle with an unofficial
committee representing Holders of the Old Senior Subordinated Notes. Under the
terms of the proposal, trade creditors will continue to be paid under normal
trade terms. On January 5, 1996, the Company filed a prenegotiated Debtor's
Joint Plan of Reorganization ("Plan") with the U.S. Bankruptcy Court under
Chapter 11 of the Bankruptcy Code. Certain representatives of Holders of the Old
Credit Facilities and Old Senior Notes have indicated they oppose the Plan. The
Company continues to negotiate with all their Creditors in an attempt to reach a
consensual agreement. There can be no assurance that this prenegotiated Plan
will be accepted by the Bankruptcy Court or all the necessary votes accepting
the Plan will be obtained from the Creditors. If an agreement is not reached, a
non-negotiated Chapter 11 proceeding is likely to occur.
<PAGE>
NOTE 3. RESTRUCTURING CHARGES:
Included in the operating results for 1995 are restructuring charges of
$32.7 million. These charges are the result of the Company's reassessment of its
strategy for ongoing financial improvement and a decision to downsize or exit
certain areas of its business. Specifically, the Company is closing its Omaha,
Nebraska magnetic media manufacturing facility, exiting the manufacture of
readers and reader/printers at its San Diego, California manufacturing facility,
and reducing headcount worldwide. These activities are expected to be completed
by March 31, 1996. The restructuring charges include severance costs of $5.9
million, which includes personnel related to Omaha, Nebraska, reader and
reader/printer manufacturing and other various personnel associated with the
worldwide headcount reduction. Approximately 400 people will be terminated
pursuant to these plans. Also included in restructuring charges are inventory
write downs of $9.1 million, excess facility reserves of $7.7 million and other
reserves of $10.0 million.
NOTE 4. GOODWILL:
Goodwill related to the micrographics business is summarized as follows
(Dollars in thousands):
September 30,
---------------------------------------
1995 1994
---- ----
Goodwill $315,561 $314,865
Less goodwill write-off (108,000) ----
Less accumulated amortization (73,988) (65,698)
------- -------
$133,573 $249,167
======== ========
The developments discussed in Notes 1, 2 and 3 have significantly
constrained Anacomp's ability to finance certain previously projected
activities. In addition, Anacomp has failed to achieve its original projections
of fiscal 1995 operating results and has experienced lower than expected sales
of new software products first introduced in January 1995. In light of Anacomp's
withdrawn note offering, disappointing recent financial performance and default
on its indebtedness, the Company prepared a revised business plan and operating
forecast through 1999.
Based on these developments and in connection with the change in accounting
discussed in Note 1, Anacomp determined that goodwill had been impaired and
measured the impairment based on a fair value approach. As required by generally
accepted accounting principles, this accounting change, which amounted to a
charge of $108.0 million, was recorded as a change in estimate and was included
in the results of operations for the quarter ended June 30, 1995.
NOTE 5. FINANCIAL RESTRUCTURING COSTS:
On April 6, 1995, Anacomp announced that it had withdrawn its proposed
offering of $225.0 million Senior Secured Notes and a related offer to purchase
up to $50.0 million of the Company's outstanding 15% Senior Subordinated Notes.
The offering would have deferred an aggregate of $153.0 million in scheduled
principal payments in fiscal years 1995 through 1998, thereby providing Anacomp
with increased liquidity and additional cash for product development. Also, as
mentioned in Note 2, the Company has been engaged in continuous efforts since
May 1995 to formulate a restructuring plan to satisfy its various investor
constituencies. Costs directly related to these activities of $6.0 million are
included as "Financial restructuring costs" in the accompanying Consolidated
Statements of Operations.
NOTE 6. FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, requires disclosure of fair value information
for certain financial instruments. The carrying amounts for trade receivables
and payables are considered to be their fair values. The carrying amounts and
fair values of the Company's other financial instruments at September 30, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Carrying Carrying
(Dollars in thousands) Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Long-Term Debt:
<S> <C> <C> <C> <C>
Revolving Loan $ 31,328 $31,328 $23,000 $ 23,000
Multi-currency Revolving Loan 28,813 28,813 20,665 20,665
Term Loans 13,039 13,039 40,261 40,261
Series A Senior Notes ---- ---- 3,548 3,548
Series B Senior Notes 58,908 58,908 67,500 74,410
15% Senior Subordinated Notes 220,281 181,224 219,384 249,357
13.875% Convertible Subordinated
Debentures 21,155 4,376 20,922 23,232
9% Convertible Subordinated
Debentures 10,479 1,880 10,479 10,479
Redeemable Preferred Stock 24,574 ---- 24,478 19,371
</TABLE>
The September 30, 1995 estimated fair values of Long-Term Debt and
Redeemable Preferred Stock are based on a restructuring proposal prepared as a
result of discussion and negotiations with representatives of the Creditors in
connection with a "plan of reorganization."
The September 30, 1994 estimated fair values of Long-Term Debt and
Redeemable Preferred Stock are based on quoted market values or discounted
future cash flows using current interest rates.
NOTE 7. ACQUISITIONS:
During the three years ended September 30, 1995, Anacomp made the
acquisitions set forth below, each of which has been accounted for as a
purchase. The consolidated financial statements include the operating results of
each business from the date of acquisition. Pro forma results of operations have
not been presented because the effects of these acquisitions were not
significant.
Fiscal 1995
During fiscal 1995 Anacomp made no significant acquisitions.
Fiscal 1994
During fiscal 1994, Anacomp acquired 16 data service centers or the related
customer base (all were incorporated with existing Anacomp service centers), a
computer tape products company and the customer base of a micrographics supplies
business. Total consideration for these acquisitions was $39.1 million of which
approximately $24.2 million has been assigned to excess of purchase price over
net assets of businesses acquired and other intangible assets. In connection
with these acquisitions, Anacomp issued $17.2 million of its common stock and
increased debt and accrued liabilities by $4.3 million.
National Business Systems
One of the acquisitions included above was the purchase of the COM services
customer base of 14 data service centers operated by National Business Systems
("NBS"). The acquisition was effective on January 3, 1994, and the acquisition
cost consisted of the following (Dollars in thousands):
Cash paid to NBS Stockholders.........................$..7,400
Common stock issued to NBS Stockholders.....................
7,400
Acquisition costs incurred.................................416
$15,216
Anacomp issued 1,973,000 common shares to the NBS Stockholders at a price
of $3.75 per share. As part of the acquisition agreement, Anacomp agreed to
provide stock price protection at the end of two years on those shares so
designated by the NBS Stockholders (1,128,000 of the shares issued are subject
to this protection).
On January 3, 1996, Anacomp recalculated the share price based on the
average closing price of Anacomp stock for the 30 consecutive trading days
ending on December 29, 1995. The revised price was used to adjust the number of
issued shares which were subject to price protection. However, the revised price
used for the revaluation was higher than 150% or lower than 50% of the original
$3.75 per share price.
If the per share price reached the 150% maximum, NBS Stockholders would
return 376,000 shares to Anacomp. If the per share price reached the 50%
minimum, Anacomp would issue 1,128,000 additional shares to the NBS
Stockholders. The adjustment in the number of shares issued in connection with
the NBS acquisition will not affect the recorded purchase price. Contingently
issuable shares under the above arrangement are measured at each reporting
period based on the market price of the Company's stock at the close of the
period being reported on, and are considered in the computation of earnings per
share when dilutive.
Graham Magnetics
Another of the acquisitions included above was the purchase of Graham
Acquisition Corporation ("Graham"), a computer tape products company. The
acquisition was effective on May 4, 1994, and the acquisition cost consisted of
the following (dollars in thousands):
Common stock issued to Graham Stockholders..................
$ 8,515
Common stock issued for a note payable...................... 1,286
Issuance of note payable to a creditor...................... 4,240
Cash paid to retire bank debt............................... 5,540
Acquisition costs incurred.................................. 689
--------
$20,270
Anacomp issued 2,129,000 common shares to the Graham Stockholders based on
an agreed upon per share price. However, to determine the acquisition cost, the
shares were valued at the market price on the date of closing.
Contingent consideration of $7.6 million is payable in Anacomp common stock
and will be based upon defined future earnings through September 1997. The
contingent consideration will be computed based upon an agreed upon formula
using a minimum stock price of $2.00 per share and was issuable beginning in
January 1995. The contingent consideration is not included in the acquisition
cost total above but is recorded when the future earnings requirements have been
met. The contingent consideration amount for fiscal 1994 was $144,000 and the
estimate for fiscal 1995 is zero.
Anacomp also issued 360,000 common shares to a Graham creditor at $3.57 per
share to reduce the note payable to $4.2 million. The note is unsecured and
bears interest at 10%. Principal payments of $345,000 plus accrued interest are
payable quarterly beginning July 15, 1994. The note holder may at any time
require Anacomp to prepay any amount of the note by issuing common stock. The
shares of common stock to be issued will equal the prepayment amount divided by
$3.57. The current outstanding note balance subject to prepayment was $2.5
million at September 30, 1995.
Anacomp has reserved 3,800,000 shares of authorized common stock for the
contingent acquisition consideration and 1,091,000 shares of authorized common
stock for the contingent prepayment of the note.
Fiscal 1993
During fiscal 1993, Anacomp acquired four micrographics service centers
(all four were merged with existing Anacomp service centers) and certain assets
of a microfilm reader maintenance services business for a total consideration of
$4.4 million, of which approximately $1.9 million has been assigned to excess of
purchase price over net assets of businesses acquired and other intangible
assets.
NOTE 8. SKC AGREEMENT:
In March 1992, Anacomp entered into a ten-year supply agreement (the
"Supply Agreement") with SKC America, Inc., a New Jersey corporation ("SKCA"),
and SKC Limited ("SKCL"), an affiliated corporation of SKCA organized pursuant
to the laws of the Republic of Korea. SKCA and SKCL are collectively referred to
as SKC. Pursuant to the Supply Agreement, Anacomp purchases substantially all of
its requirements for magnetic base polyester and coated duplicate microfilm from
SKC.
In October 1993, the Supply Agreement was extended to December 2003 and
amended to include finished microfilm products manufactured by SKC exclusively
for Anacomp. Concurrent with the modification of the Supply Agreement, SKC
purchased Anacomp's Sunnyvale, California duplicate microfilm manufacturing
operation for $900,000 payable over five years. At September 30, 1995, $720,000
was due from SKC. Costs of $3.4 million associated with this Supply Agreement
were deferred and are being amortized over the life of the Supply Agreement. The
unamortized balance at September 30, 1995 was $2.8 million.
SKC is providing Anacomp with a $25.0 million trade credit arrangement
which expires December 31, 2001. However, since Anacomp is in default under its
various debt agreements as discussed in Note 11, SKC has the option to terminate
the Supply Agreement at any time. If SKC were to terminate the Supply Agreement,
all amounts owed pursuant to the trade credit arrangement or the Supply
Agreement become immediately due and payable. The trade credit arrangement bears
interest at 2.5% over the prime rate of The First National Bank of Boston (8.75%
as of September 30, 1995). Anacomp has provided SKC a purchase money security
interest in up to $10.0 million of products purchased by Anacomp under the
Supply Agreement.
<PAGE>
NOTE 9. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30,
-------------
Estimated Useful
(Dollars in thousands) Life in Years 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land and buildings................... 10 - 40 $ 5,283 $ 7,590
Office furniture..................... 3 - 12 12,141 12,553
Manufacturing equipment and tooling.. 2 - 10 31,351 28,901
Field support spare parts............ 4 - 7 21,764 25,555
Leasehold improvements............... Term of Lease 10,782 12,826
Equipment leased to others........... 2 - 4 1,838 1,824
Processing equipment................. 3 - 12 58,722 78,094
141,881 167,343
Less accumulated depreciation and
amortization....................... (96,898) (100,574)
------- --------
$ 44,983 $ 66,769
========== ==========
</TABLE>
NOTE 10. LONG-TERM RECEIVABLES:
Long-term receivables consist of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Lease contracts receivable.................................... $15,678 $21,160
Notes receivable from asset sales............................. 2,619 1,635
Other......................................................... 411 1,609
--- -----
18,708 24,404
Less current portion.......................................... (6,386) (8,021)
------ ------
$12,322 $16,383
======= =======
</TABLE>
Other long-term receivables include $1.1 million at September 30, 1994, due
from an officer. This receivable was settled during 1995.
Lease contracts receivable result from customer leases of products under
agreements which qualify as sales-type leases. Annual future lease payments to
be received under sales-type leases are as follows:
<PAGE>
(Dollars in thousands) Year ended September 30,
---------------------------------------------------------------------------
1996.................................................... $ 7,024
1997.................................................... 5,337
1998.................................................... 3,328
1999.................................................... 1,971
2000.................................................... 736
----- ---
18,396
Less deferred interest.................................. (2,718)
------
$ 15,678
==========
NOTE 11. LONG-TERM DEBT:
Long-term debt is comprised of the following:
(Dollars in thousands) September 30, 1995 1994
- --------------------------------------------------------------------------------
Revolving Loan at 8.63% and 7.81%, respectively..... $ 31,328 $ 23,000
Multi-currency Revolving Loan at 8.44% and
7.67%, respectively............................. 28,813 20,665
Term Loans at 8.56% and 7.56%, respectively......... 13,039 40,261
Series A Senior Notes at 7.56%...................... ---- 3,548
Series B Senior Notes at 12.25%..................... 58,908 67,500
15% Senior Subordinated Notes (net of unamortized
discount of $4,619 and $5,516, respectively).... 220,281 219,384
13.875% Convertible Subordinated Debentures due
January 15, 2002 (net of unamortized discount of
$2,077 and $2,309, respectively)................ 21,155 20,922
9% Convertible Subordinated Debentures due 10,479 10,479
January 15, 1996................................
Installment note payable at 10% due July 15, 1997... 2,513 3,895
Other............................................... 3,384 2,193
----- -----
389,900 411,847
Less current portion................................ (389,900) (45,222)
-------- -------
$ ---- $ 366,625
======= ============
On April 26, 1995 the Company failed to make scheduled principal payments
of $12.5 million on its Term Loan and $7.5 million on its Series B Senior Notes.
The Company failed on May 1, 1995 to make a scheduled interest payment of $17.0
million on its 15% Senior Subordinated Notes (the "15% Notes") and on July 17,
1995 to make a scheduled interest payment of $1.6 million on its 13.875%
Convertible Subordinated Debentures. As a result of these failures and the
violation of various debt covenants, the Company is in default of all of its
debt and all such amounts are classified as current.
The Term Loan, Revolving Loans and Series B Senior Notes call for the
payment of default interest in the amount of 2% annually of the outstanding
principal. The 15% Notes call for the payment of default interest in the amount
of 1% annually of the principal amount of the Notes and for the payment of
interest on unpaid scheduled interest in the amount of 16% annually.
The Company has accrued default interest and interest on unpaid scheduled
interest as of September 30, 1995 in the amount of $3.3 million.
The Company has agreed with its Senior Creditors (collectively the Holders
of the Term Loan, Revolving Loans and Series B Senior Notes) to continue to pay
interest monthly on its Senior Debt at the regular non-default rate. At
September 30, 1995, the Company was current in its payment of such interest
obligations.
The Company also failed on October 15, 1995 to make a $345,000 payment on
the installment note payable, and on October 26, 1995 to make a scheduled Term
Loan principal payment of $539,000 and a scheduled Series B Senior Note
principal payment of $7.5 million. On October 26, 1995, the Company's Revolving
Loans became due, but were not repaid. On November 1, 1995, the Company failed
to make a scheduled interest payment on its 15% Notes in the amount of $17.2
million.
The Company is currently in negotiations with its Senior and Subordinated
Creditors to arrive at a resolution to the above described defaults and intends
to continue to defer the above payments until an agreement is reached.
The Multi-currency Revolving Loan has been borrowed by certain of the
Company's foreign subsidiaries and by the Company in U.S. Dollars and German
Marks in an equivalent amount of $28.8 million, and carries an interest rate of
275 basis points (excluding default interest) over the one-, two-, three- or
six-month reserve adjusted London Interbank Offered Rate ("LIBOR") of the
borrowed currency, selected at the Company's option.
The Revolving Loan carries an interest rate of 275 basis points (excluding
default interest) over the one-, two-, three- or six-month reserve adjusted
LIBOR, selected at the Company's option.
The Term Loans and Series A Senior Notes carry an interest rate of 275
basis points (excluding default interest) over the three-month LIBOR rate.
The Series B Senior Notes carry an interest rate of 12.25% (excluding
default interest).
Subject to certain exceptions, 100% of proceeds from the sale of assets
must be applied to repayment of the Senior Debt.
The 15% Notes were issued in 224,900 units of $1,000 and 30.351 detachable
warrants to purchase Anacomp Common Stock at $1.873 per share. Accordingly,
capital surplus was increased by $8,996,000 in fiscal 1991 with the issuance of
these warrants and the notes were recorded at their discounted value of $215.9
million and are being accreted to their face value through the original due date
of 2000.
<PAGE>
The Master Agreement, which covers the Term Loans, the Revolving Credit
Commitment, and the Series A and Series B Senior Notes, gives the Senior
Creditors a security interest in all of the assets of Anacomp; contains various
limitations on advances and investments made by the Company; prohibits or
restricts without prior approval of the Senior Creditors mergers, acquisitions,
change of control, certain types of lease transactions, payment of dividends on
Anacomp Common Stock, and voluntary payment in cash of any principal amount of
Anacomp's subordinated debt; and contains certain other restrictive covenants
related to net worth, cash flow, fixed charges, debt incurrence, capital
expenditures and the current ratio.
The Master Agreement also provided for the availability of letters of
credit under the Revolving Loan. As of September 30, 1995, letters of credit for
approximately $4.5 million have been issued. The revolving loan expired on
October 26, 1995 without the Company repaying or funding the outstanding amount
of $4.5 million in letter of credit commitments resulting in such commitments
remaining outstanding.
The 15% Notes are subordinated to the payment in full of the principal and
interest on all Senior Indebtedness. The 15% Notes rank pari passu to the
remaining 12.25% Notes and 8.25% Senior Subordinated Notes (if and when issued)
discussed in Note 12. Additionally, they are senior to the outstanding 9%
Convertible Subordinated Debentures due 1996 and the 13.875% Convertible
Subordinated Debentures due 2002.
The 15% Note Indenture contains covenants relating to net worth, and
limitations on restricted payments, liens, transactions with affiliates,
incurrence of additional debt, asset sales, acquisitions, and change of control.
The 13.875% Convertible Subordinated Debentures are convertible into
1,327,542 shares of Anacomp Common Stock at a conversion price of $17.50 per
common share, and allow optional redemption at a price of 100% at any time.
Anacomp International, N.V., a wholly-owned Netherlands Antilles subsidiary, has
issued the 9% Convertible Subordinated Debentures with an original due date of
January 15, 1996 guaranteed by Anacomp. The 9% Debentures are convertible into
663,227 shares of Anacomp Common Stock at a conversion price of $15.80 per
common share. In the event of certain changes affecting United States or
Netherlands Antilles taxation, the interest rate will be increased for any taxes
required to be withheld or, at Anacomp's option, all debentures outstanding may
be redeemed at 100% of the principal amount plus accrued interest.
NOTE 12. REDEEMABLE PREFERRED STOCK:
Anacomp issued in a private placement in 1987, 500,000 shares of 8.25%
Cumulative Convertible Redeemable Exchangeable Preferred Stock (the "Preferred
Shares"). Each Preferred Share has a preference value of $50 and is convertible
into Anacomp common stock at a conversion price of $7.50. The redeemable
preferred stock was recorded at fair value on the date of issuance less issue
costs. The excess of the preference value over the carrying value is being
accreted by periodic charges to retained earnings over the original life of the
issue.
The Preferred Shares may be redeemed by Anacomp at prices declining from
105.78% to 100% of preference value, or earlier if the price of Anacomp common
stock remains at 160% of the conversion price for 20 of 30 consecutive trading
days. On March 15, 2000 and 2001, Anacomp must redeem at the preference value
125,000 shares each year unless a sufficient number of shares has already been
redeemed or converted. All remaining outstanding shares must be redeemed by
March 1, 2002.
Dividends on the preferred shares have accrued but not paid since the March
15, 1995 quarterly dividend payment. Interest on the unpaid dividends compounds
quarterly at an annual rate of 8.25%. If the Company is in arrears for the
equivalent of four quarterly dividend payments, then two directors are to be
added to the Board of Directors. The Holders of the preferred shares have the
exclusive right to elect the two additional directors.
At any dividend payment date after March 15, 1990, Anacomp may exchange the
Preferred Shares for an equal face amount of 8.25% Senior Subordinated Notes due
March 1, 2002 (the "Exchange Debentures"). Except for certain Stockholder
rights, the Exchange Debentures will carry terms similar to the Preferred
Shares. There were no such exchanges as of September 30, 1995.
NOTE 13. CAPITAL STOCK:
Stockholder Rights Plan
The Company has a Stockholder Rights Plan which was adopted by the Board of
Directors on February 4, 1990. The Rights Plan provides that each share of the
Company's common stock has associated with it a Common Stock Purchase Right.
Each right entitles the registered Holder to purchase from the Company one-tenth
of a share of Anacomp common stock, par value $.01 per share, at a cash exercise
price of $3.20 subject to adjustment.
The rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the outstanding shares of common stock of
Anacomp, or announces a tender or exchange offer upon consummation of which such
person or group would beneficially own 30% or more of the Company's common
stock. If any person acquires 15% of Anacomp's common stock, the rights would
entitle stockholders (other than the 15% acquirer) to purchase at $32 (as such
price may be adjusted) a number of shares of Anacomp's common stock which would
have a market value of $64 (as such amount may be adjusted). In the event that
Anacomp is acquired in a merger or other business combination, the rights would
entitle the stockholders (other than the acquirer) to purchase securities of the
surviving company at a similar discount.
Anacomp can redeem the rights at $.001 per right at any time until the
tenth day following the announcement that a 15% ownership position has been
acquired. Under certain circumstances as set forth in the Rights Plan, the
decision to redeem shall require the concurrence of a majority of the Continuing
Directors (as such term is defined in the Rights Plan). The rights expire
February 26, 2000.
Preferred Stock
Anacomp has authorized 1,000,000 shares of preferred stock, of which
500,000 shares of redeemable preferred stock were issued and outstanding at
September 30, 1995 and 1994 (see Note 12).
Stock Option Plans
Anacomp's stock option plans provide that the exercise price of the options
be determined by the Board of Directors (the "Board"), and in no case be less
than 100% of fair market value at the time of grant for qualified options, or
less than the par value of the stock for non-qualified options. An option may be
exercised subject to such restrictions as the Board may impose at the time the
option is granted. In any event, each option shall terminate not later than 10
years after the date on which it is granted, except for certain non-qualified
options which shall terminate not later than 20 years after the date on which
granted.
Shares available for grant under the plans were 1,401,328, 725,827 and
895,145 at September 30, 1995, 1994 and 1993, respectively. Options outstanding,
of which 2,512,992 are exercisable as of September 30, 1995 are as follows:
Option Price
Shares Per Share
- --------------------------------------------------------------------------------
Outstanding at September 30, 1992....... 3,680,709 $1.000 - $7.875
Granted................................. 1,308,834 2.750 - 9.000
Canceled................................ (72,839) 2.000 - 7.875
Expired................................. (38,701) 2.000 - 7.875
Exercised............................... (463,475) 2.000 - 3.500
-------- ----- -----
Outstanding at September 30, 1993....... 4,414,528 1.000 - 9.000
Granted................................. 205,381 2.750 - 4.000
Canceled................................ (81,908) 1.000 - 7.875
Expired................................. (23,096) 2.000 - 7.875
Exercised............................... (306,646) 1.000 - 3.375
-------- ----- -----
Outstanding at September 30, 1994....... 4,208,259 1.000 - 9.000
Granted................................. 1,355,736 .563 - 2.500
Canceled................................(2,010,753) .563 - 4.750
Expired................................. (20,484) 2.000 - 4.500
Exercised............................... (24,863) .563 - 2.000
------- ---- -----
Outstanding at September 30, 1995....... 3,507,895 $ .563 - $ 9.000
========= ====== =======
Warrants
In October 1990, Anacomp issued 6,825,940 warrants to Holders of the 15%
Senior Subordinated Notes. Each warrant entitles the Holder to purchase one
common share at a price of $1.873 and is exercisable through November 11, 2000,
the date of expiration. Anacomp filed a shelf registration statement with
respect to the warrants which became effective on February 25, 1991.
<PAGE>
Other Items
Under an Employee Stock Purchase Plan, Anacomp may offer to sell common
stock to its employees. Purchases of these shares are made by employee
participants periodically at 85% of the market price on the date of offer or
exercise, whichever is lower.
At September 30, 1995, approximately 23.4 million shares of Anacomp common
stock were reserved for exercise of stock options, conversion of convertible
subordinated debentures, purchases by stock purchase plan participants,
conversion of preferred stock, exercise of warrants, Graham acquisition
agreement requirements and other corporate purposes.
NOTE 14. INCOME TAXES:
The components of income (loss) before income taxes and extraordinary
credit were:
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- -----------------------------------------------------------------------------
United States.............................. .....$(209,151) $7,143 $10,761
Foreign........................................... 5,825 8,212 9,730
$(203,326) $15,355 $20,491
========= ======= =======
The components of income tax expense after utilization of net operating
loss carryforwards and the adjustment of tax reserves are summarized below:
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- --------------------------------------------------------------------------------
Federal...................................$ ---- $ ---- $5,800
Foreign................................... 4,800 3,300 4,800
State..................................... ---- 300 1,900
4,800 3,600 12,500
Tax reserve adjustment........................ 1,200 (1,200) (3,700)
Deferred...................................... 29,000 6,000 ----
------ ----- ------
35,000 8,400 8,800
Extraordinary credit, reduction of income
taxes arising from carryforward of
prior year's operating losses............ ---- ---- (6,900)
------- ------ ------
$35,000 $8,400 $1,900
======= ====== ======
<PAGE>
The following is a reconciliation of income taxes calculated at the
United States federal statutory rate to the provision for income taxes:
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1995 1994 1993
- ----------------------------------------------------------------------------- ------------ ------------- ------------
<S> <C> <C> <C>
Provision for income taxes at U.S. statutory rate............... $(71,200) $ 5,374 $7,131
Increase in deferred tax asset valuation allowance.............. 51,400 ---- ----
Nondeductible amortization and write-off of intangible assets... 40,500 3,175 2,973
U.S. tax on distributed and undistributed foreign earnings...... 12,300 ---- ----
Tax reserve adjustment.......................................... 1,200 (1,200) (3,700)
State and foreign income taxes.................................. 2,800 821 2,140
Other........................................................... (2,000) 230 256
$ 35,000 $ 8,400 $8,800
</TABLE>
The Company adopted FAS 109 in the first quarter of fiscal 1994 and
recorded a deferred tax asset of $95.0 million representing the federal and
state tax savings from net operating loss carryforwards ("NOLs") and tax
credits. The Company also recorded a valuation allowance of $60.0 million
reducing the deferred tax asset to a net of $35.0 million. Recognition of the
deferred tax asset reduced goodwill by $27.0 million and provided a cumulative
effect increase to income of $8.0 million. During 1994, the net deferred tax
asset was reduced to $29.0 million, reflecting usage of the asset to reduce
income taxes payable by $6.0 million. During 1995, tax effects of future
differences and carryforwards increased from $86.0 million to $108.4 million, an
increase of $22.4 million resulting from the tax effect of the 1995 taxable loss
($5.6 million) and the tax effect of an increase in cumulative temporary
differences ($16.8 million) between income reported for financial reporting
purposes and for tax purposes. The valuation allowance was increased from $57.0
million to $108.4 million to reduce the net deferred tax asset to zero as a
result of the uncertainty associated with the utilization of these assets in
future periods due to the events described in Note 2.
The components of deferred tax assets and liabilities at September 30, 1995
and September 30, 1994 are as follows:
Net Deferred Tax Asset September 30, September 30,
(Dollars in thousands) 1995 1994
- -------------------------------------------------------------------------------
Tax effects of future tax deductible
differences related to:
Inventory reserves....................$ 5,700 $ 2,600
Depreciation.......................... 1,700 1,600
Building reserves..................... 1,800 5,000
EPA reserve........................... 2,500 2,300
Sale/leaseback of assets.............. 2,800 900
Restructuring reserves................ 8,000 ----
Asset sale............................ 3,200 ----
Capitalized software.................. 1,600 ----
Bad debt reserve...................... 2,100 ----
Other net deductible differences...... 5,500 4,100
Tax effects of future differences related to:
Undistributed foreign earnings........ (8,800) ----
Leases................................ (3,300) (4,500)
Capitalized software.................. ---- (6,000)
Net tax effects of future differences 22,800 6,000
Tax effects of carryforward benefits:
Federal net operating loss carryforwards...78,600 73,000
Federal general business tax credits....... 3,000 3,000
Foreign tax credits........................ 4,000 4,000
Tax effects of carryforwards 85,600 80,000
------ ------
Tax effects of future taxable differences 108,400 86,000
and carryforwards........................
Less deferred tax asset valuation allowance..(108,400) (57,000)
-------- -------
Net deferred tax asset........... $ ---- $ 29,000
========= ==========
At September 30, 1995, the Company has NOLs of approximately $218.0 million
available to offset future taxable income. This amount will increase to $281.0
million as certain timing differences reverse in future periods. The Company
also has tax credit carryforwards of $3.0 million available to reduce future tax
liabilities, including $1.0 million of preacquisition tax credits. The NOLs
expire commencing in 1996 ($2.0 million) with remaining amounts in various
periods through 2010. The tax credit carryforwards expire substantially in 1997.
During 1995, 1994 and 1993, the Company settled various income tax matters,
including issues associated with the 1988 Xidex acquisition. Settlement of these
issues and other considerations resulted in an unfavorable adjustment to federal
and foreign income tax reserves in 1995 of $1.2 million and favorable
adjustments in 1994 and 1993 to federal and foreign income tax reserves of $1.2
million and $3.7 million, respectively. The adjustments are reflected as a
charge or credit to income tax expense.
<PAGE>
The 1993 provision for income taxes includes an amount which is offset by
the utilization of federal and foreign NOLs. The tax benefit from utilization of
these NOLs prior to the adoption of FAS 109 is reported as an extraordinary
credit in the Consolidated Statements of Operations. The net tax provision
results from foreign and state income taxes which cannot be reduced by NOLs from
prior years.
NOTE 15. COMMITMENTS AND CONTINGENCIES:
Anacomp has commitments under long-term operating leases, principally
for building space and data service center equipment. Lease terms generally
cover periods from five to twelve years. The following summarizes the future
minimum lease payments under all noncancelable operating lease obligations,
including the unfavorable lease commitments and vacant facilities discussed in
Note 1, which extend beyond one year:
(Dollars in thousands) Year ended September 30,
- --------------------------------------------------------------------
1996.....................................................$23,508
1997..................................................... 18,822
1998..................................................... 15,540
1999..................................................... 7,789
2000..................................................... 4,558
2001 and thereafter...................................... 28,985
- ---- ------
99,202
Lessliabilities recorded as of September 30, 1995
related to unfavorable lease commitments and future
lease costs for vacant facilities........................ (6,664)
$ 92,538
The total of future minimum rentals to be received under noncancelable
subleases related to the above leases is $1.9 million. No material losses in
excess of the liabilities recorded are expected in the future.
Anacomp leases certain equipment installed in its data service centers. As
a result of the Company's default under its debt obligations, as more fully
discussed in Notes 2 and 11, Anacomp is in default under these lease agreements
whereby the lessors have the right to require that Anacomp prepay the remaining
future lease payments. Because the equipment lease payments have been made and
are expected to be made in a timely manner, the Company does not expect that the
lessors will assert this right under these lease agreements.
In November 1993, Anacomp and Pennant Systems, a division of IBM, announced
a joint effort to develop software which will allow Anacomp's XFP 2000 to
process and image IBM Advanced Function Presentation ("AFP") formatted data.
This program resulted in the XFP 2000 being able to interpret AFP data streams,
including those containing fonts, logos, signatures and other images on
microfiche.
As consideration for the development of the AFP, Anacomp paid Pennant
Systems a development fee of $6.5 million. Anacomp must also pay Pennant Systems
minimum annual royalty payments for the licensed system installations for six
years. The minimum royalty payments for years one through three are $1.5 million
per year and $1.0 million per year for years four through six. In addition,
Anacomp must pay Pennant Systems for ongoing system support which began in
December 1995 and will continue for 10 years. The minimum system support
payments over the 10 year period are $5.7 million. As of September 30, 1995,
Anacomp established a reserve of $7.7 million for future payments to Pennant
Systems for software royalty and systems support obligations which are not
recoverable as more fully discussed in Note 1.
<PAGE>
The Company sold $10.5 million and $5.9 million of lease receivables in the
years ended September 30, 1995 and 1994, respectively. Under the terms of the
sale, the purchasers have recourse to the Company should the receivables prove
to be uncollectible. The amount of recourse at September 30, 1995 is $5.5
million.
Anacomp also is involved in various claims and lawsuits incidental to its
business and believes that the outcome of any of those matters will not have a
material adverse effect on its consolidated financial position or results of
operations.
NOTE 16. SUPPLEMENTARY INCOME STATEMENT INFORMATION:
Year ended September 30, 1995 1994 1993
(Dollars in Thousands)
- -------------------------------------- ------------ ------------- ------------
Maintenance and repairs................ $16,609 $12,759 $11,765
Depreciation and amortization:
Property and equipment.............. 19,406 17,524 17,149
Deferred software costs............. 3,449 3,673 2,873
Intangible assets................... 13,143 13,418 12,984
Rent and lease expense................. 23,755 19,371 19,312
NOTE 17. OTHER ACCRUED LIABILITIES:
Other accrued liabilities consist of the following:
(Dollars in thousands) Year ended September 30, 1995 1994
- -------------------------------------------------------- ------------ ----------
Deferred profit on sale/leaseback
transactions.........................................$14,559 $9,165
EPA reserve............................................... 7,350 6,420
Software license reserve.................................. 7,672 ----
Other..................................................... 31,006 19,442
------ ------
$60,587 $35,027
======= =======
Xidex was designated by the United States Environmental Protection Agency
("EPA") as a potentially responsible party for investigatory and cleanup costs
incurred by state and federal authorities involving locations included on a list
of EPA's priority sites for investigation and remedial action under the federal
Comprehensive Environmental Response, Compensation, and Liability Act. The EPA
reserve noted above relates to the Company's estimated liability for cleanup
costs for the aforementioned locations and other sites, both foreign and
domestic. The Company's estimate of the Debtors' contingent liability for such
cleanup costs is $6.5 million, and such amount is included in the Company's
estimate of Class 7 Claims. In particular, the Company's estimates of its
contingent liabilities for the sites described on Schedule II to this Disclosure
Statement are as follows: Resolve ($471,000); Union Chemical ($50,000); Lorentz
Drum ($65,000); Solvent Recovery Services ($200,000); Santa Clara ($100,000);
Holyoke ($2,075,000); Sunnyvale, Soquel ($3,796,483); Sunnyvale, Pastoria
($185,162); and Omaha ($25,000). No material losses are expected in excess of
the liabilities recorded above.
NOTE 18. EARNINGS (LOSS) PER SHARE:
The computation of earnings (loss) per share is based upon the weighted
average number of common shares outstanding during the period plus (in periods
in which they have a dilutive effect) the effect of common shares contingently
issuable, primarily from stock options, exercise of warrants and acquisitions.
Fully diluted earnings (loss) per share also reflect additional dilution related
to stock options due to the use of the market price at the end of the period,
when higher than the average price for the period.
The weighted average number of common and common equivalent shares used to
compute earnings per share is:
<TABLE>
<CAPTION>
Year ended September 30, 1995 1994 1993
- ------------------------------ ----------------- ---------------- ------------ -----------
<S> <C> <C> <C>
For earnings (loss) per common and common
equivalent share.............................. 46,061,818 47,335,723 42,749,933
For earnings (loss) per share assuming 46,061,818 47,534,985 42,964,380
full dilution.................................
</TABLE>
NOTE 19. INTERNATIONAL OPERATIONS:
Anacomp's international operations are conducted principally through
subsidiaries, a substantial portion of whose operations are located in Western
Europe. Information as to U.S. and international operations for the years ended
September 30, 1995, 1994 and 1993 is as follows:
1995
<TABLE>
<CAPTION>
(Dollars in thousands) U.S. International Elimination Consolidated
- -------------------------------------- ---------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Customer sales...................... $ 404,239 $ 186,950 $ ---- $ 591,189
Inter-geographic.................... 24,973 ---- (24,973) ----
------ -------- ------- ---------
Total sales......................... $ 429,212 $ 186,950 $ (24,973) $ 591,189
========= ========== ========== ==========
Operating income (loss)............. $(135,811) $ 7,622 $ ---- $(128,189)
========== =========== ========== ==========
Identifiable assets................. $ 350,310 $ 70,719 $ ---- $ 421,029
========== ============ ========== ===========
1994
Customer sales...................... $ 421,339 $ 171,260 $ ---- $ 592,599
Inter-geographic.................... 23,726 ------ (23,726) ----
------ -------- ------- ---------
Total sales......................... $ 445,065 $ 171,260 $ (23,726) $ 592,599
========= ========== ========== ==========
Operating income (loss)............. $ 60,794 $ 18,783 $ ---- $ 79,577
========== =========== ========== ==========
Identifiable assets................. $ 590,743 $ 67,896 $ ---- $ 658,639
========== ============ ========== ===========
1993
Customer sales...................... $ 414,726 $ 175,482 $ ---- $ 590,208
Inter-geographic.................... 26,101 ------ (26,011) ----
------ -------- ------- ---------
Total sales......................... $ 440,827 $ 175,482 $ (26,101) $ 590,208
========= =========== ========== ==========
Operating income (loss)............. $ 66,883 $ 21,751 $ ---- $ 88,634
========== =========== ========== ==========
Identifiable assets................. $ 570,863 $ 72,685 $ ---- $ 643,548
========== =========== ========== ===========
</TABLE>
<PAGE>
NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
(Dollars in thousands, except per share First Quarter Second Quarter Third Quarter Fourth Quarter
amounts)
- --------------------------------------------- ----------------- ------------------- ----------------- -------------------
Fiscal 1995
<S> <C> <C> <C> <C>
Revenues................................ $ 151,812 $ 151,489 $ 148,933 $ 138,955
Gross profit............................ 42,089 39,667 39,147 29,619
Net income (loss)....................... 281 (7,664) (138,829) (92,114)
Preferred stock dividends and discount
accretion........................... 540 539 540 539
--- --- --- ---
Net loss to common Stockholders......... $ (259) $ (8,203) $ (139,369) $ (92,653)
========== ========= ========== ==========
Earnings (loss) per common share
(primarily and fully diluted):
Net loss to common Stockholders......... $ (.01) $ (.18) $ (3.02) $ (2.01)
Fiscal 1994
Revenues................................ $ 136,949 $ 146,569 $ 145,581 $ 163,500
Gross profit............................ 41,337 42,049 40,944 47,786
Income before cumulative effect of
accounting change................... 1,401 942 2,185 2,427
Cumulative effect on prior years of a
change in accounting for
income taxes........................ 8,000 ----- ------ ------
----- ----- ------ ------
Net income.............................. 9,401 942 2,185 $ 2,427
Preferred stock dividends and discount
accretion........................... 540 539 540 539
--- --- --- ---
Net income available to common
Stockholders........................ $ 8,861 $ 403 $ 1,645 $ 1,888
========== ========== ========== ==========
Earnings per common share
(primarily and fully diluted):
Income before cumulative effect of
accounting change (net of
preferred stock dividends)....... $ .02 $ .01 $ .03 $ .04
Net income available to common
Stockholders........................ .20 .01 .03 .04
</TABLE>
<PAGE>
NOTE 21. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES:
The following is a summary of activity in the Company's valuation and
qualifying accounts and reserves for the years ended September 30, 1995, 1994
and 1993:
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning of costs and end of period
Description period expenses Deductions
- --------------------------------------------------- -------------- --------------- -------------- --------------
(Dollars in thousands) Year ended September 30, 1995:
<S> <C> <C> <C> <C>
Allowance for doubtful accounts............ $ 3,550 $ 4,670 $ 853[1] $ 7,367
========== ========== ========= = ==========
Year ended September 30, 1994:
- -----------------------------
Allowance for doubtful accounts............ $ 4,245 $ (268) $ 427[1] $ 3,550
========== ========== ========= = ==========
Year ended September 30, 1993:
- -----------------------------
Allowance for doubtful accounts............ $ 7,365 $ 669 $ 3,789[1] $ 4,245
========== ========== ========= = ==========
<FN>
[1] Uncollectible accounts written off, net of recoveries.
</FN>
</TABLE>
NOTE 22. SUBSEQUENT EVENTS:
Subsequent to September 30, 1995 Anacomp sold its Image Conversion Services
Division ("ICS") for approximately $13.5 million which resulted in a net gain to
the Company of approximately $6.2 million. The proceeds from this sale were used
to reduce the principal balance on certain senior debt. The ICS division
performed source document microfilm services at several facilities around the
country generating approximately $20.0 million of revenues per year.
On January 5, 1996, the Company filed a prenegotiated Debtors Joint Plan of
Reorganization with the U.S. Bankruptcy Court. See Note 2 for further
discussion.
<PAGE>
ANACOMP, INC.
IMPORTANT
Any Holder of Claims or Interests solicited pursuant to this Disclosure
Statement who wishes to vote with respect to the Plan should complete and sign
the applicable Ballot or Master Ballot in accordance with the instructions set
forth in this Disclosure Statement and return such Ballot or Master Ballot in
accordance with the instructions set forth thereon.
The Ballot Agent:
LOGAN & COMPANY, INC.
615 Washington Street
Hoboken, NJ 07030
(201) 798-1031
By Mail/Hand/Overnight Delivery:
615 Washington Street
Hoboken, NJ 07030
The Information Agent:
MORROW & CO., INC.
909 Third Avenue
New York, NY 10022
ADDITIONAL COPIES
Requests for additional copies of this Disclosure Statement should be
directed to the Ballot Agent. You may also contact your local broker, dealer,
commercial bank or trust company for assistance concerning the solicitation made
pursuant to this Disclosure Statement.
<PAGE>
SCHEDULE I
LITIGATION MATTERS
AS DEFENDANT:
CASE NAME
1. Lopez v. Anacomp, Inc.
(filed in Supreme Court,
Bronx County, NY)
2. In re: Xidex Corp. (report
filed 11/9/92, Regulatory
Audit Division, U.S. Customs
Service, Department of the
Treasury)
3. Wishart v. Anacomp. Inc.
(filed 8/27/93 in Superior
Court, Hartford, CT)
4. Colleen Morton v. Anacomp
(filed 1/17/94 in State
Court, San Jose, CA)
5. Phillip Ramirez v. Anacomp
(filed 1/20/94 before
Workers Comp Appeals Board,
CA)
6. Fred Lucas v. Dysan Corp.
(filed 5/2/94 before
Workers Comp Appeals Board,
CA)
7. Estate of Faucett v.
Anacomp, AmSouth Bank
(filed 3/23/94 in
Circuit Court, Jefferson
County, Birmingham, AL)
<PAGE>
8. Victorio S. Solomon v.
Anacomp (filed 5/11/95 in
Superior Court, King County,
Washington)
9. Transamerica Occidental Life
Ins. Co. v. Anacomp, Inc.
(filed 4/24/95 in Superior
Court, Los Angeles)
10 Raymond Hansen d/b/a New
England Dataform v. Anacomp
Inc. (filed 7/14/95 in
Superior Court, Bridgeport
CT)
11 Richard Dungey v. Anacomp,
Inc. (filed 10/25/95 in
U. S. District Court, Western
District of Oklahoma)
12 Robert Stewart v. Anacomp
Magnetics, a division of
Anacomp, Inc. (filed
12/4/95 in Court of Common
Pleas, Hamilton County, OH)
13 Gloria Judkins v. Anacomp,
Inc. (filed 11/95 in Superior
Court, New Britain, CT)
14 Jodi Simonson v. Anacomp,
Inc. (served on Anacomp in
11/95, not yet filed in court
in Minnesota)
15 People of the State of
California v. Anacomp, Inc.
(filed 1/5/96 in Superior
Ct., Alameda County, CA)
16 Carol Force v. Daniel Young
et al. (filed 12/28/95 in
Superior Court, New Britain,
CT)
<PAGE>
17 Intercargo Insurance and
Old Republic Insurance v.
Anacomp, Inc. (filed
11/8/95 in U.S. District
Court, Northern District
of California)
AS PLAINTIFF:
CASE NAME
1. Anacomp v. Contract
Microfilm, Inc. (filed
10/22/93 in 73rd Judicial
District, Bexar County, TX)
2. Anacomp v. Complete Date
Services, Inc. (filed 6/28/91
in U.S. District Court,
Northern District of Texas)
3. Anacomp, et al. v.
Churchill Truck Lines, Inc.
(filed with Interstate
Commerce Commission)
4. Anacomp, Inc. v. SRH. and
Girard Davis (District
Court, Colorado Springs)
5. Anacomp v. Bayer Corp.
d/b/a Agfa division of Miles
(filed 1/26/96 in U.S.
District Court, Atlanta)
6. Anacomp v. COM Products, Inc.
and Fuji Photo Film (filed
1/26/96 in U.S. District
Court, Atlanta)
7. Anacomp v. Fuji Photo Film
(filed 1/31/96 in U.S.
District Court, Atlanta)
<PAGE>
OUTSTANDING DISCRIMINATION CHARGES BEFORE EEOC OR STATE AGENCY:
1. Shannon Clark, EEOC, St. Louis.
Sex discrimination alleged.
2. Katherine Bagley, Connecticut Commission on Human Rights, Hartford.
Disability discrimination alleged.
3. Beverly Elder, Nevada Equal Rights Commission, Las Vegas.
Sex discrimination and retaliation alleged.
4. David Hoopes, EEOC, Atlanta.
Age and disability discrimination alleged.
5. Sheree Roper, EEOC, Atlanta.
Sex discrimination and retaliation alleged.
6. Margarita Donahue, DFEH, San Jose.
Sex discrimination alleged.
LIST OF ENVIRONMENTAL LAWSUITS AND ADMINISTRATIVE PROCEEDINGS PENDING AGAINST
ANACOMP
LAWSUITS
1. People of the State of California vs. Anacomp, Inc. Filed January 5, 1996,
Alameda County Superior Court, Case No. 761576-0. Alleged violations of state
hazardous waste laws. (Soquel, Sunnyvale, California)
2. People of California vs. Xidex Corporation, Judgement Pursuant to Stipulation
Case No. 619023. Filed December 31, 1986, Superior Court of Santa Clara.
(Pastoria, Sunnyvale, California)
SUPERFUND CASES
1. Resolve Site, Massachusetts: Resolve Consent Decree; Civil Action Nos.
CA89-0306-S and CA89-0307-S.
2. Cannons Site, Massachusetts: Administrative Order by Consent, Docket No.
1-87-1094.
3. Ace Autobody (Eastern Chemical): Consent Decree: Superior Court Civil Action
Number 87-5777.
4. Solvent Recovery Services, Connecticut: Notice of Potential Liability dated
June 11, 1992.
<PAGE>
5. Lorentz Barrel and Drum, California: Administrative order on Consent, Order
No. 92-29 dated October 23, 1992.
6. Union Chemical, South Hope, Maine: Section 3007 letter dated November 30,
1990.
GROUNDWATER CASES
1. 305 Soquel Way, Sunnyvale, California: Regional Water Quality Control Board
Order 87-033.
2. 195 Appleton Street, Holyoke, Massachusetts: Notice of Responsibility letter
from the Massachusetts Department of Environmental Quality Engineering dated
February 12, 1990. Tier II Permit dated January 6, 1996.
<PAGE>
SCHEDULE II
ENVIRONMENTAL RESERVE
Superfund Sites
Resolve Site
Xidex Corporation, acquired by Anacomp in 1988, operated a microfilm coating
plant in Holyoke Massachusetts from the mid 1970's to the early 1980's. During
that time hazardous waste was shipped off-site to disposal facilities and those
disposal facilities became Environmental Protection Agency Superfund sites.
Xidex was held jointly liable for cleanup of the Resolve Chemical Superfund
Site. Anacomp signed a consent agreement with the Environmental Protection
Agency for the site cleanup and restoration of the Resolve Superfund site. The
reserve amount is considered accurate and is based upon the latest estimates
from the Resolve Site Group Executive Committee.
Union Chemical
The Holyoke facility also shipped hazardous waste to Union Chemical for
disposal. This facility is also an Environmental Protection Agency Superfund
site. Anacomp is held jointly liable for the site and has signed a consent
agreement with the Environmental Protection Agency for the site cleanup. The
reserve amount is based upon Environmental Protection Agency and Working Group
estimates.
Lorentz Barrel and Drum
Xidex facilities located in Santa Clara and Sunnyvale, California shipped empty
drums to Lorentz Barrel and Drum Company from 1980 to 1989. This site is now a
Superfund site and Xidex was named a Potentially Responsible Party (PRP) by the
Environmental Protection Agency. Anacomp is currently pursuing a de minimis
settlement with the Environmental Protection Agency. The reserve amount is based
upon a proposed settlement offer from the Environmental Protection Agency and
DTSC.
Solvent Recovery Services
The Xidex facility in Holyoke shipped solvents for recycling and disposal to
Solvent Recovery Services (SRS) in Southington, Connecticut. The SRS is now a
Superfund site. Xidex was named in PRP in 1992. The reserve amount is based upon
Xidex's percent of total materials shipped to the site and projected cleanup
costs.
<PAGE>
Holyoke
Soil and Groundwater Investigation and Remediation
Releases from product storage and waste underground storage tanks impacted
shallow groundwaters at the Holyoke facility. The underground storage tanks were
removed in 1988 (some tanks were abandoned in place with the consent of the
local fire department). Groundwater investigation conducted between 1989 and
1994 determined that the groundwater contains elevated levels of volatile
organic compounds and metals. Remediation of soils and groundwater will be
required.
Anacomp is currently conducting a risk assessment of the facility, which will be
followed by the design of a remediation system. The reserve amounts are based
upon estimates prepared by the consulting firm of ICF Kaiser Engineers and
Groundwater Technology, Inc.
Soquel Facility, Sunnyvale, California
Replacement of Groundwater Treatment System
Groundwater at the facility was impacted by seven volatile organic compounds.
The facility operated a groundwater treatment system from 1987 to 1992. The
treatment system must be replaced. The reserve amount is based upon an estimate
prepared by the consulting firm of Wahler Associates (now known as RUST) for the
construction of a biological treatment system.
Groundwater Treatment and Operation.
The new treatment system will require operation and maintenance. The reserve
amount is an estimate of operation and maintenance costs for an estimated period
of 5 to 8 years. The reserve cost was estimated based upon communications with
Wahler Associates and EOA.
Groundwater Monitoring and Reporting
The California Regional Water Quality Control Board requires quarterly
groundwater monitoring and reporting. The reserve includes the cost of this
monitoring for an anticipated 8 years. The reserve also includes money for
monitoring in accordance with National Pollutant Discharge Elimination System
(NPDES) permit requirements. Reserve costs were estimated based upon
communications with Wahler Associates, EOA and ICF Raiser Engineers.
Closure of Monitoring Wells
At the end of the groundwater project, Anacomp will be required to properly
close the existing monitoring and extraction wells. This requires pulling the
well casing, overdrilling the existing hole and backfilling the hole with
bentonite grout. This reserve covers the cost of closing all extraction and
monitoring wells at the site. This reserve cost was estimated based upon closure
of wells at another site in California.
RCRA Closure
The facility is classified by the Environmental Protection Agency and the
California Department of Toxic Substances Control (DTSC) as a hazardous waster
treatment, storage and disposal facility (TSDF) pursuant to Resource
Conservation and Recovery Act (RCRA) regulations. This status is related to
Xidex's operation of the facility, during which time hazardous wastes were
stored longer than 90 days.
RCRA regulations require the facility to have a Closure Plan and Closure Cost
Estimates for remediating the facility at closure. The reserve for the RCRA
closure is based upon regulatory requirements relating to the Closure Plan and
Closure Cost Estimates. Even though the facility is closed, the requirement
continues until the agencies approve the Closure Plan.
The facility is now in the process of Closure. Closure costs were developed by
RUST and approved by DTSC.
Coating Room Release
Aancomp discovered a release had occurred in the coating room at the facility in
1994. An investigation of the release defined the depth and radius of the
release. The reserve is based upon engineering consulting estimates for
remediation of the release.
Pastoria Facility, Sunnyvale, California
Mix Room Release and Remediation
In 1990 Anacomp discovered a release of solvents to soils beneath the room
referred to as the Magnetics Mix Room. Xidex used this room to mix coatings for
flexible magnetic media. Investigation of the soils revealed that several
organic chemicals were present in the soils beneath the room, mostly to a depth
of 10 feet below ground surface. The release was investigated and in 1993
Anacomp installed a soil vapor extraction system to remediate the release. The
reserve includes funds for the operation and maintenance of the soil vapor
extraction system and preparation of quarterly reports submitted to the Regional
Water Quality Control Board. The reserve amount is based upon actual operating
costs.
Potential Fines
The Pastoria Facility is part of the facility regulated by the Environmental
Protection Agency and DTSC as a TSDF. This reserve was established as a
contingency for possible fines associated with allegations by DTSC of past
activities related to the operation of the facility. The reserve amount is based
upon an offer made by DTSC and negotiation discussions.
<PAGE>
APPENDIX I
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- --------------------------------------
In re:
KALVAR MICROFILM, INC., Chapter 11
ANACOMP, INC., ANACOMP
INTERNATIONAL N.V., Case No. 96-15 (HSB)
FLORIDA A A C CORPORATION
and XIDEX DEVELOPMENT COMPANY, Jointly Administered
- --------------------------------------
DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION
Dated: March 28, 1996
KALVAR MICROFILM, INC., ANACOMP, INC., ANACOMP INTERNATIONAL N.V., FLORIDA
A A C CORPORATION and XIDEX DEVELOPMENT COMPANY, Debtors and
Debtors-in-Possession (collectively, the "Debtors") in the above-captioned
Chapter 11 cases, propose the following Second Amended Joint Plan of
Reorganization (the "Plan") pursuant to Section 1121(a) of Title 11 of the
United States Code, as amended.
<PAGE>
TABLE OF CONTENTS
I DEFINITIONS AND RULES OF CONSTRUCTION......................................1
Administrative Claim...................................................1
Allowed................................................................1
Allowed Claim..........................................................1
Allowed Interest.......................................................1
Amended Anacomp Articles...............................................1
Amended Anacomp Bylaws.................................................1
Amended and Restated Master Agreement..................................1
Anacomp................................................................2
Anacomp Debentures Guarantee...........................................2
Anacomp Guarantee......................................................2
Anacomp International..................................................2
Bankruptcy Code........................................................2
Bankruptcy Court.......................................................2
Bankruptcy Rules.......................................................2
Business Day...........................................................2
Carlisle Note..........................................................2
Carlisle Note Claim....................................................2
Cash...................................................................2
Cash Collateral Amount.................................................2
Cash Collateral Order..................................................3
Cash Sweep Amount......................................................3
Cedel..................................................................3
Chapter 11.............................................................3
Chapter 11 Cases.......................................................3
Chapter 11 Schedules...................................................3
Citibank Agency Amount.................................................3
Citibank Letter Agreement..............................................3
Claim..................................................................3
Class..................................................................3
Collateral Agent.......................................................3
Confirmation...........................................................4
Confirmation Date......................................................4
Confirmation Hearing...................................................4
Confirmation Order.....................................................4
Consolidated Claim.....................................................4
Consolidated Debtors...................................................4
Consolidated Estates...................................................4
Credit Agreement.......................................................4
Creditor...............................................................4
Creditors' Committee...................................................4
Debt Security Claims...................................................4
Debtor or Debtors......................................................4
Disbursing Agent.......................................................4
Disclosure Statement...................................................4
Disputed Claim.........................................................4
Disputed Interest......................................................5
Distribution Record Date...............................................5
Domestic Subsidiaries..................................................5
Effective Date.........................................................5
<PAGE>
Employee Options.......................................................5
Encumbrance............................................................5
Entity.................................................................5
Estates................................................................5
Euroclear..............................................................6
File, Filed, or Filing.................................................6
Final Order............................................................6
Florida A A C..........................................................6
Foreign Subsidiaries...................................................6
General Unsecured Claim................................................6
Holder.................................................................6
Impaired Claim.........................................................7
Indenture Trustee Charging Lien........................................7
Indenture Trustee Claim................................................7
Intercompany Claim.....................................................7
Interest...............................................................7
Kalvar.................................................................7
Lending Parties........................................................7
Letter of Credit Cash Amount...........................................7
Lien...................................................................7
Limited Bar Date.......................................................7
Limited Bar Date Order.................................................7
Merged Subsidiaries....................................................8
Miscellaneous Secured Claim............................................8
Multicurrency Borrowers................................................8
Multicurrency Lenders..................................................8
Multicurrency Revolver Loan Agreement..................................8
New Carlisle Note......................................................8
New Common Stock.......................................................8
New Indenture Trustees.................................................8
New LC Facility........................................................8
New Management Incentive Plan..........................................8
New Senior Secured Notes...............................................8
New Senior Secured Notes Indenture.....................................8
New Senior Secured Notes Indenture Trustee.............................9
New Senior Secured Notes Security and Pledge Agreement.................9
New Senior Subordinated Notes..........................................9
New Senior Subordinated Notes Indenture................................9
New Senior Subordinated Notes Indenture Trustee........................9
New Warrant Agent......................................................9
New Warrant Agreement..................................................9
New Warrants...........................................................9
Old Collateral Documents...............................................9
Old Common Stock......................................................10
Old Credit Facilities.................................................10
Old Credit Facilities Note............................................10
Old Credit Facilities Secured Claim...................................10
Old Indentures........................................................10
Old Indenture Trustees................................................10
Old 9% Subordinated Debentures........................................10
Old 9% Subordinated Debentures Claim..................................10
Old 9% Subordinated Debentures Indenture..............................10
Old 9% Subordinated Debentures Indenture Trustee......................11
<PAGE>
Old Preferred Stock...................................................11
Old Security or Old Securities........................................11
Old Senior Notes......................................................11
Old Senior Notes Secured Claim........................................11
Old Senior Subordinated Notes.........................................11
Old Senior Subordinated Notes Claim...................................11
Old Senior Subordinated Notes Indenture...............................11
Old Senior Subordinated Notes Indenture Trustee.......................11
Old Subordinated Debentures...........................................11
Old Subordinated Debentures Claims....................................11
Old 13.875% Subordinated Debentures...................................12
Old 13.875% Subordinated Debentures Claim.............................12
Old 13.875% Subordinated Debentures Indenture.........................12
Old 13.875% Subordinated Debentures Indenture Trustee.................12
Old Transfer Agent....................................................12
Old Warrants..........................................................12
Ordinary Course Professionals Order...................................12
Petition Date.........................................................12
Plan..................................................................12
Plan Documents........................................................12
Plan Securities.......................................................12
Post-Petition Trade Claim.............................................12
Premium Amount........................................................13
Priority Claim........................................................13
Priority Tax Claim....................................................13
Professional..........................................................13
Pro Rata..............................................................13
Registration Rights Agreement.........................................13
Rejection Claim.......................................................13
Releasees.............................................................13
Reorganized Anacomp...................................................13
Reorganized Florida A A C.............................................13
Revolving Loan Agreement..............................................13
Secured Claim.........................................................14
Series B Note Purchase Agreement......................................14
Series B Purchasers...................................................14
Shelf Registration Statement..........................................14
Subsidiaries..........................................................14
Term Loan Agreements..................................................14
Trade Claim...........................................................14
Treasury Rate.........................................................14
Unimpaired Claim......................................................14
Unimpaired Excepted Claim.............................................14
Unimpaired Non-Excepted Claim.........................................15
Unofficial Senior Subordinated Committee..............................15
Xidex.................................................................15
Interpretation and Rules of Construction..............................15
Other Terms...........................................................15
Headings..............................................................15
Incorporation of Exhibits.............................................15
<PAGE>
II CLASSIFICATION OF CLAIMS AND INTERESTS...................................15
2.1 Pre-Petition Claims and Equity Interests Classified..................15
2.2 Administrative Claims and Priority Tax Claims........................16
2.3 Claims Against and Interests in the Debtors..........................16
III IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS.......17
3.1 Impaired Classes of Claims...........................................17
3.2 Unimpaired Classes of Claims and Equity Interests....................17
3.3 Impairment Controversies.............................................17
IV TREATMENT OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS......................17
4.1 Fees of Professionals and Claims for Substantial Contribution........17
4.2 Ordinary Course Liabilities..........................................17
4.3 Priority Tax Claims..................................................17
V TREATMENT OF CLAIMS AND INTERESTS.........................................18
5.1 Class 1. Priority Claims.............................................18
5.2 Class 2. Old Credit Facilities Secured Claims and Old Senior Notes
Secured Claims.............................................18
5.3 Class 3. Miscellaneous Secured Claims...............................19
5.4 Class 4. Carlisle Note Claim........................................19
5.5 Class 5. Old Senior Subordinated Notes Claims.......................19
5.6 Class 6. Old Subordinated Debentures Claims.........................19
5.7 Class 7. General Unsecured Claims...................................20
5.8 Class 8. Old Preferred Stock........................................20
5.9 Class 9. Old Common Stock...........................................20
5.10 Class 10. Claims for Issuance of Old Common Stock..................21
5.11 Class 11. Intercompany Claims......................................21
5.12 Allocation Between Principal and Accrued Interest...................21
VI MEANS FOR EXECUTION OF THE PLAN..........................................21
6.1 General Corporate Matters............................................21
Cancellation of Old Securities, Instruments and Agreements Relating
to Impaired Claims and Interests......................................21
Effectiveness of Securities, Instruments and Agreements...............22
Corporate Action......................................................22
Management and Board of Directors.....................................22
Substantive Consolidation.............................................22
Extinguishment of Guarantees..........................................23
Continued Corporate Existence and Vesting of Assets in Reorganized
Anacomp...............................................................23
Continued Corporate Existence and Vesting of Assets in Reorganized
Florida A A C.........................................................23
6.2 Distributions........................................................24
Generally.............................................................24
Distributions to Holders of Allowed Old Credit Facilities
Secured Claims........................................................24
Distributions to Holders of Allowed Debt Security Claims..............24
Distributions to Holders of Other Claims and Interests................24
Compensation for Services Related to Distribution.....................25
Delivery of Distributions and Undeliverable or Unclaimed
Distributions.........................................................25
Distribution Record Date..............................................26
Means of Cash Payments................................................27
Fractional Plan Securities............................................27
Surrender of Canceled Instruments or Securities.......................28
Fees and Expenses of Senior Lenders...................................29
Setoff................................................................29
6.3 Indenture Trustee Charging Liens.....................................29
6.4 Retiree Benefits.....................................................30
6.5 Exemptions from Securities Laws and Shelf Registration...............30
<PAGE>
VII ACCEPTANCE OR REJECTION OF THE PLAN.....................................30
7.1 Classes Entitled to Vote.............................................30
7.2 Class Acceptance Requirement.........................................30
7.3 Confirmation Notwithstanding a Rejection of Plan by an
Impaired Class.......................................................31
VIII PROCEDURE FOR RESOLVING DISPUTED CLAIMS................................31
8.1 Unimpaired Excepted Claims Generally.................................31
8.2 Unimpaired Non-Excepted Claims Generally.............................32
8.3 Rejection Claims.....................................................33
8.4 Disputed Claims......................................................33
8.5 Authority to Oppose Claims...........................................33
8.6 Treatment of Disputed Claims and Disputed Interests..................33
IX EXECUTORY CONTRACTS......................................................33
9.1 General Treatment....................................................33
9.2 Bar to Rejection Damages.............................................34
9.3 Cure of Defaults for Executory Contracts and
Unexpired Leases.....................................................34
X CONDITIONS TO CONFIRMATION AND THE OCCURRENCE OF
THE EFFECTIVE DATE........................................................34
10.1 Conditions to Confirmation..........................................34
10.2 Conditions to the Occurrence of the Effective Date..................34
XI EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN........................35
11.1 Discharge of Claims.................................................35
11.2 Discharge of Debtors................................................35
11.3 Survival of Indemnification Claims and Obligations..................36
11.4 Termination of Claims of Contractual Subordination Against
Holders of Old Senior Subordinated Notes Claims36
11.5 Termination of Claims of Contractual Subordination Against
Holders of Old Subordinated Debentures Claims.36
<PAGE>
XII RELEASES AND INJUNCTION.................................................36
12.1 Releases............................................................36
12.2 No Liability for Solicitation or Participation......................37
12.3 Limitation of Liability.............................................37
12.4 General Injunction..................................................38
12.5 Section 346 Injunction..............................................38
XIII RETENTION OF JURISDICTION..............................................38
13.1 Scope of Jurisdiction...............................................38
13.2 Failure of the Bankruptcy Court to Exercise Jurisdiction............39
XIV MISCELLANEOUS PROVISIONS................................................40
14.1 Compliance With Tax Requirements....................................40
14.2 Discharge of Old Indenture Trustees.................................40
14.3 Post-Effective Date Fees and Expenses of Professionals..............40
14.4 Vesting of Property of the Debtors..................................40
14.5 Causes of Action....................................................41
14.6 Assumption of Liabilities...........................................41
14.7 Other Documents and Actions.........................................41
14.8 Section 1146 Exemption..............................................41
14.9 Binding Effect......................................................42
14.10 Governing Law......................................................42
14.11 Filing of Additional Documents.....................................42
14.12 Dissolution of Creditors' Committee................................42
14.13 Amendments and Modifications.......................................42
14.14 Revocation.........................................................43
14.15 Severability.......................................................43
14.16 Notices............................................................43
14.17 De Minimis Distributions...........................................44
14.18 Plan and Plan Documents Control....................................44
EXHIBITS
1 Form of Amended Anacomp Articles
2 Form of Amended Anacomp Bylaws
3 Form of New Senior Secured Notes Indenture
4 Form of New Senior Secured Notes Security and Pledge Agreement
5 Form of New Senior Subordinated Notes Indenture
6 Form of New Warrant Agreement
7 Form of New Warrants
8 Form of Registration Rights Agreement
ANNEXES
A Summary of Terms of New Senior Secured Notes
B Summary of Terms of New Senior Subordinated Notes
C List of Merged Subsidiaries
<PAGE>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
The following terms used in the Plan shall, unless the context otherwise
clearly requires, have the meanings specified below, and such meanings shall be
equally applicable to both the singular and plural forms of such terms.
1.1 "Administrative Claim" shall mean a Claim or expense allowed under
Section 503(b) of the Bankruptcy Code that is entitled to priority under Section
507(a)(1) of the Bankruptcy Code, including, without limitation, amounts
required to be paid in connection with any assumption of executory contracts and
unexpired leases and all Post-Petition Trade Claims.
1.2 "Allowed" shall mean with respect to any Claim or Interest, a Claim or
Interest as to which no objection to the allowance thereof, or motion to
estimate for purposes of allowance, shall have been Filed on or before any
applicable period of limitation that may be fixed by the Bankruptcy Code, the
Bankruptcy Rules and/or the Bankruptcy Court, or as to which any objection, or
any motion to estimate for purposes of allowance, shall have been so Filed, to
the extent allowed by a Final Order.
1.3 "Allowed Claim" shall mean a Claim, or a portion thereof, including any
guarantee by any Debtor of such right, if any, (i) that is deemed allowed under
the Plan, (ii) that has been scheduled by a Debtor as other than contingent,
disputed or unliquidated, (iii) proof of which has been timely filed with the
Bankruptcy Court and as to which the period of time in which to file objections
as fixed by the Bankruptcy Code, the Bankruptcy Rules, the Plan or an order of
the Bankruptcy Court, has expired with no such objection having been filed, or
(iv) that has been allowed by a Final Order of the Bankruptcy Court.
1.4 "Allowed Interest" shall mean an Interest (i) that is deemed allowed
under the Plan, (ii) that has been scheduled by a Debtor, (iii) proof of which
has been timely filed with the Bankruptcy Court and as to which the period of
time in which to file objections as fixed by the Bankruptcy Code, the Bankruptcy
Rules, the Plan or an order of the Bankruptcy Court, has expired with no such
objection having been filed, or (iv) that has been allowed by a Final Order of
the Bankruptcy Court.
1.5 "Amended Anacomp Articles" shall mean the amended and restated articles
of incorporation of Reorganized Anacomp to become effective on the Effective
Date, substantially in the form as which will be Filed as Exhibit 1 to this Plan
at or prior to the Confirmation Hearing.
1.6 "Amended Anacomp Bylaws" shall mean the amended and restated by-laws of
Reorganized Anacomp to become effective on the Effective Date, substantially in
the form as which will be Filed as Exhibit 2 to this Plan at or prior to the
Confirmation Hearing.
1.7 "Amended and Restated Master Agreement" shall mean the agreement, dated
as of March 22, 1993, as amended, among Anacomp, the Multicurrency Borrowers,
the Lending Parties, the Multicurrency Lenders, the Series B Purchasers, The
First National Bank of Chicago, as Multicurrency Agent, and Citibank, N.A. as
Agent, Administrative Agent and Collateral Agent.
<PAGE>
1.8 "Anacomp" shall mean Anacomp, Inc., an Indiana corporation, prior to
the Petition Date and as debtor and debtor-in-possession in the Chapter 11
Cases.
1.9 "Anacomp Debentures Guarantee" shall mean the guarantee by Anacomp,
dated as of January 1, 1981 and as amended, of the obligations of Anacomp
International, as issuer, of the Old 9% Subordinated Debentures.
1.10 "Anacomp Guarantee" shall mean the guarantee, dated as of March 22,
1993, by Anacomp of the obligations of Anacomp S.A., a French corporation,
Anacomp GmbH, a German corporation, Xidex GmbH, a German corporation, Anacomp
Italia SRL, an Italian corporation, Anacomp A.B., a Swedish corporation, Anacomp
Holdings Ltd., a United Kingdom corporation, Anacomp Ltd., a United Kingdom
corporation, and Xidex (U.K.) Ltd., a United Kingdom corporation, pursuant to
the Multicurrency Revolver Loan Agreement and the Amended and Restated Master
Agreement.
1.11 "Anacomp International" shall mean Anacomp International N.V., a
Netherlands Antilles corporation, prior to the Petition Date and as debtor and
debtor-in-possession in the Chapter 11 Cases.
1.12 "Bankruptcy Code" shall mean Title 11 of the United States Code, as
now in effect and as amendments hereinafter are applicable.
1.13 "Bankruptcy Court" shall mean the United States Bankruptcy Court for
the District of Delaware, or any other court of competent jurisdiction
exercising jurisdiction over the Chapter 11 Cases.
1.14 "Bankruptcy Rules" shall mean the Rules of Bankruptcy Procedure, as
amended and promulgated under Section 2075, Title 28, United States Code.
1.15 "Business Day" shall mean any day except a Saturday, Sunday, or any
other day on which commercial banks are authorized by law to close in the State
of New York.
1.16 "Carlisle Note" shall mean that certain 10% unsecured note due 1998,
payable to Carlisle Companies Incorporated and issued by Anacomp in connection
with the acquisition of Graham Magnetics, Inc.
1.17 "Carlisle Note Claim" shall mean any Claim arising under, based upon
or otherwise related to the Carlisle Note, including, without limitation, all
Allowed Claims for principal, interest, fees, expenses, or other amounts payable
under or with respect to the Carlisle Note.
1.18 "Cash" shall mean cash or cash equivalents.
1.19 "Cash Collateral Amount" shall mean an amount of Cash, if any, equal
to all accrued and unpaid interest, as of the Effective Date, that is payable to
the Holders of the Old Credit Facilities Secured Claims and the Holders of the
Old Senior Notes Secured Claims pursuant to the terms of Paragraph 4(d) of the
Cash Collateral Order.
<PAGE>
1.20 "Cash Collateral Order" shall mean that certain Final Order
Authorizing Use of Cash Collateral, which was signed by the Bankruptcy Court on
January 31, 1996, as amended from time to time.
1.21 "Cash Sweep Amount" shall mean an amount of Cash equal to $7.5
million. 1.22 "Cedel" shall mean Cedel S.A., a European securities clearinghouse
with an address at 67 Belgrande, Duchesee Charlotte, L-1010 Luxembourg.
1.23 "Chapter 11" shall mean Chapter 11 of the Bankruptcy Code.
1.24 "Chapter 11 Cases" shall mean these cases under Chapter 11 with
respect to the Debtors, pending or to be pending in the District of Delaware,
administered as In re Kalvar Microfilm Inc., Anacomp, Inc., Anacomp
International N.V., Florida A A C Corporation and Xidex Development Company,
Chapter 11 Case Nos. 96-15 (HSB) through 96-19 (HSB).
1.25 "Chapter 11 Schedules" shall mean the schedules of assets and
liabilities and the statements of financial affairs that may be filed by the
Debtors with the Bankruptcy Court, in the form filed or as may thereafter be
amended, modified or supplemented in accordance with the Bankruptcy Code, the
Bankruptcy Rules, and the Bankruptcy Court's local bankruptcy rules.
1.26 "Citibank Agency Amount" shall mean an amount of Cash equal to
$1,033,333.35 less any amounts paid to Citibank, N.A. pursuant to the Citibank
Letter Agreement between March 21, 1996 and the Effective Date.
1.27 "Citibank Letter Agreement" shall mean that certain Other Fees Letter
No. 2, dated as of September 1, 1990, between Anacomp and Citibank, N.A.
1.28 "Claim" shall mean (i) any right to payment from any Debtor arising
before the Confirmation Date, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or (ii) any right to an
equitable remedy against any Debtor arising before the Confirmation Date for
breach of performance if such breach gives rise to a right of payment from such
Debtor, whether or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured or
unsecured, and shall include any guarantee by any Debtor of such right, if any.
1.29 "Class" shall mean a class of Claims or Interests as defined in
Article II of the Plan.
1.30 "Collateral Agent" shall mean Citibank, N.A., as collateral agent
under the Old Collateral Documents.
<PAGE>
1.31 "Confirmation" shall mean the entry of the Confirmation Order by the
Bankruptcy Court pursuant to Section 1129 of the Bankruptcy Code.
1.32 "Confirmation Date" shall mean the date on which the Confirmation
Order is entered on the docket maintained in the Chapter 11 Cases by the Clerk
of the Bankruptcy Court.
1.33 "Confirmation Hearing" shall mean the hearing pursuant to which the
Bankruptcy Court signed the Confirmation Order.
1.34 "Confirmation Order" shall mean an order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
1.35 "Consolidated Claim" shall mean any Claim of any Consolidated Debtor
against any other Consolidated Debtor.
1.36 "Consolidated Debtors" shall mean Kalvar, Anacomp and Xidex,
collectively.
1.37 "Consolidated Estates" shall mean the substantively consolidated
estates of Kalvar, Anacomp and Xidex.
1.38 "Credit Agreement" shall mean the agreement dated as of October 24,
1990 and as amended by and among Anacomp, the Lending Parties and the Collateral
Agent.
1.39 "Creditor" shall mean any entity that is the holder of any Claim
against the Debtors that arose on or before the Petition Date or any Claim
against the Debtors' Estates of a kind specified in Sections 502(g), 502(h), or
502(i) of the Bankruptcy Code.
1.40 "Creditors' Committee" shall mean the official committee of unsecured
creditors appointed in the Chapter 11 Cases by the United States Trustee
pursuant to Section 1102 of the Bankruptcy Code, as constituted by the addition
or removal of members from time to time.
1.41 "Debt Security Claims" shall mean the Old Senior Note Secured Claims,
the Old Senior Subordinated Note Claims and the Old Subordinated Debentures
Claims, collectively.
1.42 "Debtor" or "Debtors" shall mean Kalvar, Anacomp, Anacomp
International, Florida A A C and Xidex, individually or collectively, as the
context may require.
1.43 "Disbursing Agent" shall mean any Entity or Entities designated in the
Confirmation Order to make distributions required under the Plan, and may
include Reorganized Anacomp when acting in such capacity.
1.44 "Disclosure Statement" shall mean the Joint Disclosure Statement,
dated January 12, 1996, that was Filed by the Debtors and approved by the
Bankruptcy Court in connection with the Plan, as may be further amended,
modified, restated, or supplemented from time to time.
1.45 "Disputed Claim" shall mean any Claim, to the extent it has not since
become an Allowed Claim, (i) listed on the Chapter 11 Schedules as unliquidated,
disputed or contingent, or (ii) as to which the Debtors or any other party in
interest has interposed a timely objection or request for estimation in
accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection or
request for estimation has not been withdrawn or determined by a Final Order.
<PAGE>
1.46 "Disputed Interest" shall mean an Interest in the Debtors to the
extent it has not become an Allowed Interest, (i) listed on the Chapter 11
Schedules as contingent, unliquidated or disputed, or (ii) as to which the
Debtors or any other party in interest has interposed a timely objection in
accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection
has not been withdrawn or determined by Final Order.
1.47 "Distribution Record Date" shall mean the date specified in the
Confirmation Order as the Distribution Record Date with respect to each Class,
or, if no such date is specified, the Business Day immediately prior to the
Effective Date.
1.48 "Domestic Subsidiaries" shall mean Florida A A C, Computer Services
Corporation, a Michigan corporation, Kalvar, Applied Peripheral Systems, Inc., a
California corporation, Cadren Systems Corporation, a California corporation,
Data Management Labs, Inc., a California corporation, Dysan International Sales
Corporation, a California corporation, Dysan International Sales Corporation II,
a California corporation, Teksad Corporation, a California corporation, U.S.
Video Corporation, a California corporation, Xidex, Xidex International Sales
Corporation, a California corporation, and Xidex Magnetics International Sales
Corporation, a California corporation in which (except for Computer Services
Corporation) 99% or more of the outstanding equity having ordinary voting power
to elect a majority of the board of directors or other managers of such Entity
is owned directly or indirectly by Anacomp or Reorganized Anacomp.
1.49 "Effective Date" shall mean a Business Day selected by the Debtors
that is the later of (i) a day that is not less than ten (10) nor more than
thirty (30) days after the Confirmation Date, and (ii) the first Business Day on
which all conditions to the occurrence of the Effective Date have been satisfied
or duly waived.
1.50 "Employee Options" shall mean stock options and warrants granted to
Anacomp employees pursuant to Anacomp's stock option plans.
1.51 "Encumbrance" shall mean any Lien, imperfection of title, option, or
restriction of any kind affecting any property of any Debtor.
1.52 "Entity" shall mean a person, a corporation, a partnership, an
association, a joint stock company, a joint venture, a limited liability
company, an estate, a trust, an unincorporated organization, a government or any
subdivision thereof or any other entity.
1.53 "Estates" shall mean the estates of Kalvar, Anacomp, Anacomp
International, Florida A A C and Xidex created by Section 541 of the Bankruptcy
Code upon the commencement of the Chapter 11 Cases.
<PAGE>
1.54 "Euroclear" shall mean a European securities clearinghouse with an
address c/o Morgan Guaranty Trust Company of New York, Boulevard E. Jacqumain
151 B-1210 Brussels, Belgium.
1.55 "File," "Filed" or "Filing" shall mean file, filed or filing with the
Bankruptcy Court in the Chapter 11 Cases.
1.56 "Final Order" shall mean an order of the Bankruptcy Court or any other
court of competent jurisdiction (i) which is not subject to a stay of
effectiveness; (ii) as to which the time to appeal, petition for certiorari or
move for reargument; or rehearing has expired and as to which no timely appeal,
petition for certiorari or other proceedings for reargument or rehearing shall
then be pending; or (iii) if a timely appeal, writ of certiorari, reargument or
rehearing thereof has been sought, which shall have been affirmed by the highest
court to which such order was appealed, or certiorari shall have been denied or
reargument or rehearing shall have been denied or resulted in no modification of
such order, and the time to take any further appeal, petition for certiorari, or
move for modification of such order, or move for reargument or rehearing shall
have expired; provided, however, that the possibility that a motion under Rule
59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule
under the Bankruptcy Rules or other rules governing procedure in cases before
the Bankruptcy Court, if not the Bankruptcy Court, may be Filed with respect to
such order shall not cause such order not to be a Final Order.
1.57 "Florida A A C" shall mean Florida A A C Corporation, a Florida
corporation, prior to the Petition Date and as debtor and debtor-in-possession
in the Chapter 11 Cases.
1.58 "Foreign Subsidiaries" shall mean Anacomp International, Anacomp S.A.,
a French corporation, Xidex GmbH, a German corporation, Datamagnetics GmbH, a
German corporation, Anacomp Italia SRL, an Italian corporation, Anacomp B.V., a
Dutch corporation, Anacomp A.B., a Swedish corporation, Anacomp A/S, a Danish
corporation, Anacomp OY, a Finnish corporation, Anacomp A/S, a Norwegian
corporation, Anacomp GesmbH, an Austrian corporation, Anacomp Belgium S.A., a
Belgian corporation, Anacomp GmbH, a German corporation, Xidex Magnetics S.A., a
Swiss corporation, Xidex Corp. S.A., a Swiss corporation, Anacomp Holdings,
Ltd., a United Kingdom corporation, Anacomp Ltd., a United Kingdom corporation,
Xidex (U.K.) Ltd., a United Kingdom corporation, Anacomp Canada, Inc., a
Canadian corporation, Anacomp do Brasil Ltda., a Brazilian corporation, Anacomp
Japan Ltd., a Japanese corporation, Anacomp PTY Ltd., an Australian corporation,
and Xidex New Zealand Ltd., a New Zealand corporation.
1.59 "General Unsecured Claim" shall mean any Claim (including any Trade
Claim, Rejection Claim and Indenture Trustee Claim) that is not a Consolidated
Claim, Carlisle Note Claim, Old Subordinated Debentures Claim, Old Senior
Subordinated Notes Claim, Intercompany Claim, Administrative Claim, Priority
Claim, Old Credit Facilities Secured Claim, Old Senior Notes Secured Claim or a
Miscellaneous Secured Claim.
1.60 "Holder" shall mean an Entity which is the owner, legal and/or
beneficial, of the applicable Claim or Interest.
<PAGE>
1.61 "Impaired Claim" shall mean a Claim identified in Section 3.1 of the
Plan as impaired under the Plan.
1.62 "Indenture Trustee Charging Lien" shall mean any Lien or other
priority in payment available to any of the Old Indenture Trustees pursuant to
any of the Old Indentures for payment of any fees, costs or disbursements
incurred by such Old Indenture Trustee, to the extent not otherwise paid
pursuant to the applicable terms of the Plan.
1.63 "Indenture Trustee Claim" shall mean a contractual Claim held by any
of the Old Indenture Trustees for compensation, reimbursement of costs or
disbursements (including without limitation the costs and expenses of its
attorneys, accountants and financial advisors), or indemnity arising from any of
the Old Indentures regardless of whether such fees and expenses are incurred
prior or subsequent to the Petition Date.
1.64 "Intercompany Claim" shall mean any Claim held by any Domestic
Subsidiary or Foreign Subsidiary, other than any of the Consolidated Debtors,
against any of the Debtors.
1.65 "Interest" shall mean an equity security in Anacomp within the meaning
of Section 101(16) of the Bankruptcy Code.
1.66 "Kalvar" shall mean Kalvar Microfilm, Inc., a Delaware corporation and
a wholly-owned subsidiary of Anacomp, prior to the Petition Date and as debtor
and debtor-in-possession in the Chapter 11 Cases.
1.67 "Lending Parties" shall mean Citibank, N.A., Internationale
Nederlanden (U.S.) Capital Corporation, Lehman Commercial Paper Inc., Pearl
Street L.P., and Bank Polska Kasa Opieki, S.A.
1.68 "Letter of Credit Cash Amount" shall mean an amount of Cash equal to
105% of the amounts outstanding under undrawn letters of credit issued under the
Credit Agreement as of the Effective Date, to the extent not replaced by the New
LC Facility, plus all fees and expenses payable to the issuers of such letters
of credit.
1.69 "Lien" shall mean any conveyance in trust, assignment or pledge of,
mortgage or lien on, security interest in, or charge or encumbrance of any kind
against, any property of any Debtor.
1.70 "Limited Bar Date" shall mean February 23, 1996, the date established
by the Bankruptcy Court as the "Limited Bar Date" pursuant to the Limited Bar
Date Order.
1.71 "Limited Bar Date Order" shall mean the Order (1) Establishing
Procedures and Deadlines for Filing Proofs of Certain Claims and (2) Approving
Form and Manner of Notice, signed by the Bankruptcy Court on the Petition Date,
as amended or supplemented from time to time.
<PAGE>
1.72 "Merged Subsidiaries" shall mean those Subsidiaries of Anacomp to be
merged into Reorganized Anacomp which are listed on Annex C hereto.
1.73 "Miscellaneous Secured Claim" shall mean any Allowed Claim that is a
Secured Claim other than an Old Credit Facilities Secured Claim and an Old
Senior Notes Secured Claim.
1.74 "Multicurrency Borrowers" shall mean Anacomp, Anacomp S.A., a French
corporation, Anacomp GmbH, a German corporation, Xidex GmbH, a German
corporation, Anacomp Italia SRL, an Italian corporation, Anacomp A.B., a Swedish
corporation, Anacomp Holdings, Ltd., a United Kingdom corporation, Anacomp Ltd.,
a United Kingdom corporation, and Xidex (U.K.) Ltd., a United Kingdom
corporation.
1.75 "Multicurrency Lenders" shall mean Citibank, N.A. and Lehman
Commercial Paper Inc.
1.76 "Multicurrency Revolver Loan Agreement" shall mean that certain
revolving loan agreement, dated as of March 22, 1993 among the Multicurrency
Borrowers, the Multicurrency Lenders, and The First National Bank of Chicago, as
Multicurrency Agent.
1.77 "New Carlisle Note" shall mean the unsecured note due 2001 to be
issued to the Holder of the Carlisle Note, in an amount equal to the Allowed
Carlisle Note Claim, containing the same provisions as the Carlisle Note, except
that it shall mature on July 15, 2001 and no principal payment shall be made on
such New Carlisle Note until the later of (i) payment in full of New Senior
Secured Notes and (ii) July 15, 2001.
1.78 "New Common Stock" shall mean, collectively, the twenty million shares
of authorized new common stock of Reorganized Anacomp, par value $.01 per share,
of which ten million shares are to be issued on the Effective Date pursuant to
the Plan.
1.79 "New Indenture Trustees" shall be as designated at the Confirmation
Hearing and have the meaning set forth in the Confirmation Order.
1.80 "New LC Facility" shall mean a new letter of credit facility to be
provided by a financial institution, which facility shall be reasonably
satisfactory to the Creditors' Committee (in the event that Class 5 shall have
accepted the Plan).
1.81 "New Management Incentive Plan" shall mean a stock option plan to be
implemented by Reorganized Anacomp providing for the issuance to management and
key employees of options to purchase up to 7.5% of the New Common Stock on a
fully diluted basis.
1.82 "New Senior Secured Notes" shall mean the Senior Secured Notes to be
issued by Reorganized Anacomp pursuant to the Plan under the New Senior Secured
Notes Indenture. The principal economic terms of the New Senior Secured Notes
are set forth on Annex A hereto.
1.83 "New Senior Secured Notes Indenture" shall mean the Indenture between
Reorganized Anacomp, as issuer, and the New Senior Secured Notes Indenture
Trustee, as trustee, which indenture relates to the New Senior Secured Notes,
substantially in the form which will be Filed as Exhibit 3 to the Plan at or
prior to the Confirmation Hearing.
<PAGE>
1.84 "New Senior Secured Notes Indenture Trustee" shall be as designated at
the Confirmation Hearing and have the meaning set forth in the Confirmation
Order.
1.85 "New Senior Secured Notes Security and Pledge Agreement" shall mean
the security and pledge agreement pursuant to which certain collateral is
pledged to secure Reorganized Anacomp's obligations under the New Senior Secured
Notes, substantially in the form as which will be Filed as Exhibit 4 to the Plan
at or prior to the Confirmation Hearing.
1.86 "New Senior Subordinated Notes" shall mean the 13% Senior Subordinated
Notes due 2002 to be issued by Reorganized Anacomp pursuant to the Plan under
the New Senior Subordinated Notes Indenture. The principal economic terms of the
New Senior Subordinated Notes are set forth on Annex B to the Plan.
1.87 "New Senior Subordinated Notes Indenture" shall mean the Indenture
between Reorganized Anacomp, as issuer, and the New Senior Subordinated Notes
Indenture Trustee, as trustee, which indenture relates to the New Senior
Subordinated Notes, substantially in the form as which will be Filed as Exhibit
5 to the Plan at or prior to the Confirmation Hearing.
1.88 "New Senior Subordinated Notes Indenture Trustee" shall be as
designated at the Confirmation Hearing and have the meaning set forth in the
Confirmation Order.
1.89 "New Warrant Agent" shall be as designated at the Confirmation Hearing
and shall have the meaning set forth in the Confirmation Order.
1.90 "New Warrant Agreement" shall mean the Warrant Agreement between
Reorganized Anacomp, as issuer, and the New Warrant Agent, as agent, which
agreement relates to the New Warrants, substantially in the form as which will
be Filed as Exhibit 6 to the Plan at or prior to the Confirmation Hearing.
1.91 "New Warrants" shall mean the freely transferable rights issued
pursuant to the New Warrant Agreement to purchase shares of the New Common Stock
which shall expire five (5) years from the Effective Date, and which shall have
an exercise price of $12.23 per share, substantially in the form as which will
be Filed as Exhibit 7 to the Plan at or prior to the Confirmation Hearing.
1.92 "Old Collateral Documents" shall mean (i) the Company Security
Agreement, dated as of October 24, 1990, between Anacomp and the Collateral
Agent; (ii) the Subsidiary Security Agreement, dated as of October 24, 1990,
among Xidex Corporation, Stromberg Datagraphix International Corp., Sun-Flex
Company, Inc., Florida A A C, Electronic Data Preparation Corporation, Kalvar,
Xidex and the Collateral Agent; (iii) the Company Pledge Agreement, dated as of
October 24, 1990, between Anacomp and the Collateral Agent; (iv) the Subsidiary
Pledge Agreement, dated as of October 24, 1990, among Xidex Corporation,
Stromberg Datagraphix International Corp., Sun-Flex Company, Inc. and the
Collateral Agent; (v) the Company Intellectual Property Security Agreement,
dated as of October 24, 1990, between Anacomp and the Collateral Agent; and (vi)
the Subsidiary Intellectual Property Security Agreement dated as of October 24,
1990, among Xidex Corporation, Sun-Flex Company, Inc. and the Collateral Agent;
each as subsequently amended prior to the Petition Date.
<PAGE>
1.93 "Old Common Stock" shall mean the common shares, par value $.01 per
share, of Anacomp issued and outstanding, or held in treasury, immediately prior
to the Effective Date.
1.94 "Old Credit Facilities" shall mean the Credit Agreement, the
Multicurrency Revolver Loan Agreement, the Revolving Loan Agreement and the Term
Loan Agreements.
1.95 "Old Credit Facilities Note" shall mean a note or other evidence of
indebtedness issued pursuant to the Old Credit Facilities.
1.96 "Old Credit Facilities Secured Claim" shall mean any Claim related to,
based upon or arising under or in connection with the Old Credit Facilities that
is a Secured Claim against property of the Debtors, the Domestic Subsidiaries
and/or the Foreign Subsidiaries or any guarantee by any Debtor of such Claim.
1.97 "Old Indentures" shall mean, collectively, the Old Senior Subordinated
Notes Indenture, the Old 13.875% Subordinated Debentures Indenture and the Old
9% Subordinated Debentures Indenture.
1.98 "Old Indenture Trustees" shall mean IBJ Schroder Bank & Trust Company,
United States Trust Company of New York and State Street Bank and Trust Company,
as trustees or successor trustees, as the case may be, under the Old 9%
Subordinated Debentures Indenture, the Old 13.785% Subordinated Debentures
Indenture and the Old Senior Subordinated Notes Indenture, respectively.
1.99 "Old 9% Subordinated Debentures" shall mean the 9% Convertible
Subordinated Debentures due 1996, issued by Anacomp International pursuant to
the Old 9% Subordinated Debentures Indenture.
1.100 "Old 9% Subordinated Debentures Claim" shall mean any Claim of a
Holder of Old 9% Subordinated Debentures which, for purposes of the Plan, shall
be deemed to be an amount equal to the sum of (i) the face amount, as of the
Petition Date, of Old 9% Subordinated Debentures held by such Holder and (ii) an
amount equal to 100% of the accrued and unpaid interest at the non-default
contract rate under such Old 9% Subordinated Debentures through but not
including the Petition Date.
1.101 "Old 9% Subordinated Debentures Indenture" shall mean the Indenture
between Anacomp International, as issuer, Anacomp, as guarantor, and Chase
Manhattan Bank, N.A., as trustee, dated as of January 1, 1981, which indenture
relates to the Old 9% Subordinated Debentures.
<PAGE>
1.102 "Old 9% Subordinated Debentures Indenture Trustee" shall mean IBJ
Schroder Bank & Trust Company, or its successor, as successor trustee under the
Old 9% Subordinated Debentures Indenture.
1.103 "Old Preferred Stock" shall mean the shares of 8.25% Cumulative
Convertible Redeemable Exchangeable Preferred Stock of Anacomp issued and
outstanding, or held in treasury immediately prior to the Effective Date,
including any and all accrued but unpaid dividends.
1.104 "Old Security" or "Old Securities" shall mean the Old Senior Notes,
the Old Senior Subordinated Notes, the Old Subordinated Debentures, the Carlisle
Note, the Old Common Stock, the Old Preferred Stock and the Old Warrants,
individually or collectively, as the context may require.
1.105 "Old Senior Notes" shall mean the 12.25% Series B Senior Notes due
1997, issued by Anacomp pursuant to the Series B Senior Note Purchase Agreement.
1.106 "Old Senior Notes Secured Claim" shall mean any Claim related to,
based upon or arising under or in connection with the Old Senior Notes, that is
a Secured Claim against property of the Debtors, the Domestic Subsidiaries
and/or the Foreign Subsidiaries or any guarantee by a Debtor of such Claim.
1.107 "Old Senior Subordinated Notes" shall mean the 15% Senior
Subordinated Notes due 2000, issued by Anacomp pursuant to the Old Senior
Subordinated Notes Indenture.
1.108 "Old Senior Subordinated Notes Claim" shall mean any Claim of a
Holder of Old Senior Subordinated Notes which, for purposes of the Plan, shall
be deemed to be an amount equal to the sum of (i) the face amount, as of the
Petition Date, of Old Senior Subordinated Notes held by such Holder, (ii) an
amount equal to 100% of the accrued and unpaid interest at the non-default
contract rate under such Old Senior Subordinated Notes through but not including
the Petition Date and (iii) an amount equal to 100% of the interest on such
accrued and unpaid interest at the non-default contract rate under such Old
Senior Subordinated Notes through but not including the Petition Date.
1.109 "Old Senior Subordinated Notes Indenture" shall mean the Indenture
between Anacomp, as issuer, and the Old Senior Subordinated Notes Indenture
Trustee, as trustee, dated as of October 24, 1990, as amended, which indenture
relates to the Old Senior Subordinated Notes.
1.110 "Old Senior Subordinated Notes Indenture Trustee" shall mean State
Street Bank and Trust Company, or its successor, as trustee under the Old Senior
Subordinated Notes Indenture.
1.111 "Old Subordinated Debentures" shall mean the Old 9% Subordinated
Debentures and the Old 13.875% Subordinated
Debentures, collectively.
1.112 "Old Subordinated Debentures Claims" shall mean the Old 9%
Subordinated Debentures Claims and the Old 3.875% Subordinated Debentures
Claims, collectively.
<PAGE>
1.113 "Old 13.875% Subordinated Debentures" shall mean the 13.875%
Convertible Subordinated Debentures due 2002, issued by Anacomp pursuant to the
Old 13.875% Subordinated Debentures Indenture.
1.114 "Old 13.875% Subordinated Debentures Claim" shall mean any Claim of a
Holder of Old 13.875% Subordinated Debentures which, for purposes of the Plan,
shall be deemed to be an amount equal to the sum of (i) the face amount, as of
the Petition Date, of Old 13.875% Subordinated Debentures held by such Holder
and (ii) an amount equal to 100% of the accrued and unpaid interest at the
non-default contract rate under such Old 13.875% Subordinated Debentures through
but not including the Petition Date.
1.115 "Old 13.875% Subordinated Debentures Indenture" shall mean the
Indenture between Anacomp, as issuer, and American Fletcher National Bank and
Trust Company, as trustee, dated as of January 15, 1982, which indenture relates
to the Old 13.875% Subordinated Debentures.
1.116 "Old 13.875% Subordinated Debentures Indenture Trustee" shall mean
United States Trust Company of New York, as successor trustee under the Old
13.875% Subordinated Debentures Indenture.
1.117 "Old Transfer Agent" shall mean Chemical Mellon Shareholder Services,
L.L.C., as registrar and transfer agent with respect to the Old Common Stock and
the Old Preferred Stock.
1.118 "Old Warrants" shall mean the freely transferable rights to purchase
shares of Old Common Stock.
1.119 "Ordinary Course Professionals Order" shall mean that certain Nunc
Pro Tunc Order Authorizing Debtors to Employ and Compensate Professionals for
Specific Services Rendered in the Ordinary Course of Business, which was signed
by the Bankruptcy Court on January 31, 1996, as amended from time to time.
1.120 "Petition Date" shall mean January 5, 1996, which was the date on
which the Debtors filed their voluntary petitions for relief under Chapter 11.
1.121 "Plan" shall mean this Second Amended Joint Plan of Reorganization
proposed by the Debtors, as it may hereafter be amended or modified from time to
time.
1.122 "Plan Documents" shall mean those documents identified in Exhibits 1
through 8 which will be Filed prior to the Confirmation Hearing.
1.123 "Plan Securities" shall mean the New Carlisle Note, the New Common
Stock, the New Senior Secured Notes, the New Senior Subordinated Notes and the
New Warrants.
1.124 "Post-Petition Trade Claim" shall mean an expense or obligation
incurred by any of the Debtors arising from or with respect to the sale and
delivery of goods or the rendition of services (except for fees and
disbursements of Professionals) to any of the Debtors after the Petition Date.
<PAGE>
1.125 "Premium Amount" shall mean an amount of Cash equal to $2,750,000.
1.126 "Priority Claim" shall mean any Allowed Claim, to the extent entitled
to priority under Section 507(a) of the Bankruptcy Code, other than an
Administrative Claim or a Priority Tax Claim, against any Debtor.
1.127 "Priority Tax Claim" shall mean the tax Claims of governmental units
to the extent such Claims are entitled to priority under Section 507(a)(8) of
the Bankruptcy Code.
1.128 "Professional" shall mean (i) any professional retained in the
Chapter 11 Cases pursuant to an order of the Bankruptcy Court in accordance with
Section 327 or 1103 of the Bankruptcy Code (other than the Ordinary Course
Professionals Order), (ii) any attorney or accountant seeking compensation or
reimbursement of expenses pursuant to Section 503(b) of the Bankruptcy Code,
(iii) any Entity whose fees and expenses are subject to approval by the
Bankruptcy Court as reasonable pursuant to Section 1129(a)(4) of the Bankruptcy
Code, and (iv) any attorney, accountant or financial advisor for any Old
Indenture Trustee.
1.129 "Pro Rata" shall mean, with respect to an amount of consideration to
be distributed to a Creditor holding an Allowed Claim or Holder of an Allowed
Interest of a particular Class on a particular date, a proportionate share, so
that the ratio of the consideration distributed on account of an Allowed Claim
or Allowed Interest in a Class to the amount of such Allowed Claim or Allowed
Interest is the same as the ratio of the aggregate amount of the consideration
distributed on account of all Allowed Claims or Allowed Interests in such Class
to the aggregate amount of all Allowed Claims or Allowed Interests in such
Class.
1.130 "Registration Rights Agreement" shall mean a registration rights
agreement with respect to the New Senior Secured Notes, the New Senior
Subordinated Notes and the New Common Stock substantially in the form as which
will be Filed as Exhibit 8 to the Plan at or prior to the Confirmation Hearing.
1.131 "Rejection Claim" shall mean the Claim, if any, of parties other than
any of the Debtors to executory contracts or unexpired leases with any of the
Debtors which are rejected or deemed rejected pursuant to a Final Order.
1.132 "Releasees" shall have the meaning set forth in Section 12.1 of this
Plan.
1.133 "Reorganized Anacomp" shall mean Anacomp from and after the Effective
Date.
1.134 "Reorganized Florida A A C" shall mean Florida A A C from and after
the Effective Date.
1.135 "Revolving Loan Agreement" shall mean the revolving loan agreement,
as memorialized in the Credit Agreement, dated as of October 24, 1990, and as
amended, among Anacomp, the Lending Parties and the Collateral Agent.
<PAGE>
1.136 "Secured Claim" shall mean any Claim which is wholly or partially
secured by a valid Lien, which has been properly perfected as required by
applicable law on property of the Debtors to the extent of the value of the
interest of the Holder of such Claim in such property of the Debtors, or that is
subject to set-off under Section 553 of the Bankruptcy Code as determined by the
Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code.
1.137 "Series B Note Purchase Agreement" shall mean the note purchase
agreement, dated as of October 24, 1990, and as amended, between Anacomp and the
Series B Purchasers relating to the issuance of the Old Senior Notes.
1.138 "Series B Purchasers" shall mean International Nederlanden (U.S.)
Capital Corporation, KS Capital Partners, Lehman Commercial Paper Inc., Morgens,
Waterfall Vintiades & Company, Inc., Murray Capital Management, Inc., Polly &
Co., Presidential Life Insurance Company, Pearl Street L.P., Salked & Co., and
Whippoorwill Associates, Inc.
1.139 "Shelf Registration Statement" means a "shelf" registration statement
filed by Reorganized Anacomp on any appropriate form pursuant to the Securities
Act of 1933, as amended, and/or any similar rule that may be adopted by the
Securities and Exchange Commission, in accordance with Section 6.5 hereof.
1.140 "Subsidiaries" shall mean the Domestic Subsidiaries and the Foreign
Subsidiaries, collectively.
1.141 "Term Loan Agreements" shall mean the term loan agreements, as
memorialized in the Credit Agreement, dated as of October 24, 1990, and as
amended, among Anacomp, the Lending Parties and the Collateral Agent.
1.142 "Trade Claim" shall mean any unsecured Claim arising from or with
respect to (i) the sale and delivery of goods or the rendition of services to
the Debtors prior to the Petition Date and (ii) all other obligations incurred
in the ordinary course of business by the Debtors in the conduct and operation
of their business prior to the Petition Date.
1.143 "Treasury Rate" shall mean the "underpayment rate" (as defined in
Section 6612(a)(2) of the Internal Revenue Code of 1986, as amended) on the
Business Day immediately preceding the Confirmation Date, which rate is the rate
of interest charged by the Internal Revenue Service on delinquent federal income
taxes.
1.144 "Unimpaired Claim" shall mean a Claim in a Class identified in
Section 3.2 of the Plan as unimpaired under the Plan.
1.145 "Unimpaired Excepted Claim" shall mean an Unimpaired Claim, other
than a Rejection Claim, with respect to which the Holder of such Claim is not
required to File a proof of Claim pursuant to the terms of the Limited Bar Date
Order.
<PAGE>
1.146 "Unimpaired Non-Excepted Claim" shall mean an Unimpaired Claim, other
than a Rejection Claim, with respect to which the Holder of such Claim is
required to File a proof of Claim pursuant to the terms of the Limited Bar Date
Order.
1.147 "Unofficial Senior Subordinated Committee" shall mean an unofficial
committee of the Holders of the Old Senior Subordinated Notes.
1.148 "Xidex" shall mean Xidex Development Company, a California
corporation, prior to the Petition Date and as debtor and debtor-in-possession
in the Chapter 11 Cases.
Rules of Construction
1.149 Interpretation and Rules of Construction. Unless otherwise specified,
all section, article, schedule, annex and exhibit references in the Plan are to
the respective section in, article of, annex to or schedule or exhibit to, the
Plan, as the same may be amended, waived, or modified from time to time in
accordance with the provisions hereof. The rules of construction contained in
Section 102 of the Bankruptcy Code shall apply to the construction of the Plan
(excluding the Plan Documents, unless made applicable thereto pursuant to an
express provision thereof).
1.150 Other Terms. The words "herein" "hereof," "hereto," "hereunder," and
others of similar import refer to the Plan as a whole and not to any particular
section, subsection, or clause contained in the Plan. Each capitalized term used
herein that is not defined herein shall have the meaning ascribed to that term,
if any, in the Bankruptcy Code or the Bankruptcy Rules.
1.151 Headings. Headings are used in the Plan for convenience of reference
only and shall not constitute a part of the Plan for any other purpose. Headings
shall not limit or otherwise affect the provisions of the Plan.
1.152 Incorporation of Exhibits. All exhibits referred to in this Plan are
deemed incorporated into, and made a part of this Plan, whether Filed
contemporaneously herewith or hereafter.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 Pre-Petition Claims and Equity Interests Classified. All Claims and all
Interests are classified as set forth in Article II, Section 2.3. hereof. A
Claim or Interest is classified in a particular Class only to the extent that
the Claim or Interest qualifies within the description of that Class, and is
classified in another Class or Classes to the extent that any remainder of the
Claim or Interest qualifies within the description of such other Class or
Classes. A Claim or Interest is classified in a particular Class only to the
extent that the Claim or Interest is an Allowed Claim or Allowed Interest in
that Class and has not been paid, released or otherwise satisfied before the
Effective Date. A Claim or Interest which is not an Allowed Claim or Interest is
not in any Class and, notwithstanding anything to the contrary contained in the
Plan, no distribution shall be made on account of any Claim or Interest which is
not an Allowed Claim or Allowed Interest. Holders of Claims or Interests shall
be entitled to vote in, and receive distributions from, a particular Class only
to the extent the Allowed Claim or Allowed Interest is within such Class.
<PAGE>
2.2 Administrative Claims and Priority Tax Claims. As provided in Section
1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims
against the Debtors shall not be classified for purposes of voting on or
receiving distributions under the Plan. All such Claims shall be treated
separately as unclassified Claims on the terms set forth in Article IV of the
Plan.
2.3 Claims Against and Interests in the Debtors. All Claims against, and
Interests in, any Debtor are classified as follows:
(a) Class 1 Claims. Class 1 consists of all Priority Claims.
(b) Class 2 Claims. Class 2 consists of all Old Credit
Facilities Secured Claims and all
Old Senior Notes Secured Claims.
(c) Class 3 Claims. Class 3 consists of all Miscellaneous
Secured Claims.
(d) Class 4 Claims. Class 4 consists of all Carlisle Note Claims.
(e) Class 5 Claims. Class 5 consists of all Old
Senior Subordinated Notes Claims.
(f) Class 6 Claims. Class 6 consists of all Old
Subordinated Debentures Claims.
(g) Class 7 Claims. Class 7 consists of all General Unsecured
Claims.
(h) Class 8 Interests. Class 8 consists of all Interests
of Holders of Old Preferred Stock.
(i) Class 9 Interests. Class 9 consists of all Interests
of Holders of Old Common Stock.
(j) Class 10 Claims for Issuance of Old Common Stock. Class
10 consists of all Employee Options and all other
options or rights to acquire Old Common Stock,
including, without limitation, all claims arising out
of the rejection of Employee Options and other options
to acquire Old Common Stock, to the extent they
constitute executory contracts, and any Claim that has
the same priority as the Old Common Stock pursuant to
Section 510(b) of the Bankruptcy Code, including,
without limitation, any Claim for the issuance of Old
Common Stock in connection with an acquisition or
otherwise.
(k) Class 11 Claims. Class 11 consists of all Intercompany Claims.
<PAGE>
ARTICLE III
IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS
3.1 Impaired Classes of Claims. With the exception of the Classes specified
in Section 3.2 of the Plan, all Classes of Claims and Interests are impaired
under the Plan.
3.2 Unimpaired Classes of Claims and Equity Interests. Class 1 Claims,
Class 3 Claims, Class 7 Claims and Class 11 Claims are not impaired under the
Plan.
3.3 Impairment Controversies. If a controversy arises as to whether any
Claim or Interest, or any Class of Claims or Class of Interests, is impaired
under the Plan, the Bankruptcy Court shall, after notice and a hearing, resolve
such controversy.
ARTICLE IV
TREATMENT OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS
4.1 Fees of Professionals and Claims for Substantial Contribution. All
Professionals retained by any Debtor and any other Entities (other than any
Professionals retained by any Old Indenture Trustee, which Professionals shall
be paid in accordance with Section 6.3 of the Plan) requesting compensation or
reimbursement of expenses pursuant to Sections 327, 328, 330, 331, or 503(b) of
the Bankruptcy Code for services rendered before the Effective Date (including,
without limitation, any compensation requested by any Professional or any other
Entity for making a substantial contribution in the Chapter 11 Cases) shall File
and serve on Reorganized Anacomp, the Creditors' Committee and the United States
Trustee an application for final allowance of compensation and reimbursement of
expenses no later than thirty (30) days after the Effective Date. Objections to
applications of Professionals for compensation or reimbursement of expenses must
be Filed and served on Reorganized Anacomp, the United States Trustee, the
Creditors' Committee and the Professionals to whose application the objections
are addressed, no later than fifteen (15) days after service of the related
application.
4.2 Ordinary Course Liabilities. Holders of Administrative Claims based on
liabilities incurred in the ordinary course of the Debtors' business shall not
be required to File any request for payment of such Claims. Such Administrative
Claims shall be assumed and paid by Reorganized Anacomp pursuant to the terms
and conditions of the particular transactions giving rise to such Administrative
Claims without any further action by the Holders of such Claims or the need for
Bankruptcy Court approval.
4.3 Priority Tax Claims. Unless otherwise agreed between the Holder of a
Priority Tax Claim and any Debtor or Reorganized Anacomp, in accordance with
Section 1129(a)(9)(C) of the Bankruptcy Code, each Holder of an Allowed Priority
Tax Claim shall receive, at such Debtor's or Reorganized Anacomp's option, as
the case may be, either (i) Cash, in the full amount of such Allowed Priority
Tax Claim, on the Effective Date or (ii) deferred payments of Cash in the full
amount of such Allowed Priority Tax Claim, payable in equal annual principal
installments beginning the first anniversary of the Effective Date and ending on
the earlier of the sixth anniversary of the Effective Date or the sixth
anniversary of the date of the assessment of such Claim, together with interest
(payable quarterly in arrears) on the unpaid balance of such Allowed Priority
Tax Claim at an annual rate equal to the Treasury Rate or such other rate as may
be set by the Bankruptcy Court at the Confirmation Hearing. The amount of any
Allowed Priority Tax Claim for which the time for filing a return, if required,
under applicable law or under any authorized extension thereof, has not expired
on or prior to the Effective Date, and the rights of the Holder of such Claim,
if any, to payment in respect thereof shall (i) be determined in the manner in
which the amount of such Claim and the rights of the Holder of such Claim would
have been resolved or adjudicated if the Chapter 11 Cases had not been
commenced, (ii) survive the Effective Date and consummation of the Plan as if
the Chapter 11 Cases had not been commenced, and (iii) not be discharged
pursuant to Section 1141 of the Bankruptcy Code.
<PAGE>
ARTICLE V
TREATMENT OF CLAIMS AND INTERESTS
5.1 Class 1. Priority Claims. Class 1 Claims are unimpaired. At Reorganized
Anacomp's option, each Holder of an Allowed Priority Claim shall be entitled to
receive, in full satisfaction of such Claim, the Allowed amount of such Claim in
full in Cash on the later of (i) the Effective Date, (ii) the date that such
Claim becomes an Allowed Priority Claim and (iii) the date that such Claim would
be paid in accordance with any terms and conditions of any agreements or
understandings relating thereto between any Debtor and the Holder of such Claim.
To the extent payment is not made on the Effective Date, the Allowed Class 1
Claims shall include interest at the interest rate provided in the agreement, if
any, between the Creditor and any Debtor, or if no interest rate is provided, at
the Treasury Rate from the later of: (i) the Effective Date; or (ii) the date on
which payment was first due to the date of payment.
5.2 Class 2. Old Credit Facilities Secured Claims and Old Senior Notes
Secured Claims. Allowed Class 2 Claims are impaired. On the Effective Date, the
aggregate amount of the Claims in Class 2 will be deemed to be an Allowed Claim
of $122,804,648.
(a) On the Effective Date, each Holder of an Allowed Class 2 Claim, as of
the Distribution Record Date, shall receive, in full satisfaction of its Allowed
Class 2 Claim, its Pro Rata share of: (i) the Premium Amount, (ii) the Cash
Sweep Amount and (iii) the New Senior Secured Notes. The principal amount of the
New Senior Secured Notes shall be an amount equal to $120,054,648 minus the Cash
Sweep Amount. Pursuant to and in accordance with the New Senior Secured Notes
Security and Pledge Agreement, the Holders of Allowed Class 2 Claims shall
retain the Liens securing such Claims. The principal economic terms of the New
Senior Secured Notes are set forth on Annex A hereto.
(b) On the Effective Date, the theretofore unpaid fees, costs and other
expenses of the Holders of the Old Credit Facilities Secured Claims and the
Holders of the Old Senior Notes Secured Claims will be paid in accordance with
Section 6.2.11 hereof, and the Citibank Agency Amount will be paid to Citibank,
N.A.
(c) On the Effective Date, all then existing undrawn letters of credit
under the Old Credit Facilities shall be, at Reorganized Anacomp's option: (i)
Cash collateralized by the Letter of Credit Cash Amount or (ii) replaced by the
New LC Facility. Unless all undrawn letters of credit issued pursuant to the
Credit Agreement are replaced by the New LC Facility prior to the Effective
Date, any and all Claims relating to such letters of credit shall survive after
the Effective Date, shall not be discharged or released under this Plan or the
Confirmation Order and, other than the pledge by Reorganized Anacomp of the
Letter of Credit Cash Amount, shall be unaffected by the Plan.
(d) On the Effective Date, the Cash Collateral Amount shall be paid to the
Holders of the Allowed Class 2 Claims in the manner provided with respect to the
payment of interest in Paragraph 4(d) of the Cash Collateral Order.
5.3 Class 3. Miscellaneous Secured Claims. Class 3 Claims are unimpaired.
At Reorganized Anacomp's option, on the Effective Date, each Holder of an
Allowed Miscellaneous Secured Claim shall either (i) retain unaltered the legal,
equitable and contractual rights to which such Allowed Miscellaneous Secured
Claim entitles the Holder thereof or (ii) be treated in accordance with Section
1124(2) of the Bankruptcy Code.
5.4 Class 4. Carlisle Note Claim. The Class 4 Claim is impaired. On the
Effective Date, the amount of the Claim in Class 4 will be deemed to be an
Allowed Claim of $2,615,760, and the Holder of the Allowed Class 4 Claim shall
receive, in full satisfaction of its Allowed Class 4 Claim, a New Carlisle Note
in an amount equal to such amount.
5.5 Class 5. Old Senior Subordinated Notes Claims. Class 5 Claims are
impaired. On the Effective Date, the aggregate amount of the Claims in Class 5
will be deemed to be an Allowed Claim of $267,672,398, and each Holder of an
Allowed Class 5 Claim, as of the Distribution Record Date, shall receive, in
full satisfaction of its Allowed Class 5 Claim, its Pro Rata share of: (i) the
New Senior Subordinated Notes, (ii) nine million two hundred fifty thousand
(9,250,000) shares of the New Common Stock and (iii) any consideration payable
to the Holders of Allowed Class 5 Claims pursuant to Sections 5.6(b), 5.8(b)
and/or 5.9(b) of the Plan. The principal economic terms of the New Senior
Subordinated Notes are set forth on Annex B hereto.
5.6 Class 6. Old Subordinated Debentures Claims. Class 6 Claims are
impaired. On the Effective Date, the aggregate amount of the Claims in Class 6
will be deemed to be an Allowed Claim of $37,776,286.09, of which amount
$11,395,912.50 is the aggregate amount of the Allowed Old 9% Subordinated
Debentures Claims and $26,380,373.59 is the aggregate amount of the Allowed Old
13.875% Subordinated Debentures Claims.
(a) If Class 6 accepts the Plan, each Holder of an Allowed Class 6 Claim as
of the Distribution Record Date shall receive on the Effective Date, in full
satisfaction of its Allowed Class 6 Claim, its Pro Rata share of: (i) seven
hundred fifty thousand (750,000) shares of the New Common Stock, (ii) two
hundred fifty-nine thousand sixty-eight (259,068) New Warrants and (iii) any
consideration payable to the Holders of Allowed Class 6 Claims pursuant to
Sections 5.8(b) and/or 5.9(b) of the Plan.
(b) If Class 6 rejects the Plan, the Holders of Old Subordinated Debentures
shall not receive or retain any property on account of their Old Subordinated
Debentures Claims, and all consideration payable to Class 6 pursuant to
subparagraph (a) of this Section 5.6 shall be distributed instead Pro Rata to
the Holders of Allowed Class 5 Claims.
<PAGE>
5.7 Class 7. General Unsecured Claims. Class 7 Claims are unimpaired. To
the extent any Allowed General Unsecured Claim (including, without limitation,
Trade Claims) has not been paid or satisfied by performance in full prior to the
Effective Date, Reorganized Anacomp (i) shall pay, on the Effective Date, if
such Allowed General Unsecured Claim is then matured, the Holder of such Allowed
General Unsecured Claim in full in Cash or shall satisfy such Allowed General
Unsecured Claim by performance when such payment or performance is due, (ii)
shall pay or satisfy such Allowed General Unsecured Claim by performance, in
accordance with its respective terms, if such Allowed General Unsecured Claim is
not matured prior to the Effective Date, (iii) shall pay or satisfy such Allowed
General Unsecured Claim as otherwise agreed by the Holder of the Allowed General
Unsecured Claim and Reorganized Anacomp, or (iv) provide such other treatment as
will render such Allowed General Unsecured Claim unimpaired in accordance with
Section 1124(2) of the Bankruptcy Code, provided that Reorganized Anacomp shall
pay any General Unsecured Claim which is subject to approval by the Bankruptcy
Court as reasonable pursuant to Section 1129(a)(4) of the Bankruptcy Code upon
entry of a Final Order of the Bankruptcy Court allowing such General Unsecured
Claim and approving such General Unsecured Claim as reasonable.
5.8 Class 8. Old Preferred Stock. Class 8 Interests are impaired. (a) If
both Class 6 and Class 8 accept the Plan, each Holder of an Allowed Class 8
Interest as of the Distribution Record Date shall receive on the Effective Date,
in full satisfaction of its Allowed Interest, its Pro Rata share of sixty-two
thousand one hundred seventy-six (62,176) New Warrants.
(b) If either Class 6 or Class 8 rejects the Plan, the Holders of Class 8
Interests shall not receive or retain any property on account of their Class 8
Interests, and all consideration payable to Class 8 pursuant to subparagraph (a)
of this Section 5.8 shall be distributed instead Pro Rata to the Holders of
Allowed Class 6 Claims if Class 6 has accepted the Plan, or Pro Rata to the
Holders of Allowed Class 5 Claims if Class 6 has rejected the Plan.
5.9 Class 9. Old Common Stock. Class 9 Interests are impaired.
(a) If both Class 6 and Class 8 accept the Plan, each Holder of an Allowed
Class 9 Interest as of the Distribution Record Date shall receive on the
Effective Date, in full satisfaction of its Allowed Interest, its Pro Rata share
of forty-one thousand four hundred fifty (41,450) New Warrants.
(b) If either Class 6 or Class 8 rejects the Plan, Holders of Class 9
Interests shall not receive or retain any property on account of their Class 9
Interests, and all consideration payable to Class 9 pursuant to subparagraph (a)
of this Section 5.9 shall be distributed instead Pro Rata to the Holders of
Allowed Class 6 Claims if Class 6 has accepted the Plan but Class 8 has rejected
the Plan, or Pro Rata to the Holders of Allowed Class 5 Claims if both Class 6
and Class 8 have rejected the Plan.
5.10 Class 10. Claims for Issuance of Old Common Stock. Class 10 Interests
are impaired. The Holders of Class 10 Interests shall not receive or retain any
property under the Plan. All Employee Options and all other options or rights to
acquire the Old Common Stock shall be canceled, annulled and extinguished on the
Effective Date.
<PAGE>
5.11 Class 11. Intercompany Claims. Class 11 Claims are unimpaired. Except
as provided in Section 6.1.5 hereof, at Reorganized Anacomp's option, each
Holder of an Allowed Class 11 Claim shall either (i) retain unaltered the legal,
equitable and contractual rights to which such Allowed Class 11 Claim entitles
the Holder thereof or (ii) be treated in accordance with Section 1124(2) of the
Bankruptcy Code.
5.12 Allocation Between Principal and Accrued Interest. The aggregate
consideration paid to Holders in respect of their Allowed Claims shall be
treated under this Plan as allocated first to the principal amount of such
Allowed Claim to the extent thereof and, thereafter, to the interest accrued
thereon through the Effective Date.
ARTICLE VI
MEANS FOR EXECUTION OF THE PLAN
6.1 General Corporate Matters. Reorganized Anacomp shall take such action
as is necessary under the laws of the State of Indiana, federal law and other
applicable law to effect the terms and provisions of the Plan. As of the
Effective Date, Anacomp International shall be liquidated and Reorganized
Anacomp shall take such action as is necessary under the laws of the Netherlands
Antilles, N.V. and other applicable law to dissolve Anacomp International after
the Effective Date. As of the Effective Date, Anacomp and the Merged
Subsidiaries shall be deemed to have been merged into and become a part of
Reorganized Anacomp. Reorganized Anacomp shall cause the appropriate
certificates of merger to be filed in the appropriate jurisdictions.
6.1.1 Cancellation of Old Securities, Instruments and Agreements Relating
to Impaired Claims and Interests. On the Effective Date, except as otherwise
provided in the Plan, all securities, instruments and agreements governing any
Claims and Interests impaired hereby shall be deemed canceled and terminated,
and the obligations of the Debtors relating to, arising under, in respect of or
in connection with such securities, instruments and agreements shall be
discharged; provided, however, that except as otherwise provided herein, notes
and other evidences of Claims and Interests shall, effective upon the Effective
Date, represent the right to participate, to the extent such Claims and
Interests are Allowed, in the distributions contemplated by the Plan.
<PAGE>
6.1.2 Effectiveness of Securities, Instruments and Agreements. On the
Effective Date, all securities, instruments and agreements entered into or
issued pursuant to the Plan, including, without limitation, (i) the Plan
Securities, (ii) the New Senior Secured Notes Indenture, (iii) the New Senior
Subordinated Notes Indenture, (iv) the New Senior Secured Notes Security and
Pledge Agreement, (v) the New LC Facility, (vi) the New Management Incentive
Plan, (vii) the New Warrant Agreement, (viii) the Registration Rights Agreement
and (ix) any security, instrument or agreement entered into in connection with
any of the foregoing, shall become effective and binding in accordance with
their respective terms and conditions upon the parties thereto and shall be
deemed to become effective simultaneously.
6.1.3 Corporate Action. As of the Effective Date, Reorganized Anacomp shall
be deemed to have adopted the Amended Anacomp Articles and the Amended Anacomp
Bylaws which shall thereupon become effective. Reorganized Anacomp shall file
the Amended Anacomp Articles which shall, among other things, contain
appropriate provisions consistent with the Plan and other Plan Documents (i)
governing the authorization of the New Common Stock and the New Warrants, (ii)
prohibiting the issuance of nonvoting equity securities as required by Section
1123(a)(6) of the Bankruptcy Code, and (iii) implementing such other matters as
Reorganized Anacomp believes are necessary and appropriate to effectuate the
terms and conditions of the Plan, including the merger of the Merged
Subsidiaries. Except as otherwise specifically provided in the Plan, the
adoption of the Amended Anacomp Articles and the Amended Anacomp Bylaws, the
selection of directors and officers of Reorganized Anacomp, the distribution of
Cash, the issuance and distribution of the New Common Stock and the New Warrants
and the adoption, execution and delivery of all contracts, instruments,
indentures, modifications and other agreements related to any of the foregoing,
and other matters provided for under the Plan involving corporate action to be
taken by or required of Reorganized Anacomp shall be deemed to have occurred and
be effective on the Effective Date as provided herein, and shall be authorized
and approved in all respects without any requirement of further action by
stockholders, officers or directors of Reorganized Anacomp. To the extent
required by law, the board of directors of Reorganized Anacomp shall take such
action as may be necessary from time to time to approve the issuance of the Plan
Securities and such other action, if any, as may be required to meet the
requirements of the Plan or any of the Plan Securities issued thereto.
6.1.4 Management and Board of Directors. On the Effective Date, the board
of directors of Reorganized Anacomp shall be comprised of the following
individuals: P. Lang Lowrey III, Talton R. Embry, Jay P. Gilbertson, Darius W.
Gaskins, Jr., Richard D. Jackson, George A. Poole, Jr. and Lewis Solomon. Except
as otherwise provided herein or in any Plan Document, the members of the
existing board of directors of Anacomp shall have no continuing obligations to
any of the Debtors, Reorganized Anacomp or Reorganized Florida A A C on and
after the Effective Date. Also on the Effective Date, the executive officers of
Reorganized Anacomp shall be the same individuals serving in the same capacities
as of the Business Day immediately preceding the Effective Date.
6.1.5 Substantive Consolidation. The Plan contemplates the substantive
consolidation of the Chapter 11 Cases of the Debtors into a single proceeding
with respect to confirmation, consummation and implementation of the Plan.
Pursuant to the Confirmation Order, on the Confirmation Date: (i) all assets,
and all proceeds thereof, and all liabilities of the Consolidated Debtors will
be merged or treated as though they were merged with and into the assets and
liabilities of Reorganized Anacomp; (ii) all Consolidated Claims and Claims
among the Consolidated Debtors and the Merged Subsidiaries will be eliminated;
(iii) any obligation of any Consolidated Debtor, and all guarantees thereof
executed by one or more of the Consolidated Debtors, and any Claims filed or to
be filed in connection with any such obligation and guarantee will be deemed one
Claim against Reorganized Anacomp; (iv) each and every Claim filed in the
individual Chapter 11 Case of any of the Consolidated Debtors will be deemed
filed against Reorganized Anacomp; and (v) for purposes of determining the
availability of the right of set-off under Section 553 of the Bankruptcy Code,
the Consolidated Debtors shall be treated for purposes of the Plan as one entity
so that, subject to the other provisions of Section 553 of the Bankruptcy Code,
debts due to any of the Consolidated Debtors may be setoff against the debts of
any of the Consolidated Debtors.
<PAGE>
6.1.6 Extinguishment of Guarantees. Except as otherwise provided in the
Plan or in any Plan Document, on the Effective Date, (i) all Claims based upon
guarantees of collection, payment or performance made by any of the Debtors as
to the obligations of each other, including, without limitation, the Anacomp
Debentures Guarantee, and (ii) all Claims arising under the Anacomp Guarantee,
shall be discharged, released and of no further force and effect.
6.1.7 Continued Corporate Existence and Vesting of Assets in Reorganized
Anacomp. Anacomp shall continue to exist on and after the Effective Date as
Reorganized Anacomp, a duly organized Indiana corporation, with all the rights
and powers of a corporation under applicable law and without prejudice to any
right to alter or terminate such existence (whether by merger or otherwise)
under Indiana law, subject to the terms and provisions of this Plan and the
Confirmation Order. Except as otherwise provided in the Plan, on or after the
Effective Date, all property of the Consolidated Estates, and any property and
assets acquired by Anacomp or Reorganized Anacomp under any provisions of the
Plan, shall vest in Reorganized Anacomp, free and clear of any and all Claims,
Liens, charges and other Encumbrances. On and after the Effective Date,
Reorganized Anacomp may operate its business and may use, acquire and dispose of
property or assets and compromise or settle any claims against it without
supervision or approval by the Bankruptcy Court and free of any restrictions of
the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly
imposed by the Plan or the Confirmation Order. Without limiting the foregoing,
Reorganized Anacomp may pay the charges that it incurs on or after the Effective
Date for Professional fees, disbursements, expenses or related support services
without application to the Bankruptcy Court.
6.1.8 Continued Corporate Existence and Vesting of Assets in Reorganized
Florida A A C. Florida A A C shall continue to exist on and after the Effective
Date as Reorganized Florida A A C with all the rights and powers of a
corporation under applicable law and without prejudice to any right to alter or
terminate such existence (whether by merger or otherwise) under Florida law,
subject to the terms and provisions of this Plan and the Confirmation Order. On
and after the Effective Date, Reorganized Florida A A C may operate its business
and may use, acquire and dispose of property or assets and compromise or settle
any claims against it without supervision or approval by the Bankruptcy Court
and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other
than those restrictions expressly imposed by the Plan or the Confirmation Order.
Without limiting the foregoing, Reorganized Florida A A C may pay the charges
that it incurs on or after the Effective Date for Professional fees,
disbursements, expenses or related support services without application to the
Bankruptcy Court.
<PAGE>
6.2 Distributions.
6.2.1 Generally. Except as otherwise provided in the Plan, any distribution
required by the Plan to be made on the Effective Date in respect of a Claim or
Interest that is Allowed as of the Effective Date will be deemed made on the
Effective Date if made on the Effective Date or as promptly thereafter as
practicable, but in any event no later than the later to occur of: (i) 45 days
after the Effective Date or (ii) the date on which such Claim or Interest
becomes Allowed and any other conditions to distribution with respect to such
Claim or Interest shall have been satisfied.
6.2.2 Distributions to Holders of Allowed Old Credit Facilities Secured
Claims. All distributions provided for in the Plan on account of Allowed Old
Credit Facilities Secured Claims will be made by the Disbursing Agent to the
Collateral Agent for further distribution to individual Holders of such Claims.
Within five days after the Distribution Record Date, The First National Bank of
Chicago, as agent under the Multicurrency Revolver Loan Agreement, shall provide
the information necessary to calculate such distribution with respect to the
Multicurrency Revolver Loan Agreement in writing to the Disbursing Agent, and
within eight days after the Distribution Record Date, the Collateral Agent shall
provide such information received from The First National Bank of Chicago,
together with the information necessary to calculate such distribution with
respect to the other Old Credit Facilities, in writing to the Disbursing Agent.
Notwithstanding any provision in the Plan to the contrary, the Old Credit
Facilities and the Old Collateral Documents will continue in effect to the
extent necessary to allow the Collateral Agent to receive and make distributions
pursuant to the Plan, and the Collateral Agent will remain entitled to any
limitation of liability, exculpation or indemnification provisions between or
among the Holders of Allowed Old Credit Facilities Secured Claims under the Old
Credit Facilities and the Old Collateral Documents.
6.2.3 Distributions to Holders of Allowed Debt Security Claims. All
distributions provided for in the Plan on account of Allowed Debt Security
Claims will be made, at the option of Reorganized Anacomp, to the respective Old
Indenture Trustees or the Disbursing Agent for further distribution to
individual Holders of Allowed Debt Security Claims. Any such distribution made
by an Old Indenture Trustee will be made pursuant to the applicable Old
Indenture or other disbursing agent agreement entered into by Reorganized
Anacomp and the applicable Old Indenture Trustee. Notwithstanding any provision
in the Plan to the contrary, the Old Indentures will continue in effect to the
extent necessary to allow the Old Indenture Trustees to receive and make
distributions pursuant to the Plan on account of Allowed Debt Security Claims.
Any actions taken by any Old Indenture Trustee on or after the Effective Date
that are not for this purpose will be null and void as against the Debtors and
Reorganized Anacomp, and Reorganized Anacomp will have no obligations to any Old
Indenture Trustee for any fees, costs or expenses incurred in connection with
any such actions.
6.2.4 Distributions to Holders of Other Claims and Interests. The
Disbursing Agent will make all distributions required under the Plan, except for
distributions made by the Collateral Agent or the Old Indenture Trustees. The
Disbursing Agent will serve without bond, and may employ or contract with other
Entities to assist in or make the distributions required by the Plan.
<PAGE>
6.2.5 Compensation for Services Related to Distribution. In consideration
for providing services related to distributions pursuant to the Plan, the
Collateral Agent, the Old Indenture Trustees and the Disbursing Agent, as the
case may be, will receive from Reorganized Anacomp, without further Bankruptcy
Court approval, reasonable compensation for such services and reimbursement of
reasonable out-of-pocket expenses incurred in connection with such services.
These payments will be made on terms agreed to with Reorganized Anacomp, and
will not be deducted from distributions to be made pursuant to the Plan to
Holders of Allowed Claims and Allowed Interests.
6.2.6 Delivery of Distributions and Undeliverable or Unclaimed
Distributions.
(a) Distributions to Holders of Allowed Claims and Holders of Allowed
Interests will be made as follows: (a) with respect to Allowed Old Credit
Facilities Secured Claims, by the Collateral Agent, (b) with respect to Allowed
Debt Security Claims other than Allowed Old 9% Subordinated Debentures Claims,
if made by an Old Indenture Trustee, in accordance with the applicable Old
Indenture and, if made by the Disbursing Agent, at the addresses supplied in the
letter of transmittal provided by or on behalf of the Holders of such Claims in
accordance with Section 6.2.10(b) hereof; (c) with respect to Old 9%
Subordinated Debentures Claims, Anacomp will publish notice of the availability
of the distribution under the Plan in the manner provided in Section 1105 of the
Old 9% Subordinated Debentures Indenture and distributions will be made by the
Disbursing Agent upon presentation of a letter of transmittal and original
certificate to Cedel, Euroclear or the Disbursing Agent, (d) with respect to all
other Allowed Claims, by the Disbursing Agent (i) at the addresses set forth on
the respective proofs of Claim Filed by Holders of such Claims; (ii) at the
addresses set forth in any written notices of address change delivered to the
Disbursing Agent after the Limited Bar Date; or (iii) at the addresses reflected
in the applicable Debtor's records if no proof of Claim has been Filed and the
Disbursing Agent has not received a written notice of a change of address, (e)
with respect to Allowed Class 8 Interests and Allowed Class 9 Interests, by the
Disbursing Agent (i) at the addresses supplied by the Old Transfer Agent, (ii)
at the addresses set forth on the respective proofs of Interests Filed by
Holders of such Interests; (iii) at the addresses set forth in any written
notices of address change delivered to the Disbursing Agent, or (iv) at the
addresses reflected in the applicable Debtor's records if no proof of Interest
has been Filed and the Disbursing Agent has not received a written notice of a
change of address.
(b) If any Allowed Claim Holder's or Allowed Interest Holder's distribution
is returned to the Disbursing Agent as undeliverable, no further distributions
will be made to such Holders unless and until the Disbursing Agent is notified
in writing of such Holder's then-current address. Undeliverable distributions
will remain in the possession of the Disbursing Agent until such time as a
distribution becomes deliverable. Undeliverable Cash (including dividends or
other distributions on account of undeliverable New Common Stock) will be held
in segregated bank accounts in the name of the Disbursing Agent for the benefit
of the potential claimants of such funds. Undeliverable Cash will be invested by
the Disbursing Agent in a manner consistent with Reorganized Anacomp's
investment and deposit guidelines. Undeliverable Plan Securities will be held by
the Disbursing Agent for the benefit of the potential claimants of such
securities.
<PAGE>
(c) Pending the distribution of the New Common Stock, the Disbursing Agent
will cause all of the New Common Stock held by it in its capacity as Disbursing
Agent to be: (i) represented in person or by proxy at each meeting of the
stockholders of Reorganized Anacomp; and (ii) voted proportionately with the
votes cast by the other stockholders of Reorganized Anacomp, taken as a whole.
(d) Any Holder of an Allowed Claim or an Allowed Interest that does not
assert a claim pursuant to the Plan for an undeliverable distribution to be made
by the Disbursing Agent, the Collateral Agent or the Old Indenture Trustees, as
the case may be, within two years after the Effective Date will have its claim
for such undeliverable distribution discharged and will be forever barred from
asserting any such claim against the Debtors, Reorganized Anacomp or their
property. In such cases: (i) any Cash held for distribution on account of such
claims for undeliverable distributions (including Cash interest, maturities,
dividends and other distributions on undelivered Plan Securities, as the case
may be) shall be property of Reorganized Anacomp, free of any restrictions
thereon (except as otherwise provided in any Plan Document); (ii) any New Senior
Secured Notes and New Senior Subordinated Notes held for distribution on account
of such claims for distributions shall be canceled and of no further force or
effect; (iii) any New Common Stock held for distribution on account of such
claims for distributions shall either be canceled or held as treasury shares as
Reorganized Anacomp may determine is appropriate; and (iv) any New Warrants held
for distribution on account of such claims for distributions shall be canceled.
(e) If an Old Indenture Trustee or the Disbursing Agent, as applicable,
determines that an individual Holder of an Allowed Debt Security Claim is no
longer entitled to a distribution pursuant to the applicable Old Indenture, the
Plan, the Confirmation Order or applicable foreign law with respect to the Old
9% Subordinated Debentures Claims, such individual Holder's claim for such
distribution will be discharged, and such individual Holder will be forever
barred from asserting any such claim for a distribution against the Debtors,
Reorganized Anacomp or their respective property. In such cases: (i) any Cash
held for distribution on account of such claims for undeliverable distributions
(including Cash interest, maturities, dividends and other distributions on
undelivered Plan Securities, as the case may be) shall be property of
Reorganized Anacomp, free of any restrictions thereon (except as otherwise
provided in any Plan Document); (ii) any New Senior Subordinated Notes held for
distribution on account of such claims for distributions shall be canceled and
of no further force or effect; (iii) any New Common Stock held for distribution
on account of such claims for distributions shall either be canceled or held as
treasury shares as Reorganized Anacomp may determine is appropriate; and (iv)
any New Warrants held for distribution on account of such claims for
distributions shall be canceled.
6.2.7 Distribution Record Date.
(a) The Collateral Agent will have no obligation to recognize the transfer
of, or the sale of, any participation in any Allowed Old Credit Facilities
Secured Claim occurring after the close of business on the Distribution Record
Date, and will be entitled for all purposes herein to recognize and distribute
only to those Holders of Allowed Old Credit Facilities Secured Claims who are
Holders of such Claims, or participants therein, as certified by such Holders in
writing to the Collateral Agent by the close of business on the Distribution
Record Date.
(b) As of the close of business on the Distribution Record Date, the
respective transfer registers for the Old Securities (as applicable) will be
closed, and the Disbursing Agent, the Old Indenture Trustees and their
respective agents will have no obligation to recognize the transfer of any Old
Securities, any Old Common Stock or any Old Preferred Stock occurring after the
close of business on the Distribution Record Date and will be entitled for all
purposes herein to recognize and deal only with those Holders of record as of
the close of business on the Distribution Record Date.
<PAGE>
6.2.8 Means of Cash Payments. Except as otherwise specified herein, Cash
payments made pursuant to the Plan will be in U.S. dollars by checks drawn on a
domestic bank selected by Reorganized Anacomp, or by wire transfer from a
domestic bank, at the option of Reorganized Anacomp.
6.2.9 Fractional Plan Securities.
(a) Notwithstanding any other provisions of the Plan, principal amounts of
the New Senior Secured Notes and the New Senior Subordinated Notes will be
initially issued only in denominations of $1,000 and integral multiples thereof.
When any distribution on account of an Allowed Claim would otherwise result in
the issuance of New Senior Secured Notes or New Senior Subordinated Notes with
an aggregate principal amount that is not an integral multiple of $1,000, the
actual distribution of such notes will be rounded to the next higher or lower
integral multiple of $1,000, as follows: (a) aggregate principal amounts that
exceed an integral multiple of $1,000 by $500 or more will be rounded to the
next higher integral multiple of $1,000 and (b) aggregate principal amounts that
exceed an integral multiple of $1,000 by less than $500 will be rounded to the
next lower integral multiple of $1,000. If, as a result of such rounding, the
sum of such principal amounts differs from the aggregate principal amount of
such New Senior Secured Notes or New Senior Subordinated Notes to be distributed
pursuant to the Plan, as applicable, the aggregate principal amount of the New
Senior Secured Notes or the New Senior Subordinated Notes will be adjusted
upward or downward to provide for the distribution of the applicable New Senior
Secured Notes or New Senior Subordinated Notes in an aggregate principal amount
equal to such sum. No consideration will be provided in lieu of principal
amounts that are rounded down.
(b) Notwithstanding any other provision of the Plan, only whole numbers of
shares of New Common Stock and whole numbers of New Warrants will be issued.
When any distribution on account of an Allowed Claim or an Allowed Interest
would otherwise result in the issuance of a number of shares of New Common Stock
or a number of New Warrants that is not a whole number, the actual distribution
of shares of such stock or warrants will be rounded to the next higher or lower
whole number as follows: (i) fractions equal to or greater than 1/2 will be
rounded to the next higher whole number and (ii) fractions less than 1/2 will be
rounded to the next lower number. The total number of shares of New Common Stock
and New Warrants to be distributed to a Class of Claims or Interests will be
adjusted as necessary to account for the rounding provided for herein. If, as a
result of such rounding, the amount of shares of New Common Stock or the amount
of New Warrants to be distributed to a particular Class differs from the
aggregate number of shares of New Common Stock or New Warrants to be distributed
pursuant to the Plan to that Class, the aggregate number of shares of New Common
Stock or the amount of New Warrants specified with respect to such Class will be
adjusted upward or downward to provide for the distribution of New Common Stock
or New Warrants, as the case may be, in an aggregate number of shares or New
Warrants equal to such sum. No consideration will be provided in lieu of
fractional shares or warrants that are rounded down.
<PAGE>
6.2.10 Surrender of Canceled Instruments or Securities.
(a) As a condition precedent to receiving any distribution pursuant to the
Plan on account of an Allowed Claim or an Allowed Interest evidenced by the
notes, instruments, securities or other documentation canceled pursuant to the
Plan, the Holder of such Claim or Interest will tender the applicable notes,
instruments, securities or other documentation evidencing such Claim or Interest
to the Collateral Agent, the Disbursing Agent, Cedel, Euroclear or one of the
Old Indenture Trustees, as applicable. Any Cash or Plan Securities to be
distributed pursuant to the Plan on account of any such Claim or Interest will,
pending such surrender, be treated as an undeliverable distribution pursuant to
Section 6.2.6 hereof.
(b) Except as provided in Section 6.2.10(c) hereof, each Holder of an
Allowed Claim or an Allowed Interest will tender such Old Security to the
Disbursing Agent, Cedel, Euroclear or one of the Old Indenture Trustees, as
applicable, together with a letter of transmittal to be provided to such Holders
by the Disbursing Agent, Cedel, Euroclear or the Old Indenture Trustees as
promptly as practicable following the Effective Date. The letter of transmittal
will include, among other provisions, customary provisions with respect to the
authority of the Holder of the applicable Old Security to act and the
authenticity of any signatures required thereon. All surrendered Old Securities
will be marked as canceled by the Disbursing Agent, Cedel, Euroclear or one of
the Old Indenture Trustees, as applicable, and delivered to Reorganized Anacomp.
(c) In addition to any requirements under the applicable Old Indenture, any
Holder of a Claim or Interest evidenced by an Old Security that has been lost,
stolen, mutilated or destroyed will, in lieu of surrendering such Old Security,
deliver to the Disbursing Agent or one of the Old Indenture Trustee, as
applicable: (i) evidence satisfactory to such Entity of such loss, theft,
mutilation or destruction and (ii) such security or indemnity as may be required
by such Entity to hold such Entity harmless from any damages, liabilities or
costs incurred in treating such individual as a Holder of an Old Security. Upon
compliance with this Section 6.2.10(c) by a Holder of a Claim or an Interest
evidenced by an Old Security, such Holder will, for all purposes under the Plan,
be deemed to have surrendered an Old Security.
(d) Any Holder of an Old Security that fails to surrender or be deemed to
have surrendered such Old Security within two years after the Effective Date
will have its claim for a distribution pursuant to the Plan on account of such
Old Security discharged and will be forever barred from asserting any such claim
against the Debtors, Reorganized Anacomp or their respective property. In such
cases: (i) any Cash held for distribution on account of such claims for
undeliverable distributions (including Cash interest, maturities, dividends and
other distributions on undelivered Plan Securities, as the case may be) shall be
property of Reorganized Anacomp, free of any restrictions thereon (except as
otherwise provided in any Plan Document); (ii) any New Senior Secured Notes and
New Senior Subordinated Notes held for distribution on account of such claims
for distributions shall be canceled and of no further force or effect; (iii) any
New Common Stock held for distribution on account of such claims for
distributions shall either be canceled or held as treasury shares as Reorganized
Anacomp may determine is appropriate; and (iv) any New Warrants held for
distribution on account of such claims for distributions shall be canceled.
<PAGE>
6.2.11 Fees and Expenses of Senior Lenders. On the Effective Date,
Reorganized Anacomp will reimburse in Cash, without prior Bankruptcy Court
approval, the Holders of the Old Senior Notes Secured Claims and the Holders of
the Old Credit Facilities Secured Claims, as part of their Secured Claims, for
certain reasonable legal and other professional fees, costs and other expenses
incurred by such Holders, to the extent not theretofore paid to or on behalf of
such Holders and upon submission, two Business Days prior to the Effective Date,
by each attorney, accountant and financial advisor retained by such Holders of
billing statements setting forth amounts equal to (a) all fees, costs and other
expenses incurred by such Entity from the Petition Date through the end of the
Business Day immediately preceding the date of such submission and (b) a good
faith estimate of the fees, costs and other expenses to be incurred thereafter
by such Entity through the Effective Date, to the Debtors and the Creditors'
Committee.
6.2.12 Setoff. Reorganized Anacomp may, but shall not be required to, set
off against any Allowed Claim and the distributions to be made pursuant to the
Plan on account of such Claim, claims of any nature that the Debtors or
Reorganized Anacomp may have against the Holder of such Allowed Claim; provided,
however, that neither the failure to effect such a setoff nor the allowance of
any Claim against the Debtors or Reorganized Anacomp shall constitute a waiver
or release by the Debtors or Reorganized Anacomp of any claim that the Debtors
or Reorganized Anacomp may possess against such Holder.
6.3 Indenture Trustee Charging Liens. In full satisfaction of Allowed
Claims secured by Indenture Trustee Charging Liens, the Old Indenture Trustees
will receive from Reorganized Anacomp Cash equal to the amount of such Claims,
and any Indenture Trustee Charging Liens will be released. Distributions
received by Holders of Allowed Claims pursuant to the Plan will not be reduced
on account of payment of Allowed Claims secured by Indenture Trustee Charging
Liens. Notwithstanding any other provisions of the Plan, upon: (a) submission of
appropriate documentation to Reorganized Anacomp and the Creditors' Committee
regarding fees and expenses incurred by an Old Indenture Trustee in connection
with the Chapter 11 Cases through the Effective Date that are secured by an Old
Indenture Trustee Charging Lien and (b) the failure of Reorganized Anacomp or
the Creditors' Committee to object on the grounds of reasonableness, as
determined under the terms of the applicable Old Indenture, to the payment of
such fees and expenses within 10 Business Days after receipt of such
documentation, such Old Indenture Trustee will be deemed to hold an Allowed
Claim for such fees and expenses, which Reorganized Anacomp will pay in Cash
within 30 days after the receipt of the documentation regarding the fees and
expenses of such Old Indenture Trustee, without further Bankruptcy Court
approval.
<PAGE>
6.4 Retiree Benefits. On and after the Effective Date, to the extent
required by Section 1129(a)(13) of the Bankruptcy Code, Reorganized Anacomp
and/or Reorganized Florida A A C shall continue to pay all retiree benefits (if
any), as the term "retiree benefits" is defined in Section 1114(a) of the
Bankruptcy Code, maintained or established by the Debtors prior to the
Confirmation Date.
6.5 Exemptions from Securities Laws and Shelf Registration.
(a) The Confirmation Order shall provide that the offer and sale of the
Plan Securities are exempt from registration pursuant to Section 1145(a) of the
Bankruptcy Code and that the Plan Securities may be resold by the holders
thereof without restriction, except to the extent that any such holder that is
deemed to be an "underwriter," as defined in Section 1145(b)(1) of the
Bankruptcy Code with respect to the Plan Securities.
(b) Within 45 days after the Effective Date, or such longer time as may be
required to prepare the necessary financial statements, Reorganized Anacomp
shall file, at its expense, the Shelf Registration Statement. Reorganized
Anacomp shall use its best efforts to file the Shelf Registration Statement as
expeditiously as possible after the Effective Date and to have the Shelf
Registration Statement declared effective as soon as practicable after such
filing and to keep the Shelf Registration Statement continuously effective until
the third anniversary date of the effective date thereof, except as otherwise
provided in the Registration Rights Agreement. The New Senior Secured Notes
shall be included in the Shelf Registration Statement if Class 2 shall have
accepted the Plan and the New Senior Subordinated Notes shall be included in the
Shelf Registration Statement if Class 5 shall have accepted the Plan. The New
Common Stock shall be included in the Shelf Registration Statement. No
securities other than the New Common Stock, the New Senior Secured Notes and the
New Senior Subordinated Notes shall be included in the Shelf Registration
Statement unless the holders of a majority of the outstanding New Common Stock
consent to such inclusion. Reorganized Anacomp shall also, if necessary,
supplement or make amendments to the Shelf Registration Statement.
ARTICLE VII
ACCEPTANCE OR REJECTION OF THE PLAN
7.1 Classes Entitled to Vote. Each Holder of an Allowed Claim or Allowed
Interest in a Class of Claims against or Interests in any of the Debtors which
may be impaired under the Plan, including any Holder of a Class 2 Claim, Class 4
Claim, Class 5 Claim, Class 6 Claim or a Class 8 Interest shall be entitled to
vote separately to accept or reject the Plan. Each Holder of a Claim or Interest
in a Class of Claims or Interests which is unimpaired under the Plan, including
Class 1, Class 3, Class 7 and Class 11, shall be presumed to have accepted the
Plan pursuant to Section 1126(f) of the Bankruptcy Code. Classes 9 and 10 shall
be presumed to have rejected the Plan pursuant to Section 1126(g) of the
Bankruptcy Code.
7.2 Class Acceptance Requirement. An impaired Class of Claims shall have
accepted the Plan if (i) the Holders (other than any Holder designated under
Section 1126(e) of the Bankruptcy Code) of at least two-thirds in dollar amount
of the Allowed Claims actually voting in such Class have voted to accept the
Plan and (ii) the Holders (other than any Holder designated under Section
1126(e) of the Bankruptcy Code) of more than one-half in number of the Allowed
Claims actually voting in such Class have voted to accept the Plan. An impaired
Class of Interests shall have accepted the Plan if the Holders (other than any
Holder designated under Section 1126(e) of the Bankruptcy Code) of at least
two-thirds in amount of the Allowed Interests actually voting in such Class have
voted to accept the Plan.
<PAGE>
7.3 Confirmation Notwithstanding a Rejection of Plan by an Impaired Class.
If any impaired Class or Classes of Claims or Interests shall not accept the
Plan, the Debtors request that the Bankruptcy Court confirm the Plan in
accordance with Section 1129(b) of the Bankruptcy Code. In addition, the Debtors
reserve the right to modify the Plan pursuant to the provisions of Section 14.13
of the Plan to provide treatment sufficient to assure that the Plan does not
discriminate unfairly, and is fair and equitable, with respect to the Class or
Classes not accepting the Plan, and, in particular, the treatment necessary to
meet the minimum requirements of Sections 1129(a) and (b) of the Bankruptcy Code
with respect to the rejecting Classes and any other Classes affected by such
modifications; provided, however, that the Debtors shall not modify the Plan to
(i) reduce the distributions to be made to any of Classes 4, 5, 6 or 7 or (ii)
increase the distributions to be made to any Class, without first having
obtained the consent of the Creditors' Committee.
ARTICLE VIII
PROCEDURE FOR RESOLVING DISPUTED CLAIMS
8.1 Unimpaired Excepted Claims Generally. The Allowed amount of any
Unimpaired Excepted Claim and the rights of the Holder of such Unimpaired
Excepted Claim, if any, to payment in respect thereof shall (a) be determined
(i) in the event that the Holder thereof (A) does not File proof of such Claim
on or before the Limited Bar Date or (B) Files a proof of such Claim on or
before the Limited Bar Date and no objection to, or request for estimation with
respect to, such Claim is Filed in accordance with Section 8.4 hereof, by any
court of competent jurisdiction other than the Bankruptcy Court in the manner in
which the amount of such Claim and the rights of the Holder of such Claim would
have been resolved and adjudicated if the Chapter 11 Cases had not been
commenced, or (ii) in the event that the Holder thereof Files a proof of such
Claim on or before the Limited Bar Date and an objection to, or request for
estimation with respect to, such Claim is Filed in accordance with Section 8.4
hereof, by the Bankruptcy Court, (b) except as otherwise provided in Section
8.1(a)(ii) hereof, survive the Effective Date and consummation of the Plan as if
the Chapter 11 Cases had not been commenced, and (c) not be discharged pursuant
to Section 1141 of the Bankruptcy Code. In order to carry out the foregoing
provisions of the Plan, the Debtors, Reorganized Anacomp and the Holders of
Unimpaired Excepted Claims shall have, among other rights and obligations, the
following rights and obligations:
8.1.1 Except to the extent that an objection to, or a request for
estimation with respect to, an Unimpaired Excepted Claim has been Filed in
accordance with Section 8.4 hereof, the Holder of such Claim shall be entitled,
after the Effective Date, to commence any action or proceeding against
Reorganized Anacomp, or to continue any action or proceeding against any of the
Debtors, to determine the amount of its Claim in any court of competent
jurisdiction.
<PAGE>
8.1.2 The Debtors and Reorganized Anacomp, as the case may be, shall not
assert any defense based solely upon the facts that (i) no proof of such Claim
shall have been Filed on or before the Limited Bar Date, and/or (ii) such Claim
was listed by the Debtors in their Chapter 11 Schedules as unliquidated,
contingent or disputed.
8.1.3 The Debtors or Reorganized Anacomp, as the case may be, may at any
time before or after the Confirmation Date and before or after the Effective
Date, dispute, defend against or otherwise oppose, in accordance with
nonbankruptcy law, any such Unimpaired Excepted Claim (other than any such Claim
to the extent allowed by Final Order of the Bankruptcy Court or the Confirmation
Order) without taking any formal action either in or out of court (except as
otherwise required by nonbankruptcy law). Reorganized Anacomp shall retain, in
addition to all claims, rights and causes of action retained by Reorganized
Anacomp pursuant to Section 14.5 of the Plan, all defenses, at law or in equity,
to any and all such Unimpaired Excepted Claims (other than any such Claim to the
extent allowed by Final Order of the Bankruptcy Court or the Confirmation
Order), other than as provided in Section 8.1.2 hereof.
8.2 Unimpaired Non-Excepted Claims Generally. The amount of any Allowed
Unimpaired Non-Excepted Claim and the rights, if any, of the Holder of any such
Claim that has properly Filed a proof of Claim on or prior to the Limited Bar
Date, or any other date determined by the Bankruptcy Court with respect to such
Claim, to payment in respect thereof shall (a) be determined, (i) in the event
that no objection to, or request for estimation with respect to, such Claim is
Filed in accordance with Section 8.4 hereof, by any court of competent
jurisdiction other than the Bankruptcy Court in the manner in which the amount
of such Claim and the rights of the Holder of such Claim would have been
resolved and adjudicated if these Chapter 11 Cases had not been commenced or
(ii) in the event that an objection to, or request for estimation with respect
to, such Claim is Filed in accordance with Section 8.4 hereof, by the Bankruptcy
Court, (b) except as otherwise provided in Section 8.2(a)(ii) hereof, survive
the Effective Date and consummation of the Plan as if the Chapter 11 Cases had
not been commenced, and (c) not be discharged pursuant to Section 1141 of the
Bankruptcy Code. In order to carry out the foregoing provisions of the Plan, the
Debtors, Reorganized Anacomp and the Holders of Unimpaired Non-Excepted Claims
that have properly Filed a proof of Claim on or prior to the Limited Bar Date,
shall have, among other rights and obligations, the following rights and
obligations:
8.2.1 Except to the extent that an objection to, or a request for
estimation with respect to, an Unimpaired Non-Excepted Claim has been filed in
accordance with Section 8.4 hereof, the Holder of such Claim shall be entitled,
after the Effective Date, to commence any action or proceeding against
Reorganized Anacomp, or to continue any action or proceeding against any of the
Debtors, to determine the amount of its Claim in any court of competent
jurisdiction.
8.2.2 The Debtors or Reorganized Anacomp, as the case may be, may at any
time before or after the Confirmation Date and before or after the Effective
Date, dispute, defend against or otherwise oppose, in accordance with
nonbankruptcy law, any such Unimpaired Non-Excepted Claim (other than any such
Claim to the extent allowed by Final Order of the Bankruptcy Court or the
Confirmation Order) without taking any formal action either in or out of court
(except as otherwise required by nonbankruptcy law). Reorganized Anacomp shall
retain, in addition to all claims, rights and causes of action retained by
Reorganized Anacomp pursuant to Section 14.5 of the Plan, all defenses, at law
or in equity, to any and all Unimpaired Non-Excepted Claims (other than any such
Claim to the extent allowed by Final Order of the Bankruptcy Court or the
Confirmation Order).
<PAGE>
8.3 Rejection Claims. Any Rejection Claim not barred pursuant to the
provisions of Section 9.2 of the Plan shall be an Allowed Claim in the amount
set forth in the Filed proof of Claim evidencing such Claim unless an objection
is Filed to such Claim not later than sixty (60) days after the filing of such
proof of Claim or such later time ordered by the Bankruptcy Court without need
for notice and hearing. Upon the Filing of any such objection, the amount of the
Allowed Rejection Claim, if any, shall be determined by the Bankruptcy Court
unless it shall have sooner become an Allowed Claim.
8.4 Disputed Claims. The amount of any Impaired Claim which is a Disputed
Claim and the rights of the Holder of such Claim, if any, to payment in respect
thereof shall be determined by the Bankruptcy Court, unless it shall have sooner
become an Allowed Claim. Unless otherwise ordered by the Bankruptcy Court, all
objections to Claims (other than as provided in Section 4.1 hereof) and
Interests shall be Filed and served upon the Holder of such Claim or Interest no
later than sixty (60) days after the Effective Date; provided, however, that,
unless otherwise ordered by the Bankruptcy Court, any of the Debtors,
Reorganized Anacomp or Reorganized Florida A A C shall be entitled to File an
objection to any Claim Filed after the Limited Bar Date, including, without
limitation, any Claim Filed by a governmental unit pursuant to Section 502(b)(9)
of the Bankruptcy Code, on or prior to the later of (i) sixty (60) days after
the Effective Date and (ii) sixty (60) days after the service of such Claim on
any of the Debtors, Reorganized Anacomp or Reorganized Florida A A C.
8.5 Authority to Oppose Claims. On and after the Effective Date, except as
the Bankruptcy Court may otherwise order, Reorganized Anacomp and/or Reorganized
Florida A A C shall have the exclusive right to make, prosecute and settle any
objections to Claims or Interests.
8.6 Treatment of Disputed Claims and Disputed Interests. Notwithstanding
any other provisions of the Plan, no payments or distributions shall be made on
account of a Disputed Claim until such Claim or Interest becomes an Allowed
Claim or an Allowed Interest, as the case may be.
ARTICLE IX
EXECUTORY CONTRACTS
9.1 General Treatment. All executory contracts and unexpired leases of the
Debtors shall be assumed by Reorganized Anacomp as of the Effective Date, unless
(i) rejected pursuant to an order entered on or prior to the Effective Date, or
(ii) a motion to reject any such executory contract or unexpired lease is
pending before the Bankruptcy Court on the Effective Date, or (iii) assumed
pursuant to an order entered on or prior to the Effective Date.
<PAGE>
9.2 Bar to Rejection Damages. If the rejection of an executory contract or
unexpired lease by the Debtors results in damages to the other party or parties
to such contract or lease, a Claim for such damages, if not previously evidenced
by a Filed proof of Claim or barred by a Final Order, shall be forever barred
and shall not be enforceable against the Debtors or Reorganized Anacomp, or
their properties or agents, successors, or assigns, unless a proof of Claim
relating thereto is filed with the Bankruptcy Court within thirty (30) days
after the later of (i) the entry of a Final Order authorizing such rejection and
(ii) the Effective Date, or within such shorter period as may be ordered by the
Bankruptcy Court.
9.3 Cure of Defaults for Executory Contracts and Unexpired Leases. Each
executory contract and unexpired lease to be assumed pursuant to the Plan shall
be reinstated and rendered unimpaired in accordance with Sections 1124(2) and
365(b)(1) of the Bankruptcy Code. In connection therewith, the Debtors shall
cure or provide adequate assurance that they will cure any monetary default
(other than of the kind specified in Section 365(b)(2) of the Bankruptcy Code),
by payment of the default amount in Cash on the Effective Date (or on such other
terms as the parties to such executory contract or unexpired lease may otherwise
agree), compensate, or provide adequate assurance that the Debtors will promptly
compensate parties other than the Debtors to such contract or lease for any
actual pecuniary loss to such parties resulting from such default, and provide
adequate assurance of future performance under such contract or lease. In the
event of a dispute regarding: (i) the amount of any cure payments, (ii) the
ability of Reorganized Anacomp or any of the assignees to provide "adequate
assurance of future performance" (within the meaning of Section 365 of the
Bankruptcy Code) under the contract or lease to be assumed, or (iii) any other
matter pertaining to assumption, the cure payments or performance required by
Section 365(b)(1) of the Bankruptcy Code shall be made following the entry of a
Final Order resolving the dispute and approving the assumption.
ARTICLE X
CONDITIONS TO CONFIRMATION AND THE
OCCURRENCE OF THE EFFECTIVE DATE
10.1 Conditions to Confirmation. Confirmation of this Plan is conditioned
upon the occurrence of the following, or waiver of the following, condition
jointly by the Debtors, the Collateral Agent (if Class 2 shall have accepted the
Plan) and the Creditors' Committee (if Class 5 shall have accepted the Plan):
The provisions of the Plan and all exhibits thereto shall be reasonably
satisfactory to the Collateral Agent (if Class 2 shall have accepted the Plan)
and the Creditors' Committee (if Class 5 shall have accepted the Plan).
10.2 Conditions to the Occurrence of the Effective Date. This Plan shall
not be consummated and the Effective Date shall not occur unless and until each
of the following conditions has been satisfied or waived jointly by the Debtors,
the Creditors' Committee (if Class 5 shall have accepted the Plan) and the
Collateral Agent (if Class 2 shall have accepted the Plan):
<PAGE>
(a) All fees payable pursuant to Section 1930 of Title 28 of the United
States Code, as determined by the Bankruptcy Court at the Confirmation Hearing,
shall have been paid;
(b) If the condition specified in Section 10.1 has been duly waived, the
provisions of the Plan and all exhibits thereto shall be reasonably satisfactory
to the Collateral Agent (if Class 2 shall have accepted the Plan) and the
Creditors' Committee (if Class 5 shall have accepted the Plan);
(c) The Confirmation Order shall have become a Final Order; and
(d) All actions and documents necessary to implement the provisions of this
Plan shall have been effected, executed or duly provided for in a manner
reasonably satisfactory to the Collateral Agent (if Class 2 shall have accepted
the Plan) and the Creditors' Committee (if Class 5 shall have accepted the
Plan).
ARTICLE XI
EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN
11.1 Discharge of Claims. Except as otherwise provided herein or in the
Confirmation Order, on the Effective Date: (i) the rights afforded in the Plan
and the payments and distributions to be made hereunder shall discharge all
existing debts and Claims of any kind, nature, or description whatsoever against
the Debtors, any of their assets or properties or any property dealt with under
the Plan to the extent permitted by Section 1141 of the Bankruptcy Code; (ii)
all existing Claims against the Debtors shall be and shall be deemed to be
discharged; (iii) all obligations of the Debtors, directly or as guarantors,
under the Old Indentures, the Old Credit Facilities, the Old Securities and the
Old Collateral Documents shall be deemed released, discharged and satisfied; and
(iv) all Holders of Claims and Interests shall be precluded from asserting
against the Debtors, any of their assets or properties, or any property dealt
with under the Plan, any other or further Claim based upon any act or omission,
transaction, or other activity of any kind or nature that occurred prior to the
Confirmation Date, whether or not such Holder Filed a proof of Claim.
11.2 Discharge of Debtors. Except as otherwise provided herein, any
consideration distributed to Creditors under the Plan shall be in exchange for
and in complete satisfaction, discharge, and release of all Claims of any nature
whatsoever against the Debtors or any of their assets or properties; and, except
as otherwise provided herein, upon the Effective Date, the Debtors shall be
deemed discharged and released to the extent permitted by Section 1141 of the
Bankruptcy Code from any and all Claims, including but not limited to demands
and liabilities that arose before the Confirmation Date, and all debts of the
kinds specified in Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code,
whether or not (i) a proof of Claim based upon such debt is filed or deemed
filed under Section 501 of the Bankruptcy Code; or (ii) the Holder of a Claim
based upon such debt has accepted the Plan. Except as provided herein and
therein, the Confirmation Order shall be a judicial determination of discharge
of all liabilities of the Debtors. As provided in Section 524 of the Bankruptcy
Code, such discharge shall void any judgment against the Debtors at any time
obtained to the extent it relates to a Claim discharged, and operates as an
injunction against the commencement or continued prosecution of any action
against the Debtors, Reorganized Anacomp, Reorganized Florida A A C or any of
their respective properties, to the extent it relates to a Claim discharged.
<PAGE>
11.3 Survival of Indemnification Claims and Obligations. Notwithstanding
any other provision of this Plan, all obligations of the Debtors or any Foreign
Subsidiary or Domestic Subsidiary to indemnify or hold harmless current or
former officers or directors of any of the Debtors, or the Old Indenture
Trustees, and all Claims of such officers, directors or the Old Indenture
Trustees, under the bylaws of such Debtor, the Old Indentures or other
applicable law, corporate documents or agreements shall expressly survive
Confirmation of the Plan and be binding on and enforceable against Reorganized
Anacomp irrespective of whether indemnification is owed in connection with an
event occurring before, on or after the Petition Date.
11.4 Termination of Claims of Contractual Subordination Against Holders of
Old Senior Subordinated Notes Claims. Provided that (i) the Plan has been
accepted by Class 5 under Section 1126(c) of the Bankruptcy Code, (ii) the
Bankruptcy Court shall have entered the Confirmation Order and (iii) the
Effective Date shall have occurred, all rights, actions or causes of action
between or among Holders of "senior indebtedness" (as defined in the Old Senior
Subordinated Notes Indenture) and Holders of Old Senior Subordinated Notes
Claims based upon any claimed right to contractual subordination shall be
satisfied, terminated, void and of no further force or effect as of the
Effective Date so that, notwithstanding any such rights, actions or causes of
action, each Holder of Old Senior Subordinated Notes Claims shall have the
rights and benefits of the distributions provided in this Plan.
11.5 Termination of Claims of Contractual Subordination Against Holders of
Old Subordinated Debentures Claims. Provided that (i) the Plan has been accepted
by Class 6 under Section 1126(c) of the Bankruptcy Code, (ii) the Bankruptcy
Court shall have entered the Confirmation Order and (iii) the Effective Date
shall have occurred, all rights, actions or causes of action between or among
Holders of "senior indebtedness" (as defined in the Old 9% Subordinated
Debentures Indenture and the Old 13.875% Subordinated Debentures Indenture) and
Holders of Old Subordinated Debentures Claims based upon or in any way relating
to any claimed right to contractual subordination shall be satisfied,
terminated, void and of no further force or effect as of the Effective Date so
that, notwithstanding any such rights, actions or causes of action, each Holder
of Old Subordinated Debentures Claims shall have the rights and benefits of the
distributions provided in this Plan.
ARTICLE XII
RELEASES AND INJUNCTIONS
12.1 Releases. On the Effective Date, Reorganized Anacomp shall be deemed
to release unconditionally, and hereby is deemed to release unconditionally on
such date (i) each present or former officer, director, shareholder, employee,
consultant, attorney, accountant and other representatives of the Debtors, the
Domestic Subsidiaries and the Foreign Subsidiaries, (ii) the Creditors'
Committee and the Unofficial Senior Subordinated Committee and, solely in their
capacity as members or representatives of the Creditors' Committee or the
Unofficial Senior Subordinated Committee, as applicable, each consultant,
attorney, accountant or other representative or member (and each of such
member's respective officers, directors, shareholders, employees, consultants,
attorneys, accountants and other representatives) of the Creditors' Committee or
the Unofficial Senior Subordinated Committee, as applicable, and (iii) the
Holders of Old Senior Notes Secured Claims and Old Credit Facilities Secured
Claims and, solely in their capacity as representatives of such Holders, each of
such Holder's respective officers, directors, shareholders, employees,
consultants, attorneys, accountants and other representatives (the Entities
specified in clauses (i), (ii) and (iii) are referred to collectively as the
"Releasees"), from any and all claims, obligations, suits, judgments, damages,
rights, causes of action and liabilities whatsoever, whether known or unknown,
foreseen or unforeseen, existing or hereafter arising, in law, equity or
otherwise, based in whole or in part upon any act or omission, transaction,
event or other occurrence taking place on or prior to the Effective Date in any
way relating to the Chapter 11 Cases or the Plan, except that no Releasees shall
be released from acts or omissions which are the result of willful misconduct.
<PAGE>
On the Effective Date, each Holder of a Claim shall be deemed to have
released unconditionally, and hereby is deemed to release unconditionally on
such date, the Releasees, from any and all rights, claims, causes of action,
obligations, suits, judgments, damages and liabilities whatsoever which any such
Holder may be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or otherwise, based in
whole or in part upon any act or omission, transaction, event or other
occurrence taking place on or before the Effective Date in any way relating to
Reorganized Anacomp, the Debtors, the Chapter 11 Cases or the Plan, except that
no Releasees shall be released from acts or omissions which are the result of
willful misconduct.
If and to the extent that the Bankruptcy Court concludes that the Plan
cannot be confirmed with any portion of the foregoing releases, then the Debtors
reserve the right to amend the Plan so as to give effect as much as possible to
the foregoing releases, or to delete them.
12.2 No Liability for Solicitation or Participation. As specified in
Section 1125(e) of the Bankruptcy Code, Entities who solicit acceptances or
rejections of the Plan and/or who participate in the offer, issuance, sale or
purchase of securities offered or sold under the Plan, in good faith and in
compliance with the applicable provisions of the Bankruptcy Code, are not
liable, on account of such solicitation or participation, for violation of any
applicable law, rule or regulation governing the solicitation of acceptances or
rejections of the Plan or the offer, issuance, sale or purchase of securities in
connection therewith.
12.3 Limitation of Liability. Neither the Debtors, Reorganized Anacomp,
Reorganized Florida A A C, nor any of their respective employees, officers,
directors, agents, or representatives, nor any Professionals employed by any of
them, nor any Creditors' Committee or the Unofficial Senior Subordinated
Committee, or any of their members, agents, representatives, or professional
advisors, shall have or incur any liability to any Entity for any act taken or
omission made in good faith in connection with or related to formulating,
implementing, confirming, or consummating the Plan, or any contract, instrument,
release, or other agreement or document created in connection with the Plan.
<PAGE>
12.4 General Injunction. Except as provided herein or in the Confirmation
Order, from and after the Effective Date, all Entities who received or are
Holders of Plan Securities and all Holders of Claims against the Estates are
permanently restrained and enjoined after the Confirmation Date (i) from
commencing, continuing, or taking any act, to enforce against any of the Debtors
or any Foreign Subsidiary or Domestic Subsidiary or any right, claim or cause of
action arising under or related to any Old Security or the Old Credit Facilities
Note, (ii) from enforcing, attaching, collecting or recovering by any manner or
means, any judgment, award, decree, or order against any Debtor or any Foreign
Subsidiary or Domestic Subsidiary or any right, claim or cause of action arising
under or related to any Old Security or the Old Credit Facilities Note, (iii)
from creating, perfecting or enforcing any encumbrance of any kind against any
Debtor or any Foreign Subsidiary or Domestic Subsidiary or any right, claim or
cause of action arising under or related to any Old Security or the Old Credit
Facilities Note, (iv) from asserting any setoff, right of subrogation,
indemnification, contribution or recoupment of any kind against any obligation
due any Debtor or any Foreign Subsidiary or Domestic Subsidiary, or any right,
claim or cause of action arising under or related to any Old Security or the Old
Credit Facilities Note and (v) from performing any act, in any manner, in any
place whatsoever, that does not conform to or comply with the provisions of the
Plan and orders of the Bankruptcy Court; provided, however, that each Holder of
a Claim may, to the extent permitted by and in accordance with the provisions of
the Plan, commence or continue any action or proceeding to determine the amount
of its Claim in the Bankruptcy Court or any other court of competent
jurisdiction, and all Holders of Claims shall be entitled to enforce their
rights under the Plan and the Plan Documents.
12.5 Section 346 Injunction. In accordance with Section 346 of the
Bankruptcy Code, for purposes of any state or local law imposing a tax, income
will not be realized by the Estates, the Debtors, Reorganized Anacomp or
Reorganized Florida A A C by reason of the forgiveness or discharge of
indebtedness resulting from the Chapter 11 Cases. As a result, each state or
local taxing authority is permanently enjoined and restrained, after the
Confirmation Date, from commencing, continuing or taking any act to impose,
collect or recover in any manner any tax against any Debtor, Reorganized Anacomp
or Reorganized Florida A A C arising by reason of the forgiveness or discharge
of indebtedness of any such Entity under the Plan.
<PAGE>
ARTICLE XIII
RETENTION OF JURISDICTION
13.1 Scope of Jurisdiction. Pursuant to Sections 1334 and 157 of Title 28
of the United States Code, notwithstanding occurrence of the Effective Date or
substantial consummation of the Plan, the Bankruptcy Court shall retain and have
jurisdiction from and after the Confirmation Date of all matters arising in,
arising under, and related to the Chapter 11 Cases and the Plan pursuant to, and
for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and for,
among other things, the following purposes:
13.1.1 To hear and determine any and all adversary proceedings,
applications or contested matters pending on the Effective Date or brought after
the Effective Date;
13.1.2 To hear and determine any and all applications for substantial
contribution and for compensation and reimbursement of expenses Filed in
accordance with the Plan;
13.1.3 To hear and determine Rejection Claims, disputes arising from the
assumption and assignment of executory contracts and unexpired leases, and
Disputed Claims which are Impaired Claims or which are held by Holders of
Unimpaired Claims;
13.1.4 To hear and determine, pursuant to the provisions of Section 505 of
the Bankruptcy Code, all issues related to the liability of a Debtor for any tax
incurred prior to the Effective Date;
13.1.5 To enforce the provisions of the Plan and to determine any and all
disputes arising under the Plan;
13.1.6 To enter and implement such orders as may be appropriate in the
event Confirmation is for any reason stayed, reversed, revoked, modified or
vacated;
13.1.7 To modify any provision of the Plan to the extent permitted by the
Bankruptcy Code and to correct any defect, cure any omission or reconcile any
inconsistency in the Plan or the Confirmation Order as may be necessary to carry
out the purposes and intent of the Plan;
13.1.8 To enter such orders as may be necessary or appropriate in
furtherance of consummation and implementation of the Plan;
13.1.9 To determine the allowance of Claims and Interests as provided in
the Plan; and
13.1.10 To enter an order closing the Chapter 11 Cases.
13.2 Failure of the Bankruptcy Court to Exercise Jurisdiction. If the
Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction
or is otherwise without jurisdiction over any matter arising in, arising under,
or related to the Chapter 11 Cases, this Article XIII shall have no effect upon
and shall not control, prohibit, or limit the exercise of jurisdiction by any
other court having jurisdiction with respect to such matter.
ARTICLE XIV
<PAGE>
MISCELLANEOUS PROVISIONS
14.1 Compliance With Tax Requirements. In connection with the Plan, the
Debtors, Reorganized Anacomp, the Collateral Agent, the Disbursing Agent and the
Old Indenture Trustees shall comply with all applicable withholding and
reporting requirements imposed by federal, state, local and foreign taxing
authorities, and all distributions hereunder shall be subject to such
withholding and reporting requirements. Creditors may be required to provide
certain tax information as a condition to receipt of distributions pursuant to
the Plan. Notwithstanding any other provision of the Plan, each Entity receiving
a distribution pursuant to the Plan will have sole and exclusive responsibility
for the satisfaction and payment of any tax obligations imposed by any
governmental unit, including income, withholding and other tax obligations, on
account of such distribution.
14.2 Discharge of Old Indenture Trustees. Subsequent to the performance of
the Old Indenture Trustees, or their respective agents, of their duties and
obligations under the provisions of the Plan and the Confirmation Order, if any,
and under the terms of such Old Indentures, such Old Indenture Trustees and
their agents shall be relieved, discharged and released from all obligations,
claims, rights, demands and causes of action associated with or arising from
such Old Indentures. The Confirmation Order shall enjoin from and after the
Effective Date the prosecution, whether directly, derivatively or otherwise, of
any claim, debt, right, cause of action or liability released or to be released
pursuant to this Section 14.2.
14.3 Post-Effective Date Fees and Expenses of Professionals. Reorganized
Anacomp shall, in the ordinary course of business and without the necessity for
any approval by the Bankruptcy Court (except as may be required by Section
1129(a)(4) of the Bankruptcy Code), pay the reasonable fees and reasonable
expenses of the Professionals related to implementation and consummation of the
Plan that are incurred after the Effective Date; provided, however, that no such
fees and expenses shall be paid except upon receipt by Reorganized Anacomp of a
detailed written invoice from the Professional seeking compensation and expense
reimbursement and provided, further, however, that Reorganized Anacomp may,
within ten (10) days after receipt of an invoice for fees and expenses, request
that the Bankruptcy Court determine the reasonableness of such fees and
expenses.
14.4 Vesting of Property of the Debtors. Except as otherwise provided in
the Plan (including any Plan Document) or any other indentures, instruments or
agreements to be executed and delivered pursuant to the Plan or the Confirmation
Order, upon the Effective Date, all property of the Consolidated Estates,
wherever situated, shall vest in Reorganized Anacomp and shall be retained by
Reorganized Anacomp or distributed to Creditors or Interest Holders as provided
in the Plan. On the Effective Date, all property of the Consolidated Estates,
whether retained by Reorganized Anacomp or distributed to Creditors or Interest
Holders, shall be free and clear of all Claims, Liens, Encumbrances and
Interests, except the Claims, Liens, Encumbrances and Interests of Creditors and
Holders of Interests expressly provided for in the Plan (including in any Plan
Document).
<PAGE>
14.5 Causes of Action. Except as otherwise provided in the Plan, or in any
contract, instrument, release, or other agreement entered into in connection
with the Plan, in accordance with Section 1123(b) of the Bankruptcy Code,
Reorganized Anacomp shall retain and may enforce any claims, rights and causes
of action that any of the Consolidated Debtors or the Consolidated Estates may
hold against any entity including, without limitation, any claims, rights or
causes of action under Sections 544 through 550 of the Bankruptcy Code or any
similar provisions of state law, or any other statute or legal theory.
Reorganized Anacomp or any successor may pursue those rights of action, as
appropriate, in accordance with what is in the best interests of Reorganized
Anacomp or any successor holding such rights of action.
14.6 Assumption of Liabilities. The liability for and obligation to make
the distributions required under the Plan shall be assumed by Reorganized
Anacomp, which shall have the liability for, and obligation to make, all
distributions of Cash, Plan Securities or other instruments to be issued by
Anacomp, Reorganized Anacomp and Reorganized Florida A A C.
14.7 Other Documents and Actions. Without a further order of the Bankruptcy
Court, the Debtors and Reorganized Anacomp may execute such documents and take
such other action as is necessary to effectuate the transactions provided for in
the Plan. Each of the President, any Vice President, the Chief Financial
Officer, the Secretary and the Treasurer of each of the Debtors and of
Reorganized Anacomp is authorized in accordance with their authority under the
resolutions of the respective Boards of Directors of the Debtors or Reorganized
Anacomp, as the case may be, to execute, deliver, file, or record such
contracts, instruments, releases, indentures and other agreements or documents
and take such actions as may be necessary or appropriate to effectuate and
further evidence the terms and conditions of the Plan and any notes or
securities issued pursuant to the Plan.
14.8 Section 1146 Exemption. Pursuant to Section 1146(c) of the Bankruptcy
Code, (i) the issuance, transfer or exchange of any security under the Plan or
the making or delivery of any instrument of transfer pursuant to, in
implementation of, or as contemplated by the Plan, including any merger
agreements or agreements of consolidation, deeds, bills of sale or assignments
executed in connection with any of the transactions contemplated under the Plan
or the revesting, transfer or sale of any real or personal property of the
Debtors pursuant to, in implementation of, or as contemplated by the Plan, (ii)
the making, delivery, creation, assignment, amendment or recording of any note
or other obligation for the payment of money or any mortgage, deed of trust or
other security interest under, in furtherance of, or in connection with the
Plan, the issuance, renewal, modification or securing of indebtedness by such
means, and (iii) the making, delivery or recording of any deed or other
instrument of transfer under, in furtherance of, or in connection with, the
Plan, including, without limitation, the Confirmation Order, shall not be
subject to any document recording tax, stamp tax, conveyance fee or other
similar tax, mortgage tax, real estate transfer tax, mortgage recording tax or
other similar tax or governmental assessment. Consistent with the foregoing,
each recorder of deeds or similar official for any county, city or governmental
unit in which any instrument hereunder is to be recorded shall, pursuant to the
Confirmation Order, be ordered and directed to accept such instrument, without
requiring the payment of any documentary stamp tax, deed stamps, stamp tax,
transfer tax, intangible tax or similar tax.
<PAGE>
14.9 Binding Effect.
(a) From and after the Confirmation Date, the Plan shall be binding upon
and inure to the benefit of Reorganized Anacomp, Reorganized Florida A A C,
Holders of Claims, Holders of Interests, and their respective successors and
assigns.
(b) If the Plan is not confirmed, the Plan shall be deemed null and void
and notwithstanding anything herein or in the Disclosure Statement to the
contrary nothing contained herein or in the Disclosure Statement shall be deemed
(i) to constitute a waiver or release of any Claims by the Debtors or any other
Entity, (ii) to prejudice in any manner the rights of the Debtors or any other
Entity, (iii) to constitute any admission by any of the Debtors, or any other
Entity, or (iv) to constitute any admission or concession regarding any Claim or
Interest.
14.10 Governing Law. Unless an applicable rule of law or procedure is
supplied by federal law (including the Bankruptcy Code and the Bankruptcy Rules)
or the Indiana General Corporation Law, the internal laws of the State of New
York (without reference to conflict of laws principles) shall govern the
construction and implementation of the Plan and any agreements, documents, and
instruments executed in connection with the Plan or the Chapter 11 Cases, except
as may otherwise be provided in such agreements, documents, and instruments.
14.11 Filing of Additional Documents. On or before the conclusion of the
Confirmation Hearing, the Debtors shall File such agreements and other documents
as may be necessary or appropriate to effectuate and further evidence the terms
and conditions of the Plan.
14.12 Dissolution of Creditors' Committee. On the Effective Date, except to
the extent contemplated by Sections 4.1 and 6.3 hereof, the Creditors' Committee
shall dissolve and the members of the Creditors' Committee shall be released and
discharged from all further rights and duties arising from or related to the
Chapter 11 Cases. The Professionals retained by the Creditors' Committee and the
members thereof shall not be entitled to compensation or reimbursement of
expenses for any services rendered after the Effective Date, except to the
extent contemplated by Sections 4.1 and 6.3 hereof and for services rendered and
expenses incurred in connection with any applications for allowance of
compensation and reimbursement of expenses pending on the Effective Date or
Filed after the Effective Date pursuant to the Plan.
14.13 Amendments and Modifications.
(a) The Debtors may, with the consent of the Creditors' Committee (unless
Class 5 shall have rejected the Plan) and the Collateral Agent (unless Class 2
shall have rejected the Plan), and in accordance with Section 1127(a) of the
Bankruptcy Code and Bankruptcy Rule 3019, after hearing on notice to such
Entities as are entitled to such notice pursuant to Bankruptcy Rule 3019, amend
or modify the Plan prior to the entry of the Confirmation Order. No amendment of
or modification of Section 12.1 of the Plan shall require any resolicitation of
acceptances.
<PAGE>
(b) After the entry of the Confirmation Order, Anacomp may, with the
consent of the Creditors' Committee (in the event that Class 5 shall have
accepted the Plan) and in accordance with Section 1127(b) of the Bankruptcy
Code, amend or modify this Plan, or remedy any defect or omission or reconcile
any inconsistency in the Plan in such manner as may be necessary to carry out
the purpose and intent of the Plan, and after the Effective Date the parties to
any Plan Document may amend or modify any such Plan Document pursuant to the
terms thereof without notice to any Entity not entitled to receive notice under
such Plan Document and without an order from the Bankruptcy Court.
14.14 Revocation. The Debtors reserve the right to revoke and withdraw the
Plan prior to Confirmation. If the Debtors revoke or withdraw the Plan pursuant
to this Section 14.14, then the Plan shall be deemed null and void and, in such
event, the provisions of Section 14.9(b) shall apply.
14.15 Severability. Should any provision in the Plan be determined to be
unenforceable, with the consent of the Debtors or Reorganized Anacomp, as
applicable, such determination shall in no way limit or affect the
enforceability and operative effect of any other provisions of the Plan.
14.16 Notices. Any pleading, notice or other document required by the Plan
or the Confirmation Order to be served or delivered to the Debtors, Reorganized
Anacomp, Reorganized Florida A A C, the Creditors' Committee, the Holders of the
Old Credit Facilities Secured Claims or the Holders of the Old Senior Notes
Secured Claims, will be sent by overnight delivery service, courier service or
facsimile transmission to:
(a) ANACOMP, INC.
11550 North Meridian Street
Carmel, Indiana 46032
Attn: P. Lang Lowrey III
with copies to:
Barry J. Dichter
Michael J. Sage
CADWALADER, WICKERSHAM & TAFT
100 Maiden Lane
New York, New York 10038
(counsel to the Debtors, Reorganized Anacomp
and Reorganized Florida A A C)
(b) Daniel H. Golden
STROOCK & STROOCK & LAVAN
Seven Hanover Square
New York, New York 10004
(counsel to the Creditors' Committee)
<PAGE>
(c) Marcia L. Goldstein
WEIL, GOTSHAL & MANGES 767 Fifth Avenue
New York, New York 10153
(counsel to the Holders of Old Credit
Facilities Secured Claims)
(d) Douglas R. Davis
MILBANK, TWEED, HADLEY & McCLOY
One Chase Manhattan Plaza
New York, New York 10005
(counsel to the Holders of Old Senior Notes Secured Claims)
14.17 De Minimis Distributions. Notwithstanding any provision to the
contrary contained herein, no distribution of less than twenty-five dollars
($25) in Cash or less than five (5) shares of New Common Stock or five (5) New
Warrants shall be made to any Holder of an Allowed Claim or an Allowed Interest,
unless such Holder shall have requested such distribution in writing from
Reorganized Anacomp before the second anniversary of the Effective Date. Such
undistributed amount will be retained by Reorganized Anacomp, and in the case of
undistributed New Common Stock, held as treasury shares.
14.18 Plan and Plan Documents Control. In the event and to the extent that
any provision of the Disclosure Statement is inconsistent with any provision of
the Plan or any Plan Document, the applicable provision of the Plan or the
applicable Plan Document shall control and take precedence. In the event and to
the extent that any provision of the Plan is inconsistent with any provision of
any Plan Document, the applicable provision of the applicable Plan Document
shall control and take precedence.
<PAGE>
Dated: March 28, 1996
Respectfully submitted,
KALVAR MICROFILM, INC.
By: /s/P. Lang Lowery
Its: President and Chief Executive Officer
ANACOMP, INC.
By: /s/P. Lang Lowery
Its: President and Chief Executive Officer
ANACOMP INTERNATIONAL N.V.
By: /s/K. Gordon Fife
Its: Managing Director
FLORIDA A A C CORPORATION
By: /s/P. Lang Lowery
Its: President and Chief Executive Officer
XIDEX DEVELOPMENT COMPANY
By: /s/P. Lang Lowery
Its: President and Chief Executive Officer
<PAGE>
CADWALADER, WICKERSHAM & TAFT
By: /s/Barry J. Dichter
Barry J. Dichter
Michael J. Sage
100 Maiden Lane
New York, New York 10038
(212) 504-6000
-- and --
YOUNG, CONAWAY, STARGATT & TAYLOR
By: /s/Laura Davis Jones
Laura Davis Jones (No. 2436)
11th Floor, Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
Co-Counsel for Debtors
and Debtors-in-Possession
<PAGE>
Annex A
New Senior Secured Notes
Class 2
The principal economic terms of the New Senior Secured Notes are as
follows:
Principal Amount: Approximately $120 million less the Cash
Sweep Amount ($7.5 million).
Interest: 11.625% per annum, payable semi-annually on
September 30 and March 31, beginning on
September 30, 1996.
Maturity: Three and one-half years after the
Effective Date.
Mandatory Redemption: Year 1 $34.2 million
Year 2 $34.2 million
Year 3 $34.2 million
Maturity Balance
The amounts payable in each year
shall be payable on a pro rata basis
in two equal installments, beginning
on September 30, 1996. The amount of
the first two (Year 1) installments
shall, in each case, be reduced by
37.5% of the Cash Sweep Amount, if
any, and the amount of the second
two (Year 2) installments shall, in
each case, be reduced by 12.5% of
the Cash Sweep Amount, if any.
Collateral: First Lien on all of Reorganized
Anacomp's domestic account
receivables, inventory, general
intangibles, plant, property and
equipment; 100% of the stock of
Reorganized Anacomp's Domestic
Subsidiaries; 100% of the stock of
Reorganized Anacomp's Foreign
Subsidiaries.
Optional Redemption: The New Senior Secured Notes are
redeemable by Reorganized Anacomp at any
time prior to maturity at 100% of principal
amount plus accrued interest.
Asset Sales: Lien to be released on receipt by Reorganized
Anacomp of net sale proceeds.
Ranking: The New Senior Secured Notes shall be senior
to the New Senior Subordinated
Notes and all future Subordinated
Indebtedness of Reorganized Anacomp.
Registration: Provided that Class 2 shall have
accepted the Plan, the New Senior
Secured Notes shall be registered
pursuant to the Shelf Registration
Statement and freely tradable.
THE FOREGOING SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY THE TERMS OF THE NEW SENIOR
SECURED NOTES INDENTURE, WHICH WILL BE
FILED ON OR BEFORE THE CONFIRMATION DATE.
<PAGE>
Annex B
New Senior Subordinated Notes
Class 5
The principal economic terms of the New Senior Subordinated Notes are
as follows:
Principal Amount: $160 million
Interest: 13.00% per annum, payable in cash
semi-annually on June 30 and
December 31, provided, however, that
interest shall be payable on June
30, 1996 (in the event that the Plan
shall have become effective by that
date), December 31, 1996 and June
30, 1997 in additional New Senior
Subordinated Notes.
Maturity: On the sixth anniversary of the
Effective Date.
Collateral: None.
Optional Redemption: The New Senior
Subordinated Notes shall be
redeemable by Reorganized Anacomp at
any time prior to maturity at an
initial redemption price of 103% of
principal amount plus accrued
interest, declining ratably to
101.5% in year 5 and 100%
thereafter.
Mandatory Redemption: None. Any outstanding New Senior
Subordinated Notes issued in lieu
of cash interest shall be redeemed
before April 30 in the year that
is five years after the Effective
Date at the rate then applicable
to optional redemptions.
Ranking: The New Senior Subordinated Notes
shall be senior to all future
Subordinated Indebtedness of
Reorganized Anacomp and will be
subordinated to the New Senior
Secured Notes to the same extent as
the Old Senior Subordinated Notes
were subordinated to the Old Senior
Secured Notes and Old Credit
Facilities.
Registration: Provided that Class 5 shall have
accepted the Plan, the New Senior
Subordinated Notes shall be
registered pursuant to the Shelf
Registration Statement and freely
tradable.
THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF
THE NEW SENIOR SUBORDINATED NOTES INDENTURE AND THE NEW SENIOR
SECURED NOTES INDENTURE, WHICH WILL BE FILED ON OR BEFORE THE
CONFIRMATION DATE.
<PAGE>
Annex C
List of Merged Subsidiaries
Applied Peripheral Systems, Inc.
Cadren Systems Corporation
Computer Services Corporation
Data Management Labs, Inc.
Dysan International Sales Corporation
Dysan International Sales Corporation II
Kalvar Microfilm, Inc.
Teksad Corporation
U.S. Video Corporation
Xidex Development Company
Xidex International Sales Corporation
Xidex Magnetics International Sales Corporation
