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THIS DOCUMENT IS A COPY OF THE 8-K PREVIOUSLY FILED ON FEBRUARY 14, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
Page 1 of 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: January 29, 1996
NVF COMPANY
(Exact name of Registrant as specified in charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
1-3290 51-0035270 (I.R.S. Employer
(Commission File No.) Identification No.)
1166 Yorklyn Road, Yorklyn, Delaware 19736
(Address of principal executive offices) (Zip Code)
(302) 239-5281
(Registrant's telephone number, including area code)
NVF COMPANY
Date: February 13, 1996 By: /s/ Robert W. Flack
-------------------
Robert W. Flack
Acting Chief Financial Officer
Date: February 13, 1996 By: /s/ Martin J. Posner
--------------------
Martin J. Posner
Executive Vice President
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ITEM 2. Acquisition and Disposition of Assets
On January 29, 1996 the Joint Plan of Reorganization of NVF Company and the
Official Committee of Unsecured Creditors and the Disclosure Statement to
accompany the Joint Plan was filed in the United States Bankruptcy Court,
District of Delaware. The Joint Plan contemplates the entire Company be sold to
First Security and Investment Corp., a Florida corporation ("First Security")
for consideration as detailed in the Joint Plan and Disclosure Statement.
Included within the Plan is a recapitalization alternative if for any reason the
sale is not affected. The price was determined by an auction bidding process
conducted by Alex. Brown and Sons. First Security and Investment Corp. is a
private company owned by Victor Posner, former Chairman of the Board of the
Company. The current directors of the Company, (1) Bernard I. Posner and Martin
J. Posner are father and son and (2) Victor Posner and Bernard I. Posner are
brothers. Melvin R. Colvin and Brenda N. Castellano are directors of both NVF
Company and First Security and Investment Corp.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
No. Description
--- -----------
2 NVF Company Reorganization Plan filed with the United States
Bankruptcy Court for the District of Delaware on January 29, 1996.
99 NVF Company Disclosure Statement filed with the United States
Bankruptcy Court for the District of Delaware on January 29, 1996.
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EXHIBIT 2
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
----------------
In re ) Case No. 93-1020
)
NVF COMPANY, ) JOINT PLAN OF REORGANIZATION BY
) NVF COMPANY AND OFFICIAL
Debtor and Debtor-in-Possession ) COMMITTEE OF UNSECURED
) CREDITORS
)
) January 31, 1996
BAKER & McKENZIE YOUNG, CONAWAY, STARGATT &
Ali M. M. Mojdehi TAYLOR
Katherine S. Kruis Laura Davis Jones
Ronald F. Hoffman 11th Floor - Rodney Square North
101 West Broadway, 12th Floor Wilmington, Delaware 19801
San Diego, California 92101 Telephone (302) 571-6600
Telephone (619) 236-1441 Co-Counsel for Debtor and Debtor-in-
Co-Counsel for Debtor and Debtor-in- Possession
Possession
LeBOEUF, LAMB, GREENE & MacRAE, MORRIS, JAMES, HITCHENS & WILLIAMS
L.L.P. Edward M. McNally
Angela J. Somers 111 Delaware Avenue
Irena M. Goldstein Wilmington, Delaware 19899
Ira Dizengoff Telephone: (302) 888-6945
125 West 55th Street Co-Counsel for Official Committee of
New York, New York 10019-5389 Unsecured Creditors
Telephone: (212) 424-8000
Co-Counsel for Official Committee of
Unsecured Creditors
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ARTICLE I. DEFINITIONS; RULES OF CONSTRUCTION............................. 2
A. Definitions................................................... 2
1. "Accounts Payable Postpetition Claim" ............... 2
2. "Administrative Claims".............................. 2
3. "Administrative Environmental Claims" ............... 3
4. "Affiliate Claim".................................... 3
5. "Agreement".......................................... 3
6. "Agreement Damages".................................. 3
7. "Allowed"............................................ 3
8. "Allowed Administrative Claim"....................... 3
9. "Amount"............................................. 3
10. "Assumed Claimant"................................... 4
11. "Assumed Liabilities" ............................... 4
12. "Bankruptcy Code".................................... 4
13. "Bankruptcy Court"................................... 4
14. "Bankruptcy Rules"................................... 4
15. "Bar Date"........................................... 4
16. "Business Days"...................................... 4
17. "Buyer".............................................. 4
18. "Chapter 11 Case".................................... 4
19. "Cash"............................................... 4
20. "Cash Purchase Price"................................ 4
21. "CIT "............................................... 4
22. "Claim".............................................. 5
23. "Claimant"........................................... 5
24. "Class".............................................. 5
25. "Committee".......................................... 5
26. "Company"............................................ 5
27. "Confirmation"....................................... 5
28. "Confirmation Hearing Date".......................... 5
29. "Confirmation Order"................................. 5
30. "Consummation Date" ................................. 5
31. "Damages"............................................ 5
32. "Debentures"......................................... 5
33. "Disbursing Agent"................................... 5
34. "Disbursing Agent Agreement"......................... 5
35. "Disclosure Statement"............................... 6
36. "Disputed Claim"..................................... 6
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37. "Disputed Claims Reserve Account"..................... 6
38. "Disputed Claims Trustee"............................. 6
39. "Disputed Claims Trustee Agreement"................... 6
40. "Distribution"........................................ 7
41. "Distribution Date"................................... 7
42. "Distribution Fund"................................... 7
43. "Distribution Record Date"............................ 7
44. "Effective Date"...................................... 7
45. "Environmental Claim"................................. 7
46. "Environmental Claim for Kennett Square".............. 7
47. "Environmental Law"................................... 7
48. "Environmental Postpetition Claim at Kennett Square".. 8
49. "EPA"................................................. 8
50. "ERISA"............................................... 8
51. "Estate".............................................. 8
52. "Excess Reserve"...................................... 8
53. "Existing Common Stock"............................... 8
54. "Exit Financing"...................................... 8
55. "Filed"............................................... 9
56. "Final Order"......................................... 9
57. "First Security"...................................... 9
58. "General Unsecured Claims"............................ 9
59. "General Unsecured Creditors"......................... 9
60. "Hartwell"............................................ 9
61. "Hartwell Claim"...................................... 9
62. "Hartwell Secured Note"............................... 9
63. "Hazardous Material".................................. 9
64. "Indentures".......................................... 9
65. "Indenture Trustees".................................. 10
66. "Indenture Trustee Claims"............................ 10
67. "Interests"........................................... 10
68. "Legal Proceeding".................................... 10
69. "Lien"................................................ 10
70. "Litigation Settlement"............................... 10
71. "Litigation Settlement Agreement"..................... 10
72. "Litigation Settlement Proceeds"...................... 10
73. "New Castle County Claim"............................. 10
74. "New Common Stock".................................... 10
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75. "NVF 5% Debentures"................................... 10
76. "NVF 5% Debenture Indenture".......................... 11
77. "NVF 10% Debentures".................................. 11
78. "NVF 10% Debenture Indenture"......................... 11
79. "NVF 10% Secured Note"................................ 11
80. "NVF 10% Secured Note Claims"......................... 11
81. "NVF 10% Secured Note Holders"........................ 11
82. "PBGC"................................................ 11
83. "Pension Plans"....................................... 11
84. "Pension Plan Fund Claims" ........................... 11
85. "Petition Date"....................................... 11
86. "Plan"................................................ 11
87. "Plan Proponents"..................................... 12
88. "Postpetition Accrued Wages And Other Claims"......... 12
89. "Priority Claims"..................................... 12
90. "Professionals"....................................... 12
91. "Pro Rata"............................................ 12
92. "Purchase Alternative"................................ 12
93. "Purchase Price"...................................... 12
94. "Recapitalization Alternative"........................ 12
95. "Recapitalization Notice"............................. 12
96. "Reed Smith".......................................... 12
97. "Reorganized Company"................................. 12
98. "Reorganized Company Account"......................... 12
99. "Reorganized NVF Common Stock"........................ 12
100. "Reserve Amounts"..................................... 13
101. "Sales Agent"......................................... 13
102. "Secured Claim"....................................... 13
103. "Secured Debentures".................................. 13
104. "Secured Reed Smith Claim"............................ 13
105. "Tax Claim"........................................... 13
106. "Tax Code"............................................ 13
107. "Unclaimed Distributions"............................. 13
108. "Unsecured Claims".................................... 13
109. "Unsecured Environmental Claims"...................... 13
110. "Voting Record Date".................................. 13
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B. Rules of Interpretation, Computation of Time and Governing Law.... 13
1. Rules of Construction.................................... 14
2. Computation of Time...................................... 14
ARTICLE II. CLASSIFICATION OF CLAIMS AND INTERESTS ........................... 14
A. Unclassified Claims (not entitled to vote on the Plan)............ 15
B. Secured Claims.................................................... 15
C. Priority Claims................................................... 15
D. Unsecured Claims Without Priority and Interests................... 15
ARTICLE III. DESIGNATION AND TREATMENT OF UNCLASSIFIED CLAIMS ................ 16
A. Administrative Claims............................................. 16
B. Tax Claims........................................................ 17
ARTICLE IV. DESIGNATION AND TREATMENT OF IMPAIRED
CLASSES AND INTERESTS ................................................... 17
A. The Allowed NVF 10% Secured Note Claims - Class 1................. 17
B. The Allowed Secured Hartwell Claim - Class 2...................... 18
C. The Allowed Secured Reed Smith Claim - Class 3. .................. 18
D. The New Castle County Claim - Class 5............................. 19
E. Unsecured Claims Without Priority - Class 8....................... 20
1. General Unsecured Claims - Class 8A...................... 20
a. Description:.................................... 20
b. Treatment Under the Purchase Alternative:....... 20
c. Treatment Under the Recapita.................... 20
2. Unsecured Environmental Claims - Class 8B................ 20
a. Description: .................................. 20
b. Treatment:...................................... 20
3. Class 8 Voting........................................... 21
F. Affiliate Claim - Class 10........................................ 21
1. Description:............................................. 21
2. Treatment................................................ 21
3. Voting:.................................................. 21
G. Interests - Class 11.............................................. 21
1. Description:............................................. 21
2. Treatment: .............................................. 21
3. Voting: ................................................ 22
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ARTICLE V. DESIGNATION AND TREATMENT OF UNIMPAIRED CLAIMS .............................. 22
A. The Allowed CIT Group/Business Credit, Inc. Financing Claim - Class 4....... 22
1. Description........................................................ 22
2. Treatment.......................................................... 22
3. Voting. .......................................................... 22
B. Priority Claims - Class 6................................................... 22
C. Pension Plan Fund Claims - Class 7.......................................... 23
1. Description........................................................ 23
2. Treatment.......................................................... 23
3. Voting. .......................................................... 24
D. Administrative Convenience Claims - Class 9................................. 24
1. Description:....................................................... 24
2. Treatment:......................................................... 24
3. Voting: .......................................................... 24
ARTICLE VI. MEANS FOR IMPLEMENTATION OF THE PLAN........................................ 24
A. Means of Effectuating the Plan.............................................. 24
1. Purchase Alternative............................................... 24
2. Recapitalization Alternative....................................... 25
B. Directors and Officers...................................................... 25
C. Revesting of Property....................................................... 26
D. Bar Date For Certain Administrative Claims.................................. 26
E. Cancellation of Debentures and Existing Common Stock; Discharge of
Indenture Trustees.......................................................... 26
F. Effectuating Documents; Further Transactions................................ 27
ARTICLE VII. ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF
REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR INTERESTS ................................ 28
A. Classes Entitled To Vote.................................................... 28
B. Class Acceptance Requirement................................................ 28
C. Cramdown.................................................................... 28
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ARTICLE VIII. DESCRIPTION OF SECURITIES TO BE ISSUED AND
APPLICATION OF FEDERAL AND OTHER SECURITIES LAWS......................................... 28
A. Adoption of the Reorganized Company's Charter Documents...................... 28
B. Issuance and Distribution of New Common Stock under the
Purchase Alternative......................................................... 29
C. Issuance and Distribution of the Reorganized NVF Common Stock and Secured
Debentures under the Recapitalization Alternative............................ 29
1. Reorganized NVF Common Stock........................................ 29
2. Secured Debentures.................................................. 29
3. Deposit with Disbursing Agent....................................... 31
4. Fractional Securities under the Recapitalization Alternative........ 31
D. Resale of Securities Received under the Purchase Alternative or the
Recapitalization Alternative................................................. 32
1. Registration of Securities.......................................... 32
2. Lack of Established Market for Reorganized NVF Common Stock and
Secured Debentures.................................................. 33
E. Risks Associated with the Recapitalization Alternative....................... 33
ARTICLE IX. PROVISIONS GOVERNING DISTRIBUTIONS UNDER THE PLAN ........................... 33
A. Distributions Under the Plan................................................. 33
1. Distribution Record Date............................................ 33
2. The Initial Distributions........................................... 33
3. Treatment of Disputed Claims........................................ 34
4. Unclaimed Distributions............................................. 34
a. Safeguarding of Unclaimed Distributions. .................. 34
b. Release of Unclaimed Distributions......................... 34
5. Excess Reserves..................................................... 35
6. Form of Distributions............................................... 35
7. Rounding............................................................ 35
B. The Disbursing Agent......................................................... 35
1. Appointment......................................................... 35
2. Powers.............................................................. 35
3. Compensation........................................................ 35
4. Appointment of Successor............................................ 35
5. Termination of the Disbursing Agent................................. 36
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C. The Disputed Claims Trustee................................................... 36
1. Appointment.......................................................... 36
2. Powers............................................................... 36
3. Compensation......................................................... 36
4. Appointment of Successor............................................. 36
5. Termination of the Disputed Claims Trustee........................... 36
6. Recapitalization Alternative......................................... 37
ARTICLE X. TREATMENT OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES..................................................................... 37
A. Executory Contracts and Unexpired Leases...................................... 37
ARTICLE XI. CONDITIONS PRECEDENT.......................................................... 37
A. Conditions to Confirmation of the Plan........................................ 37
B. Conditions To The Consummation Date........................................... 37
C. Waiver of Conditions to the Confirmation of the Plan and to the
Consummation Date. ........................................................... 39
ARTICLE XII. MODIFICATIONS AND AMENDMENTS ................................................ 39
A. Revocation and Modification of the Plan....................................... 39
ARTICLE XIII. EFFECT OF CONFIRMATION ..................................................... 39
A. Discharge of Claims and Termination of Interests.............................. 39
ARTICLE XIV. JURISDICTION RETAINED ....................................................... 40
A. Jurisdiction.................................................................. 40
ARTICLE XV. MISCELLANEOUS PROVISIONS...................................................... 41
A. Discharge of the Company...................................................... 41
B. Exculpation And Limitation Of Liability....................................... 41
C. Binding Effect. ............................................................. 42
D. Revocation, Withdrawal, Or Non-Consummation................................... 42
1. Right to Revoke Or Withdraw.......................................... 42
2. Effect Of Withdrawal, Revocation, Or Non-Consummation................ 42
E. Notices....................................................................... 42
F. Indemnification Obligations................................................... 43
G. Committee Disbanded........................................................... 44
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H. Term Of Injunctions Or Stays.................................................. 44
I. Prepayment.................................................................... 44
J. Voting Record Date............................................................ 44
K. Dismissal of Preference Action Against Debenture Holders. .................... 44
L. Choice of Law................................................................. 44
M. Headings...................................................................... 45
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JOINT PLAN OF REORGANIZATION BY
NVF COMPANY AND OFFICIAL COMMITTEE OF
UNSECURED CREDITORS
NVF Company (the "Company"), debtor and debtor in possession, and the
Official Committee of Unsecured Creditors (the "Committee") hereby submit this
Joint Plan of Reorganization for NVF Company, pursuant to section 1121(a) of the
Bankruptcy Code and request confirmation of the Plan (as defined below) pursuant
to section 1129 of the Bankruptcy Code (as defined below). Reference is made to
the Disclosure Statement (as defined below) for (1) a discussion of the
Company's history, businesses, and results of operations and properties, (2) a
discussion regarding the sale process and (3) a summary and analysis of the Plan
and related matters. All holders of claims entitled to vote to accept or reject
the Plan should read the Plan and Disclosure Statement in their entirety before
voting to accept or reject the Plan. No solicitation materials, other than the
Disclosure Statement and the related materials transmitted with it, have been
approved by the Bankruptcy Court for use in soliciting acceptances or rejections
of the Plan. The Company and the Committee are the proponents of the Plan within
the meaning of Bankruptcy Code section 1129.
ARTICLE I.
DEFINITIONS; RULES OF CONSTRUCTION
A. DEFINITIONS.
For the purposes of the Plan, the following terms shall have the
respective meanings set forth in this Article I. Any term used in this Plan that
is not defined herein, but that is used in the Bankruptcy Code or the Bankruptcy
Rules (as defined below), shall have the meaning assigned to that term in the
Bankruptcy Code or the Bankruptcy Rules. Any term used in this Plan that is
defined herein, but that is also defined in the Agreement (as defined below),
shall have the meaning assigned to that term in this Plan.
1. "ACCOUNTS PAYABLE POSTPETITION CLAIM" means Claims of
third parties arising after the Petition Date for the
purchase of merchandise, supplies, utilities and other
non-employee related expenses incurred in the ordinary course
of business.
2. "ADMINISTRATIVE CLAIMS" means a Claim for costs and expenses
of administration under sections 503, 507(a)(1), 507(b) and
1114(e)(2) of the Bankruptcy Code, including: (a) the actual
and necessary costs and expenses incurred after the
commencement of the Chapter 11 Case of preserving the
Company's Estate and operating the business of the Company
(such as wages, salaries or commissions for services); (b)
compensation for legal, accounting and other services and
reimbursement of expenses awarded or allowed under sections
330(a) or 331 of
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the Bankruptcy Code; (c) all payments made to cure defaults
under executory contracts and leases which have been assumed
by the Company; (d) the Indenture Trustee Claims and (e) all
fees and charges assessed against the Company under section
1930 of title 28 of the United States Code.
3. "ADMINISTRATIVE ENVIRONMENTAL CLAIMS" means any Environmental
Claim against the Company or Environmental Claim for which the
Company is liable, directly or indirectly, and which is
entitled to administrative priority, including without
limitation, the Environmental Postpetition Claim for Kennett
Square and any Environmental Claim entitled to Administrative
priority related to properties or sites owned or operated by
the Company.
4. "AFFILIATE CLAIM" means the unsecured Claim in the principal
Amount of $480,997.00 held by NVF Industries of Canada, Ltd.
5. "AGREEMENT" means the Stock Purchase Agreement dated as of
___________, 1996 between and among the Company, the Buyer and
the Committee, as amended and restated and attached as Exhibit
"E" hereto.
6. "AGREEMENT DAMAGES" means the $3 million of the Cash Purchase
Price to which the Estate is entitled in the event the
Agreement is terminated pursuant to Section 9.2 of the
Agreement.
7. "ALLOWED", when used with respect to a Claim other than an
Administrative Claim, means a Claim (a) either (i) scheduled
by the Company pursuant to the Bankruptcy Code, other than a
Claim scheduled as disputed, contingent, or unliquidated, or
(ii) proof of which has been timely filed pursuant to the
Bankruptcy Code and any order of the Bankruptcy Court, or late
filed with leave of the Bankruptcy Court after notice and a
hearing, and as to which (b) either (x) no objection to the
allowance of which has been filed within the periods of
limitation, if any, fixed by the Plan or an order of the
Bankruptcy Court, or (y) any objection to the allowance of
which has been overruled by a Final Order, or (z) which has
otherwise been Allowed by a Final Order or this Plan only to
the extent that it has been so Allowed.
8. "ALLOWED ADMINISTRATIVE CLAIM" means all or that portion of
any Administrative Claim which either (a) has become Allowed
by a Final Order or (b) was incurred by the Company in the
ordinary course of business during the Case, is not disputed
by the Company or the Committee and is due and owing under the
terms and conditions of any agreements or applicable law.
9. "AMOUNT" means, with respect to (i) an Allowed Claim, the
Amount of such Allowed Claim; and (ii) with respect to a
Disputed Claim, the estimated Amount of
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such Disputed Claim, determined in accordance with paragraph 5
of Article IX of this Plan.
10. "ASSUMED CLAIMANT" has the meaning set forth in the Agreement.
11. "ASSUMED LIABILITIES" has the meaning set forth in the
Agreement.
12. "BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as
amended and codified in title 11 of the United States Code, 11
U.S.C. sections 101-1330, and applicable as to cases filed as
of the Petition Date.
13. "BANKRUPTCY COURT" means the United States Bankruptcy Court
for the District of Delaware, or such other court as may have
jurisdiction over the Chapter 11 Case.
14. "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, and any local rules
of the Bankruptcy Court.
15. "BAR DATE" means January 31, 1994, the deadline for filing
certain proofs of Claim in the Chapter 11 Case.
16. "BUSINESS DAYS" means each Monday, Tuesday, Wednesday,
Thursday and Friday, which is not a day on which banking
institutions in New York, New York, are authorized or
obligated by law, governmental decree, or executive order to
be closed.
17. "BUYER" means First Security.
18. "CHAPTER 11 CASE" means that case Filed in the Bankruptcy
Court entitled "In re NVF Company, Debtor," Case No. 93-1020,
under Chapter 11, Title 11 of the Bankruptcy Code.
19. "CASH" shall mean United States currency, a certified check, a
cashier's check or a wire transfer of good funds from any
source, or a check from the Reorganized Company, or the
Disbursing Agent.
20. "CASH PURCHASE PRICE" means the cash portion (US$24.5 Million)
of the total consideration for the purchase of the New Common
Stock paid by the Buyer pursuant to the Agreement.
21. "CIT" means the CIT Group/Business Credit, Inc.
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22. "CLAIM" means a claim, as that term is defined in section
101(5) of the Bankruptcy Code, against the Company.
23. "CLAIMANT" means the holder of a Claim.
24. "CLASS" means a class of Claims or Interests in respect of the
Company.
25. "COMMITTEE" means the Official Committee of Unsecured
Creditors of the Company.
26. "COMPANY" means NVF Company, a Delaware corporation.
27. "CONFIRMATION" means the entry of the Confirmation Order.
28. "CONFIRMATION HEARING DATE" means the hearing before the
Bankruptcy Court on the Confirmation of the Plan and the
date(s) upon which such hearing continues.
29. "CONFIRMATION ORDER" means the order issued by the Bankruptcy
Court confirming the Plan.
30. "CONSUMMATION DATE" means the Business Day on which all
conditions to the consummation of the Plan set forth in
Article XI hereof have been satisfied or waived as provided in
Article XI hereof.
31. "DAMAGES" means any loss, liability, claim, damage, expense
(including, without limitation, costs of investigation and
defense and reasonable attorneys' fees and expenses) or
diminution of value.
32. "DEBENTURES" means, collectively, the NVF 5% Debentures and
the NVF 10% Debentures.
33. "DISBURSING AGENT" means the person appointed by the Plan
Proponents pursuant to the Plan for the purpose of overseeing
and making Distributions from the Distribution Fund and taking
such other action as is described herein or as is necessary to
effectuate the Plan. Under the Purchase Alternative and the
Recapitalization Alternative the Disbursing Agent shall be
compensated out of the Distribution Fund.
34. "DISBURSING AGENT AGREEMENT" means the agreement entered into
between the Disbursing Agent and the Plan Proponents that sets
forth the rights and obligations of such Disbursing Agent. The
agreement shall be substantially in the form to be
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filed by the Plan Proponents not less than ten days prior to
the commencement of the hearing on the adequacy of the
Disclosure Statement.
35. "DISCLOSURE STATEMENT" means the Disclosure Statement (and all
exhibits and schedules annexed to or referenced in this
Disclosure Statement) that relates to this Plan and that was
approved pursuant to section 1125 of the Bankruptcy Code by an
order entered by the Bankruptcy Court on the Disclosure
Statement approval date, as such Disclosure Statement may be
amended, modified or supplemented.
36. "DISPUTED CLAIM" means, for the purpose of receiving
distributions pursuant to the Plan:
a. a Claim, as to which, if no proof of Claim has been
Filed by the Bar Date or has otherwise been deemed
timely Filed under applicable law and such Claim has
been scheduled by the Company in its schedule of
liabilities as other than disputed, contingent or
unliquidated, the Company has Filed an objection by
the Effective Date; or
b. a Claim as to which, if a proof of Claim has been
Filed by the Bar Date or has otherwise been deemed
timely Filed under applicable law, an objection has
been timely Filed by the Company or any other party
in interest and such objection has not been withdrawn
on or before any date fixed by the Plan or order of
the Bankruptcy Court for Filing such objections and
such objection has not been denied by a Final Order.
For the purpose of receiving Distributions pursuant
to the Plan, a Claim or Claims asserted in a proof of
claim shall be considered a Disputed Claim in its
entirety if an objection is timely Filed to any
portion of such Claim or Claims.
37. "DISPUTED CLAIMS RESERVE ACCOUNT" means the Amount of Cash or
other property that would have been distributed on the
Distribution Date to holders of Allowed Disputed Claims.
38. "DISPUTED CLAIMS TRUSTEE" means the person or persons
appointed by the Plan Proponents under the Purchase
Alternative for the purpose of liquidating and/or resolving
General Unsecured Claims which are Disputed Claims. The
Disputed Claims Trustee shall be compensated out of the
Distribution Fund.
39. "DISPUTED CLAIMS TRUSTEE AGREEMENT" means the agreement
entered into between the Disputed Claims Trustee and the Plan
Proponents that sets forth the rights and obligations of such
Disputed Claims Trustee. The agreement shall be substantially
in the form to be filed by the Plan Proponents not less than
ten days prior to the commencement of the Confirmation Hearing
Date.
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40. "DISTRIBUTION" means the distribution of Cash or other
property that is required under the Plan.
41. "DISTRIBUTION DATE" shall mean the date of the first
Distribution of Cash or securities, which shall be the
Consummation Date or as soon as practicable thereafter.
42. "DISTRIBUTION FUND" means the fund established pursuant to the
Plan, administered by the Disbursing Agent, out of which
certain Distributions will be made, and which fund shall
contain: (a) an Amount equal to (i) in the event of the
Purchase Alternative, the Cash Purchase Price or (ii) in the
event of the Recapitalization Alternative, Reorganized NVF
Common Stock, Secured Debentures and the Agreement Damages, if
any, and proceeds, if any, of any Exit Financing; and (b) the
Litigation Settlement Proceeds.
43. "DISTRIBUTION RECORD DATE" means the first Business Day (a)
that is at least eleven (11) days after the date of
Confirmation; (b) on which no stay of the Confirmation Order
is in effect; and (c) on which all conditions to the
Consummation Date set forth in Article XI(B) of the Plan have
been satisfied or waived (if waivable).
44. "EFFECTIVE DATE" means the earlier of (a) the date on which
the Confirmation Order becomes a Final Order or (b) if the
Confirmation Order is appealed but not stayed, the date on
which the Plan Proponents file with the Bankruptcy Court a
statement that the Plan will be consummated notwithstanding
the appeal.
45. "ENVIRONMENTAL CLAIM" means any investigation, notice,
violation, demand, allegation, action, suit, injunction,
judgment, order, consent decree, penalty, fine, lien,
proceeding, or claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection
with, an actual or alleged violation of, any Environmental
Law, (b) in connection with any Hazardous Material, (c) from
any abatement, removal, remedial, corrective, or other
response action in connection with a Hazardous Material,
Environmental Law or other order of governmental authority or
(d) from any actual or alleged damage, injury, threat, or harm
to health, safety, natural resources, or the environment.
46. "ENVIRONMENTAL CLAIM FOR KENNETT SQUARE" means any
Environmental Claim incurred by the EPA related to the
facility owned and operated by the Company in Kennett Square
Chester County, Pennsylvania and arising prior to the Petition
Date.
47. "ENVIRONMENTAL LAW" means any current or future legal
requirement pertaining to (a) the protection of health,
safety, and the indoor or outdoor environment, (b) the
conservation, management, or use of natural resources and
wildlife, (c) the protection
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<PAGE> 16
or use of surface water and groundwater, (d) the management,
manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release,
threatened release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Material or (e)
pollution (including any release to air, land, surface water
and groundwater), including, but not limited to, the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 USC 9601 et seq, Solid
Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 USC 6901 et seq, Federal Water
Pollution Control Act, as amended by the Clean Water Act of
1977, 33 USC 1251 et seq, Clean Air Act of 1966, as amended,
42 USC 7401 et seq, Toxic Substances Control Act of 1976, 15
USC 2601 et seq, Hazardous Materials Transportation Act, 49
USC App. 1801 et seq, Occupational Safety and Health Act of
1970, as amended, 29 USC 651 et seq, Oil Pollution Act of
1990, 33 USC 2701 et seq, Emergency Planning and Community
Right-to-Know Act of 1986, 42 USC 11001 et seq, National
Environmental Policy Act of 1969, 32 USC 4321 et seq, Safe
Drinking Water Act of 1974, as amended, 42 USC 300(f) et seq,
any similar, implementing or successor law, any similar or
analogous state laws and regulations, and any amendment, rule,
regulation, order, or directive issued thereunder.
48. "ENVIRONMENTAL POSTPETITION CLAIM AT KENNETT SQUARE" means any
Environmental Claim incurred by the Environmental Protection
Agency related to the facility owned and operated by the
Company in Kennett Square, Chester County, Pennsylvania and
arising after the Petition Date.
49. "EPA" means the Environmental Protection Agency.
50. "ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. sections 1301 et seq., as amended.
51. "ESTATE" means the estate of the Company pursuant to section
541 of the Bankruptcy Code.
52. "EXCESS RESERVE" means any Unclaimed Distributions described
in Article IX(A) of this Plan.
53. "EXISTING COMMON STOCK" means issued and outstanding shares of
the Company's common stock.
54. "EXIT FINANCING" means any financing obtained by the Company
as the Reorganized Company post-confirmation for the purpose
of, among other things, funding the Plan.
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55. "FILED" means filed with the Bankruptcy Court in the Chapter
11 Case.
56. "FINAL ORDER" means an order or a judgment which has not been
reversed or stayed and as to which (i) the time to appeal or
seek review, rehearing or certiorari has expired and (ii) no
appeal or petition for review, rehearing or certiorari is
pending.
57. "FIRST SECURITY" shall mean First Security and Investment
Corp., a Florida corporation.
58. "GENERAL UNSECURED CLAIMS" means all Unsecured Claims not
entitled to priority, other than Environmental Claims, Pension
Plan Fund Claims, and the Affiliate Claim.
59. "GENERAL UNSECURED CREDITORS" means holders of General
Unsecured Claims.
60. "HARTWELL" means the City of Hartwell, a municipal corporation
of the State of Georgia, County of Hartwell.
61. "HARTWELL CLAIM" means the Claim of Hartwell under the
Hartwell Secured Note.
62. "HARTWELL SECURED NOTE" means the secured promissory note
dated November 13, 1984, issued by the Company in favor of the
City of Hartwell in the original aggregate principal Amount of
Seven Hundred Fifty Thousand Dollars ($750,000).
63. "HAZARDOUS MATERIAL" means any substance, chemical, compound,
product, solid, gas, liquid, waste, byproduct, pollutant,
contaminant, or material which is hazardous or toxic,
including, but not limited to (a) asbestos, polychlorinated
biphenyls, and petroleum (including crude oil or any fraction
thereof) and (b) any such material classified or regulated as
"hazardous" or "toxic" pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 USC 9601 et seq, Solid Waste
Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 USC 6901 et seq, Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et
seq, Clean Air Act of 1966, as amended, 42 USC 7401 et seq,
Toxic Substances Control Act of 1976, 15 USC 2601 et seq,
Hazardous Materials Transportation Act, 49 USC App. 1801 et
seq, and any similar, implementing or successor law, any
similar or analogous state laws and regulations, and any
amendment, rule, regulation, order, or directive issued
thereunder.
64. "INDENTURES" means, collectively, the NVF 5% Debenture
Indenture and the NVF 10% Debenture Indenture.
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<PAGE> 18
65. "INDENTURE TRUSTEES" means, collectively, Bankers Trust
Company, as trustee under the NVF 5% Debenture Indenture, and
Sterling National Bank & Trust Company, as trustee under the
NVF 10% Debenture Indenture.
66. "INDENTURE TRUSTEE CLAIMS" means the fees and expenses of the
Indenture Trustees incurred in their capacity as such,
including the fees and expenses of their counsel, which are
Allowed in the Amounts specified in Article VI(E).
67. "INTERESTS" means the legal, equitable and contractual rights
represented by any equity security of the Company as defined
in Bankruptcy Code section 101(16).
68. "LEGAL PROCEEDING" means any judicial, administrative, or
arbitral actions, suits, proceedings (public or private),
Claims or governmental proceedings.
69. "LIEN" means, with respect to any property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind or any agreement to give, or notice of, any of the
foregoing.
70. "LITIGATION SETTLEMENT" means the settlement of the adversary
proceeding captioned, Official Committee of Unsecured
Creditors of NVF Company v. Victor Poser, et. al., Civil
Action No. 94-400 (RRM) filed in the District Court for the
District of Delaware.
71. "LITIGATION SETTLEMENT AGREEMENT" means the agreement among
the parties to the litigation memorializing the Litigation
Settlement as approved by the Bankruptcy Court on November 22,
1995.
72. "LITIGATION SETTLEMENT PROCEEDS" means proceeds obtained from
the Litigation Settlement, less Amounts used to pay certain of
the Bankruptcy Court approved fees earned and expenses
incurred by the Professionals in connection with the Chapter
11 Case.
73. "NEW CASTLE COUNTY CLAIM" means the Claim of New Castle County
arising from sanitation and sewer services provided to the
Company.
74. "NEW COMMON STOCK" means the shares of common stock of the
Reorganized Company issued to the Buyer.
75. "NVF 5% DEBENTURES" means the subordinated debentures issued
by the Debtor, due January 1, 1994, and bearing an interest
rate of five percent (5%).
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76. "NVF 5% DEBENTURE INDENTURE" means that certain debenture
dated as of January 1, 1969 between the Company and Bankers
Trust Company, as trustee, for the NVF 5% Debentures.
77. "NVF 10% DEBENTURES" shall mean the subordinated debentures
issued by the Debtor, due November 15, 2003, and bearing an
interest rate of ten percent (10%).
78. "NVF 10% DEBENTURE INDENTURE" means that certain indenture
dated as of November 15, 1973 between the Debtor and Sterling
National Bank & Trust Company, as trustee, for the NVF 10%
Debentures.
79. "NVF 10% SECURED NOTE" means the secured promissory notes
issued by the Debtor, due November 22, 1996, and bearing an
interest rate of 10%.
80. "NVF 10% SECURED NOTE CLAIMS" means all Claims arising out of
or related to the NVF 10% Secured Notes.
81. "NVF 10% SECURED NOTE HOLDERS" means the following individuals
and entities which received the NVF 10% Secured Notes from the
Company in exchange for $16,335,000 in aggregate principal
Amount of the NVF 5% Debentures: (i) Mid-Continent Casualty
Company; (ii) Great American Communications Company; (iii)
Robert C. Lintz; (iv) Sandra W. Heimann; (v) Rodger M. Miller;
(vi) Thomas E. Mischell; (vii) Fred J. Runk; (viii) James E.
Evans; and (ix) Ronald F. Walker.
82. "PBGC" means the Pension Benefit Guaranty Corp.
83. "PENSION PLANS" means the pension plans established by the
Company for its employees known as Holyoke, Massachusetts
Plant of NVF Company Pension Plan, the Pension Plan for Hourly
Paid Employees of the NVF Company Plant in Broadview,
Illinois, the Employees Pension Plan of NVF Company, the
Pension Plan for Hourly Employees of the NVF Company Plants in
Newark, Yorklyn and Wilmington, Delaware, and Kennett Square
and Willow Grove, Pennsylvania, and the Pension Plan for
Hourly Paid Employees of the NVF Company Plant in Los Angeles,
California.
84. "PENSION PLAN FUND CLAIMS" means those Claims asserted by the
PBGC against the Company in connection with its Pension Plans.
85. "PETITION DATE" means August 27, 1993.
86. "PLAN" means the Joint Plan of Reorganization including,
without limitation, any modifications or amendments thereto.
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87. "PLAN PROPONENTS" means the Company and the Committee.
88. "POSTPETITION ACCRUED WAGES AND OTHER CLAIMS" means Claims
arising after the Petition Date for employee related costs
incurred in the ordinary course of business, including wages,
salaries, commissions, payroll withholdings and contributions
to any employee benefit plan.
89. "PRIORITY CLAIMS" means Claims that have priority under
section 507(a)(2)(3) or (4) of the Bankruptcy Code.
90. "PROFESSIONALS" means all professionals, firms, or entities
employed in the Chapter 11 Case pursuant to sections 327 or
1103 of the Bankruptcy Code, and all professionals seeking
compensation or reimbursement of expenses pursuant to section
503(b)(4) of the Bankruptcy Code.
91. "PRO RATA" means with respect to Allowed Claims in the same
Class, the proportion that the dollar amount of an Allowed
Claim bears to the aggregate dollar amount of all Allowed
Claims of that Class.
92. "PURCHASE ALTERNATIVE" means the purchase of New Common Stock
by the Buyer.
93. "PURCHASE PRICE" means the total consideration for the
purchase of the New Common Stock.
94. "RECAPITALIZATION ALTERNATIVE" means a recapitalization of the
Company pursuant to Article VI of the Plan which shall be
implemented if the sale to the Buyer is not consummated.
95. "RECAPITALIZATION NOTICE" means the notice filed by the Plan
Proponents with the Bankruptcy Court to advise creditors and
parties in interest of the implementation of the
Recapitalization Alternative.
96. "REED SMITH" means the law firm of Reed, Smith, Shaw & McClay.
97. "REORGANIZED COMPANY" means the Company as reorganized
pursuant to the Plan.
98. "REORGANIZED COMPANY ACCOUNT" means the account established by
the Company with restricted funds provided by the Buyer
obtained by the Company, for the purpose of making certain
Cash Distributions on the Consummation Date or as soon
thereafter as is practical, in accordance with the provisions
set forth herein.
99. "REORGANIZED NVF COMMON STOCK" means the common stock to be
issued under the Recapitalization Alternative.
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100. "RESERVE AMOUNTS" means the Amount of Cash or other property
required to be deposited in the Disputed Claims Reserve
Account, on account of Disputed Claims.
101. "SALES AGENT" means Alex. Brown and Sons Incorporated.
102. "SECURED CLAIM" means a Claim to the extent of the value of
any Lien on or security interest in property of the Company
that secures payment of such Claim.
103. "SECURED DEBENTURES" means those debentures distributed to
Class 8A creditors under the Recapitalization Alternative that
substantially have the principal terms and conditions set
forth in Article VIII herein.
104. "SECURED REED SMITH CLAIM" means the claim of Reed Smith for
fees and services rendered to the Company secured by an
attorney charging lien pursuant to an agreement between the
Company and Reed Smith.
105. "TAX CLAIM" means an Allowed priority Claim for taxes of the
kind specified in Section 507(a)(7) of the Bankruptcy Code.
106. "TAX CODE" means the Internal Revenue Code of 1986, as
amended.
107. "UNCLAIMED DISTRIBUTIONS" means those Distributions held by
the Disbursing Agent for the benefit of the holders of Allowed
Claims who have failed to claim such Distributions.
108. "UNSECURED CLAIMS" means all unsecured claims against the
Company, however arising, not entitled to priority under
Bankruptcy Code section 507(a).
109. "UNSECURED ENVIRONMENTAL CLAIMS" means all Unsecured
Environmental Claims against the Company, or for which it is
liable, directly or indirectly, including, without limitation,
any Environmental Claims relating in any manner to an
environmental condition on or from a site or property owned by
NVF or from which it operates or from any other site or
property and not entitled to priority under Bankruptcy Code
section 507(a).
110. "VOTING RECORD DATE" means ____________, 1996 at 5:00 p.m.
prevailing Eastern Time.
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B. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW.
1. RULES OF CONSTRUCTION.
a. The words "herein, "hereof," "hereto," "hereunder"
and others of similar usage refer to this Plan as a whole and not to any
particular article, section, subsection, paragraph or clause contained in this
Plan, unless a particular reference is stated.
b. Any reference to the word "on" shall mean "on or
about".
c. Any reference to the word "including" shall mean
"including without limitation."
d. Unless specified otherwise in a particular reference,
a reference in this Plan to a particular article, section, subsection or
paragraph of this Plan is a reference only to that article, section, subsection
or paragraph.
e. Any reference in this Plan to a document being in a
particular form means that the document shall be in substantially such form.
f. Any reference in this Plan to an existing document
means such document as it may have been amended, modified or supplemented from
time to time prior to the date hereof, unless a particular reference is stated.
g. Whenever it is appropriate in context, each term
stated in either the singular or the plural shall include both the singular and
the plural.
h. In addition to the foregoing, the rules of
construction set forth in section 102 of the Bankruptcy Code shall apply to this
Plan.
i. All exhibits and schedules to the Disclosure
Statement are incorporated into the Plan, and shall be deemed to be included in
this Disclosure Statement, regardless of when they are Filed.
2. COMPUTATION OF TIME.
In computing any period of time prescribed or allowed by this
Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
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ARTICLE II.
CLASSIFICATION OF CLAIMS AND INTERESTS
All Claims and Interests, except for Administrative Claims and Tax
Claims, are placed in the Classes set forth below. In accordance with section
1123(a)(1) of the Bankruptcy Code, Administrative Claims and Tax Claims, as
described below, have not been classified. A Claim or Interest shall be deemed
classified in a particular Class only to the extent that the Claim or Interest
qualifies within the description of that Class and shall be deemed classified in
a different Class to the extent that any remainder of the Claim or Interest
qualifies within the description of such different Class. A Claim or Interest is
in a particular Class only to the extent that the Claim or Interest is an
Allowed Claim or Allowed Interest.
A. UNCLASSIFIED CLAIMS (NOT ENTITLED TO VOTE ON THE PLAN).
1. Administrative Claims.
2. Tax Claims.
B. SECURED CLAIMS.
1. Class 1 consists of the Allowed NVF 10% Secured Note Claims.
2. Class 2 consists of the Allowed Hartwell Claim.
3. Class 3 consists of the Allowed Reed Smith Claim.
4. Class 4 consists of the Allowed CIT Claim.
5. Class 5 consists of the New Castle Claim.
C. PRIORITY CLAIMS.
1. Class 6 consists of the Allowed Unsecured Priority Claims.
D. UNSECURED CLAIMS WITHOUT PRIORITY AND INTERESTS.
1. Class 7 consists of all Allowed Pension Plan Fund Claims.
2. Class 8A consists of Allowed General Unsecured Claims.
3. Class 8B consists of Unsecured Environmental Claims.
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<PAGE> 24
4. Class 9 consists of Allowed General Unsecured Claims in an
Amount equal to or less than $100.
5. Class 10 consists of the Allowed Affiliate Claim.
6. Class 11 consists of Allowed Interests in the Company
comprised of the Existing Common Stock.
ARTICLE III.
DESIGNATION AND TREATMENT OF UNCLASSIFIED CLAIMS
The following sets forth the designation and treatment of all
unclassified Claims. The Distributions received pursuant to the provisions set
forth in this Article III shall represent full and final satisfaction of all
such unclassified Claims.
A. ADMINISTRATIVE CLAIMS.
1. Description. Allowed Administrative Claims are all costs and
expenses of administration of the Chapter 11 Case Allowed under section 503(b)
of the Bankruptcy Code, and referred to in sections 507(a)(1) and 1114 of the
Bankruptcy Code, including, without limitation, the actual and necessary costs
and expenses of preserving the Company's Estate and operating its businesses,
including wages, salaries or commissions for services rendered postpetition, the
Indenture Trustees' Claims, any indebtedness or obligation incurred or assumed
by the Company, as debtor-in-possession. The Plan Proponents estimate that the
aggregated Amount of Allowed Administrative Claims to be paid from the
Distribution Fund is $6 million.
2. Treatment. On the Distribution Date or as soon thereafter as
is practical, under both the Purchase Alternative and the Recapitalization
Alternative, each holder of an Allowed Administrative Claim except for those (i)
holders of Allowed Accounts Payable Postpetition Claims, and (ii) holders of
Allowed Postpetition Accrued Wages and Other Claims shall receive from the
Disbursing Agent on account of such Allowed Claim, payment in full in Cash from
the Distribution Fund. Each Professional employed at the expense of the
Company's Estate pursuant to sections 327 and 1103 of the Bankruptcy Code and an
appropriate order of the Bankruptcy Court, shall be paid by the Disbursing
Agent, the unpaid portion of its Allowed Administrative Claim in Cash from the
Distribution Fund. Allowed Accounts Payable Postpetition Claims and Allowed
Postpetition Accrued Wages and Other Claims shall receive payment in full in
Cash from the Reorganized Company in the ordinary course of business.
On the Distribution Date, Allowed Administrative Environmental
Claims shall be paid in full in Cash from the Reorganized Company Account under
the Purchase Alternative, or from the Distribution Fund under the
Recapitalization Alternative. Administrative Environmental Claims
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<PAGE> 25
which are not Allowed on the Distribution Date, but which become fixed and
liquidated thereafter, will be paid in full in Cash by the Reorganized Company
in the ordinary course of its business.
B. TAX CLAIMS.
1. Description. Tax Claims consist of all Claims against the
Company entitled to priority under section 507(a)(8) of the Bankruptcy Code. The
Plan Proponents estimate that the aggregate Allowed Amount of Tax Claims
approximate $134,066.09.
2. Treatment. On the Distribution Date, each holder of an Allowed
Tax Claim shall receive, payment in full in Cash by the Reorganized Company, if
funds are available, or (a) from the Reorganized Company Account under the
Purchase Alternative, or (b) from the Distribution Fund under the
Recapitalization Alternative.
ARTICLE IV.
DESIGNATION AND TREATMENT OF IMPAIRED CLASSES AND INTERESTS
The following sets forth the designation and treatment of those
classified Claims and Interests set forth in Article II herein which are
impaired under the Plan. Each member of the impaired Classes, except for Classes
10 and 11, set forth in this Article IV are entitled to vote on the Plan. Class
10 and 11 will receive no Distributions under the Plan and, therefore, are
deemed to have rejected the Plan. The Distributions received pursuant to this
Article IV shall represent full and final satisfaction of all Allowed Claims in
Classes 1, 2, 3, 5, 8A, 8B, 10, and 11.
A. THE ALLOWED NVF 10% SECURED NOTE CLAIMS - CLASS 1.
1. Description. Class 1 consists of the NVF 10% Secured Note
Claims as Allowed pursuant to the Litigation Settlement Agreement. Under the
Litigation Settlement Agreement, the NVF 10% Secured Note Claims are Allowed in
the aggregate Amount of $8,225,643.74 constituting principal in the Amount of
$7,460,643.74 and interest in the Amount of $765,000. Interest on the principal
shall accrue at a rate of 10% per annum (simple interest with no compounding)
from September 30, 1995 until (i) the Consummation Date or (ii) May 22, 1996,
which is the date the first semi-annual payment is due. The NVF 10% Secured Note
Claims are secured by mortgages on the Company's manufacturing plants located in
Kennett Square, Pennsylvania, Wilmington, Delaware and Hartwell, Georgia and on
certain unimproved land of the Company.
2. Treatment. Under the Purchase Alternative and the
Recapitalization Alternative, the Reorganized Company shall pay each holder of
an Allowed NVF 10% Secured Note Claim semi-annual payments of interest only at a
rate of 10% per annum from September 30, 1995, on the principal Amount owed of
$7,460,643.74, with the entire outstanding balance due and payable on November
22, 1996. Interest that has accrued from September 30, 1995 to (i) the
Consummation Date or (ii) May 22, 1996, which is the date the first semi-annual
payment is due, plus past due
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<PAGE> 26
interest in the Amount of $765,000, shall be paid in Cash from the Reorganized
Company Account under the Purchase Alternative or from the Distribution Fund
under the Recapitalization Alternative. The holders of the NVF 10% Secured Note
Claims shall retain their Liens securing the NVF 10% Secured Note Claims. The
NVF 10% Secured Notes, mortgages and other security documents shall be modified
to be consistent with the treatment set forth herein and to preclude a default
except as set forth herein. The Reorganized Company shall have the right to pay
any balance of the Allowed NVF 10% Secured Note Claims in full at any time on or
after the Consummation Date without premium or penalty. Under the
Recapitalization Alternative, the Committee shall have the right, but not the
obligation, to require the Disbursing Agent to reserve monies in the
Distribution Fund to pay in full the Allowed NVF 10% Secured Note Claims prior
to the November 22, 1996 due date.
3. Voting. Class 1 is impaired under the Plan and, accordingly,
the members of this Class are entitled to vote on the Plan.
B. THE ALLOWED SECURED HARTWELL CLAIM - CLASS 2.
1. Description. Class 2 consists of the Allowed Hartwell Claim in
the Amount of $128,956.09. The Hartwell Secured Note is secured by a deed of
trust on the Company's manufacturing plant located in Hart County, Georgia.
2. Treatment. Under both the Purchase Alternative and the
Recapitalization Alternative, commencing on the Distribution Date, the holder of
the Allowed Hartwell Claim shall receive nineteen monthly payments from the
Reorganized Company in the Amount of $7,189.93, consisting of principal and
interest. The holder of the Allowed Hartwell Claim shall retain its Lien on the
manufacturing plant in Hart County, Georgia. The Hartwell Secured Note,
mortgages and other security documents shall be modified to be consistent with
the treatment provided herein and to preclude a default except as set forth
herein. The Reorganized Company shall have the right to pay any balance of the
Allowed Secured Hartwell Claim in full at any time on or after the Consummation
Date without premium or penalty.
3. Voting. Class 2 is impaired under the Plan and, accordingly,
the member of this Class is entitled to vote on the Plan.
C. THE ALLOWED SECURED REED SMITH CLAIM - CLASS 3.
1. Description. Class 3 consists of the Allowed Secured Reed
Smith Claim in the Amount of $412,682.96. The Reed Smith Claim arises from fees
and services provided to the Company and is secured by a charging Lien pursuant
to an agreement between the Company and Reed Smith whereby the Company granted
Reed Smith a security interest in future monies or property recoverable from
judgment, verdict, or settlement in the insurance litigation styled NVF v.
American Casualty of Reading, Pennsylvania et. al. (the "Charging Lien
Agreement").
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<PAGE> 27
2. Treatment. Pursuant to a settlement agreement between the
Company and American Casualty of Reading, Pennsylvania and Continental Casualty
Company ("CNA"), CNA paid the Company $1,000,000 (the "CNA Proceeds"). Reed
Smith asserted a charging Lien against the CNA Proceeds, however, the parties
revised the Charging Lien Agreement with respect to the treatment of the claim
of Reed Smith's under the Plan. Under the Purchase Alternative and the
Recapitalization Alternative, the holder of the Allowed Secured Reed Smith Claim
shall receive payment (i) in the Amount of $138,000 out of the CNA Proceeds and,
upon receipt, release the CNA Proceeds from its charging Lien, and (ii) the
balance of the Reed Smith Claim shall be paid in monthly installments in the
Amount of $22,890.24 until such Claim is paid in full commencing the later of
the Distribution Date or thirty (30) days after the date of Confirmation of this
Plan. Notwithstanding the monthly payment schedule set forth above, the balance
of the prepetition sums due and owing to Reed Smith will be paid in full upon
receipt of any additional funds received in connection with the litigation
styled NVF v. American Casualty of Reading, Pennsylvania et. al. Except as set
forth above, Reed Smith shall retain its charging Lien as set forth in the
Charging Lien Agreement.
3. Voting. Class 3 is impaired under the Plan and, accordingly,
the member of this Class is entitled to vote on the Plan.
D. THE NEW CASTLE COUNTY CLAIM - CLASS 5.
1. Description: Class 5 consists of the New Castle County Claim
in the aggregate Amount of $1,813,507.27 constituting principal in the Amount of
$1,442,243.86 and interest in the Amount of $371,263.41. Interest shall continue
to accrue on the entire Amount at a rate of 9% per annum from November 1, 1995
until the Consummation Date. The holder of the New Castle County Claim asserts a
statutory Lien against all of the Company's real property located in Delaware
pursuant to Delaware law.
2. Treatment: Under the Purchase Alternative and the
Recapitalization Alternative, commencing on the Distribution Date, the holder of
the New Castle County Claim shall receive twelve monthly payments of interest at
the rate of 8% per annum on the aggregate amount of (i) principal in the Amount
of $1,813,507.27 plus (ii) accrued interest on this principal Amount at the rate
of 9% per annum from November 1, 1995 to the Distribution Date. Commencing
thirteen months after the Distribution Date, amounts owing on the New Castle
County Claim shall be paid monthly with interest at a rate of 8% per annum,
amortized over a forty-eight month period. The holder of the New Castle County
Claim shall retain its statutory Lien, to the extent valid. The Reorganized
Company shall have the right to pay any balance of the Allowed New Castle Claim
in full at any time on or after the Consummation Date without premium or
penalty.
The Company or the Reorganized Company shall also have the
right to contest this Claim by setoff, objection or avoidance, so long as it
commences or continues such action the earlier of March 30, 1996 or 30 days
after the Consummation Date.
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<PAGE> 28
3. Voting: Class 5 is impaired under the Plan and, accordingly,
the member of this Class is entitled to vote on the Plan.
E. UNSECURED CLAIMS WITHOUT PRIORITY - CLASS 8.
1. GENERAL UNSECURED CLAIMS - CLASS 8A.
a. Description: Class 8A consists of all Allowed
General Unsecured Claims in an Amount Greater than $100, including, but not
limited to, the NVF 5% Debentures and NVF 10% Debentures.
b. Treatment Under the Purchase Alternative: Allowed
General Unsecured Claims will be paid Pro Rata in Cash from the Distribution
Fund after payment of certain Allowed Administrative Claims as provided above.
On the Distribution Date, the holders of Allowed
Class 8A Claims shall receive Pro Rata Distributions of all Cash received by the
Distribution Fund, subject to prior payment in full or reserve on account of all
unpaid Allowed Administrative Claims and Allowed Class 9 Claims entitled to
Distribution as set forth herein and subject to any reserves required under
Article VI(A)(2) and on account of Disputed Class 8A Unsecured Claims under the
Plan. The Plan Proponents estimate that Allowed Class 8A Claimants will receive
approximately 47(cent) per $1.00 of Allowed Unsecured Claim.
c. Treatment Under the Recapitalization Alternative.
On the Distribution Date, holders of Allowed Class 8A General Unsecured Claims
will receive their Pro Rata share of the Distribution Fund consisting of: (i)
the Cash from any Agreement Damages, Exit Financing, and the Litigation
Settlement Proceeds less (a) any Distributions to holders of Allowed
Administrative Claims, Allowed Tax Claims and the holders of Allowed Claims in
Classes 1 through 6 and 9 under the Plan, (b) amounts necessary to fund the
reserve, if applicable, for payment of the Class 1 NVF 10% Secured Notes Claims,
(c) amounts necessary to fund the Reorganized Company's working capital
requirements, and (d) reserves, if any, required for Disputed Claims and
pursuant to Article VI(A)(2) under the Plan; and (ii) the Reorganized NVF Common
Stock and Secured Debentures. The Plan Proponents estimate that holders of Class
8A General Unsecured Claims will receive a Distribution under the
Recapitalization Alternative having a value of approximately 47(cent) per $1.00
of Allowed Claim.
2. UNSECURED ENVIRONMENTAL CLAIMS - CLASS 8B.
a. Description: Class 8B consists of the Unsecured
Environmental Claims.
b. Treatment: Unsecured Environmental Claims that are
Allowed on the Distribution Date will receive the same Pro Rata Distribution as
holders of Allowed Class 8A Unsecured Claims as follows. Under the Purchase
Alternative, on the Distribution Date, each holder
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of an Allowed Unsecured Environmental Claim will receive a Pro Rata Cash
Distribution from the Reorganized Company Account calculated by multiplying the
Allowed Amount of such Claim by the percentage each Allowed Class 8A General
Unsecured Creditor has received from the Distribution Fund for its Claim at the
time that the Distribution is made to such holder of an Environmental Claim.
Under the Purchase Alternative, holders of Allowed Unsecured Environmental
Claims shall not be entitled to receive Distributions from the Distribution
Fund. Under the Recapitalization Alternative, each holder of an Unsecured
Environmental Claim Allowed as of the Distribution Date shall receive its Pro
Rata Distribution from the Distribution Fund.
Under both the Purchase Alternative and the
Recapitalization Alternative, unliquidated or Disputed Unsecured Environmental
Claims will not be estimated or paid on the Distribution Date, but rather will
be fixed and liquidated in the ordinary course post-Confirmation. Upon being
fixed and liquidated, each holder of a fixed and liquidated Unsecured
Environmental Claim will be entitled to a Cash payment directly from the
Reorganized Company in an Amount determined by multiplying the fixed and
liquidated Unsecured Environmental Claim by a fraction, the numerator of which
will be the fair market value of the property received by Allowed Class 8A
General Unsecured Creditors and those Environmental Claims Allowed prior to the
Distribution Date, and the denominator of which shall be the aggregate amount of
Allowed Class 8A General Unsecured Creditors and Environmental Claims Allowed
prior to the Distribution Date at the time the Distribution is made to such
holder of a fixed and liquidated Unsecured Environmental Claim.
3. CLASS 8 VOTING.
Class 8 is impaired under the Plan and, accordingly, the
members of this Class are entitled to vote on the Plan.
F. AFFILIATE CLAIM - CLASS 10.
1. Description: Class 10 consists of the Affiliate Claim in the
aggregate Amount of $480,997.00 constituting principal in the Amount of
$454,344.00 and interest in the Amount of $26,653.00.
2. Treatment: Under the Purchase Alternative and the
Recapitalization Alternative, the holder of the Affiliate Claim shall receive no
Distribution under the Plan.
3. Voting: Class 10 is impaired under the Plan and will receive
no Distribution. Accordingly, this Class is deemed to have rejected the Plan.
G. INTERESTS - CLASS 11.
1. Description: Class 11 consists of Allowed Interests in the
Company comprised of the Existing Common Stock.
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2. Treatment: Under the Purchase Alternative and the
Recapitalization Alternative, the Interests shall be canceled and the Interest
holders shall receive no Distribution under the Plan.
3. Voting: Class 11 is impaired under the Plan and will receive
no Distributions. Accordingly, this Class is deemed to have rejected the Plan.
ARTICLE V.
DESIGNATION AND TREATMENT OF UNIMPAIRED CLAIMS
The following sets forth the designation and treatment of those
classified Claims set forth in Article II herein which are unimpaired under the
Plan. Members of the unimpaired classes set forth in this Article V are not
entitled to vote on the Plan. The Distributions received pursuant to the
provisions described in this Article V shall represent full and final
satisfaction of all Allowed Claims in Classes 4, 6, 7 and 9.
A. THE ALLOWED CIT GROUP/BUSINESS CREDIT, INC. FINANCING CLAIM - CLASS 4.
1. Description. Class 4 consists of the postpetition secured
Allowed Claim of CIT in the maximum Amount of $8,000,000.
2. Treatment. On the Distribution Date, under the Purchase
Alternative, the holder of the Allowed Class 4 Claim will be paid in full in
Cash from the Reorganized Company (a) through the Exit Financing, or, if no such
financing can be obtained, (b) from the Reorganized Company Account. On the
Distribution Date, under the Recapitalization Alternative, the holder of the
Allowed Class 4 Claim will be paid in full in Cash from the Reorganized Company
through the Exit Financing.
3. Voting. Class 4 is unimpaired under the Plan and, accordingly,
the member of this Class is deemed to have accepted the Plan.
B. PRIORITY CLAIMS - CLASS 6.
1. Description: Class 6 consists of Allowed Priority Claims in
the Amount of $555,469.54.
2. Treatment: On the Distribution Date, the holders of Allowed
Priority Claims will be paid in Cash from the Reorganized Company, if funds are
available, under the Purchase Alternative and the Recapitalization Alternative
or from (a) the Reorganized Company Account, under the Purchase Alternative or
(b) the Distribution Fund, under the Recapitalization Alternative.
3. Voting: Class 6 is unimpaired under the Plan and, accordingly,
the members of this Class are deemed to have accepted the Plan.
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C. PENSION PLAN FUND CLAIMS - CLASS 7.
1. Description. Class 7 consists of Pension Plan Fund Claims. The
Company's Pension Plans are covered by ERISA. The Company understands that it
and all members of its control group are obligated to contribute to the Pension
Plans at least the Amount necessary to satisfy ERISA's minimum funding
standards, ERISA section 302, Tax Code section 412, and, in addition, may be
contractually liable to contribute to the Pension Plans. In addition, the
Company, as the contributing sponsor of the Pension Plans and all members of its
controlled group are jointly and severally liable for any unfunded benefit
liabilities of the Pension Plans. See 29 U.S.C. section 1362(a). The Company
further understands that the Pension Plans may be terminated only if the
statutory requirements of either ERISA section 4041, 29 U.S.C. section 1341, or
ERISA section 4042, 29 U.S.C. section 1342, are met.
Insufficiently funded plans must use the PBGC's
assumptions to measure benefit liabilities in a distress termination under
ERISA. The PBGC is a wholly-owned United States government corporation created
under Title IV of ERISA which guarantees the payment of certain pension benefits
upon termination of a pension plan. It should be noted that the PBGC would
review the determination of the Pension Plans' enrolled actuary as to asset
sufficiency, including all actuarial assumptions. See 29 C.F.R. section 2617.1
et seq. The PBGC has asserted Claims in the aggregated estimated Amount of
approximately $21,275,000 for unfunded pension benefits that will become due IF
THE PENSION PLANS ARE TERMINATED. In addition, the PBGC has asserted Claims for
due and unpaid contributions owed to the Pension Plan. The PBGC has also
asserted unliquidated Claims under 9 U.S.C. section 1307.
2. Treatment. Under the Purchase Alternative or the
Recapitalization Alternative, unless the Pension Plans have been terminated
prior to the Effective Date, the Pension Plan Fund Claims shall be deemed
withdrawn. The Reorganized Company will assume the Pension Plans and will be the
contributing sponsor thereof. As long as it is the contributing sponsor, the
Reorganized Company will administer and maintain each Pension Plan in accordance
with the terms thereof and in accordance with ERISA.
Under the Purchase Alternative and the Recapitalization
Alternative, neither the Pension Plans nor the PBGC shall be precluded by
Confirmation of the Plan from commencing any action, or from taking any other
action, to collect, enforce, or recover from the Reorganized Company, its
successors, or its assets or properties, any rights or claims under ERISA or
otherwise. For example, the Plan will have no effect upon the liability of the
Company under ERISA section 4062 for the Amount by which the assets of the
Pension Plans are insufficient to cover benefit liabilities under one or more of
the Pension Plans on the date(s) of termination, plus interest calculated from
the termination date(s), and for any liability under ERISA section 4062(c), 29
U.S.C. section 1362(c), for the outstanding balance, if any, of the accumulated
funding deficiencies of one or more of the Pension Plans, as determined in
accordance with ERISA section 302(a)(2) and Tax Code section 412(a).
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3. Voting. Class 7 is unimpaired and, accordingly, the member of
this Class is deemed to have accepted the Plan.
D. ADMINISTRATIVE CONVENIENCE CLAIMS - CLASS 9.
1. Description: Class 9 consists of all non-priority Allowed
General Unsecured Claims in an Amount equal to or less than $100.
2. Treatment: Under the Purchase Alternative and
Recapitalization, on the Distribution Date, each holder of an Allowed Claim in
Class 9 shall receive Cash from the Distribution Fund in the Amount of one
hundred percent (100%) of its Allowed Claim.
3. Voting: Class 9 is unimpaired under the Plan and, accordingly,
is deemed by law to have accepted the Plan.
ARTICLE VI.
MEANS FOR IMPLEMENTATION OF THE PLAN
A. MEANS OF EFFECTUATING THE PLAN.
1. PURCHASE ALTERNATIVE.
On the Consummation Date, the Purchase Price and the
Litigation Settlement Proceeds will be released to the Disbursing Agent for the
purpose of making Distributions to Allowed Administrative Claimants (except for
those Administrative Claims that constitute Allowed Accounts Postpetition
Claims, Allowed Postpetition Accrued Wages and Other Claims, and Allowed
Administrative Environmental Claims) and Allowed General Unsecured Creditors
(Class 8A and Class 9) under the Plan. The Disbursing Agent shall exercise the
Indenture Trustee's charging Liens under their respective Indentures and shall
reserve and hold from the Cash payable to Debenture holders the unpaid Amounts
owed to the Indenture Trustees and Distribute such amount to the Indenture
Trustees. The Reorganized Company will make the Distributions required under the
Plan to Classes 1, 2, 3, 4, 5, 6, 7, 8B, holders of Allowed Accounts Payable
Postpetition Claims, Allowed Postpetition Accrued Wages and Other Claims,
Administrative Environmental Claims and Allowed Unsecured Environmental Claims
by using Cash from the Reorganized Company Account, cash from operations,
outside cash infusions, or Exit Financing. The Buyer has committed its financial
capability and capitalization to consummate the Plan, including but not limited
to, the obligations with respect to the assumed liabilities and to the extent
the Buyer has insufficient financial capability and capitalization, the Buyer
has entered into an agreement with Security Management Corporation pursuant to
which Security Management Corporation is obligated to provide any credit
enhancement necessary to consummate the transaction herein.
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2. RECAPITALIZATION ALTERNATIVE.
In the event that the Buyer fails or is precluded from
consummating the Agreement, the Plan Proponents shall promptly file with the
Bankruptcy Court the Recapitalization Notice. Immediately thereafter, the Plan
Proponents shall seek to implement the Recapitalization Alternative. On the
Consummation Date, any Agreement Damages the Exit Financing, the remaining
Litigation Settlement Proceeds, the Reorganized NVF Common Stock and Secured
Debentures will be transferred to the Disbursing Agent.
The Disbursing Agent will use the Cash from the above sources
to make the payments required under the Plan to holders of Allowed
Administrative Claims, Allowed Tax Claims, and, to the extent necessary, the
holders of Allowed Claims in Classes 1 through 6 and 9. The Reorganized Company
shall have the right, but not the obligation, after reserving, if necessary, any
working capital needed by the Reorganized Company, to require the Disbursing
Agent to reserve funds in the Distribution Fund for the payment in full of the
Allowed NVF 10% Secured Note Claims. The Disbursing Agent shall exercise the
Indenture Trustee's charging Liens under their respective Indentures and shall
reserve and hold from the Cash payable to Debenture holders the unpaid Amounts
owed to the Indenture Trustees and Distribute such amount to the Indenture
Trustees.
The Disbursing Agent shall also reserve the necessary Cash,
Reorganized NVF Common Stock and Secured Debentures as required under the Plan
with respect to Disputed Claims as set forth in Article IX, except for Unsecured
Environmental Claims which are not Allowed. After making such reserves, and
subject to subsection E of this Article on the Distribution Date, the Disbursing
Agent shall Distribute to holders of Allowed Class 8A General Unsecured Claims
and Unsecured Environmental Claims Allowed as of the Distribution Date Pro Rata
the (a) Cash remaining in the Distribution Fund after making the payments set
forth above and (b) the Reorganized NVF Common Stock and Secured Debentures.
The Company will continue operating as the Reorganized
Company. After the Consummation Date, the Reorganized Company will fund its
operations through existing Cash balances, Cash generated from continuing
operations and available borrowings. The Reorganized Company's Cash flow will be
sufficient not only to fund its operating expenses, but all other estimated
payments that may be required under the Plan.
B. DIRECTORS AND OFFICERS.
Under the Purchase Alternative, the officers identified and set forth
in the Disclosure Statement shall serve as the officers of the Reorganized
Company as of the Consummation Date. In addition, on the Consummation Date, the
term of the current Board of Directors of the Company shall expire, and the
individuals identified and set forth in the Disclosure Statement shall become
the initial Board of Directors of the Reorganized Company. Under the
Recapitalization Alternative, officers and directors shall be selected in
accordance with the procedures set forth in the Disclosure Statement.
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C. REVESTING OF PROPERTY.
Property of the Estate not distributed to holders of Allowed Claims
pursuant to the Plan shall revest in the Reorganized Company on the Effective
Date. Thereafter, the Reorganized Company may operate its business and may use,
acquire, and dispose of property free of any restrictions of the Bankruptcy
Code, the Bankruptcy Rules, and the Bankruptcy Court. As of the Effective Date,
all property of the Reorganized Company shall be free and clear of all Claims
and Interests, except as specifically provided in the Plan or the Confirmation
Order. In addition, in accordance with section 1123(b)(3) of the Bankruptcy
Code, the Reorganized Company shall retain and may pursue all rights and claims
as it deems appropriate. Without limiting the foregoing, the Reorganized Company
may, without application to or approval by the Bankruptcy Court, pay fees that
it incurs after the Effective Date for Professional fees and expenses.
D. BAR DATE FOR CERTAIN ADMINISTRATIVE CLAIMS.
Except as otherwise provided in Confirmation Order, all applications by
Professionals for final compensation for services rendered and for reimbursement
of expenses incurred on or before the Consummation Date (including, without
limitation, any compensation requested by any Professional or other entity for
making a substantial contribution to the Chapter 11 Case) and all other requests
for payment of administrative claims and expenses not otherwise Allowed incurred
before the Consummation Date under section 507(a)(1) or 507(b) of the Bankruptcy
Code (except only for Claims in trade debt incurred in the ordinary course of
business and Claims under 28 U.S.C. section 1930) shall be Filed no later than
thirty (30) days after the Consummation Date, unless such date is extended by
order of the Bankruptcy Court entered upon motion Filed prior to the deadline
hereunder, on notice to the Reorganized Company. Any such Claim that is not
Filed by the deadline shall be forever barred. Holders of Administrative Claims
who are required to file applications or other requests for payment of such
Claims and who do not do so timely shall be forever barred from asserting such
Claims against the Reorganized Company or any other entity in connection with
their respective activities in the Reorganized Case or any of their respective
property. The Bankruptcy Court shall retain exclusive jurisdiction over any
disputes concerning the Administrative Claims set forth in paragraph A of
Article XIV.
E. CANCELLATION OF DEBENTURES AND EXISTING COMMON STOCK; DISCHARGE OF
INDENTURE TRUSTEES.
As of the Consummation Date, the Debentures shall be canceled and shall
be null and void, and the holders thereof shall have no rights, and such
instruments shall evidence no rights, except the right to receive Distributions
under this Plan in accordance with the Allowed Claims of the holders of such
Debentures. As of the Consummation Date, the holders of certificates for
Existing Common Stock shall have no rights, and such instruments shall evidence
no such rights.
No holder of a Debenture shall be entitled to any Distribution under
this Plan unless and until such holder shall have first surrendered or caused to
be surrendered, to the Disbursing Agent, the
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original Debentures together with an appropriate letter of transmittal, or, in
the event that such original Debentures have been lost, destroyed, stolen or
mutilated, unless such holder shall have executed and delivered an affidavit of
loss and an indemnity with respect thereto in a form customarily utilized for
such purposes.
On the Distribution Date, the Indenture Trustee Claims shall be paid in
full in Cash as follows: to Bankers Trust Company, $297,693.53; to Sterling
National Bank and Trust Company, $_______. In addition to the foregoing, which
cover the Indenture Trustee Claims through December 31, 1995, the Indenture
Trustees may submit to the Company and the Committee invoices and back-up for
all expenses incurred thereafter through the Consummation Date. If neither the
Company nor the Committee has advised an Indenture Trustee in writing of its
specific objection to any such subsequent fees and expenses within five (5)
business days of receipt, then the Disbursing Agent shall pay such additional
Indenture Trustee Claims in Cash by the later of ten (10) business days after
submission of the invoice and backup or the Distribution Date. In the event any
such invoice is disputed, the Indenture Trustee may apply for allowance of such
disputed invoice as an Indenture Trustee Claim in accordance with Article VI(D)
of the Plan. Nothing contained herein shall deprive the Indenture Trustees of
their charging Liens under their respective Indentures as exercised by the
Disbursing Agent under this Plan. Bankers Trust currently estimates that its
additional Indenture Trustee Claim will not exceed $15,000 and Sterling
currently estimates that its additional Indenture Trustee Claim will not exceed
$________.
After the Indenture Trustees or their agents perform their obligations
under the Plan, the Indenture Trustees and their agents, successors and assigns
shall be discharged of all their obligations associated with the respective
Indentures and agreements and released from all claims arising in the Chapter 11
Case, and as of the Distribution Date, such Indentures or agreements shall be
deemed terminated, except that such termination shall not impair the rights of
holders of Claims under the Indentures to receive Distributions on their Claims
or the rights of the Indenture Trustees under their charging Liens pursuant to
their respective Indentures to the extent that they have not received payment in
full of amounts owed to the Indenture Trustees under their Indentures.
F. EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS.
The President, the Chief Executive Officer, or any other appropriate
officer of the Company, or the Committee, shall be authorized to execute,
deliver, file or record such contracts, instruments, releases, indentures, and
other agreements or documents, and take such actions as may be necessary or
appropriate to effectuate and further evidence the terms and conditions of the
Plan. The Secretary of the Company, or the appropriate member of the Committee,
shall be authorized to certify or attest to any of the foregoing actions, if
necessary.
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ARTICLE VII.
ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF
REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR INTERESTS
A. CLASSES ENTITLED TO VOTE.
Each impaired Class shall be entitled to vote to accept or reject the
Plan. Any unimpaired Class of Claims shall be deemed to have accepted the Plan
and shall not be entitled to vote to accept or reject the Plan.
B. CLASS ACCEPTANCE REQUIREMENT.
Under section 1126(c) of the Bankruptcy Code, an impaired Class of
Claims has accepted the Plan if the holders of at least two-thirds (2/3) in
dollar Amount and more than one-half (1/2) in number of the Allowed Claims of
such Class who have voted on the Plan, have voted to accept the Plan.
Under section 1126(d) of the Bankruptcy Code, an impaired Class of
Interest has accepted the Plan if the holders of at least two-thirds (2/3) in
Amount of the Interests of such Class who have voted on the Plan, have voted to
accept the Plan.
C. CRAMDOWN
The Plan Proponents hereby request Confirmation of the Plan, as it may
be modified from time to time, under section 1129(b) of the Bankruptcy Code.
ARTICLE VIII.
DESCRIPTION OF SECURITIES TO BE ISSUED AND APPLICATION
OF FEDERAL AND OTHER SECURITIES LAWS
A. ADOPTION OF THE REORGANIZED COMPANY'S CHARTER DOCUMENTS.
As of the Consummation Date, the adoption of the Reorganized Company's
restated certificate of incorporation and bylaws, the initial selection of
directors and officers of the Reorganized Company, and all other matters under
the Plan involving the capital stock or corporate governance of the Reorganized
Company will be authorized and approved in all respects without any requirement
of further action by stockholders or directors of the Company or the Reorganized
Company. All such instruments will be adopted pursuant to section 1123(a)(5)(I)
of the Bankruptcy Code and section 303 of the Delaware General Corporation Law
("DGCL"). The restated certificate of incorporation and bylaws of the
Reorganized Company shall, prohibit the issuance of non-voting equity securities
to the extent required by section 1123(a) of the Bankruptcy Code. After the
Consummation Date, the Reorganized Company may further amend and restate its
certificate of incorporation or bylaws as permitted by the DGCL.
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B. ISSUANCE AND DISTRIBUTION OF NEW COMMON STOCK UNDER THE PURCHASE
ALTERNATIVE.
Under the Purchase Alternative, on the Distribution Date, the
Reorganized Company will issue __________ shares of New Common Stock, $__ par
value per share, of the Reorganized Company to the Buyer. Upon issuance and
distribution, the New Common Stock will be fully paid and nonassessable and will
be authorized and approved in all respects without any requirement of further
action by stockholders or directors of the Company or the Reorganized Company.
When issued pursuant to the Purchase Alternative, the New Common Stock
will constitute all of the outstanding shares of the Reorganized Company. Each
holder of New Common Stock will be entitled to one vote per share of New Common
Stock on all matters submitted for a vote of the stockholders of the Reorganized
Company.
C. ISSUANCE AND DISTRIBUTION OF THE REORGANIZED NVF COMMON STOCK AND
SECURED DEBENTURES UNDER THE RECAPITALIZATION ALTERNATIVE.
1. REORGANIZED NVF COMMON STOCK.
Under the Recapitalization Alternative, after the filing of
the Recapitalization Notice on the Distribution Date, the Reorganized Company
will issue __________ shares of Reorganized NVF Common Stock, $__ par value per
share, to Allowed General Unsecured Creditors and Unsecured Environmental Claims
Allowed as of the Distribution Date. Certain restrictions may be imposed on the
accumulation of Reorganized NVF Common Stock by the Plan Proponents. Upon
issuance and distribution, the Reorganized NVF Common Stock will be fully paid
and nonassessable and will be authorized and approved in all respects without
any requirement of further action by stockholders or directors of the Company or
the Reorganized Company.
When issued pursuant to the Recapitalization Alternative, the
Reorganized NVF Common Stock will constitute all of the outstanding shares of
equity securities of the Reorganized Company. Each holder of Reorganized NVF
Common Stock will be entitled to one vote per share of Reorganized NVF Common
Stock on all matters submitted for a vote of the stockholders of the Reorganized
Company.
2. SECURED DEBENTURES.
Under the Recapitalization Alternative, after the filing of
the Recapitalization Notice, on the Distribution Date, or as soon as practicable
thereafter, Reorganized NVF will issue Secured Debentures with the following
principal characteristics:
Principal Amount $28,000,000 aggregate principal amount of Secured
Debentures.
Initial Issuance Up to $28,000,000 aggregate principal amount of
Secured
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Debentures.
Denominations Minimum denomination of $1,000 and integral
multiples of $1,000 per Secured Debenture.
Maturity Five years.
Amortization None.
Mandatory Prepayment Annually, Pro Rata, in the amount of "Excess Cash"
defined as the excess of (i) earnings before
interest, taxes, depreciation and amortization
over (ii) the sum of cash interest expenses, net
change in working capital, principal repayments,
capital expenditures, and an annual reserve of
$1.0 million.
Optimal Prepayment At any time without premium or penalty.
Interest 9% per annum payable semi-annually in arrears.
Guarantors Parsons Paper and NVF Industries of Canada Ltd.
(the "Guarantors").
Security First-priority security interest in all available
unencumbered assets of the Reorganized Company and
the Guarantors. Junior security interest in all
available assets of the Reorganized Company and
the Guarantors that are subject to existing
security interests.
Certain covenants The Reorganized Company will: (1) maintain a ratio
of current assets to current liabilities equal to
or greater than 1.8 to 1, (2) maintain a ratio of
EBITDA (where EBITDA equals the sum of: (a) net
operating income before taxes, interest expense,
extraordinary and unusual items, and income or
loss attributable to equity in affiliates and (b)
depreciation and amortization to the extent
deducted in determining net operating income) to
interest expense equal to or in excess of 1.3 to
1, (3) continue and maintain the businesses of the
Reorganized Company and its subsidiaries, (4)
comply with the requirements of ERISA, and (5)
deliver quarterly and annual financial statements.
The Reorganized Company will not, subject to
certain exceptions: (1) incur additional
indebtedness and contingent
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obligations, except of certain types or below
certain limits, (2) incur additional liens or make
investments in securities, (3) enter into
sale-leaseback arrangements, (4) sell any assets
other than in the ordinary course of business, or
(5) undergo a change in control, merger,
consolidation, or similar combination or
reorganization.
The above summary description of the Secured Debentures is qualified in its
entirety by reference to the form of Secured Debentures and related documents
available from the Company.
3. DEPOSIT WITH DISBURSING AGENT.
As of the Consummation Date, or as soon as practicable
thereafter, and after the filing of the Recapitalization Notice, the Reorganized
Company will deposit with the Disbursing Agent sufficient shares of Reorganized
NVF Common Stock and Secured Debentures to effect the distributions to be made
pursuant to the Recapitalization Alternative.
4. FRACTIONAL SECURITIES UNDER THE RECAPITALIZATION ALTERNATIVE.
The Reorganized NVF Common Stock and Secured Debentures will
be issued in whole shares and whole Secured Debentures only. Each creditor
entitled under the Recapitalization Alternative to receive Reorganized NVF
Common Stock or Secured Debentures will receive the total number of whole shares
of Reorganized NVF Common Stock or Secured Debentures to which such creditor is
entitled. Whenever any Distribution to a particular creditor would otherwise
call for Distribution under the Recapitalization Alternative of a fraction of a
share of Reorganized NVF Common Stock, the fractional portion of an entitlement
to a share will be canceled.
The Disbursing Agent will allocate the aggregate remaining
principal amount of the Secured Debentures in $1,000 denominations to creditors
otherwise entitled under the Recapitalization Alternative to a fraction of a
Secured Debenture. Such Secured Debentures shall be allocated in order of the
size of the fractional portion of the entitlements for all creditors, starting
with the largest such fractional portion, until all remaining whole Secured
Debentures in the minimum denomination of $1,000 have been allocated. If two or
more creditors are entitled to equal fractional entitlements and the number of
creditors so entitled exceeds the number of whole Secured Debentures in the
minimum denomination of $1,000 which remain to be allocated, the Disbursing
Agent will allocate the remaining whole Secured Debentures in the minimum
denomination of $1,000 to such creditors by random lot or such other impartial
method that the Disbursing Agent deems fair. Upon the allocation of a whole
Secured Debenture in the minimum denomination of $1,000 to a creditor in respect
of the fractional portion of its entitlement, such fractional portion will be
canceled.
Upon the allocation of all of the whole Secured Debentures,
the Disbursing Agent will pay creditors Cash for any of their respective
remaining fractional portion of entitlements. The
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amount of such Cash will be equal to the amount of such creditor's Claim giving
rise to such fractional portion of entitlements to a whole Secured Debenture
multiplied by ____ cents per dollar.
D. RESALE OF SECURITIES RECEIVED UNDER THE PURCHASE ALTERNATIVE OR THE
RECAPITALIZATION ALTERNATIVE.
1. REGISTRATION OF SECURITIES.
Under section 1145(a) of the Bankruptcy Code, the issuance of
the New Common Stock or Reorganized NVF Common Stock and Secured Debentures to
be distributed under the Plan and the subsequent resale of such securities by
entities which are not "underwriters" (as defined in section 1145(b) of the
Bankruptcy Code), is not subject to the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act").
BECAUSE OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF
WHETHER A PARTICULAR HOLDER OF SECURITIES ISSUED UNDER THE PLAN IS AN
UNDERWRITER, NEITHER THE COMPANY NOR THE CREDITORS' COMMITTEE MAKES ANY
REPRESENTATION CONCERNING THE ABILITY OF ANY PERSON TO DISPOSE OF THE NEW COMMON
STOCK, THE REORGANIZED NVF COMMON STOCK, OR THE SECURED DEBENTURES TO BE
DISTRIBUTED UNDER THE PLAN. MOREOVER, SUCH SECURITIES, OR THE DOCUMENTS THAT
ESTABLISH THEIR TERMS AND CONDITIONS, MAY CONTAIN TERMS AND LEGENDS THAT
RESTRICT, OR INDICATE THE EXISTENCE OF RESTRICTIONS ON, THE TRANSFER OF SUCH
SECURITIES AND INSTRUMENTS. THE COMPANY AND THE COMMITTEE RECOMMEND THAT
RECIPIENTS OF SUCH SECURITIES UNDER THE PLAN CONSULT WITH LEGAL COUNSEL
CONCERNING THE LIMITATIONS ON THEIR ABILITY TO DISPOSE OF SUCH SECURITIES.
The Company has no present intention to register under the
Securities Act the New Common Stock to be distributed under the Purchase
Alternative or the Reorganized NVF Common Stock and Secured Debentures to be
distributed under the Recapitalization Alternative. The certificates
representing the shares of New Common Stock or Reorganized NVF Common Stock and
the Secured Debentures will bear the following legend and may bear other
restrictive legends:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "ACT"), OR THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD UNLESS
REGISTERED AND QUALIFIED PURSUANT TO THE APPLICABLE PROVISIONS OF FEDERAL AND
STATE SECURITIES OR BLUE SKY LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
OR QUALIFICATION APPLIES. THE SECURITIES REPRESENTED BY THIS INSTRUMENT WERE
ISSUED PURSUANT TO AN EXEMPTION PROVIDED BY 11 U.S.C. SECTION 1145, UNDER AN
ORDER CONFIRMING THE PLAN IN THE CASE ENTITLED IN RE NVF COMPANY,
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<PAGE> 41
DEBTOR, CASE NO. 93-1020, IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT
OF DELAWARE. THE HOLDER OF THIS INSTRUMENT IS REFERRED TO 11 U.S.C. SECTION
1145(b) AND (c) FOR GUIDANCE AS TO THE SALE OF THESE SECURITIES.
2. LACK OF ESTABLISHED MARKET FOR REORGANIZED NVF COMMON STOCK
AND SECURED DEBENTURES.
Reorganized NVF Common Stock and Secured Debentures will be
issued pursuant to Recapitalization Alternative to persons who may prefer to
liquidate their investment rather than hold such securities on a long-term
basis. In the event of the Recapitalization Alternative, following the
Consummation Date, the Reorganized Company intends to explore the possibility of
obtaining a listing of the Recapitalized NVF Common Stock and/or Secured
Debentures on a regional or national securities exchange or automated
inter-dealer quotation system. At present, the Company has no specific plans
with respect to obtaining any such listing and its ability to obtain any listing
is uncertain. There is currently no established trading market for the
Recapitalized NVF Common Stock and Secured Debentures and in the absence of such
a listing, it is unlikely that any such market will develop. Moreover, even if
such a listing is obtained, there is no assurance that there will be sufficient
market interest to create a liquid market.
E. RISKS ASSOCIATED WITH THE RECAPITALIZATION ALTERNATIVE.
See Section VIII of the Disclosure Statement for a discussion of
certain risk factors associated with the Recapitalization Alternative. Each
creditor should review such factors carefully before voting to accept or reject
the plan.
ARTICLE IX.
PROVISIONS GOVERNING DISTRIBUTIONS UNDER THE PLAN
A. DISTRIBUTIONS UNDER THE PLAN.
1. DISTRIBUTION RECORD DATE.
All Distributions under the Plan shall be made to (or, in the
case of Disputed Claims, reserved on behalf of) holders of Allowed General
Unsecured Claims as of the Distribution Record Date.
2. THE INITIAL DISTRIBUTIONS.
On the Consummation Date, the Disbursing Agent shall make the
Distributions and payments required under the Plan and deposit the Reserve
Amounts in the Disputed Claims Reserve Accounts to the extent required by the
Bankruptcy Court in respect of Disputed Claims.
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3. TREATMENT OF DISPUTED CLAIMS.
If in Class 8A, there exists with respect to General Unsecured
Claims, as of the Distribution Date or any relevant date thereafter, Disputed
Claims, the Disbursing Agent shall hold in the Disputed Claims Reserve Account
and reserve all Pro Rata Distributions to which such holder of a Disputed Claim
would otherwise be entitled, for the benefit of such holder, in either (a) the
full Amount claimed by the holder of such Claim) or (b) the Amount of such Claim
as estimated or Allowed by the order of the Bankruptcy Court provided, however,
that no reserve shall be necessary on account of unliquidated Class 8A Claims
and such Claims shall become disallowed, unless and until the holder of such
Claim shall obtain an order of the Bankruptcy Court estimating such Claim for
the purpose of calculating a proper reserve prior to the allowance thereof by
order of the Bankruptcy Court. No Claimant shall be entitled to recover any
Distributions made to holders of Allowed Claims regardless of any delay in
obtaining an order allowing or estimating a Disputed Claim or an unliquidated
Claim. The Disputed Claims Trustee designated by the Plan Proponents hereunder
shall have the responsibility of liquidating and/or otherwise resolving General
Unsecured Claims which are Disputed Claims.
After a Final Order has been entered, or other final
resolution has been reached with respect to all Disputed Claims, the Disbursing
Agent shall distribute each Claimant's Pro Rata share in accordance with Article
II herein, but in no event no later than sixty (60) days after the entry of such
order, pursuant to the terms of the order allowing the Claim and the terms of
this Plan, with any Distributions reserved by the Disbursing Agent in an Amount
greater than that required to be distributed as a result of the order allowing
such Disputed Claim becoming property of the Disbursing Agent for Distribution
Pro Rata to the respective holders of Allowed General Unsecured Claims in Class
8A.
4. UNCLAIMED DISTRIBUTIONS.
a. SAFEGUARDING OF UNCLAIMED DISTRIBUTIONS.
All Unclaimed Distributions, shall be held by the
Disbursing Agent in the Distribution Fund for one hundred and eighty (180) days
following the Consummation Date. Such Distributions shall be held solely for the
benefit of the holders of Allowed Claims and Allowed Administrative Claims who
have failed to claim such Distributions and shall be released from the
Distribution Fund and delivered to such holder, net of any taxes or other
applicable charges required to be paid by the Disbursing Agent in respect
thereof, upon presentation of proper proof by such holder of its entitlement
thereto.
b. RELEASE OF UNCLAIMED DISTRIBUTIONS.
After one hundred and eighty (180) days, the
Unclaimed Distributions (including interest thereon) may be released by the
Disbursing Agent from the Distribution Fund and in such case, they shall
constitute an Excess Reserves.
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<PAGE> 43
5. EXCESS RESERVES.
All Excess Reserves shall be distributed to holders of Allowed
General Unsecured Claims Pro Rata, under the Purchase Alternative and to holders
of Allowed Claims in Class 8A and 8B under the Recapitalization Alternative.
6. FORM OF DISTRIBUTIONS.
Any Cash payment to be made pursuant to the Plan may be made
by a check or wire transfer or as otherwise required.
7. ROUNDING.
Fractions of cents cannot be distributed. Therefore, whenever
a payment of a fraction of a cent would otherwise be called for, the actual
payment shall reflect a rounding of such fraction down to the nearest whole
cent.
B. THE DISBURSING AGENT.
1. APPOINTMENT.
The Disbursing Agent shall be ______________________, who has
been jointly retained by the Plan Proponents pursuant to the Disbursing Agent
Agreement dated ____, 1996.
2. POWERS.
The rights, powers and duties of the Disbursing Agent shall
include (a) maintenance and oversight of the Distribution Fund, (b) the
calculation and payment of all the Distributions and the making of all other
payments required under the Plan, including under the Recapitalization
Alternative, (c) the maintenance and oversight of the Disputed Claims Reserve
Accounts, (d) the maintenance of Distributions that are unclaimed and the
Distribution of Excess Reserves, and (e) any and all other actions necessary or
appropriate to implement or consummate the Plan.
3. COMPENSATION.
The Disbursing Agent shall be compensated pursuant to the
Disbursing Agent Agreement.
4. APPOINTMENT OF SUCCESSOR.
In the event of the death, resignation or discharge of the
Disbursing Agent, the Bankruptcy Court shall appoint a successor to the
Disbursing Agent, who will be bound by the provisions of the Plan and the
Disbursing Agent Agreement.
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<PAGE> 44
5. TERMINATION OF THE DISBURSING AGENT.
After the Consummation Date, upon Distribution of all funds
and securities or securities in the Distribution Fund, and upon the final
resolution of all Disputed Claims and the release of all funds from the Disputed
Claims Reserve Accounts, and the payment or transfer of all Excess Reserves, the
Disbursing Agent shall so inform the Bankruptcy Court and shall be relieved of
any further responsibilities under the Plan.
C. THE DISPUTED CLAIMS TRUSTEE.
1. APPOINTMENT.
Under the Purchase Alternative, the Disputed Claims Trustee
shall be John P. Kneafsey, who is a Committee member and holder of Debentures,
and who was jointly retained by the Plan Proponents pursuant to the Disputed
Claims Trustee Agreement dated ______, 1996.
2. POWERS.
The rights, powers and duties of the Disputed Claims Trustee
shall include the liquidation and/or resolution of the General Unsecured Claims
which are Disputed Claims under the Purchase Alternative and the Disputed Claims
Trustee shall be authorized to retain counsel or other Professionals necessary
to enable him to fulfill his obligations.
3. COMPENSATION.
The Disputed Claims Trustee shall be compensated pursuant to
the Disputed Claims Trustee Agreement.
4. APPOINTMENT OF SUCCESSOR.
In the event of the death, resignation or discharge of the
Disputed Claims Trustee, the Bankruptcy Court shall appoint a successor to the
Disputed Claims Trustee, who will be bound by the provisions of the Plan, and
the Disputed Claims Trustee Agreement.
5. TERMINATION OF THE DISPUTED CLAIMS TRUSTEE.
Upon the final resolution of all General Unsecured Claims
which are Disputed Claims, the Disputed Claims Trustee shall be relieved of any
further responsibilities under the Plan.
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<PAGE> 45
6. RECAPITALIZATION ALTERNATIVE.
Under the Recapitalization Alternative, there will be no
Disputed Claims Trustee. The Reorganized Company will assume the powers of the
Disputed Claims Trustee set forth under the Purchase Alternative.
ARTICLE X.
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
A. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
All executory contracts and unexpired leases set forth in Exhibit
3.5(j) to the Agreement shall be assumed by the Company, pursuant to the
provisions of sections 365 and 1123 of the Bankruptcy Code. All other executory
contracts or unexpired leases, if any, shall be rejected. Any party to an
executory contract or unexpired lease that is rejected shall be required to file
a proof of Claim with the Bankruptcy Court no later than fifteen (15) days after
entry of the Confirmation Order.
ARTICLE XI.
CONDITIONS PRECEDENT
A. CONDITIONS TO CONFIRMATION OF THE PLAN.
The following are conditions precedent to confirmation of the Plan that
may be satisfied or waived in accordance with paragraph C of this Article XI.
1. The Bankruptcy Court shall have approved by Final Order a
disclosure statement with respect to the Plan in form and substance reasonably
acceptable to the Plan Proponents.
2. The Confirmation Order shall be in form and substance
reasonably acceptable to the Plan Proponents and Buyer.
B. CONDITIONS TO THE CONSUMMATION DATE
The following are conditions precedent to the occurrence of the
Consummation Date, each of which may be satisfied or waived in accordance with
paragraph C of this Article XI.
1. The passage of 11 days after the date on which the Bankruptcy
Court enters the Confirmation Order.
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<PAGE> 46
2. The date of Confirmation shall have occurred and the
Confirmation Order shall, among other things, provide that:
a. The provisions of the Confirmation Order are
nonseverable and mutually dependent;
b. Except as expressly provided in the Plan or the
Confirmation Order, the Company is discharged effective upon the date of
Confirmation from any "debt" (as that term is defined in section 101(12) of the
Bankruptcy Code), and the Company's liability in respect thereof is extinguished
completely, whether reduced to judgment or not, liquidated or unliquidated,
contingent or noncontingent, asserted or unasserted, fixed or unfixed, matured
or unmatured, disputed or undisputed, legal or equitable, or known or unknown,
or that arose from any agreement of the Company that has either been assumed or
rejected in the Case or pursuant to the Plan, or obligation of the Company
incurred before the date of Confirmation, or from any conduct of the Company
prior to the date of Confirmation, or that otherwise arose before the date of
Confirmation, including, without limitation, all interest, if any, on any such
debts, whether such interest accrued before or after the Petition Date;
c. Except as expressly provided in the Plan, all
Interests shall be terminated effective upon the Consummation Date;
d. The Plan does not provide for the liquidation of all
or substantially all of the property of the Company and its
Confirmation is not likely to be followed by the liquidation of the
Reorganized Company or the need for further financial
reorganization; and
e. The Bankruptcy Court shall have determined that any
Reorganized NVF Common Stock and Secured Debentures issued under the Plan in
exchange for Claims against the Company are exempt from registration under the
Securities Act of 1933 pursuant to section 1145 of the Bankruptcy Code, except
to the extent that holders of any Reorganized NVF Common Stock and Secured
Debentures are "underwriters" as that term is defined in section 1145 of the
Bankruptcy Code.
3. The Disputed Claims Reserve with respect to General Unsecured
Claims does not require reserving more than $1.5 million, unless otherwise
agreed to by the Committee.
4. No request for revocation of the Confirmation Order under
section 1145 of the Bankruptcy Code shall have been made, or, if made, shall
remain pending.
5. Under the Recapitalization Alternative, the Reorganized
Company shall have obtained the Exit Financing.
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C. WAIVER OF CONDITIONS TO THE CONFIRMATION OF THE PLAN AND TO THE
CONSUMMATION DATE.
The conditions set forth in this Article may be waived by the Plan
Proponents without notice or a hearing. The failure to satisfy or waive any
condition to the Confirmation of the Plan or the date of Consummation may be
asserted by the Plan Proponents regardless of the circumstances giving rise to
the failure of such condition to be satisfied (including any action or inaction
by the Plan Proponents). The failure of the Plan Proponents to exercise any of
the foregoing rights shall not be deemed a waiver of any other rights, and each
such right shall be deemed an ongoing right, which may be asserted at any time.
ARTICLE XII.
MODIFICATIONS AND AMENDMENTS
A. REVOCATION AND MODIFICATION OF THE PLAN.
Subject to the restrictions on modifications set forth in section 1127
of the Bankruptcy Code, the Plan Proponents acting jointly reserve the right to
alter, amend or modify the Plan so long as such alteration, amendment or
modification is consistent with the Agreement, and before the substantial
consummation of the Plan. The Plan Proponents acting jointly reserve the right
to revoke or withdraw the Plan so long as such revocation or withdrawal is
consistent with the Agreement and prior to the date of Confirmation. If the Plan
Proponents revoke or withdraw the Plan in accordance with this section, or if
Confirmation does not occur, then the Plan shall be null and void in all
respects.
ARTICLE XIII.
EFFECT OF CONFIRMATION
A. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS.
Except as otherwise provided in the Plan or the Confirmation
Order, the rights afforded under the Plan and the treatment of Claims under the
Plan shall be in exchange for and in complete satisfaction, discharge and
release of all Claims and termination of all Interests, including any interest
accrued on Claims from the Petition Date. Except as otherwise provided in the
Plan or the Confirmation Order, Confirmation shall (a) discharge the Company
from all Claims or other debts that arose before the date of Confirmation, and
all debts of the kind specified in sections 502(g), 502(h) or 502(i) of the
Bankruptcy Code, whether or not (i) a proof of Claim based on such debt is Filed
or deemed Filed pursuant to section 501 of the Bankruptcy Code, (ii) a Claim
based on such debt is allowed pursuant to section 502 of the Bankruptcy Code or
(iii) the holder of a Claim based on such debt has accepted the Plan; and (b)
terminate all Interests and other rights, if any, of equity security holders in
the Company.
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<PAGE> 48
As of the date of Confirmation, except as provided in the Plan
or Confirmation Order, all entities shall be precluded from asserting against
the Company, the Estate of the Company, the Reorganized Company, its successors
or its property, any other or further Claims, debts, rights, causes of action,
liabilities or equity Interests based upon any act, omission, transaction or
other activity of any kind or nature that occurred prior to the date of
Confirmation. In accordance with the foregoing, except as provided in the Plan
or Confirmation Order, the Confirmation Order shall be a judicial determination
of discharge of all such Claims and other debts and liabilities against the
Company and termination of all such Interests and other rights of equity
security holders in the Company, pursuant to sections 524 and 1141 of the
Bankruptcy Code, and such discharge shall void any judgment obtained against the
Company at any time, to the extent that such judgment relates to a discharged
Claim.
ARTICLE XIV.
JURISDICTION RETAINED
A. JURISDICTION.
The Plan provides that the Bankruptcy Court shall retain jurisdiction
for the following purposes:
1. to determine the allowability of Claims and Interests
upon the timely objection thereto;
2. to approve, pursuant to section 365 of the Bankruptcy Code,
the assumption, assignment or rejection of any executory contract or unexpired
lease of the Company except as otherwise provided in the Plan;
3. to determine requests for payments of Claims entitled to
priority under section 507(a)(1) of the Bankruptcy Code, including compensation
of parties entitled thereto;
4. to resolve controversies and disputes regarding the
interpretation of the Plan or any exhibit thereto;
5. to implement the provisions of the Plan and enter orders
in aid of Confirmation and consummation of the Plan;
6. to adjudicate any disputes with holders of Claims or
Interests or any causes of action;
7. to hear and determine all pending or future controversies,
suits, and disputes that may arise under the Plan including, without limitation,
disputes between the Company and the Committee, and controversies arising in
connection with the interpretation of the Plan, including any and all schedules,
documents, and exhibits hereto, or any documents intended to implement the
provisions of the Plan;
40
<PAGE> 49
8. to consider any modification to the Plan;
9. to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan, including any Exhibit thereto, or in any order of the
Bankruptcy Court, including the Confirmation Order, as may be necessary to carry
out the purposes and intent of the Plan and to implement and effectuate the
Plan;
10. to determine such other matters as may be provided for in the
Confirmation Order or other orders of the Bankruptcy Court as may be authorized
under the provisions of the Bankruptcy Code or any other applicable law;
11. to enforce all orders, judgments, injunctions, and
rulings entered in connection with the Chapter 11 Case, and
12. to enter a final decree closing the Chapter 11 Case.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
A. DISCHARGE OF THE COMPANY.
All property distributed under the Plan shall be in exchange for, and
in complete satisfaction, settlement, discharge, and release of, all Claims of
any nature whatsoever against the Company or any of its assets or properties,
and, except as otherwise provided herein or in the Confirmation Order. Upon the
date of Confirmation, the Company shall be deemed discharged and released under
section 1141(d)(1)(A) of the Bankruptcy Code from any and all debts. The
Confirmation Order shall be a judicial determination of discharge of all
liabilities of the Company, subject to the occurrence of the Consummation Date.
B. EXCULPATION AND LIMITATION OF LIABILITY.
On the Consummation Date, the Company and all holders of Claims against
and Interests in the Company will be conclusively deemed to release all
Professionals retained by order of the Bankruptcy Court in the Case and all
members of the Committee appointed in the Case, and all of the Professionals'
and the Committee members' respective officers, directors, employees,
principals, partners and agents, and all officers and directors of the Company
holding such offices at anytime through the Distribution Date from all
liabilities, claims, costs, Damages (proximate or consequential) and expenses
(including attorneys' fees), except for claims arising from fraud, willful
misconduct or gross negligence of such persons.
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<PAGE> 50
C. BINDING EFFECT.
The Plan shall be binding upon and inure to the benefit of the Company,
the holders of Claims, the holders of Interests, and their respective successors
and assigns.
D. REVOCATION, WITHDRAWAL, OR NON-CONSUMMATION.
1. RIGHT TO REVOKE OR WITHDRAW.
The Plan Proponents reserve the right to revoke or withdraw
the Plan at any time prior to the date of Confirmation so long as such
revocation or withdrawal is consistent with the Agreement.
2. EFFECT OF WITHDRAWAL, REVOCATION, OR NON-CONSUMMATION.
If the Plan Proponents revoke or withdraw the Plan in
accordance with Article XII prior to the date of Confirmation, or if
Confirmation or the Consummation Date does not occur, then the Plan, any
settlement or compromise embodied in the Plan (including the fixing or limiting
to an Amount certain any Claim or Class of Claims unless such settlement or
compromise is also embodied in a separate agreement), assumption or rejection of
executory contracts or leases effected by the Plan, and any document or
agreement executed pursuant to the Plan, shall be deemed null and void. In such
event, nothing contained herein, and no acts taken in preparation for
consummation of the Plan, shall be deemed to constitute a waiver or release of
any Claims by or against the Company or any other person, to prejudice in any
manner the rights of the Company or any person in any further proceedings
involving the Company, or to constitute an admission of any sort by the Company
or any other person.
E. NOTICES.
Any notice required or permitted to be provided to the Plan Proponents shall be
in writing and served by (a) certified mail, return receipt requested, (b) hand
delivery, or (c) overnight delivery service to be addressed as follows:
NVF COMPANY
1166 Yorklyn Road
Yorklyn, Delaware 19736
Attention: John J. McNaboe
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<PAGE> 51
with a copy to:
BAKER & McKENZIE
101 West Broadway, 12th Floor
San Diego, California 92101
Attention: Ali M. M. Mojdehi, Esq.
YOUNG, CONAWAY, STARGATT & TAYLOR
11th Floor - Rodney Square North
Wilmington, Delaware 19801
Attention: Laura Davis Jones, Esq.
and
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
c/o LeBOEUF, LAMB, GREENE & MacRAE, L. L. P.
125 West 55th Street
New York, New York 10019-5389
Attention: Angela J. Somers, Esq.
MORRIS, JAMES, HITCHENS & WILLIAMS
222 Delaware Avenue
Wilmington, Delaware 19889
Attention: Edward M. McNally, Esq.
F. INDEMNIFICATION OBLIGATIONS.
From and after the Consummation Date, the Reorganized Company shall
indemnify and hold harmless (a) the Company, its officers, Professionals and
directors, (b) the Committee, its Professionals and (c) the Committee members
and their counsel, accountants and financial advisors (including each of the
above (a) (b) (c) indemnified party's officers, directors, partners and
employees) from and against any and all Liabilities, claims, costs, Damages
(proximate or consequential) and expenses (including attorneys' fees) which may
be made, assessed or otherwise incurred by the indemnified parties arising out
of or relating to obligations or from liabilities (fixed or contingent) arising
from events occurring post-petition which the Reorganized Company has agreed to
assume or perform pursuant to the Agreement or in connection with the
transactions contemplated hereby (including, without limitation, any liability
which the Company or its affiliates may incur pursuant to ERISA and any
liability to the PBGC). In each instance where there is a claim or potential
claim for which any of the indemnified parties is or may be entitled to seek
indemnification, the indemnified party shall notify the Reorganized Company or
the Buyer in writing of such claim and shall furnish to the Reorganized Company
or the Buyer copies of all notices, service of process, pleadings and other
pertinent written communications from the party asserting such claim. The
Reorganized Company shall promptly defend, pay,
43
<PAGE> 52
discharge, compromise or settle such claim at the Reorganized Company's expense,
in such manner that neither the indemnified party nor their business, equipment,
property or other assets, shall suffer any hindrance, loss, expense,
interference, jeopardy, lien, judgment, attachment, notice of violation,
injunction or judicial or other order.
G. COMMITTEE DISBANDED.
On the Consummation Date, the Committee shall be disbanded.
H. TERM OF INJUNCTIONS OR STAYS.
Unless otherwise provided in the Plan or the Confirmation Order, all
injunctions or stays provided for in the Chapter 11 Case under section 105 or
362 of the Bankruptcy Code or otherwise, and in existence on the date of
Confirmation, shall remain in full force and effect until the Consummation Date.
I. PREPAYMENT.
Unless the Plan or the Confirmation Order otherwise provides, the
Reorganized Company shall have the right to prepay, without penalty, all or any
portion of an Allowed Claim at any time; provided, however, that any such
prepayment shall not be violative of, or otherwise prejudice, the relative
priorities and parities among the Classes of Claims.
J. VOTING RECORD DATE.
Those holders of Allowed Claims who hold such Claims as of the Voting
Record Date will be entitled to vote on the Confirmation of the Plan.
K. DISMISSAL OF PREFERENCE ACTION AGAINST DEBENTURE HOLDERS.
On the Effective Date, the adversary proceeding styled NVF Company v.
Bankers Trust Co., et al., Adversary No. A94-94, shall be deemed dismissed with
prejudice.
L. CHOICE OF LAW.
Except to the extent that the Bankruptcy Code, Bankruptcy Rules or
Delaware General Corporation Law are applicable, and subject to the provisions
of any contract, instrument, release or other agreement or document entered into
in connection with the Plan or this Disclosure Statement, the rights and
obligations arising under the Plan and this Disclosure Statement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without giving effect to the principles of conflict of laws of
the State of Delaware.
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<PAGE> 53
M. HEADINGS.
The headings are for convenience only and will not control or affect
the meaning or construction of the provisions of this Plan. When a reference is
made in this Plan to a Section, Article, Exhibit or Schedule such reference
shall be to a Section, Article, Exhibit or Schedule of this Plan unless
otherwise indicated. Whenever "include," "includes," or "including" is used in
this Plan, it shall be deemed to be followed by the words "without limitation."
Whenever "or" is used in this Plan it shall be construed in the nonexclusive
sense.
Dated: Yorklyn, Delaware
January __, 1996
NVF COMPANY,
a Delaware corporation
By /s/John J. McNaboe
----------------------------
Name: John J. McNaboe
Title: Chief Operating Officer
BAKER & MCKENZIE
By /s/
----------------------------
Ali M. M. Mojdehi
101 W. Broadway 12th Floor
San Diego, California
(619) 235-7780
Co-Counsel for Debtor and Debtor-in-Possession
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<PAGE> 54
MORRIS, JAMES, HITCHENS & WILLIAMS
/s/ Edward M. McNally
----------------------------------
Edward M. McNally
222 Delaware Avenue
P.O. Box 2306
Wilmington, DE 19899
302/888-6880
Attorneys for Official Committee of
Unsecured Creditors
OF COUNSEL:
LEBOEUF, LAMB, GREENE &
MACRAE, L.L.P.
Angela J. Somers
125 W. 55th Street
New York, NY 10019-5389
212/424-8000
<PAGE> 1
EXHIBIT 99
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
----------------
In re ) Case No. 93-1020
)
NVF COMPANY, ) DISCLOSURE STATEMENT TO ACCOMPANY
) THE JOINT PLAN OF REORGANIZATION OF
Debtor and Debtor-in-Possession ) NVF COMPANY AND THE OFFICIAL
) COMMITTEE OF UNSECURED CREDITORS
) UNDER CHAPTER 11 OF THE BANKRUPTCY
) CODE
)
) January 31, 1996
BAKER & McKENZIE YOUNG, CONAWAY, STARGATT &
Ali M. M. Mojdehi TAYLOR
Katherine S. Kruis Laura Davis Jones
Ronald F. Hoffman 1th Floor - Rodney Square North
101 West Broadway, 12th Floor Wilmington, Delaware 19801
San Diego, California 92101 Telephone (302) 571-6600
Telephone (619) 236-1441 Co-Counsel for Debtor and Debtor-in-
Co-Counsel for Debtor and Debtor-in- Possession
Possession
LeBOEUF, LAMB, GREENE & MacRAE, MORRIS, JAMES, HITCHENS & WILLIAMS
L.L.P. Edward M. McNally
Angela J. Somers 111 Delaware Avenue
Irena M. Goldstein Wilmington, Delaware 19899
Ira Dizengoff Telephone: (302) 888-6945
125 West 55th Street Co-Counsel for Official Committee of
New York, New York 10019-5389 Unsecured Creditors
Telephone: (212) 424-8000
Co-Counsel for Official Committee of
Unsecured Creditors
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXECUTIVE SUMMARY OF THE PLAN..................................................................... 2
A. Recommendation of the Plan Proponents........................................... 2
B. Summary Of The Plan Of Reorganization........................................... 2
1. Purchase Alternative................................................... 2
a. Distribution Fund............................................. 3
b. Immediate Distribution........................................ 3
c. Consensual Treatment for All Secured Creditors................ 3
d. Financial Ability of the Buyer to Consummate the Transaction.. 3
e. Limited Conditions to Closing................................. 3
2. Recapitalization Alternative........................................... 3
a. Administration Claims and Priority Claims..................... 4
b. Issuance of New Securities.................................... 4
c. Consensual Treatment of Creditors............................. 4
d. Excess Cash................................................... 4
C. Summary of Classification and Treatments of Classified Claims and Interests..... 4
D. Summary of Distributions Under the Plan......................................... 8
1. Purchase Alternative................................................... 8
2. Recapitalization Alternative........................................... 8
VOTING PROCEDURES AND PLAN REQUIREMENTS........................................................... 10
A. Notice to Holders of Claims and Interests....................................... 10
B. Voting Procedures and Plan Requirements......................................... 10
1. Requirements........................................................... 10
2. Voting Instructions.................................................... 11
C. Information Concerning Balloting Procedures for the Plan........................ 12
D. Confirmation of a Plan.......................................................... 13
1. Confirmation Hearing................................................... 13
2. Best Interests of Creditors............................................ 14
3. Feasibility............................................................ 14
E. Effect of Confirmation.......................................................... 15
1. Discharge of Claims and Termination of Interests....................... 15
2. Revocation and Modification of the Plan................................ 16
DISCLAIMER........................................................................................ 17
BACKGROUND OF THE COMPANY AND CHAPTER 11 CASE..................................................... 18
I. PRE-CHAPTER 11 BACKGROUND...................................................................... 19
A. The Company and its Pre-Chapter 11 Operations................................... 19
</TABLE>
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1. Property..................................................... 19
2. Operations................................................... 19
a. Primary Products Division........................... 19
b. Circuitry Division.................................. 20
c. Other Divisions..................................... 20
B. Factors Contributing to Chapter 11.................................... 21
II. THE CHAPTER 11 CASE................................................................. 22
A. The Company's Chapter 11 Filing....................................... 22
B. Certain Important Proceedings and Orders.............................. 23
1. Appointment of the Committee................................. 23
2. Postpetition Financing....................................... 23
3. Claims....................................................... 24
a. Settlement of Claims................................ 24
(1) American Casualty Company................... 24
(2) Army Creek Landfill......................... 25
(3) Chesapeake and Alexander & Alexander, Inc... 26
(4) Delaware Sand and Gravel Landfill........... 26
(5) Insurance Company of North America. ........ 27
(6) New Castle County........................... 27
4. The Committee Adversary Proceeding........................... 28
5. Richard L. Beltzhoover....................................... 29
6. Capital Expenditure Projects................................. 30
7. Negotiations With Committee and Joint Agreement
to Retain Sales Agent............................... 31
8. Exclusive Periods............................................ 33
DISCLOSURE STATEMENT WITH RESPECT TO JOINT PLAN OF REORGANIZATION
OF NVF COMPANY AND OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF
NVF .................................................................................... 34
III. INTRODUCTION....................................................................... 35
IV. THE PLAN OF REORGANIZATION.......................................................... 35
A. Development of the Plan............................................... 35
B. Classification and Treatment of Claims and Interests.................. 35
</TABLE>
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1. Unclassified Priority Claims........................................ 35
a. Administrative Claims...................................... 35
b. Tax Claims................................................. 36
2. Allowed Secured Claims.............................................. 36
a. NVF 10% Secured Note Claims................................ 36
b. The Allowed Secured Hartwell Claim - Class 2............... 37
c. The Allowed Secured Reed Smith Claim - Class 3. ........... 38
(1) Description. ..................................... 38
(2) Treatment. ....................................... 38
(3) Voting. ........................................... 38
d. The Allowed CIT Claim - Class 4............................ 38
(1) Description........................................ 38
(2) Treatment.......................................... 38
(3) Voting. .......................................... 38
e. The New Castle County Claim - Class 5...................... 39
(1) Description: ..................................... 39
(2) Treatment: ....................................... 39
(3) Voting: .......................................... 39
3. Allowed Unsecured Claims............................................ 39
a. Priority Claims - Class 6.................................. 39
(1) Description: ..................................... 39
(2) Treatment: ....................................... 39
(3) Voting: .......................................... 39
b. Pension Plan Fund Claims - Class 7......................... 40
(1) Description........................................ 40
(2) Treatment.......................................... 40
(3) Voting. .......................................... 40
c. Unsecured Claims Without Priority - Class 8................ 41
(1) General Unsecured Claims - Class 8A................ 41
(a) Description:.............................. 41
(b) Treatment Under the Purchase Alternative.. 41
(c) Treatment Under the Recapitalization
Alternative...................... 41
(2) Unsecured Environmental Claims - Class 8B.......... 41
(a) Description: ............................. 41
(b) Treatment:................................ 41
</TABLE>
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(3) Class 8 Voting....................... 42
d. Administrative Convenience Claims - Class 9.. 42
(1) Description:......................... 42
(2) Treatment:........................... 42
(3) Voting:.............................. 42
e. Affiliate Claim - Class 10................... 42
(1) Description:......................... 42
(2) Treatment:........................... 43
(3) Voting:.............................. 43
f. Interests - Class 11......................... 43
(1) Description:......................... 43
(2) Treatment:........................... 43
(3) Voting:.............................. 43
C. Means of Effectuating the Plan................................. 43
1. Purchase Alternative.................................. 43
2. Recapitalization Alternative.......................... 44
D. Distributions Under the Plan................................... 45
1. Purchase Alternative.................................. 45
2. Recapitalization Alternative.......................... 45
3. Distribution Record Date for Debenture Holders........ 46
a. Distribution Record Date..................... 46
4. The Initial Distributions............................. 46
5. Treatment of Disputed Claims.......................... 46
6. Unclaimed Distributions............................... 47
a. Safeguarding of Unclaimed Distributions. .... 47
b. Release of Unclaimed Distributions........... 47
7. Excess Reserves....................................... 47
8. Form of Distributions................................. 47
9. Rounding.............................................. 47
E. The Disbursing Agent........................................... 48
1. Appointment........................................... 48
2. Powers................................................ 48
3. Compensation.......................................... 48
4. Appointment of Successor.............................. 48
5. Termination of the Disbursing Agent................... 48
F. The Disputed Claims Trustee.................................... 48
</TABLE>
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1. Appointment............................................................ 48
2. Powers................................................................. 49
3. Compensation........................................................... 49
4. Appointment of Successor............................................... 49
5. Termination of the Disputed Claims Trustee............................. 49
6. Recapitalization Alternative........................................... 49
G. Conditions to Confirmation of the Plan.......................................... 49
H. Conditions To The Consummation Date............................................. 50
I. Waiver of Conditions to the Confirmation of the Plan
and to the Consummation Date........................................... 51
J. Effect of Confirmation.......................................................... 51
1. Discharge of Claims and Interests...................................... 51
2. Injunction............................................................. 51
3. Exculpation and Limitation of Liability................................ 52
4. Indemnification........................................................ 52
5. Executory Contracts and Unexpired Leases............................... 52
6. Transfer Free of Claims, Liens, Charges and Other Interest............. 53
7. Cancellation of the Debentures and Existing Common Stock
and Discharge of Indenture Trustee..................................... 53
K. Jurisdiction.................................................................... 54
L. Miscellaneous Provisions........................................................ 55
1. Amendment.............................................................. 55
2. Creditors Committee Disbanded.......................................... 55
3. Governing Law.......................................................... 55
4. Postpetition Interest.................................................. 56
V. LEGAL PROCEEDINGS.............................................................................. 56
A. Environmental Proceedings Against The Company. ................................. 56
1. Tybouts Corner Landfill................................................ 56
2. Kennett Square Plant Site and Noznesky Junk Yard....................... 57
3. Lipari Landfill........................................................ 58
4. GEMS Landfill.......................................................... 58
5. Helen Kramer Landfill, Marvin Jones Transfer Station, P.J.P. Landfill.. 59
6. Yorklyn Plant Site and Newark Plant Site. ............................. 59
7. Buzby Brothers Landfill................................................ 59
8. Boarhead Farms Site.................................................... 60
</TABLE>
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9. Spectron Site.................................................. 60
10. Bolsenski Landfill, Mountaintop Landfill,
and Rivere Chemical Site. ............................ 60
11. PCB, Inc....................................................... 60
12. Army Creek Landfill............................................ 61
13. Delaware Sand and Gravel Landfill--Private Party Lawsuit....... 61
14. Other Sites.................................................... 61
B. Settlement Discussions with the EPA..................................... 62
C. Other Legal Matters..................................................... 62
1. Preference Actions............................................. 62
2. APL Bankruptcy................................................. 62
3. Disputed Claim of Global Financial Corporation................. 63
4. Insurance & Risk Management.................................... 63
5. Other Matters.................................................. 63
VI. CLAIMS INFORMATION AND ESTIMATES...................................................... 64
A. Claims Estimates........................................................ 64
B. Objections to Claims.................................................... 64
C. Projected Distributions on Account of Allowed Claims.................... 65
D. Bar Date for Certain Administrative Claims.............................. 65
VII. RECAPITALIZATION ALTERNATIVE AND ALTERNATIVES TO THE PLAN............................ 65
A. Introduction............................................................ 65
B. The Recapitalization Alternative........................................ 66
C. Liquidation Under Chapter 7 of the Bankruptcy Code...................... 66
VIII. CERTAIN FACTORS TO BE CONSIDERED.................................................... 67
A. Certain Risk Factors Associated With the Plan........................... 67
1. Inherent Uncertainty in the Financial Projections.............. 67
2. Competition.................................................... 67
3. Dependence on Key Personnel.................................... 67
B. Certain Risk Factors Associated With the Recapitalization Alternative... 68
1. Environmental Liability Exposure and Insurance Coverage........ 68
2. Limited Market for Securities Issued Under the
Recapitalization Alternative.......................... 68
</TABLE>
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IX. ISSUANCE OF SECURITIES AND APPLICATION OF FEDERAL AND OTHER
SECURITIES LAWS ................................................................................. 69
A. Adoption of the Reorganized Company's Charter Documents........................ 69
B. Issuance and Distribution of New Common Stock under
the Purchase Alternative.............................................. 69
C. Issuance and Distribution of the Reorganized NVF Common Stock and Secured
Debentures under the Recapitalization Alternative.............................. 70
1. Reorganized NVF Common Stock.......................................... 70
2. Secured Debentures.................................................... 70
3. Deposit with Disbursing Agent......................................... 72
4. Fractional Securities under the Recapitalization Alternative.......... 72
D. Resale of Securities Received under the Purchase Alternative or the
Recapitalization Alternative................................................... 73
1. Registration of Securities............................................ 73
2. Lack of Established Market for Reorganized NVF Common Stock and
Secured Debentures.................................................... 74
E. Risks Associates with the Recapitalization Alternative......................... 74
X. INFORMATION CONCERNING THE BUYER.............................................................. 74
A. First Security................................................................. 74
XI. CORPORATE GOVERNANCE AND MANAGEMENT OF NVF................................................... 75
A. Current Board of Directors of NVF.............................................. 75
B. Changes in NVF's Board of Directors............................................ 75
C. Board of Directors of the Reorganized Company Under the Purchase Alternative... 75
D. Board of Directors of Reorganized Company Under Recapitalization Alternative... 75
E. Officers of Reorganized NVF.................................................... 75
1. Management Compensation............................................... 76
F. Officers of the Reorganized Company Under Recapitalization Alternative......... 76
G. Post-Consummation Operations................................................... 76
XII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN......................................... 76
A. Generally...................................................................... 76
B. Federal Income Tax Consequences to the Company................................. 77
</TABLE>
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1. Issuance of New Common Stock.......................................... 77
2. Reorganized NVF's Use of Company's Existing Tax Attributes............ 77
3. Discharge of Indebtedness............................................. 77
4. Limitation on Tax Attributes as a Result of an Ownership Change....... 78
5. Other Considerations.................................................. 81
6. Alternative Minimum Tax............................................... 81
C. Federal Income Tax Consequences to Creditors................................... 81
1. Tax Characterization of Exchanges..................................... 82
a. Creditors Holding Allowed Claims on the Distribution Date.... 82
(1) Creditors Receiving Cash Only........................ 82
(2) Creditors Holding Claims That Will Be Partially or
Completely Unsatisfied............................... 82
b. Holders of Disputed Claims................................... 82
c. Holders of Existing Common Stock............................. 82
2. Character and Timing of Gain or Loss.................................. 82
3. Receipt of Interest................................................... 83
4. Withholding and Reporting............................................. 83
5. Market Discount....................................................... 83
6. Tax Consequences to Creditors of the Recapitalization Alternative..... 84
D. Importance of Obtaining Professional Assistance................................ 84
XIII. CONCLUSION................................................................................. 85
</TABLE>
viii
<PAGE> 10
EXECUTIVE SUMMARY OF THE PLAN
<PAGE> 11
EXECUTIVE SUMMARY OF THE PLAN
NVF Company, a Delaware corporation, debtor and debtor-in-possession
(the "Company"), on behalf of itself and the Official Committee of Unsecured
Creditors of NVF Company (the "Committee") (collectively, the "Plan Proponents"
or "Proponents") seek approval of the Joint Plan of Reorganization (the "Plan").
The following Disclosure Statement describes the Plan. This Executive
Summary is intended solely as a summary of the Distribution provisions of the
Plan. FOR A COMPLETE UNDERSTANDING OF THE PLAN YOU SHOULD READ THE DISCLOSURE
STATEMENT, THE PLAN, AND THE EXHIBITS AND SCHEDULES THERETO IN THEIR ENTIRETY.
Unless defined in the text hereof, capitalized terms used in this Executive
Summary are given the meanings ascribed to them in the Disclosure Statement and
the Plan.
A. RECOMMENDATION OF THE PLAN PROPONENTS.
IN THE VIEW OF THE PLAN PROPONENTS, THE TREATMENT OF CREDITORS UNDER
THE PLAN CONTEMPLATES A GREATER RECOVERY AND CERTAINTY FOR CREDITORS THAN THAT
WHICH IS LIKELY TO BE ACHIEVED UNDER OTHER ALTERNATIVES FOR THE REORGANIZATION
OR LIQUIDATION OF THE COMPANY, AS IS DISCUSSED UNDER "ALTERNATIVES TO PLAN OF
REORGANIZATION." ACCORDINGLY, THE PLAN PROPONENTS BELIEVE THAT CONFIRMATION OF
THE PLAN IS IN THE BEST INTERESTS OF CREDITORS OF THE COMPANY IN LIGHT OF THE
ALTERNATIVES AND RECOMMENDS THAT CREDITORS VOTE TO ACCEPT THE PLAN.
B. SUMMARY OF THE PLAN OF REORGANIZATION.
The Plan provides for a primary as well as a default mechanism for
reorganizing the Company. The Company will be reorganized by a sale under the
Purchase Alternative. In the unlikely event that the sale is not consummated,
the Company will be recapitalized through the issuance of securities under the
Recapitalization Alternative. The Plan is supported by the Company and the
Committee.
1. PURCHASE ALTERNATIVE
Under the Purchase Alternative, the Existing Common Stock will
be extinguished and New Common Stock will be sold to the Buyer in exchange for a
Cash Purchase Price of $24.5 million, the assumption of certain Claims and the
payment of other Claims as set forth herein.
2
<PAGE> 12
a. DISTRIBUTION FUND
The Cash Purchase Price of $24.5 million and the
balance of Litigation Settlement Proceeds of $15.75 million are currently being
held in escrow accounts. Upon confirmation of the Plan, these monies will be
transferred to the Distribution Fund and distributed to the holders of certain
Allowed Administrative Claims and Allowed General Unsecured Claims.
b. IMMEDIATE DISTRIBUTION.
The availability of the Cash Purchase Price and the
treatment of creditors under the Purchase Alternative as set forth in the Plan
allows for an expeditious cash payment to General Unsecured Creditors.
c. CONSENSUAL TREATMENT FOR ALL SECURED CREDITORS.
All holders of Secured Claims have consented to their
treatment under the Purchase Alternative and support the Plan.
d. FINANCIAL ABILITY OF THE BUYER TO CONSUMMATE THE
TRANSACTION.
The Buyer and an affiliate of the Buyer, Security
Management Corporation, have agreed to fund or provide the Reorganized Company
with any credit enhancement necessary to fund or insure Confirmation of the
Plan.
e. LIMITED CONDITIONS TO CLOSING.
Although conditions to closing exist, the Plan
Proponents believe that none of these conditions are significant impediments to
Consummation of the Plan.
2. RECAPITALIZATION ALTERNATIVE.
In the event that the Purchase Alternative is not consummated,
the Plan Proponents will implement a recapitalization of the Company. The
ability to recapitalize the Company without the need for further Bankruptcy
Court approval ensures an orderly and expeditious end to the Company's Chapter
11 Case. Furthermore, the Recapitalization Alternative reduces the uncertainty
as to the Company's future in the event the Purchase Alternative is not
consummated for any reason. Notwithstanding the above, the Plan Proponents
intend that the Purchase Alternative be consummated and that the holders of
Allowed Claims against the Company receive Distributions in Amounts set forth
under the Purchase Alternative.
3
<PAGE> 13
a. ADMINISTRATION CLAIMS AND PRIORITY CLAIMS.
These Claims will be paid in full in Cash from the
Litigation Settlement Proceeds or any Exit Financing obtained from the Company.
b. ISSUANCE OF NEW SECURITIES.
The Company will issue Secured Debentures and the
Reorganized NVF Common Stock. Such securities will be placed in the Distribution
Fund and Distributed to General Unsecured Creditors and holders of Unsecured
Environmental Claims Allowed as of the Distribution Date.
c. CONSENSUAL TREATMENT OF CREDITORS.
All holders of Secured Claims have consented to their
treatment under the Recapitalization Alternative.
d. EXCESS CASH.
Under the Recapitalization Alternative, if Cash
exists in excess of (a) the capital needs of the Reorganized Company, and (b)
monies needed to pay Allowed Administrative Claims, Allowed Tax Claims, and
Allowed Priority Claims, the Company will Distribute such Cash to the holders of
Allowed General Unsecured Claims and holders of Unsecured Environmental Claims
Allowed as of the Distribution Date.
C. SUMMARY OF CLASSIFICATION AND TREATMENTS OF CLASSIFIED CLAIMS AND
INTERESTS.
The chart below summarizes the classification and treatment of Allowed
Claims and Interests.
4
<PAGE> 14
<TABLE>
<CAPTION>
Class Description of Class Impaired Treatment of Allowed Claims/Interests
- ----- -------------------- -------- -------------------------------------
<S> <C> <C> <C>
1. NVF 10% Secured Note Yes Interest on the principal Amount of
Claims $7,460,643.74 shall accrue at a rate of
10% from September 30, 1995 until (1)
the per annum Consummation Date or
(ii) May 22, 1996, which is the time the
first semi-annual payment is due. Such
interest, plus interest in the Amount of
$765,000, shall be paid in full in Cash
on the Distribution Date or May 22,
1996 to the holders of the Class 1
Claims. The Reorganized Company
shall make semi-annual payments of
interest at a rate of 10% per annum on
principal with the balance due and
payable on November 22, 1996. Class 1
Claimants shall retain their Lien. Under
the Recapitalization Alternative, the
Committee shall have the right but not
the obligation to require the Disbursing
Agent to reserve monies to pay the
Allowed NVF 10% Secured Note Claims
in full.
2. Hartwell Secured Claim Yes The holder of the Class 2 Secured Claim
in the amount of $128,956.09 shall
receive nineteen monthly payments from
the Reorganized Company in the Amount
of $7,189.93 consisting of principal and
interest until paid in full. The Class 2
Secured Claimant shall retain its Lien.
3. Reed Smith Secured Yes The holder of the Class 3 Secured
Claim Claimant in the amount of $412,682.92
shall receive $138,000 out of the CNA
Proceeds and shall receive monthly
payments in the Amount of $22,890.24 from
the Reorganized Company commencing the
later of the Distribution Date or thirty
(30) days after the entry of an order
confirming this Plan.
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
Class Description of Class Impaired Treatment of Allowed Claims/Interests
- ----- -------------------- -------- -------------------------------------
<S> <C> <C> <C>
4. CIT Claim No Under the Purchase Alternative, the
holder of Class 4 Claim will be paid in
full in Cash through either the Exit
Financing or from the Reorganized Company
Account. Under the Recapitalization
Alternative, the holder of the Class 4
Claim will either receive payment in full
in Cash from the Exit Financing.
5. New Castle County Yes Commencing on the Distribution Date,
Claim the holder of the Class 5 Claim shall
receive twelve (12) monthly payments of
interest at the rate of 8% per annum on
the aggregate amount of (i) principal in
the amount of $1,813,507.20 plus (ii)
interest on this principal amount at the
rate of 9% per annum that has accrued from
November 1, 1995 to the Distribution Date.
Commencing thirteen (13) months after the
Distribution Date, amounts owing on the
Class 5 Claim shall be paid monthly with
interest at a rate of 8% per annum
amortized over a forty-eight (48) month
period. The Class 5 Claim shall retain its
Lien, to the extent valid.
6. Priority Claims No Under the Purchase Alternative, holders
of Class 6 Priority Claims shall be paid
either by the Reorganized Company or
from the Reorganized Company Account
in Cash in full. Under the
Recapitalization Alternative, holders of
Class 6 Priority Claims will be paid in
full in Cash, either by the Reorganized
Company or from the Distribution Fund.
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
Class Description of Class Impaired Treatment of Allowed Claims/Interests
- ----- -------------------- -------- -------------------------------------
<S> <C> <C> <C>
7. Pension Plan Fund No Under the Purchase Alternative or the
Claims Recapitalization Alternative, Class 7
Unsecured Claims are being assumed by
the Reorganized Company. Unless the
Pension Plans are terminated prior to the
Effective Date, the Company's liability
under ERISA section 4062 shall not be
affected in any way by the Chapter 11
Case.
8A. General Unsecured Yes Holders of Class 8A General Unsecured
Claims Claims shall be paid in Cash Pro Rata
from the Distribution Fund under the
Purchase Alternative, or a combination of
Cash, Secured Debentures and Reorganized
NVF Common Stock under the
Recapitalization Alternative. The
estimated value of the distribution is
approximately 47(cent) per $1.00 of
Allowed General Unsecured Claim.
8B. Unsecured Yes Holders of Unsecured Environmental
Environmental Claims Claims Allowed as of the Distribution
Date will receive Pro Rata Distribution
from the Reorganized Company Account under
the Purchase Alternative, or a Pro Rata
Distribution from the Distribution Fund of
a combination of Cash, Secured Debentures
and NVF Common Stock under the
Recapitalization Alternative. Unsecured
Environmental Claims that are not fixed or
liquidated on the Distribution Date will
receive the same percentage distribution
as Allowed Unsecured Environmental Claims
in Cash from the Reorganized Company in
the ordinary course of the Reorganized
Company's business.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
Class Description of Class Impaired Treatment of Allowed Claims/Interests
- ----- -------------------- -------- -------------------------------------
<S> <C> <C> <C>
9. Administrative No The holders of Class 9 General
Convenience Unsecured Claims shall be paid 100% of
their Allowed Claims from the
Distribution Fund.
10. Affiliate Claim Yes The holder of the Class 10 Affiliate
Claim shall receive no Distribution.
11. Existing Common Stock Yes Holders of Class 11 Claims shall receive
no distribution and all outstanding shares
of Existing Common Stock shall be
extinguished.
</TABLE>
D. SUMMARY OF DISTRIBUTIONS UNDER THE PLAN.
1. PURCHASE ALTERNATIVE.
Under the Purchase Alternative, two funds are established for
the payments to holders of certain Allowed Claims entitled to be paid upon the
Distribution Date under the Plan: the Reorganized Company Account and the
Distribution Fund.
Allowed General Unsecured Claims (Class 8A) and Allowed
Administrative Claims (except for those Administrative Claims that constitute
the Allowed Accounts Payable Postpetition Claims, Allowed Postpetition Accrued
Wages and Other Claims, and Allowed Administrative Environmental Claims) shall
be paid in Cash from the Distribution Fund. Except as otherwise set forth
herein, the Disbursing Agent shall be responsible for making Distributions to
the holders of Allowed Administrative Claims and, General Unsecured Creditors
who are entitled to receive payment from the Distribution Fund.
Holders of Allowed Administrative Environmental Claims and
Allowed Unsecured Environmental Claims shall receive payment from the
Reorganized Company account. All other Allowed Claims entitled to payment under
of the Plan, but not specified above will receive payment under the Plan
directly from the Reorganized Company, or if funds are not available, from the
Reorganized Company Account. The Reorganized Company is responsible for making
Distributions from the Reorganized Company Account.
2. RECAPITALIZATION ALTERNATIVE.
In the unlikely event that the Recapitalization Alternative is
implemented, all holders of Allowed Claims (other than the Allowed Accounts
Payable Postpetition Claims and Allowed Postpetition Accrued Wages and Other
Claims) shall be paid either from the Distribution Fund or directly from the
Reorganized Company. The Disbursing Agent shall be responsible for
8
<PAGE> 18
making Distributions to holders of Allowed Claims entitled to payment from the
Distribution Fund. Holders of Allowed Accounts Payable Postpetition Claims and
Allowed Postpetition Accrued Wages and Other Claims shall receive payment from
the Reorganized Company in the ordinary course of business.
9
<PAGE> 19
I.
VOTING PROCEDURES AND PLAN REQUIREMENTS
This Disclosure Statement sets forth certain information regarding the
Company's prepetition history, significant events that have occurred during the
Company's Chapter 11 Case, and the anticipated organization and operations of
the Reorganized Company. This Disclosure Statement also describes the Plan,
including alternatives to the Plan, facts of Confirmation of the Plan, risk
factors associated with the Plan, and the manner in which Distributions will be
made under the Plan. In addition, this Disclosure Statement discusses the
Confirmation process and the voting procedures that holders of Claims or
impaired Classes must follow for their votes to be counted.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISKS AND OTHER FACTS
PERTAINING TO THE PLAN AS IT RELATES TO HOLDERS OF CLAIMS AGAINST THE COMPANY,
PLEASE SEE "SUMMARY OF THE REORGANIZATION PLAN" IN "CERTAIN FACTORS TO BE
CONSIDERED."
A. NOTICE TO HOLDERS OF CLAIMS AND INTERESTS.
This Disclosure Statement is being transmitted to holders of Claims
against or Interests in the Company only as required by the Bankruptcy Court.
The purpose of this Disclosure Statement is to provide adequate information to
enable you as the holder of a Claim against the Company, to make a reasonably
informed decision with respect to the Plan prior to exercising your right to
vote, if applicable, to accept or reject the Plan.
B. VOTING PROCEDURES AND PLAN REQUIREMENTS.
1. REQUIREMENTS.
The Bankruptcy Code requires, inter alia, that: (a) a plan be
accepted by the requisite votes of creditors and stockholders (except to the
extent that "cram-down" is available under Section 1129(b) of the Bankruptcy
Code); (b) a plan be feasible (that is, that there be a reasonable prospect that
the Company will be able to perform its obligations under the plan and continue
to operate its businesses without further financial reorganization); and (c) a
plan be in the "best interests" of all Creditors and Interest holders (that is,
that Creditors and Interest holders will receive at least as much pursuant to
the Plan as they would receive in a liquidation under Chapter 7 of the
Bankruptcy Code).
Pursuant to the provisions of the Bankruptcy Code, only
creditors whose claims are within "impaired" (as that term is used in Section
1124 of the Bankruptcy Code) classes under the terms and provisions of the plan,
but are still receiving a distribution under the plan, are entitled to vote to
accept or reject the plan. Classes of claims and interests that are not
"impaired" under the plan are deemed to have accepted the plan. Under the
Bankruptcy Code, an impaired
10
<PAGE> 20
class of claims will be found to have accepted the plan if holders of two-thirds
in dollar amount and a majority in number of allowed claims in that class that
actually vote, accept the plan. An impaired class of interests will be found to
have accepted the plan if the plan is accepted by holders of at least two-thirds
in amount of the allowed interests in such class that actually vote. Finally,
classes of claims or interests which receive no distribution or retain no
property under the plan are deemed by law to have rejected the plan.
Under the Plan, Classes 4, 6, 7 and 9 are not impaired and are
deemed by law to have accepted the Plan. Classes 10 and 11 will receive no
Distributions and are deemed to have rejected the Plan. Holders of Allowed
Claims in Classes 1, 2, 3, 5, 8A and B, are impaired and are entitled to vote to
accept or reject the Plan. FOR A MORE COMPLETE DISCUSSION OF THE CLASSIFICATION
AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN, SEE SECTION III OF THE
DISCLOSURE STATEMENT.
The Bankruptcy Code allows for the Confirmation of the Plan
even if the Plan is not accepted by all impaired Classes, as long as at least
one impaired Class has accepted the Plan. The "cram-down" provisions of the
Bankruptcy Code are set forth in section 1129(b) of the Bankruptcy Code. The
Plan may be confirmed under the cram-down provisions if, in addition to
satisfying the requirements of section 1129 of the Bankruptcy Code (other than
section 1129(a)(8)), the Plan: (a) "does not discriminate unfairly"; and (b) is
"fair and equitable", with respect to each Class of Claims or Interests that is
impaired under, and has not accepted, the Plan.
2. VOTING INSTRUCTIONS.
A ballot (the "Ballot") is enclosed for creditors to use in
voting on the Plan. To vote on the Plan, indicate on the enclosed Ballot that
you either accept or reject the Plan; sign your name and send the Ballot in the
envelope provided for this purpose to the following address:
By mail:
Poorman-Douglas Corporation
P.O. Box 19550
Portland, Oregon 97280-0550
By hand or overnight delivery:
Poorman-Douglas Corporation
1325 S.W. Custer Drive
Portland, Oregon 97219
TO BE COUNTED, BALLOTS MUST BE TIMELY SENT SO THAT THEY ARE
ACTUALLY RECEIVED AT THE ABOVE ADDRESS NO LATER THAN 5:00 P.M. EASTERN TIME ON
__________ ___, 1996. FAXES WILL NOT BE ACCEPTED.
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IF YOUR BALLOT IS NOT PROPERLY COMPLETED, SIGNED AND RETURNED
AS DESCRIBED, IT WILL NOT BE COUNTED. IF YOUR BALLOT IS DAMAGED OR LOST, YOU
MAY REQUEST A REPLACEMENT BY SENDING A WRITTEN REQUEST TO THE ABOVE ADDRESS.
The Voting Record Date for determining the holders of
Debentures entitled to vote on the Plan has been fixed as __________ ___, 1996.
Only record holders represented by such Debentures are entitled to accept or
reject the Plan. Persons who acquire any such Debentures after the Voting Record
Date will not be entitled to vote the Claims represented by such Debentures to
accept or reject the Plan.
For purposes of voting, the Amount of a Claim that will be
used to tally votes will be either (a) the Claim Amount listed in the schedule
of liabilities of the Company (the "Schedule of Liabilities"), filed with the
Bankruptcy Court on November 9, 1993 (as subsequently amended), unless such
Claim is listed in the Schedule of Liabilities as contingent, unliquidated or
Disputed; (b) the liquidated Amount specified in a proof of Claim timely filed
with the Bankruptcy Court that is not subject to an objection to Claim; or (c)
the Amount of Debentures held as of the Voting Record Date. If a creditor
submits a Ballot, but the creditor has not timely filed a proof of Claim and the
creditor's Claim is not listed on the Schedule of Liabilities or is listed on
the Schedule of Liabilities as contingent, unliquidated or disputed, or the
creditor's Claim is the subject of an objection to Claim, the creditor's Ballot
will not be counted in accordance with Bankruptcy Rule 3018, unless the
Bankruptcy Court temporarily allows the creditor's Claim for the purpose of
accepting or rejecting the Plan in accordance with such Rule.
C. INFORMATION CONCERNING BALLOTING PROCEDURES FOR THE PLAN.
Poorman-Douglas Corporation has been retained by the Company to
distribute Ballots to solicit acceptance of the Plan. Questions regarding
balloting procedures and requests for additional materials should be directed
to:
Poorman-Douglas Corporation
P.O. Box 19550
Portland, Oregon 97280-0550
(503) 245-5555
No other person or entity has been authorized by the Company or the
Committee in connection with the Plan or the solicitation of votes for the Plan
to give any information or to make any representation other than as contained in
this Disclosure Statement and the exhibits and schedules attached to, or
incorporated by reference or referred to in, this Disclosure Statement, and, if
given or made, such information or representation may not be relied upon as
having been authorized by the Company or the Committee. While the Company will
furnish to creditors entitled to vote on acceptance of the Plan such additional
information as may be required by applicable law, the delivery of this
Disclosure Statement will not under any circumstances imply
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<PAGE> 22
that the information in this Disclosure Statement is correct as of any time
subsequent to the date hereof.
D. CONFIRMATION OF A PLAN.
1. CONFIRMATION HEARING.
The Bankruptcy Code requires the Bankruptcy Court, after
notice, to hold a hearing on the confirmation of a Chapter 11 plan to consider
whether the confirmation requirements in Section 1129 of the Bankruptcy Code
have been satisfied.
The Bankruptcy Court will hold a hearing on Confirmation of
the Plan commencing at ____ a.m. on __________ ___, 1996, in the Courtroom of
the Honorable Peter J. Walsh, United States Bankruptcy Court for the District of
Delaware, 894 King Street, Wilmington, Delaware 19801. The hearing may be
adjourned from time to time without further notice. Any objections to
Confirmation of the Plan must be in writing and must be filed with the Clerk of
the Bankruptcy Court and served on (i) counsel for the Company, (ii) counsel for
the Committee and (iii) the office of the United States Trustee on or before
_______ p.m. Eastern Time on __________ ___, 1996. Any objection that is not
timely filed and served may be deemed waived or otherwise rejected as untimely.
Counsel for the Company on whom objections must be served is:
BAKER & McKENZIE
101 West Broadway, 12th Floor
San Diego, California 92101
Attn: Ali M. M. Mojdehi, Esq.
YOUNG, CONAWAY, STARGATT & TAYLOR
11th Floor - Rodney Square North
Wilmington, Delaware 19801
Attn: Laura Davis Jones, Esq.
Counsel for the Committee on whom objections must be served
is:
LeBOEUF, LAMB, GREENE & MacRAE, L. L. P.
125 West 55th Street
New York, New York 10019-5389
Attn: Angela J. Somers, Esq.
MORRIS, JAMES, HITCHENS & WILLIAMS
222 Delaware Avenue
Wilmington, Delaware 19889
Attn: Edward M. McNally, Esq.
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The Address for the United States Trustee is:
UNITED STATES TRUSTEE
601 Walnut Street
Curtis Center, Suite 950 West
Philadelphia, Pennsylvania 19106
Attn: John D. McLaughlin, Jr., Esq.
2. BEST INTERESTS OF CREDITORS.
To confirm a plan, the Bankruptcy Court must independently
determine that such plan is in the best interests of all Classes of Creditors
and Interest holders impaired by the plan. The "best interest" test requires
that the plan provide to each non-accepting member of each impaired Class of
Claims and Interests a recovery of a value at least equal to the value of the
distribution which each such person would receive if the Company were liquidated
under Chapter 7 of the Bankruptcy Code.
To estimate what members of each impaired Class of unsecured
Creditors and Interest holders would receive if the Company were liquidated, the
Bankruptcy Court must first determine the aggregate dollar Amount that would be
generated from the Company's assets if the Chapter 11 Case were converted to a
case under Chapter 7 of the Bankruptcy Code and the assets were liquidated by a
trustee (the "Liquidation Value" of such assets). The Liquidation Value would
consist of the proceeds from the disposition of the Company's assets, augmented
by the Cash held by the Company and less the costs of such a liquidation as well
as the Claims of Secured Creditors to the extent of the value of their
collateral.
The costs of liquidation under Chapter 7 would include the
compensation of a trustee as well as those of counsel and other Professionals
that might be retained by the trustee, disposition expenses, all unpaid expenses
incurred by the Company during the Chapter 11 Case (such as compensation for
attorneys, financial advisors and accountants) which are allowed in the Chapter
7 case, litigation costs, Claims arising from the operation of the Company
during pendency of the Chapter 11 Case and Chapter 7 case and Claims arising by
reason of the trustee's rejection of obligations incurred by the Company during
the Chapter 11 Case. These priority Claims would be paid in full before the
balance would be made available to pay General Unsecured Claims or to make any
distribution to Interest holders.
The Plan Proponents have prepared a liquidation analysis for
this Plan which they assert demonstrates that the Plan satisfies the "best
interest" test.
3. FEASIBILITY.
In connection with Confirmation of the Plan, the Bankruptcy
Court will have to determine that the Plan is feasible pursuant to section
1129(a)(11) of the Bankruptcy Code, which
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means that the Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further financial reorganization of the Company.
To support its belief in the feasibility of the Plan, the
Company, with the assistance of its accountants, has prepared financial
projections (the "Projections") for the period April 1, 1996 through December
31, 1999, as set forth in Exhibit "C" attached to this Disclosure Statement.
The Projections, which were prepared under the Purchase
Alternative, indicate that the Reorganized Company should have sufficient Cash
flow to repay and service its debt obligations and to maintain its operations
under either the Purchase Alternative or Recapitalization Alternative. The
Projections assume that the Company will obtain Exit Financing to confirm the
Plan. In addition, under the Purchase Alternative, the Buyer and Security
Management have agreed to provide any additional credit enhancement necessary to
confirm the Plan. Accordingly, the Company believes that the Plan complies with
the financial feasibility standard of section 1129(a)(11) of the Bankruptcy
Code. As noted in the Projections, however, the Company cautions that no
representations can be made as to the accuracy of the Projections or as to the
Reorganized Company's ability to achieve the projected results. Many of the
assumptions upon which the Projections are based are subject to uncertainties
outside the control of the Company. Some assumptions inevitably will not
materialize, and events and circumstances occurring after the date on which the
Projections were prepared may be different from those assumed or may be
unanticipated, and may adversely affect the Company's financial results.
Therefore, the actual results may vary from the projected results and the
variations may be material and adverse. See "Certain Factors To Be Considered"
for a discussion of certain risk factors that may affect financial feasibility
of the Plan.
E. EFFECT OF CONFIRMATION.
1. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS.
Except as otherwise provided in the Plan or the Confirmation
Order, the rights afforded under the Plan and the treatment of Claims under the
Plan shall be in exchange for and in complete satisfaction, discharge and
release of all Claims and in termination of all Interests, including any
interest accrued on Claims from the Petition Date. Except as otherwise provided
in the Plan or the Confirmation Order, Confirmation shall (a) discharge the
Company from all Claims or other debts that arose before the Confirmation Date,
and all debts of the kind specified in sections 502(g), 502(h) or 502(i) of the
Bankruptcy Code, whether or not (i) a proof of Claim based on such debt is Filed
or deemed Filed pursuant to section 501 of the Bankruptcy Code, (ii) a Claim
based on such debt is allowed pursuant to section 502 of the Bankruptcy Code or
(iii) the holder of a Claim based on such debt has accepted the Plan; and (b)
terminate all Interests and other rights, if any, of equity security holders in
the Company.
As of the Confirmation Date, except as provided in the Plan or
Confirmation Order, all entities shall be precluded from asserting against the
Company, the Estate of the
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<PAGE> 25
Company, the Reorganized Company, its successors or its property, any other or
further Claims, debts, rights, causes of action, liabilities or equity Interests
based upon any act, omission, transaction or other activity of any kind or
nature that occurred prior to the date of Confirmation. In accordance with the
foregoing, except as provided in the Plan or Confirmation Order, the
Confirmation Order shall be a judicial determination of discharge of all such
Claims and other debts and liabilities against the Company and termination of
all such Interests and other rights of equity security holders in the Company,
pursuant to sections 524 and 1141 of the Bankruptcy Code, and such discharge
shall void any judgment obtained against the Company at any time, to the extent
that such judgment relates to a discharged Claim.
2. REVOCATION AND MODIFICATION OF THE PLAN.
Subject to the restrictions on modifications set forth in
section 1127 of the Bankruptcy Code, the Plan Proponents acting jointly reserve
the right to alter, amend or modify the Plan so long as such alteration,
amendment or modification is consistent with the Agreement and before the
substantial consummation of the Plan. The Plan Proponents acting jointly reserve
the right to revoke or withdraw the Plan so long as such revocation or
withdrawal is consistent with the Agreement and prior to the date of
Confirmation. If the Plan Proponents revoke or withdraw the Plan in accordance
with this section, or if Confirmation does not occur, then the Plan shall be
null and void in all respects.
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<PAGE> 26
DISCLAIMER
THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN. ALL CREDITORS AND
INTEREST HOLDERS ARE ENCOURAGED TO READ AND CAREFULLY CONSIDER THIS ENTIRE
DISCLOSURE STATEMENT, INCLUDING THE ATTACHED PLAN AND THE MATTERS DESCRIBED IN
THIS DISCLOSURE STATEMENT PRIOR TO SUBMITTING BALLOTS PURSUANT TO THIS
SOLICITATION. ALL SUMMARIES OF THE PLAN CONTAINED IN THIS DISCLOSURE STATEMENT
ARE QUALIFIED IN THEIR ENTIRETY BY THE PLAN ITSELF, THE EXHIBITS TO THE PLAN AND
DOCUMENTS DESCRIBED IN THE PLAN AS BEING FILED PRIOR TO APPROVAL OF THIS
DISCLOSURE STATEMENT, WHICH ARE CONTROLLING IN THE EVENT OF ANY INCONSISTENCY.
SUBSEQUENT TO THE DATE HEREOF, THERE CAN BE NO ASSURANCE THAT: (A) THE
INFORMATION AND REPRESENTATIONS CONTAINED HEREIN ARE MATERIALLY ACCURATE OR (B)
THAT THIS DISCLOSURE STATEMENT CONTAINS ALL MATERIAL INFORMATION.
THE BANKRUPTCY COURT'S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE
EITHER A GUARANTY OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED
IN THIS DISCLOSURE STATEMENT OR AN ENDORSEMENT OF THE PLAN BY THE BANKRUPTCY
COURT.
FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY
THE COMPANY. NEITHER THE COMPANY'S NOR THE COMMITTEE'S ATTORNEYS, ACCOUNTANTS OR
OTHER PROFESSIONALS MAKE ANY REPRESENTATION REGARDING SUCH INFORMATION. NEITHER
THE COMPANY NOR THE COMMITTEE REPRESENTS OR WARRANTS THAT THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT IS FREE FROM ANY INACCURACY OR OMISSION.
WHILE THE COMMITTEE IS A PROPONENT OF THE PLAN, IT HAS NOT PROVIDED ANY OF THE
FACTUAL INFORMATION HEREIN.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE STATEMENTS CONTAINED HEREWITH.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR THREATENED
ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT BE CONSTRUED AS AN ADMISSION OR
STIPULATION, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS.
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<PAGE> 27
BACKGROUND OF THE COMPANY
AND CHAPTER 11 CASE
<PAGE> 28
I.
PRE-CHAPTER 11 BACKGROUND
A. THE COMPANY AND ITS PRE-CHAPTER 11 OPERATIONS.
The Company was originally incorporated by J.W. Marshall in 1905 as the
National Fibre and Insulation Company to produce vulcanized fibre. Vulcanized
fibre (a converted cellulose product) has valuable insulation properties, thus
the Company's operations grew along with the development of the electrical
industry. Vulcanized fibre is still one of the principal products manufactured
by the Company and is widely used as electrical insulation for a range of
products, including, electrical fuses and switches and railway track insulation.
As time progressed, the Company found new uses for vulcanized fibre. In
addition to its use as an electrical insulating material, vulcanized fibre has
valuable mechanical properties. Vulcanized fibre has been and is still used for
textile mill parts, material handling containers and abrasive disks for the
automotive industry. In 1925, the Company also began to manufacture a moisture
proof type of fibre which utilized a resin to bind sheets of paper together.
Such products, commonly known as laminated plastics, are also a principal
product manufactured by the Company.
1. PROPERTY.
The Company and its subsidiaries own or lease certain real
property. Management believes that these properties, taken as a whole, are
adequate for current business needs. Certain information regarding the Company's
facilities are set forth in Exhibit "B".
2. OPERATIONS.
The Company's operations are broken down into four divisions:
Primary Products (vulcanized fiber and industrial laminated plastics),
Circuitry, Material Handling Containers and Paper Products, together producing
more than twenty-two thousand different products.
a. PRIMARY PRODUCTS DIVISION.
The Primary Products Division manufactures and
fabricates vulcanized fibre and industrial laminated plastics in sheets, rods
and tubes. These products are controlled by a salaried sales management force
and marketed by manufacturers representatives located in major commercial
centers throughout the United States who receive incentive compensation for
sales.
The Company is the largest manufacturer of vulcanized
fibre in the world. Vulcanized fibre is an extremely sturdy and light weight
cellulose product widely used in such
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applications as backing for abrasive discs for the automotive industry and in
the manufacture of electrical insulation for electrical fuses and switches and
railway track insulation. Vulcanized fibre also serves as a structural material
for such applications as textile bobbins, material handling containers and
building construction. The Company is the exclusive manufacturer of Yorkite, a
vulcanized fibre product used for furniture surfaces, cross banding and edge
banding.
The Company has two principal competitors in the
vulcanized fibre industry worldwide. The vulcanized fibre industry, in turn,
competes against numerous manufacturers of materials that may be alternatives to
vulcanized fibre, many of which are larger than the Company.
The industrial laminated plastics are manufactured in
sheets, rods and tubes and fabricated into hundreds of custom products with a
wide range of applications. These products are marketed through manufacturer
representatives located in major commercial centers throughout the United States
who receive incentive compensation for sales. The industrial laminated plastic
industry is highly competitive and this market has many competitors, many of
which are larger than the Company.
b. CIRCUITRY DIVISION.
The Circuitry Division manufactures rigid printed
circuit boards with copper foil on one or both sides as well as fibre glass
boards prepared to add copper in the additive process. The Company also
manufactures thin fibre glass laminates for multi layer applications. These
products are used in the automotive, communications, computer and electronic
industries, all of which are highly competitive.
Circuitry products are controlled by a salaried sales
management force and marketed by manufacturer representatives throughout the
United States who receive incentive compensation for sales. The Company has
numerous competitors both domestic and international, most of which are larger
than the Company.
c. OTHER DIVISIONS.
The Company also manufactures material handling
containers used in a wide variety of applications, including the transportation
of components to assembly points in factories and the movement of goods in
retail stores. The Company also manufactures reusable shipping containers and
containers for shipping delicate instruments. These containers are fabricated
from vulcanized fibre, plastic and steel.
The Company, through its indirect wholly-owned
subsidiary Parsons Paper, manufactures paper which includes, among other
products, bond and writing papers for communication and correspondence, ledger
paper for durable and/or permanent records, index and bristol stock for record
keeping and mechanized postings, and covers and text papers of Lunar Laid(TM)
and parchment for distinctive announcements and presentations. The Company,
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through its direct wholly-owned subsidiary NVF Industries of Canada Ltd., is
also engaged in the warehousing, fabrication and sale of industrial laminated
plastics and vulcanized fibre and in the manufacture and sale of material
handling containers in Canada. The Company's foreign operations are not
significant.
B. FACTORS CONTRIBUTING TO CHAPTER 11.
From 1988 to 1990, the Company sustained operating losses resulting
from several years of unsteady operating management. During this period, the
Company had four different people serve as Chief Operating Officer of the
Company for various lengths of time. Gross sales declined steadily from
$132,768,000 in fiscal year 1988 to $98,049,000, in fiscal year 1991.
In 1991, the Company launched an aggressive campaign to turn Company
operations around to increase efficiency and boost profits. To this end, the
Company streamlined operations by consolidating its plants and eliminating
approximately 150 senior, middle management, and general workforce positions
over a one year period. The Company also cut costs by accomplishing the
following:
1. Converting a labor-intensive manufacturing process for
products within the multi-layer applications to a
machine-intensive process in 1993;
2. Constructing an on-site water recovery system to eliminate
excessive sewage charges and repairs and upgrades to the zinc
recovery Plant to re-capture zinc for industrial use;
3. Eliminating excessive transportation and disposal charges for
waste removal;
4. Reorganizing sales department and revamping of sales
commission structure;
5. Establishing a manufacturer representative organization
throughout the United States;
6. Eliminating all unprofitable product lines;
7. Consolidating its Willow Grove operations with its Hartwell
operations in 1992 and the sale of the Willow Grove Plant;
8. Consolidating the Chicago fabrication operations with the
Wilmington, Delaware facility; and
9. Restructuring cash management operations to Yorklyn, Delaware.
These strategies proved successful, as pre-tax income from operations
rose from ($5,573,000) in 1990 to $2,245,000 in 1993. However, in spite of these
restructuring efforts, by
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<PAGE> 31
1993, the Company's cash flow had become severely strained by an enormous debt
service burden. Current management had inherited a $59 million long-term
obligation, $48 million of which was coming due on June 1, 1994.
It was this severe pressure on the Company's cash flow that
precipitated the commencement of negotiations by the Company with
representatives of holders of certain Debentures on or about May, 1993, in an
effort to reach agreement on a prepackaged plan of reorganization. An unofficial
committee was formed by certain holders of the Debentures (the "Unofficial
Committee"), and was represented by LeBoeuf, Lamb, Greene & MacRae L.L.P.
("LeBoeuf"), as legal counsel, and Cold Spring Group, Inc. ("Cold Spring"), as
financial advisor, and comprised of First Boston Asset Management Corp. for
Executive Life Insurance Company of New York, Carr Securities, the Indenture
Trustees, Cutter and Dixon, Jack Kneafsey and Customers, The DBL Liquidating
Trust, Libra Investments, Baupost Group, David H. Scheiber, Esther Schulman and
the Schlosburg Family.
From June 1993 through the Petition Date, the Company and the
Unofficial Committee conducted negotiations on the terms and conditions of a
consensual plan of reorganization. The Company paid legal and advisory expenses
of approximately $500,000 incurred by the Unofficial Committee during such time.
The Company also paid the Indenture Trustees of the NVF 5% Debentures and the
NVF 10% Debentures the following interest installments (i) past due interest on
the NVF 5% Debentures, interest on that interest, and various fees and expenses,
totaling approximately $1,331,734.71 paid to Bankers Trust, and (ii) past due
interest on the NVF 10% Debentures, interest on that interest, and various fees
and expenses, totaling approximately $576,463.12 paid to Sterling, due January
1, 1993 and May 14, 1993, respectively, for a combined total of $1,908,197.83.
II.
THE CHAPTER 11 CASE
A. THE COMPANY'S CHAPTER 11 FILING.
On August 27, 1993, negotiations between the Unofficial Committee and
the Company reached an impasse and three creditors of the Company filed an
involuntary bankruptcy petition against the Company under Chapter 11 of the
Bankruptcy Code in the Bankruptcy Court. The Case was assigned to the Honorable
Helen Balick and reassigned to the Honorable Peter J. Walsh, United States
Bankruptcy Judge. On August 27, 1993, the Company also filed a voluntary
petition to reorganize under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of Florida, Case No. 93-13373
BKC-SMVW. Pursuant to an order of the Bankruptcy Court, the proceedings in the
voluntary Case filed in the Southern District of Florida were stayed. On
September 15, 1993, the Company filed its answer to the involuntary petition and
an order for relief was entered by the Bankruptcy Court.
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<PAGE> 32
Since the Petition Date, the Company has operated as a
debtor-in-possession pursuant to the applicable provisions of the Bankruptcy
Code. The Company retained Baker & McKenzie and Young, Conaway, Stargatt &
Taylor to serve as counsel to the Company in the Chapter 11 Case and selected
Arthur Andersen to serve as its accountants. By Orders entered September 15,
1993, the Bankruptcy Court approved the employment of each of these
Professionals. The Bankruptcy Court has also approved the employment of other
Professionals retained by the Company in throughout its Chapter 11 Case.
B. CERTAIN IMPORTANT PROCEEDINGS AND ORDERS.
1. APPOINTMENT OF THE COMMITTEE.
On October 26, 1993, the United States Trustee officially
formed the Committee pursuant to Bankruptcy Code section 1102(a). The United
States Trustee appointed seven members to the Committee: the two Indenture
Trustees; The DBL Liquidating Trust; Executive Life of New York (c/o First
Boston Asset Management Corp. and subsequently BEA Associates); John P.
Kneafsey; Circuit Foil USA, Inc.; and Clark-Schwebel, Inc. The DBL Liquidating
Trust subsequently resigned and the United States Trustee appointed Debenture
holder Durian Securities (c/o Smith Management) to serve in the place of The DBL
Liquidating Trust on the Committee. Shortly thereafter, Circuit Foil USA, Inc.
resigned from the Committee. The United States Trustee did not replace Circuit
Foil USA, Inc. on the Committee. Accordingly, the Committee is currently
comprised of six members. The Committee retained LeBoeuf and Morris, James,
Hitchens & Williams as its counsel. The Committee also retained Cold Spring to
serve as its financial advisor and Price Waterhouse to serve as its accountants.
The Bankruptcy Court approved the employment of each of these Professionals. The
Bankruptcy Court has also approved the employment of other Professionals
retained by the Committee throughout the Chapter 11 Case.
2. POSTPETITION FINANCING.
On December 1, 1993, the Bankruptcy Court entered an order
authorizing the Company to assume its factoring agreement (the "Factoring
Agreement") with Schottenstein Stores Corporation ("Schottenstein"), thus
enabling the Company to continue obtaining operating capital through the
financing of its accounts receivable. The Bankruptcy Court subsequently
authorized the Company to replace the Factoring Agreement with a working capital
facility offered by CIT. CIT offered more favorable terms and conditions for the
Company. For example, CIT offered a lower interest rate and afforded significant
savings with respect to annual costs. The CIT financing consists of a facility
in an aggregate Amount equal to the lesser of (i) 8,000,000 or (ii) eighty
percent (80%) of eligible accounts receivable, and within such aggregate Amount
a $1,000,000 subfacility for the issuance of letters of credit. Such financing
was approved by the Bankruptcy Court on April 12, 1995.
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<PAGE> 33
3. CLAIMS.
On November 3, 1993, the Bankruptcy Court entered the Bar Date
order fixing January 31, 1994 as the deadline for filing certain proofs of Claim
in the Chapter 11 Case. Notice of the Bar Date was mailed to parties in interest
and was published in the Wall Street Journal (all editions). Finally, the Bar
Date order provides that any creditor that is required to, but does not, file a
proof of Claim within the time fixed therein for so doing shall be forever
barred from (i) participating in the Chapter 11 Case; (ii) voting with respect
to any plan of reorganization filed in the Chapter 11 Case; and (iii) receiving
any distribution under any plan of reorganization filed in the Chapter 11 Case.
The Indenture Trustees timely filed proofs of Claim for Amounts due and owing
the Debenture holders. Under the Indentures, Debenture holders were not required
to file proofs of Claim, but they are entitled to vote on the Plan.
Claims aggregating in excess of $1 billion, plus unliquidated
Amounts have been asserted against the Company. To date, approximately 1,992
Claims objections have been filed. As a result, approximately 1,972 Claims have
been expunged or disallowed.
a. SETTLEMENT OF CLAIMS.
Several motions requesting approval of the settlement
of Disputed Claims have also been filed and granted by the Bankruptcy Court,
including, but not limited to, the following:
(1) AMERICAN CASUALTY COMPANY.
American Casualty Company of Reading, Pennsylvania
and Continental Casualty Company (together, "CNA") provided comprehensive
general liability insurance coverage to the Company under various primary
policies issued for the period January 1971 through January 1, 1975 (the
"Policies"). CNA issued, as a primary insurer for the Company, four primary
policies with total property damage aggregate limits of liability of $400,000
and which policies have remaining property damage limits of liability of
$286,000. The Company asserted claims for defense and/or indemnity under the
Policies issued by CNA with respect to various claims asserted against it for
environmental pollution.
Subsequently, a dispute arose between the parties
concerning CNA's obligations to provide coverage to NVF under the Policies with
respect to claims for environmental pollution (the "Coverage Dispute"). In 1991,
NVF commenced an action against more than thirty defendant insurers, including
CNA. The Company's insurers had refused to defend and/or indemnify the Company
against claims by federal or state environmental agencies in connection with
approximately eleven disposal sites (the "Underlying Environmental Claims"). The
Company initiated the Coverage Dispute which sought, inter alia, a declaration
that the carriers were liable to defend the Company from, and/or to indemnify
the Company against, any liability arising from the Underlying Environmental
Claims. The Coverage Dispute was commenced on June 12, 1991 in the Superior
Court of New Jersey, Law Division: Gloucester
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<PAGE> 34
County, and expanded through a three-count, 124-paragraph, Amended Complaint,
filed October 16, 1992, in which the Company seeks to recover cleanup costs and
attorneys fees for eleven sites.
Discovery in the coverage action focused on deposing
primary carriers' representatives and document production and review in an
effort to streamline trial issues and, in the shorter term, to focus and explore
coverage issues which would encourage such carriers to conduct meaningful
settlement discussions. In addition, there has been an ongoing process of
reviewing and analyzing documents produced by the defendant insurers and in
analyzing technical data pertaining to the sites, which is necessary for damage
allocation and negotiations with insurers on settlement of their claims.
Following months of extensive negotiations, the Company and CNA reached a
settlement whereby, among other things, CNA would pay the sum of $1,000,000 (the
"CNA Proceeds") to the Company. The Company believed that the costs associated
with the litigation, coupled with the risk that a finder of fact could conclude
that CNA had meritorious defenses, demonstrated that the settlement was
beneficial, fair and equitable and in the best interests of the estate. The
settlement with CNA was approved by the Bankruptcy Court on January 5, 1996.
Such settlement also approved a $138,000 distribution out of the CNA Proceeds to
Reed Smith who asserted a charging Lien in the Amount of $412,000 against the
CNA Proceeds. In exchange, Reed Smith, among other things, agreed to release its
charging Lien against the CNA Proceeds.
(2) ARMY CREEK LANDFILL.
The Company received notification from the
EPA in 1985 that the Company may be a PRP with regard to the Army Creek Landfill
Site in New Castle County, Delaware as a result of alleged deliveries of waste
generated by the Company for disposal at such site. The EPA invited PRPs to
participate in the clean up of the site and threatened to initiate civil actions
to recover the costs of all response measures taken by the EPA. The EPA has also
threatened to issue administrative orders requiring that certain cleanup
measures be undertaken. The Company has denied any involvement in connection
with this site and has declined participation in the cleanup of the site. A
group of PRPs, not including the Company, has reached an agreement with the EPA
regarding cleanup of the site. All nonsettlers at the site, including the
Company, have received demand letters from the County and the PRPs performing
the clean up requesting payment of their response costs.
Following court ordered mediation, the
Company settled all of its liability in the Delaware Sand and Gravel Superfund
site for $300,000. A Consent Decree incorporating the settlement was approved
and signed by the Bankruptcy Court on June 14, 1995. The Company has paid its
settlement Amount and, accordingly, received a complete release from liability
related to this site. The Delaware Sand and Gravel Consent Decree also released
its signatories, including NVF, from any groundwater remedy costs associated
with Army Creek. The Company may or may not have additional liability claims
related to the soil or other remedial activities at the Army Creek Landfill.
However, at present no Claim, demand or other notice has been issued by the
County to the Company for any other costs related to the Army Creek Landfill.
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(3) CHESAPEAKE AND ALEXANDER & ALEXANDER, INC.
The Company filed in the United States
District Court for the District of Delaware a complaint against Chesapeake and
Alexander & Alexander, Inc. The complaint sought $1,000,000 in Damages for
Chesapeake's failure to pay the Company's claims arising out of fires at two of
the Company's plants and additional fees and expenses incurred in connection
with the litigation. In addition, the complaint will seek from Alexander &
Alexander $458,877 for failure to return unused insurance premiums and $441,366
in Damages for wrongfully terminating the policy.
On January 3, 1993, fires damaged the
buildings at the Company's plant at Newark, Delaware. On January 9, 1993, fires
damaged the buildings at the Company's plant at Yorklyn, Delaware. Losses are
estimated to exceed $8,000,000 at each plant. The Company submitted claims for
these losses to Chesapeake, which had issued to the Company a property insurance
policy providing coverage of $500,000 per occurrence, with a deductible of
$25,000 per occurrence. Additionally, the Company paid $550,652.40 for coverage
under a property and boiler policy to Alexander and Alexander and Chesapeake for
a policy from December 31, 1992, to December 31, 1993. Because the policy was
canceled effective March 1, 1993, NVF sought return of the $458,877 in unused
premiums.
In June 1995, the Company and Chesapeake
entered into a settlement agreement which was subsequently approved by the
Bankruptcy Court. The parties agreed that the buildings destroyed by the fires
were worth more than $8 million each. They also agreed that the Chesapeake
insurance policies provided coverage of $500,000 per occurrence, less a
deductible of $25,000 per occurrence. Chesapeake asserted that the Yorklyn
building was valued at $210,000 at the time the policy was procured and that the
Company cannot recover more than the reported value. Chesapeake also asserted
that there is no coverage with respect to fire loss at Newark because the policy
excludes property that is vacant or not being actively used by the insured and
because Newark was allegedly not being actively used in the Company's business.
The Company disputed that exclusion applied because the building was being used
by the Company for storage. Following a court ordered settlement conference, the
parties agreed to settle the matter by Chesapeake paying the Company $200,000
and Chesapeake releasing its Claims against the Estate in the approximate Amount
of $436,000. In turn, the Company released Chesapeake of the claims the Company
has asserted.
(4) DELAWARE SAND AND GRAVEL LANDFILL.
The Company was notified by the EPA in March
1988 that it may be a PRP with respect to waste deposited at the Delaware Sand
and Gravel Landfill, New Castle, Delaware. The EPA also filed an action against
nineteen entities, not including the Company, to recover its response costs in
connection with the site. In March 1992, the EPA notified the Company that it is
considered by the EPA as a PRP at the site. The EPA also requested the Company
and 35 other parties designated as PRPs to conduct removal actions at the site
and
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advised the Company that it may issue a unilateral order to require the PRPs to
commence clean-up activities if the PRPs do not take the requested action. If
such an order were issued, non-compliance could result in fines of up to $25,000
per day and/or the imposition of treble Damages. In October 1992, the Company
was notified that the EPA had requested the United States Department of Justice
to add the Company as well as twelve other entities as defendants in the action
referred to above, which was accomplished through an amended complaint. Since
that time, the Company has participated in the PRP Group process which continues
to seek to allocate responsibility among the PRPs for payment of past government
costs as well as performance of a site remedy.
On November 4, 1993, New Castle County,
Delaware notified the Company that, pursuant to a consent decree negotiated with
the EPA and the State of Delaware, the County has taken a variety of response
actions at the Army Creek Landfill Site and the Delaware Sand and Gravel
Landfill Site. The County claims that the Company may be liable for costs
incurred.
Following court ordered mediation, the
Company settled all of its liability in the Delaware Sand and Gravel Superfund
site for $300,000. A Consent Decree incorporating the settlement was approved
and signed by the Bankruptcy Court on June 14, 1995. The Company has paid its
settlement Amount and, accordingly, received a complete release from liability
related to this site.
(5) INSURANCE COMPANY OF NORTH AMERICA.
On June 4, 1993, Insurance Company of North
America ("INA") filed suit against the Company claiming INA was indemnified by
the Company on certain "self insured" workers' compensation and mining
reclamation obligations written for Sharon Steel Corporation and its
subsidiaries. On January 10, 1994, INA filed a proof of Claim against the Estate
asserting entitlement to a contingent, unliquidated indemnity Claim. As a result
of the demands made by the States of Ohio, West Virginia and Pennsylvania, INA
claimed to have expended funds in the Amount of $5,110,196.964, for the payment
of workers compensation claims and reclamation claims. The Company objected to
INA's Claim on various grounds, including, but not limited to, the Company's
books and records did not show any Amount owing to INA and a substantial Amount
of time could pass before the INA Claim became fixed or liquidated.
Upon reviewing all the relevant documents,
and further inquiring into the basis for INA's Claim, the Company determined
that it was in the best interests of the Estate to settle INA's Claim in the
Amount of $4.385 million. Such settlement has been approved by the Bankruptcy
Court.
(6) NEW CASTLE COUNTY.
On March 17, 1993, New Castle County filed
an action in the
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Superior Court of the State of Delaware against the Company claiming that the
Company owed New Castle County $1,566,957.81 for sewer service provided to the
Company's Yorklyn, Delaware plant. The Company is unable to predict the outcome
of this litigation at this time; however, the Company believes that it has
certain rights of set off arising from the failure of New Castle County to
operate and maintain a sewer line and pump station on the Company's land
pursuant to an earlier agreement. New Castle has agreed to the treatment of New
Castle's Claim under the Plan which is set forth in Article IV therein. The
Company reserves its rights to contest New Castle's Claim so long as it
commences or continues such action the earlier of March 30, 1996 or thirty (30)
days after the Consummation Date of the Plan.
4. THE COMMITTEE ADVERSARY PROCEEDING.
On May 12, 1994, the Bankruptcy Court authorized the Committee
to file a lawsuit on behalf of the Estate. Shortly thereafter, the Committee
commenced an adversary proceeding against certain present and former directors
of the Company (including Mr. Posner), Triarc Companies, Inc. (formerly known as
DWG), RC/Arby's Corporation, American Financial Corporation ("AFC"), Great
American Insurance Company ("Great American") and Mid-Continent Casualty Company
("Mid-Continent"). The First Amended Complaint in that action (the "Complaint")
alleged causes of action for breach of fiduciary duty, waste, fraudulent
transfers, preference payments, and violations of the Racketeer Influence and
Corrupt Organizations Act ("RICO"). On August 30, 1994, the United States
District Court for the District of Delaware dismissed all RICO claims. However,
the RICO Claims were again raised by the Committee in a second motion for
reargument dated April 13, 1995.
In addition, there was also a dispute with the 10% Secured
Note Holders regarding their Claim against the Estate. The NVF 10% Secured Note
Holders, having timely filed the NVF 10% Secured Notes Claim in this Case, filed
a motion for adequate protection of the NVF 10% Secured Note Claim or,
alternatively, for modification of the stay so as to allow the NVF 10% Secured
Note Holders to foreclose on their collateral.
After several months of extensive discovery, and taking into
account the expense, inconvenience, and length of time necessary to prosecute
the Adversary Proceeding through trial and the risk of litigation, the Committee
and the Defendants entered into a binding agreement to settle the adversary
proceeding on May 8-9, 1995, which was subsequently reduced to writing on
October 16, 1995. According to the Litigation Settlement, among other things,
the sum of $20.75 million would be deposited into escrow for distribution to,
among others, the General Unsecured Creditors of this Estate. In addition, the
NVF 10% Secured Note Holders agreed to dismiss with prejudice their motion for
adequate protection or, alternatively, modification of the automatic stay filed
in this Chapter 11 Case.
The Litigation Settlement resolves the Claims asserted against
this Estate by the holders of certain NVF 11-3/4% secured notes as well.
Pursuant to the Litigation Settlement, AFC has transferred to NVF the NVF
11-3/4% secured notes due in the year 2001 and in the approximate face Amount of
$2,538,000 and NVF has transferred to AFC certain APL 10-3/4%
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subordinated sinking fund debentures due in the year 1997 in the approximate
face Amount of $2,538,000.
On November 22, 1995, the Bankruptcy Court approved the
Litigation Settlement and the sum of $20.75 million was deposited into an escrow
account. Of this sum, approximately $5 million has been used to pay Bankruptcy
Court approved Administrative Claims. The Litigation Settlement Proceeds will be
used to fund, in part, the Distribution Fund.
5. RICHARD L. BELTZHOOVER.
On June 9, 1994, Richard L. Beltzhoover ("Beltzhoover") as
Trustee of The Employees' Pension and Investment Plan of Insulation
Representatives, Inc. commenced an action against NVF in the Delaware Court of
Chancery to compel NVF to hold an annual shareholders' meeting (the
"Shareholders' Action"). The Company filed an answer to Beltzhoover's complaint
in the Court of Chancery on June 27, 1994. Subsequently, Beltzhoover sought
relief from the automatic stay in the Bankruptcy Court to proceed with the state
court matter. On July 15, 1994, the Bankruptcy Court announced that it would
conduct an evidentiary hearing with respect to Beltzhoover's motion. The parties
filed a stipulation in the Court of Chancery staying the proceedings therein. A
trial was set to commence in the Bankruptcy Court on October 3, 1994.
The Committee commenced negotiations with Beltzhoover
concerning the funding of a plan of reorganization for the Company in July 1994.
On July 29, 1994, Beltzhoover, on behalf of himself and other parties
(collectively, the "Beltzhoover Group") and the Committee entered into a
Memorandum of Understanding for Funding Plan of Reorganization by Beltzhoover
Group (the "Memorandum"). The Memorandum required a nonrefundable deposit of
$100,000 be placed into an escrow account. Accordingly, the Committee and the
Beltzhoover Group entered into an escrow agreement, dated as of July 29, 1994
pursuant to which the Beltzhoover Group deposited the funds into an escrow
account. The escrow agreement provided that, in the event the transaction
contemplated by the Memorandum was not consummated due to the inability,
unwillingness or refusal of the Beltzhoover Group to close the transaction or
perform any obligation set forth in the Memorandum, the funds would be paid to
the Estate.
The Memorandum further provided that the Beltzhoover Group had
until the earlier of a number of events (including, the occurrence of a
shareholders' meeting at which a board of directors is elected) or September 15,
1994 to finance the $7.5 million necessary to fund the plan contemplated by the
Memorandum. Prior to September 15, 1994, however, the Committee and the Company
agreed jointly to retain an investment banker for the purpose of marketing and
selling or recapitalizing the Company. Thereafter, a dispute arose between the
Committee and the Beltzhoover Group as to whether either party or both parties
breached the Memorandum.
Subsequent to the Committee's and the Company's joint
agreement to retain an investment banker, the Beltzhoover Group renewed their
request for a shareholders' meeting and also filed motions to terminate the
Company's exclusive period and to prevent Victor Posner from
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bidding with respect to any sale of the Company (the "Motions"). After discovery
had commenced with respect to the Shareholders' Action, the Company and the
Beltzhoover Group reached an agreement to settle this matter. The terms of the
settlement required, among other things, that (i) the Beltzhoover Group dismiss
the Shareholders' Action and withdraw the Motions and covenant not to initiate
or refile the action and the Motions prior to July 31, 1995, (ii) the
Beltzhoover Group, or any person or entity affiliated with or related to, or
controlled by any of the Beltzhoover Group have a right to participate in the
bidding process to be controlled by the Sales Agent, (iii) Beltzhoover be
entitled to appoint two nominees, including himself and/or Kim Del Fabro to fill
two vacancies on the Company's board of directors and (iv) that Beltzhoover
would not seek to recover from the Company's Estate his professional fees, which
at the time were approximately $400,000.
While Beltzhoover was negotiating with the Company, the
Committee also reached a settlement with the Beltzhoover Group and certain
related parties. The Committee settlement required, among other things, that (i)
in consideration for the Beltzhoover Group dismissing the Shareholders' Action
and withdrawing the Motions as set forth above, the Committee would agree to the
release of the funds held in escrow under the July 29, 1994 escrow agreement to
Beltzhoover and (ii) the Committee as a whole, and each Committee member
individually, along with the Committee's Professionals agree to exchange
releases with Beltzhoover individually, the Beltzhoover Group and its
professionals.
Ultimately, Beltzhoover agreed to dismiss the action and the
Motions and agreed not to refile them before July 31, 1995, Beltzhoover and Kim
Del Fabro were appointed to the Company's board of directors, the funds that
were escrowed were returned to Beltzhoover, and the releases between Beltzhoover
and the Committee were executed. In November 1995, Beltzhoover renewed his
Motions to terminate exclusivity and to disqualify Victor Posner from
participating in the bidding process alleging that the sales process has been
improperly conducted. After conducting an evidentiary hearing, the Bankruptcy
Court concluded that the Sales Agent had fairly conducted the sale process and
denied Beltzhoover's request. In addition, the Bankruptcy Court extended
exclusivity until the hearing on the Disclosure Statement provided that the
Disclosure Statement and Plan are filed by January 31, 1996.
6. CAPITAL EXPENDITURE PROJECTS.
On September 20, 1994, the Company filed its "Motion For Order
Approving Debtor To Make Capital Expenditures." The Company's market share for
vulcanized fibre had increased at such a rapid rate that its Yorklyn plant,
which has the capacity to produce 16 million pounds of vulcanized fibre, was
producing at full capacity on all fibre machines for several months in 1994.
Customer demand caused the Company's backlog to escalate resulting in
unacceptable lead time for customers who relied on timely deliveries because of
their production schedules. The backlog forced the Company to allocate its
production capacity, but the piecemeal distribution system was inadequate as a
long term solution to the escalating demand. Customer relationships were
suffering and the Company had lost one customer as a direct result of the
backlog problem.
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Accordingly, the Company requested authority to spend $2.15
million in order to expand its vulcanized fibre production. On October 27, 1994,
the Bankruptcy Court approved the expenditures and the Company immediately
implemented its expansion project. The expansion project was completed in May of
1995.
Subsequently, the Company filed a second Motion seeking Court
approval to make a capital expenditure in the Amount of $500,000 for the purpose
of converting the Company's boilers from fuel-burning to gas-burning. The
expenditure was necessary to bring the Company's operations into compliance with
federal and state environmental laws and to prevent future environmental
liabilities arising from the boilers from accruing. This Motion was approved by
the Bankruptcy Court and the conversion process is twenty percent complete.
The Company believes that these capital expenditures were
beneficial to the Estate because they increased the value of the Company, and
thus, enabled the Estate to obtain a higher purchase price during the sale
process.
7. NEGOTIATIONS WITH COMMITTEE AND JOINT AGREEMENT TO RETAIN
SALES AGENT.
Following the commencement of the Chapter 11 Case and after
the appointment of the Committee (which did not occur until more than one month
after the Company consented to relief), the Company negotiated with the
Committee in an effort to reach a consensual plan of reorganization. At the
initial meeting with the Committee, a proposal was made to the bondholder
members of the Committee and the trade members of the Committee were informed
that a proposal would be made to them shortly thereafter. A subsequent meeting
took place with the trade creditors of the Company, including certain members of
the Committee and a proposal was made to such creditors. The proposal to trade
creditors was "materially different" than the terms offered to bondholders.
Subsequently, the Committee made a counterproposal to the Company. Thereafter,
negotiations with the Committee reached an impasse and the Company decided to
proceed unilaterally. Accordingly, the Company filed its initial plan and
disclosure statement approximately seven months from the filing of the voluntary
petition. On September 7, 1994, the Company filed its second amended plan of
reorganization and disclosure statement. The Committee and others filed
objections to the second amended plan and disclosure statement.
During this period, the Committee commenced negotiations with
Beltzhoover concerning the funding of a plan of reorganization for the Company.
As explained earlier, the Committee and Beltzhoover entered into the Memorandum
to fund a plan of reorganization. As time passed after the execution of the
Memorandum, the Committee grew increasingly concerned because the Beltzhoover
Group was not able to establish that it had secured the necessary funding for
its acquisition or that the Beltzhoover Group was at all capable of fulfilling
its obligations under the Memorandum.
In light of the foregoing, the Company and the Committee each
had significant motivations to resolve their differences, and on September 15,
1994, agreed jointly to retain an investment banking firm to sell or
recapitalize the Company as a precursor to a consensual plan of
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reorganization. Subsequently, the Sales Agent was retained jointly by the
Company and the Committee. This retention was approved by the Bankruptcy Court
on or about November 2, 1994. Thereafter, the Sales Agent, the Company and the
Committee agreed on a process for maximizing the value to the Company. On
December 6, 1995, the firm procedural recommendations ("Firm Procedural
Recommendations") were approved by the Bankruptcy Court.
Pursuant to the Firm Procedural Recommendations, the Sales
Agent prepared a detailed sales memorandum describing the Company and its
prospects, which was used to solicit prospective buyers. Subsequently, the Sales
Agent contacted a total of 147 potential strategic and financial buyers for the
Company during the period of late January through early March. On March 7, 1995,
the Sales Agent completed its leveraged recapitalization analysis of the
Company, which was filed under seal with the Bankruptcy Court prior to the
receipt of offers for the Company. On March 8, 1995, the deadline for offers,
the Sales Agent received seventeen letters of intent to acquire the Company in
whole or in part. Based on both quantitative and qualitative considerations, the
Sales Agent qualified nine interested parties (including Beltzhoover) to proceed
to the due diligence phase. On June 5, 1995, the date that firm offers ("Firm
Written Offers") were due to purchase the Company, the Sales Agent received six
Firm Written Offers for the Company.
On June 15, 1995, the Sales Agent made a presentation to the
Company and the Committee which included a review and evaluation of the six Firm
Written Offers. After receiving and reviewing comments from the Company and the
Committee, the Sales Agent contacted all six of the final bidders to notify them
of where each stood in the auction process. Subsequently, certain of the bidders
revised their offers in writing in a manner which either clarified and/or
improved the value and/or structure of their offers. Of the six Firm Written
Offers received and presented at the June 15th meeting, two were rejected
because they were materially lower than the other offers. Of the four remaining
final bids, one bidder chose to withdraw its bid. The Sales Agent evaluated each
of the three final bids to determine both the "highest" and "best" offer.
On July 18, 1995, the Sales Agent submitted its firm
substantive recommendations (the "Firm Substantive Recommendations") to the
Company, the Committee and the Bankruptcy Court evaluating the three final bids.
In its Recommendations, the Sales Agent concluded that Dimeling, Schreiber &
Park (DS&P) submitted the highest and best bid. Accordingly, the Company and the
Committee immediately commenced negotiations with DS&P. After engaging in
preliminary negotiations, DS&P materially and adversely modified its Firm
Written Offer.
Subsequently, the Company and the Committee consulted with the
Sales Agent regarding the value of the DS&P bid with its proposed modifications
and the value of the Buyer's bid, which was the second highest bid, and which
had increased its bid by $500,000 subsequent to the Sales Agent's selection of
DS&P's Firm Written Offer. The Committee first informed DS&P that it would
consider other alternatives for the sale of the Company. After consulting with
the Sales Agent and receiving its input, and after carefully considering the
time and costs associated
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with the sales process, the Company and the Committee determined that it was in
the best interests of the Estate to move forward with the bidding process and
enter into negotiations with the Buyer. The Sales Agent concurred with the
decision of the Company and the Committee to negotiate with the Buyer.
Thereafter, the Company and the Committee negotiated the terms
and conditions of the Agreement with the Buyer. The Agreement provides for,
among other things, a Cash Purchase Price of $24.5 million and the assumption of
certain liabilities. The Agreement also provides that (i) the Sales Agent
conduct an overbid sale (which has been conducted); (ii) the Estate retain from
the Cash Purchase Price the Amount of $3 Million as the Agreement Damages in the
event the sale is not consummated as a result of a breach of the Agreement by
the Buyer; (iii) the Company pay to the Buyer the Amount of $250,000 in the
event the sale is not consummated as a result of a breach of the Agreement by
the Company or the Committee; (iv) Security Management Corporation, pursuant to
the terms of an agreement between the Buyer and Security Management, provide any
credit enhancement necessary for Buyer to consummate the purchase; and (v) the
Company and the Committee jointly file an amended disclosure statement and
amended plan not later than thirty days after the date of the overbid sale. On
November 22, 1995, the Company's and the Committee's motion (the "Joint Motion")
seeking approval to enter into the Agreement with the Buyer and the overbid
procedures was heard before the Bankruptcy Court. Beltzhoover, a shareholder and
a bidder, and DS&P filed objections to the Joint Motion. The Bankruptcy Court
overruled those objections and approved the Joint Motion on November 22, 1995.
On December 29, 1995, the overbid sale took place and there were no bidders
other than the Buyer. Accordingly, the Buyer was selected as the bidder with the
highest and best bid resulting from the auction process.
8. EXCLUSIVE PERIODS.
The Company has requested and received several extensions of
the periods in which it has the exclusive right to file and solicit acceptances
for a plan of reorganization. On November 22, 1995, the Bankruptcy Court
extended the exclusive periods until the hearing on the Disclosure Statement so
long as a disclosure statement and plan are filed before January 31, 1996. At
the hearing on the Disclosure Statement, the Company anticipates seeking an
extension of exclusivity until the conclusion of the hearing on Confirmation of
the Plan.
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DISCLOSURE STATEMENT WITH RESPECT TO
JOINT PLAN OF REORGANIZATION OF
NVF COMPANY AND OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF NVF
<PAGE> 44
III.
INTRODUCTION
The Company and the Committee seek approval of the Joint Plan. This
Disclosure Statement is submitted by the Plan Proponents in connection with the
solicitation of acceptances for the Plan. A copy of the Plan is attached hereto
as Exhibit "A".
The purpose of this Disclosure Statement is to provide the Company's
known creditors with adequate information of a kind, and in sufficient detail,
as far as is reasonably practicable in light of the nature and history of the
Company, upon which to base an informed decision regarding whether to accept or
reject the Plan. The Bankruptcy Court, in an order dated __________ ___, 1996,
approved this Disclosure Statement as containing adequate information and found
that it satisfied the requirements of Bankruptcy Code section 1125.
IV.
THE PLAN OF REORGANIZATION
THE FOLLOWING SECTION, AMONG OTHER THINGS, SUMMARIZES SIGNIFICANT
ELEMENTS OF THE PLAN. THIS SUMMARY IS NOT COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION SET FORTH IN THE PLAN AND
THE EXHIBITS THERETO.
A. DEVELOPMENT OF THE PLAN.
For a summary regarding the development of the Plan, see Section
II(B)(7).
B. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS.
1. UNCLASSIFIED PRIORITY CLAIMS.
a. ADMINISTRATIVE CLAIMS.
(1) Description. Allowed Administrative Claims
are all costs and expenses of administration of the Chapter 11 Case Allowed
under section 503(b) of the Bankruptcy Code, and referred to in sections
507(a)(1) and 1114 of the Bankruptcy Code, including, without limitation, the
actual and necessary costs and expenses of preserving the Company's Estate and
operating its businesses, including wages, salaries or commissions for services
rendered postpetition, the Indenture Trustees' Claims, any indebtedness or
obligation incurred or assumed by the Company, as debtor-in-possession. The Plan
Proponents estimate that the aggregated Amount of Allowed Administrative Claims
to be paid from the Distribution Fund is $6 million.
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(2) Treatment. On the Distribution Date, or as
soon thereafter as is practical, under both the Purchase Alternative and the
Recapitalization Alternative, each holder of an Allowed Administrative Claim
except for those (i) holders of Allowed Accounts Payable Postpetition Claims,
and (ii) holders of Allowed Postpetition Accrued Wages and Other Claims shall
receive from the Disbursing Agent on account of such Allowed Claim, payment in
full in Cash from the Distribution Fund. Each Professional employed at the
expense of the Company's Estate pursuant to sections 327 and 1103 of the
Bankruptcy Code and an appropriate order of the Bankruptcy Court, shall be paid
by the Disbursing Agent, the unpaid portion of its Allowed Administrative Claim
in Cash from the Distribution Fund. Allowed Accounts Payable Postpetition Claims
and Allowed Postpetition Accrued Wages and Other Claims shall receive payment in
full in Cash from the Reorganized Company in the ordinary course of business.
On the Distribution Date, Allowed
Administrative Environmental Claims shall be paid in full in Cash from the
Reorganized Company Account under the Purchase Alternative, or from the
Distribution Fund under the Recapitalization Alternative. Administrative
Environmental Claims which are not Allowed on the Distribution Date, but which
become fixed and liquidated thereafter, will be paid in full in Cash by the
Reorganized Company in the ordinary course of its business.
b. TAX CLAIMS.
(1) Description. Tax Claims consist of all
Claims against the Company entitled to priority under section 507(a)(8) of the
Bankruptcy Code. The Plan Proponents estimate that the aggregate Allowed Amount
of Tax Claims approximate $134,066.09.
(2) Treatment. On the Distribution Date, each
holder of an Allowed Tax Claim shall receive, payment in full in Cash by the
Reorganized Company, if funds are available, or (a) from the Reorganized Company
Account under the Purchase Alternative, or (b) from the Distribution Fund under
the Recapitalization Alternative.
2. ALLOWED SECURED CLAIMS
a. NVF 10% SECURED NOTE CLAIMS
(1) Description. Class 1 consists of the NVF
10% Secured Note Claims as Allowed pursuant to the Litigation Settlement
Agreement. Under the Litigation Settlement Agreement, the NVF 10% Secured Note
Claims are Allowed in the aggregate Amount of $8,225,643.74 constituting
principal in the Amount of $7,460,643.74 and interest in the Amount of $765,000.
Interest on the principal shall accrue at a rate of 10% per annum (simple
interest with no compounding) from September 30, 1995 until (i) the Consummation
Date or (ii) May 22, 1996, which is the date the first semi-annual payment is
due. The NVF 10% Secured Note Claims are secured by mortgages on the Company's
manufacturing plants located in Kennett Square, Pennsylvania, Wilmington,
Delaware and Hartwell, Georgia and on certain unimproved land of the Company.
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(2) Treatment. Under the Purchase Alternative
and the Recapitalization Alternative, the Reorganized Company shall pay each
holder of an Allowed NVF 10% Secured Note Claim semi-annual payments of interest
only at a rate of 10% per annum from September 30, 1995, on the principal Amount
owed of $7,460,643.74, with the entire outstanding balance due and payable on
November 22, 1996. Interest that has accrued from September 30, 1995 to (i) the
Consummation Date or (ii) May 22, 1996, which is the date the first semi-annual
payment is due, plus interest in the Amount of $765,000, shall be paid in Cash
from the Reorganized Company Account under the Purchase Alternative or from the
Distribution Fund under the Recapitalization Alternative on (i) the Distribution
Date or (ii) May 22, 1996, which is the date the first semi-annual payment is
due. The holders of the NVF 10% Secured Note Claims shall retain their Liens
securing the NVF 10% Secured Note Claims. The NVF 10% Secured Notes, mortgages
and other security documents shall be modified to coincide with the treatment
set forth herein and to preclude a default except as set forth herein. The
Reorganized Company shall have the right to pay any balance of the Allowed NVF
10% Secured Note Claims in full at any time on or after the Consummation Date
without premium or penalty. Under the Recapitalization Alternative, the
Committee shall have the right, but not the obligation, to require the
Disbursing Agent to reserve monies in the Distribution Fund to pay in full the
Allowed NVF 10% Secured Note Claims prior to the November 22, 1996 due date.
(3) Voting. Class 1 is impaired under the Plan
and, accordingly, the members of this Class are entitled to vote on the Plan.
b. THE ALLOWED SECURED HARTWELL CLAIM - CLASS 2.
(1) Description. Class 2 consists of the
Allowed Hartwell Claim in the Amount of $128,956.09. The Hartwell Secured Note
is secured by a deed of trust on the Company's manufacturing plant located in
Hart County, Georgia.
(2) Treatment. Under both the Purchase
Alternative and the Recapitalization Alternative, commencing on the Distribution
Date, the holder of the Allowed Hartwell Claim shall receive nineteen monthly
payments from the Reorganized Company in the Amount of $7,189.93, consisting of
principal and interest. The holder of the Allowed Hartwell Claim shall retain
its Lien on the manufacturing plant in Hart County, Georgia. The Hartwell
Secured Note mortgages and other security documents shall be modified to be
consistent with the treatment provided herein and to preclude a default except
as set forth herein. The Reorganized Company shall have the right to pay any
balance of the Allowed Secured Hartwell Claim in full at any time on or after
the Consummation Date without premium or penalty.
(3) Voting. Class 2 is impaired under the Plan
and, accordingly, the member of this Class is entitled to vote on the Plan.
c. THE ALLOWED SECURED REED SMITH CLAIM - CLASS 3.
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(1) Description. Class 3 consists of the
Allowed Secured Reed Smith Claim in the Amount of $412,682.96. The Reed Smith
Claim arises from fees and services provided to the Company and is secured by a
charging Lien pursuant to an agreement between the Company and Reed Smith
whereby the Company granted Reed Smith a security interest in future monies or
property recoverable from judgment, verdict, or settlement in the insurance
litigation styled NVF v. American Casualty of Reading, Pennsylvania et. al.
(the "Charging Lien Agreement").
(2) Treatment. Pursuant to a settlement
agreement between the Company and American Casualty of Reading, Pennsylvania and
Continental Casualty Company ("CNA"), CNA paid the Company $1,000,000 (the "CNA
Proceeds"). Reed Smith asserted a charging Lien against the CNA Proceeds,
however, the parties revised the Charging Lien Agreement with respect to the
treatment of Reed Smith's Claim under the Plan. Under the Purchase Alternative
and the Recapitalization Alternative, the holder of the Allowed Secured Reed
Smith Claim shall receive payment (i) in the Amount of $138,000 out of the CNA
Proceeds and, upon receipt, release the CNA Proceeds from its charging Lien, and
(ii) the balance of the Reed Smith claim shall be paid in monthly installments
in the Amount of $22,890.24 until such Claim is paid in full commencing the
later of the Distribution Date or thirty (30) days after the date of
Confirmation of this Plan. Notwithstanding the monthly payment schedule set
forth above, the balance of the prepetition sums due and owing to Reed Smith
will be paid in full upon receipt of any additional funds received in connection
with the litigation styled NVF v. American Casualty of Reading, Pennsylvania et.
al. Except as set forth above, Reed Smith shall retain its charging Lien as set
forth in the Charging Lien Agreement.
(3) Voting. Class 3 is impaired under the Plan
and, accordingly, the member of this Class is entitled to vote on the Plan.
d. THE ALLOWED CIT CLAIM - CLASS 4.
(1) Description. Class 4 consists of the
postpetition secured Allowed Claim of CIT in the maximum Amount of $8,000,000.
(2) Treatment. On the Distribution Date, under
the Purchase Alternative, the holder of the Allowed Class 4 Claim will be paid
in full in Cash from the Reorganized Company (a) through the Exit Financing, or,
if no such financing can be obtained, (b) payment in full in Cash from the
Reorganized Company Account. On the Distribution Date, under the
Recapitalization Alternative, the holder of the Allowed Class 4 Claim will be
paid in full in Cash from the Reorganized Company through the Exit Financing.
(3) Voting. Class 4 is unimpaired under the
Plan and, accordingly, the member of this Class is deemed to have accepted the
Plan.
e. THE NEW CASTLE COUNTY CLAIM - CLASS 5.
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(1) Description: Class 5 consists of the New
Castle County Claim in the aggregate Amount of $1,813,507.27 constituting
principal in the Amount of $1,442,243.86 and interest in the Amount of
$371,263.41. Interest shall continue to accrue on the entire Amount at a rate of
9% per annum from November 1, 1995 until the Consummation Date. The holder of
the New Castle County Claim asserts a statutory Lien against all of the
Company's real property located in Delaware pursuant to Delaware law.
(2) Treatment: Under the Purchase Alternative
and the Recapitalization Alternative, commencing on the Distribution Date, the
holder of the New Castle County Claim shall receive twelve monthly payments of
interest at the rate of 8% per annum on the aggregate amount of (i) principal in
the Amount of $1,813,507.27 plus (ii) accrued interest that has accrued on this
principal Amount at the rate of 9% per annum from November 1, 1995 to the
Distribution Date. Commencing thirteen months after the Distribution Date,
amounts owing on the New Castle County Claim shall be paid monthly with interest
at a rate of 8% per annum amortized over a forty-eight month period. The holder
of the New Castle County Claim shall retain in its statutory Lien, to the extent
valid. The Reorganized Company shall have the right to pay any balance of the
Allowed New Castle Claim in full at any time on or after the Consummation Date
without premium or penalty.
The Company or the Reorganized Company shall
also have the right to contest this Claim by setoff, objection or avoidance, so
long as it commences or continues such action the earlier of March 30, 1996 or
30 days after the Consummation Date.
(3) Voting: Class 5 is impaired under the Plan
and, accordingly, the member of this Class is entitled to vote on the Plan.
3. ALLOWED UNSECURED CLAIMS.
a. PRIORITY CLAIMS - CLASS 6.
(1) Description: Class 6 consists of Allowed
Priority Claims in the Amount of $555,469.54.
(2) Treatment: On the Distribution Date, the
holders of Allowed Priority Claims will be paid in Cash from the Reorganized
Company, if funds are available, under the Purchase Alternative and the
Recapitalization Alternative or from (a) the Reorganized Company Account, under
the Purchase Alternative or (b) the Distribution Fund, under the
Recapitalization Alternative.
(3) Voting: Class 6 is unimpaired under the
Plan and, accordingly, the members of this Class are deemed to have accepted the
Plan.
b. PENSION PLAN FUND CLAIMS - CLASS 7.
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(1) Description. Class 7 consists of Pension
Plan Fund Claims. The Company's Pension Plans are covered by ERISA. The Company
understands that it and all members of its control group are obligated to
contribute to the Pension Plans at least the Amount necessary to satisfy ERISA's
minimum funding standards, ERISA section 302, Tax Code section 412, and, in
addition, may be contractually liable to contribute to the Pension Plans. In
addition, the Company, as the contributing sponsor of the Pension Plans and all
members of its controlled group are jointly and severally liable for any
unfunded benefit liabilities of the Pension Plans. See 29 U.S.C. section
1362(a). The Company further understands that the Pension Plans may be
terminated only if the statutory requirements of either ERISA section 4041, 29
U.S.C. section 1341, or ERISA section 4042, 29 U.S.C. section 1342, are met.
Insufficiently funded plans must use the
PBGC's assumptions to measure benefit liabilities in a distress termination
under ERISA. The PBGC is a wholly-owned United States government corporation
created under Title IV of ERISA which guarantees the payment of certain pension
benefits upon termination of a pension plan. It should be noted that the PBGC
would review the determination of the Pension Plans' enrolled actuary as to
asset sufficiency, including all actuarial assumptions. See 29 C.F.R. section
2617.1 et seq. The PBGC has asserted Claims in the aggregated estimated Amount
of approximately $21,275,000 for unfunded pension benefits that will become due
IF THE PENSION PLANS ARE TERMINATED. In addition, the PBGC has asserted Claims
for due and unpaid contributions owed to the Pension Plan. The PBGC has also
asserted unliquidated Claims under 9 U.S.C. section 1307.
(2) Treatment. Under the Purchase Alternative
and the Recapitalization Alternative, neither the Pension Plans nor the PBGC
shall be precluded by Confirmation of the Plan from commencing any action, or
from taking any other action, to collect, enforce, or recover from the
Reorganized Company, its successors, or its assets or properties, any rights or
claims under ERISA or otherwise. For example, the Plan will have no effect upon
the liability of the Company under ERISA section 4062 for the Amount by which
the assets of the Pension Plans are insufficient to cover benefit liabilities
under one or more of the Pension Plans on the date(s) of termination, plus
interest calculated from the termination date(s), and for any liability under
ERISA section 4062(c), 29 U.S.C. section 1362(c), for the outstanding balance,
if any, of the accumulated funding deficiencies of one or more of the Pension
Plans, as determined in accordance with ERISA section 302(a)(2) and I.R.C.
section 412(a).
(3) Voting. The Company believes that Class 7
is unimpaired and, accordingly, the member of this Class is deemed to have
accepted the Plan.
c. UNSECURED CLAIMS WITHOUT PRIORITY - CLASS 8.
(1) GENERAL UNSECURED CLAIMS - CLASS 8A.
(a) Description: Class 8A consists of
all Allowed General Unsecured Claims in an Amount Greater than $100, including,
but not limited to, the NVF 5% Debentures and NVF 10% Debentures.
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(b) Treatment Under the Purchase
Alternative. Allowed General Unsecured Claims will be paid Pro Rata in Cash
from the Distribution Fund after payment of certain Allowed Administrative
Claims as provided above.
On the Distribution Date, the
holders of Allowed Class 8A Claims shall receive Pro Rata Distributions of all
Cash received by the Distribution Fund, subject to prior payment in full or
reserve on account of all unpaid Allowed Administrative Claims and Allowed Class
9 Claims entitled to Distribution as set forth herein and subject to any
reserves required under Article VI(A)(2) and on account of Disputed Class 8A
Unsecured Claims under the Plan. The Plan Proponents estimate that Allowed Class
8A Claimants will receive 47(cent) per $1.00 of Allowed Unsecured Claim.
(c) Treatment Under the Recapitalization
Alternative. On the Distribution Date, holders of Allowed Class 8A General
Unsecured Claims will receive their Pro Rata share of the Distribution Fund
consisting of (i) the Cash remaining, if any, from any Agreement Damages, Exit
Financing and the Litigation Settlement Proceeds less (a) any Distributions to
holders of Allowed Administrative Claims, Allowed Tax Claims and the holders of
Allowed Claims in Classes 1 through 6 and 9, under the Plan, (b) amounts
necessary to fund the reserve, if applicable, for payment of the Class 1 NVF 10%
Secured Notes Claims, (c) amounts necessary to fund the Reorganized Company's
working capital requirements, and (d) reserves, if any, required for Disputed
Claims and pursuant to Article VI(A)(2) under the Plan; and (ii) the Reorganized
NVF Common Stock and Secured Debentures. The Plan Proponents estimate that
holders of Class 8A General Unsecured Claims will receive a Distribution under
the Recapitalization Alternative having a value of approximately 47(cent) per
$1.00 of Allowed General Unsecured Claim.
(2) UNSECURED ENVIRONMENTAL CLAIMS - CLASS 8B.
(a) Description: Class 8B consists of
the Unsecured Environmental Claims.
(b) Treatment: Unsecured Environmental
Claims that are Allowed on the Distribution Date will receive the same Pro Rata
Distribution as holders of Allowed Class 8A Unsecured Claims as follows. Under
the Purchase Alternative, on the Distribution Date, each holder of an Allowed
Unsecured Environmental Claim will receive a Pro Rata Cash Distribution from the
Reorganized Company Account calculated by multiplying the Allowed Amount of such
Claim by the percentage each Allowed Class 8A General Unsecured Creditor has
received from the Distribution Fund for its Claim at the time that the
Distribution is made to such holder of an Environmental Claim. Under the
Purchase Alternative, holders of Allowed Unsecured Environmental Claims shall
not be entitled to receive Distributions from the Distribution Fund. Under the
Recapitalization Alternative, each holder of an Unsecured Environmental Claim
Allowed as of the Distribution Date shall receive its Pro Rata Distribution from
the Distribution Fund.
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Under both the Purchase Alternative
and the Recapitalization Alternative, unliquidated or Disputed Unsecured
Environmental Claims will not be estimated or paid on the Distribution Date, but
rather will be fixed and liquidated in the ordinary course post-Confirmation.
Upon being fixed and liquidated, each holder of a fixed and liquidated Unsecured
Environmental Claim will be entitled to a Cash payment directly from the
Reorganized Company in an Amount determined by multiplying the fixed and
liquidated Unsecured Environmental Claim by a fraction, the numerator of which
will be the fair market value of the property received by Allowed Class 8A
General Unsecured Creditors and those Environmental Claims Allowed prior to the
Distribution Date, and the denominator of which shall be the aggregate amount of
Allowed Class 8A General Unsecured Creditors and Environmental Claims Allowed
prior to the Distribution Date at the time the Distribution is made to such
holder of a fixed and liquidated Unsecured Environmental Claim.
(3) CLASS 8 VOTING.
Class 8 is impaired under the Plan and,
accordingly, the members of this Class are entitled to vote on the Plan.
d. ADMINISTRATIVE CONVENIENCE CLAIMS - CLASS 9.
(1) Description: Class 9 consists of all
non-priority Allowed General Unsecured Claims in an Amount equal to or less than
$100.
(2) Treatment: Under the Purchase Alternative
and the Recapitalization Alternative, on the Distribution Date, each holder of
an Allowed Claim in Class 9 shall receive Cash from the Distribution Fund in the
Amount of one hundred percent (100%) of its Allowed Claim from the Distribution
Fund.
(3) Voting: Class 9 is unimpaired under the
Plan and, accordingly, is deemed by law to have accepted the Plan.
e. AFFILIATE CLAIM - CLASS 10.
(1) Description: Class 10 consists of the
Affiliate Claim in the aggregate Amount of $480,997.00 constituting principal in
the Amount of $454,344.00 and interest in the Amount of $26,653.00.
(2) Treatment: Under the Purchase Alternative
and the Recapitalization Alternative, the holder of the Affiliate Claim shall
receive no Distribution under the Plan.
(3) Voting: Class 10 is impaired under the Plan
and will receive no Distribution. Accordingly, this Class is deemed to have
rejected the Plan.
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f. INTERESTS - CLASS 11.
(1) Description: Class 11 consists of Allowed
Interests in the Company comprised of the Existing Common Stock.
(2) Treatment: Under the Purchase Alternative
and the Recapitalization Alternative, the Interests shall be canceled and the
Interest holders shall receive no Distribution under the Plan.
(3) Voting: Class 11 is impaired under the Plan
and will receive no Distributions. Accordingly, this Class is deemed to have
rejected the Plan.
C. MEANS OF EFFECTUATING THE PLAN.
1. PURCHASE ALTERNATIVE.
On the Consummation Date, the Cash Purchase Price and the
Litigation Settlement Proceeds will be released to the Disbursing Agent for the
purpose of making Distributions to Allowed Administrative Claimants (except for
those Administrative Claims that constitute Allowed Accounts Postpetition
Claims, Allowed Postpetition Accrued Wages and Other Claims, and Allowed
Administrative Environmental Claims) and Allowed General Unsecured Creditors
(Class 8A and Class 9) under the Plan. The Disbursing Agent shall exercise the
Indenture Trustee's charging Liens under their respective Indentures and shall
reserve and hold from the Cash payable to Debenture holders the unpaid Amounts
owed to the Indenture Trustees and Distribute such amount to the Indenture
Trustees. The Reorganized Company will make the Distributions required under the
Plan to Classes 1, 2, 3, 4, 5, 6, 7, 8B, holders of Allowed Accounts Payable
Postpetition Claims, Allowed Postpetition Accrued Wages and Other Claims,
Administrative Environmental Claims, and Allowed Unsecured Environmental Claims
by using Cash from the Reorganized Company Account, cash from operations,
outside cash infusions, or Exit Financing. The Buyer has committed its financial
capability and capitalization to consummate the Plan, including but not limited
to, the obligations with respect to the assumed liabilities and to the extent
the Buyer has insufficient financial capability and capitalization, the Buyer
has entered into an agreement with Security Management Corporation pursuant to
which Security Management Corporation is obligated to provide any credit
enhancement necessary to consummate the transaction herein.
2. RECAPITALIZATION ALTERNATIVE.
In the event that the Buyer fails or is precluded from
consummating the Agreement, the Plan Proponents shall promptly file with the
Bankruptcy Court the Recapitalization Notice. Immediately thereafter, the Plan
Proponents shall seek to implement the Recapitalization Alternative. On the
Consummation Date, any Agreement Damages, the Exit
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Financing, the remaining Litigation Settlement Proceeds, the Reorganized NVF
Common Stock and Secured Debentures will be transferred to the Disbursing Agent.
The Disbursing Agent will use the Cash from the above sources
to make the payments required under the Plan to holders of Allowed
Administrative Claims, Allowed Tax Claims and, to the extent necessary, the
holders of Allowed Claims in Classes 1 through 6 and 9. The Reorganized Company
shall have the right, but not the obligation, after reserving, if necessary, any
working capital needed by the Reorganized Company, to require the Disbursing
Agent to reserve funds in the Distribution Fund for the payment in full of the
Allowed NVF 10% Secured Note Claims. The Disbursing Agent shall exercise the
Indenture Trustee's charging Liens under their respective Indentures and shall
reserve and hold from the Cash payable to Debenture holders the unpaid Amounts
owed to the Indenture Trustees and Distribute such amount to the Indenture
Trustees.
The Disbursing Agent shall also reserve the necessary Cash,
Reorganized NVF Common Stock and Secured Debentures as required under the Plan
with respect to Disputed Claims as set forth in Article IX of the Plan, except
for unliquidated Unsecured Environmental Claims which are not Allowed. The
Disbursing Agent shall exercise the Indenture Trustees' charging Liens under
their respective Indenture and shall reserve and hold from the Cash payable to
Debenture holders any unpaid Amounts owed to the Indenture Trustees and
Distribute such Amounts to the Indenture Trustees. After making such reserves,
and subject to paragraph E of Article IX of the Plan on the Distribution Date,
the Disbursing Agent shall Distribute to holders of Allowed Class 8A General
Unsecured Claims and Unsecured Environmental Claims Allowed as of the
Distribution Date Pro Rata the (a) Cash remaining in the Distribution Fund after
making the payments and reserves set forth above and (b) the Reorganized NVF
Common Stock and Secured Debentures.
The Company will continue operating as the Reorganized
Company. After the Consummation Date, the Reorganized Company will fund its
operations through existing Cash balances, Cash generated from continuing
operations and available borrowings. The Reorganized Company's Cash flow will be
sufficient not only to fund its operating expenses, but all other estimated
payments that may be required under the Plan.
D. DISTRIBUTIONS UNDER THE PLAN.
1. PURCHASE ALTERNATIVE.
Under the Purchase Alternative, there are two funds
established for the payments to certain holders of Allowed Claims entitled to be
paid upon the Distribution Date under the Plan: the Reorganized Company Account
and the Distribution Fund.
Allowed General Unsecured Claims (Classes 8A and 9), and
Allowed Administrative Claims, except for those Administrative Claims that
constitute the (i) Allowed Accounts Payable Postpetition Claims, (ii) Allowed
Postpetition Accrued Wages and Other
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Claims, and (iii) Allowed Administrative Environmental Claims, shall be paid in
Cash from the Distribution Fund. Except as otherwise set forth herein, the
Disbursing Agent shall be responsible for making Distributions to the holders of
Allowed Administrative Claims and General Unsecured Claims who are entitled to
receive payment from the Distribution Fund. Holders of Allowed Administrative
Environmental Claims, and Allowed Claims in Classes 4 and 6, Allowed Unsecured
Environmental Claims in Class 8B shall receive payment from the Reorganized
Company Account. Holders of all other Allowed Claims entitled to payment under
the Plan but not specified above will receive payments from the Reorganized
Company, or if funds are not available, from the Reorganized Company Account.
The Reorganized Company is responsible for making payments from the Reorganized
Company Account.
2. RECAPITALIZATION ALTERNATIVE.
All Allowed Administrative Claims (including the Allowed
Administrative Environmental Claim for Kennett Square) other than those
Administrative Claims that constitute the Allowed Accounts Payable Postpetition
Claims and Allowed Postpetition Accrued Wages and Other Claims shall be paid in
full in Cash from the Distribution Fund. Allowed Accounts Payable Postpetition
Claims and Allowed Postpetition Accrued Wages and Other Claims shall be assumed
by the Reorganized Company and paid in the ordinary course of business.
All Class 8 Allowed General Unsecured Claims and Unsecured
Environmental Claims Allowed on the Distribution Date will receive Pro Rata on
the Distribution Date: (i) any Agreement Damages, Exit Financing, and the
Litigation Settlement Proceeds Less (x) any Distributions to holders of Allowed
Administrative Claims, Allowed Tax Claims and the holders of Allowed Claims in
Classes 1 through 6 and 9 under the Plan, (y) the reserve, if applicable, for
payment of the Class 1 NVF 10% Secured Notes Claims and (z) amounts necessary to
fund the Reorganized Company's working capital requirements; and (ii) the
Reorganized NVF Common Stock and Secured Debentures. The Disbursing Agent shall
also reserve from the Distribution Fund amounts necessary to fund the Disputed
Claims Reserve and the reserve under Section IV(D) herein. The Plan Proponents
estimate that holders of Class 8A General Unsecured Claims will receive a
Distribution under the Recapitalization Alternative having a value of
approximately 47% per $1.00 of Allowed Claim.
The Reorganized Company shall assume the liabilities of Class
8B unliquidated or Disputed Unsecured Environmental Claims and, upon the
allowance of an Unsecured Environmental Claim, shall pay to the holders of such
Claim, an Amount determined by multiplying the Allowed Unsecured Claim by a
fraction, the numerator of which will be the fair market value of the property
received by the holders of Allowed Class 8A General Unsecured and those
Environmental Claims Allowed prior to the Distribution Date, and the denominator
of which shall be the aggregate amount of Allowed Class 8A General Unsecured
Creditors and Unsecured Environmental Claims Allowed prior to the Distribution
Date.
3. DISTRIBUTION RECORD DATE FOR DEBENTURE HOLDERS.
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a. DISTRIBUTION RECORD DATE.
All Distributions under the Plan shall be made to
(or, in the case of Disputed Claims, reserved on behalf of) holders of Allowed
General Unsecured Claims as of the Distribution Record Date.
4. THE INITIAL DISTRIBUTIONS.
On the Consummation Date, the Disbursing Agent shall make all
Distributions and payments required under the Plan and deposit the Reserve
Amounts in the Disputed Claims Reserve Accounts to the extent required by the
Bankruptcy Court in respect of Disputed Claims.
5. TREATMENT OF DISPUTED CLAIMS.
If in Class 8A, there exists with respect to General Unsecured
Claims, as of the Distribution Date or any relevant date thereafter, Disputed
Claims, the Disbursing Agent shall hold in the Disputed Claims Reserve Account
and reserve all Pro Rata Distributions to which such holder of a Disputed Claim
would otherwise be entitled, for the benefit of such holder, in either (a) the
full Amount claimed by the holder of such Claim) or (b) the Amount of such Claim
as estimated or Allowed by the order of the Bankruptcy Court provided, however,
that no reserve shall be necessary on account of unliquidated Class 8A Claims
and such Claims shall become disallowed, unless and until the holder of such
Claim shall obtain an order of the Bankruptcy Court estimating such Claim for
the purpose of calculating a proper reserve prior to the allowance thereof by
order of the Bankruptcy Court. No Claimant shall be entitled to recover any
Distributions made to holders of Allowed Claims regardless of any delay in
obtaining an order allowing or estimating a Disputed Claim or an unliquidated
Claim. The Disputed Claims Trustee designated by the Plan Proponents hereunder
shall have the responsibility of liquidating and/or otherwise resolving General
Unsecured Claims which are Disputed Claims.
After a Final Order has been entered, or other final
resolution has been reached with respect to all Disputed Claims, the Disbursing
Agent shall distribute each Claimant's Pro Rata share in accordance with Article
II of the Plan herein, but in no event no later than sixty (60) days after the
entry of such order, pursuant to the terms of the order allowing the Claim and
the terms of this Plan, with any Distributions reserved by the Disbursing Agent
in an Amount greater than that required to be distributed as a result of the
order allowing such Disputed Claim becoming property of the Disbursing Agent for
Distribution Pro Rata to the respective holders of Allowed General Unsecured
Claims in Class 8A.
6. UNCLAIMED DISTRIBUTIONS.
a. SAFEGUARDING OF UNCLAIMED DISTRIBUTIONS.
All Unclaimed Distributions, shall be held by the
Disbursing Agent in the Disputed Claims Reserve Accounts for one hundred and
eighty (180) days following the
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Distribution Date. Such Distributions shall be held solely for the benefit of
the holders of Allowed Claims and Allowed Administrative Claims who have failed
to claim such Distributions and shall be released from the Disputed Claims
Reserve Accounts and delivered to such holder, net of any taxes or other
applicable charges required to be paid by the Disbursing Agent in respect
thereof, upon presentation of proper proof by such holder of its entitlement
thereto.
b. RELEASE OF UNCLAIMED DISTRIBUTIONS.
After one hundred and eighty (180) days, the
Unclaimed Distributions (including interest thereon) may be released by the
Disbursing Agent from the Distribution Fund and in such case, they shall
constitute an Excess Reserves.
7. EXCESS RESERVES.
All Excess Reserves shall be distributed to holders of Allowed
General Unsecured Claims Pro Rata, under the Purchase Alternative to holders of
Allowed Claims in Class 8A and 8B under the Recapitalization Alternative.
8. FORM OF DISTRIBUTIONS.
Any Cash payment to be made pursuant to the Plan may be made
by a check or wire transfer or as otherwise required.
9. ROUNDING.
Fractions of cents cannot be distributed. Therefore, whenever
a payment of a fraction of a cent would otherwise be called for, the actual
payment shall reflect a rounding of such fraction down to the nearest whole
cent.
E. THE DISBURSING AGENT.
1. APPOINTMENT.
The Disbursing Agent shall be _____________, who has been
jointly retained by the Plan Proponents pursuant to the Disbursing Agent
Agreement dated ___________, 1996.
2. POWERS.
The rights, powers and duties of the Disbursing Agent shall
include (a) maintenance and oversight of the Distribution Fund, (b) the
calculation and payment of all the Distributions and the making of all other
payments required under the Plan, including under the Recapitalization
Alternative, (c) the maintenance and oversight of the Disputed Claims Reserve
Accounts, (d) the maintenance of Distributions that are unclaimed and the
Distribution of Excess
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Reserves, and (e) any and all other actions necessary or appropriate to
implement or consummate the Plan.
3. COMPENSATION.
The Disbursing Agent shall be compensated pursuant to the
Disbursing Agent Agreement.
4. APPOINTMENT OF SUCCESSOR.
In the event of the death, resignation or discharge of the
Disbursing Agent, the Bankruptcy Court shall appoint a successor to the
Disbursing Agent, who will be bound by the provisions of the Plan and the
Disbursing Agent Agreement and the Disbursing Agent Order.
5. TERMINATION OF THE DISBURSING AGENT.
After the Consummation Date, upon Distribution of all funds
and securities or securities in the Distribution Fund, and upon the final
resolution of all Disputed Claims and the release of all funds from the Disputed
Claims Reserve Accounts, and the payment or transfer of all Excess Reserves, the
Disbursing Agent shall so inform the Bankruptcy Court and shall be relieved of
any further responsibilities under the Plan.
F. THE DISPUTED CLAIMS TRUSTEE.
1. APPOINTMENT.
Under the Purchase Alternative, the Disputed Claims Trustee
shall be John P. Kneafsey, who is a Committee member and holder of Debentures,
and who was jointly retained by the Plan Proponents pursuant to the Disputed
Claims Trustee Agreement dated ______, 1996.
2. POWERS.
The rights, powers and duties of the Disputed Claims Trustee
shall include the liquidation and/or resolution of the General Unsecured Claims
which are Disputed Claims under the Purchase Alternative and the Disputed Claims
Trustee shall be authorized to retain counsel or other Professionals necessary
to enable him to fulfill his obligations.
3. COMPENSATION.
The Disputed Claims Trustee shall be compensated pursuant to
the Disputed Claims Trustee Agreement.
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4. APPOINTMENT OF SUCCESSOR.
In the event of the death, resignation or discharge of the
Disputed Claims Trustee, the Bankruptcy Court shall appoint a successor to the
Disputed Claims Trustee, who will be bound by the provisions of the Plan and the
Disputed Claims Trustee Agreement.
5. TERMINATION OF THE DISPUTED CLAIMS TRUSTEE.
Upon the final resolution of all General Unsecured Claims
which are Disputed Claims, the Disputed Claims Trustee shall be relieved of any
further responsibilities under the Plan.
6. RECAPITALIZATION ALTERNATIVE.
Under the Recapitalization Alternative, there will be no
Disputed Claims Trustee. The Reorganized Company will assume the powers of the
Disputed Claims Trustee as those set forth under the Purchase Alternative.
G. CONDITIONS TO CONFIRMATION OF THE PLAN.
The following are conditions precedent to confirmation of the Plan that
may be satisfied or waived in accordance with paragraph I of this Section.
1. The Bankruptcy Court shall have approved by Final Order a
disclosure statement with respect to the Plan in form and substance reasonably
acceptable to the Plan Proponents.
2. The Confirmation Order shall be in form and substance
reasonably acceptable to the Plan Proponents and Buyer.
H. CONDITIONS TO THE CONSUMMATION DATE
The following are conditions precedent to the occurrence of the
Consummation Date, each of which may be satisfied or waived in accordance with
paragraph I of this Section.
1. The passage of 11 days after the date on which the Bankruptcy
Court enters the Confirmation Order.
2. The date of Confirmation shall have occurred and the
Confirmation Order shall, among other things, provide that:
a. The provisions of the Confirmation Order are
nonseverable and mutually dependent;
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b. Except as expressly provided in the Plan or the
Confirmation Order, the Company is discharged effective upon the date of
Confirmation from any "debt" (as that term is defined in section 101(12) of the
Bankruptcy Code), and the Company's liability in respect thereof is extinguished
completely, whether reduced to judgment or not, liquidated or unliquidated,
contingent or noncontingent, asserted or unasserted, fixed or unfixed, matured
or unmatured, disputed or undisputed, legal or equitable, or known or unknown,
or that arose from any agreement of the Company that has either been assumed or
rejected in the Case or pursuant to the Plan, or obligation of the Company
incurred before the date of Confirmation, or from any conduct of the Company
prior to the date of Confirmation, or that otherwise arose before the date of
Confirmation, including, without limitation, all interest, if any, on any such
debts, whether such interest accrued before or after the Petition Date;
c. Except as expressly provided in the Plan, all
Interests shall be terminated effective upon the Consummation Date;
d. The Plan does not provide for the liquidation of all
or substantially all of the property of the Company and its Confirmation is not
likely to be followed by the liquidation of the Reorganized Company or the need
for further financial reorganization; and
e. The Bankruptcy Court shall have determined that any
Reorganized NVF Common Stock and Secured Debentures issued under the Plan in
exchange for Claims against the Company are exempt from registration under the
Securities Act of 1933 pursuant to section 1145 of the Bankruptcy Code, except
to the extent that holders of any Reorganized NVF Common Stock and Secured
Debentures are "underwriters" as that term is defined in section 1145 of the
Bankruptcy Code.
3. The Disputed Claims Reserve with respect to General Unsecured
Claims does not require reserving more than $1.5 million, unless otherwise
agreed to by the Committee.
4. No request for revocation of the Confirmation Order under
section 1145 of the Bankruptcy Code shall have been made, or, if made, shall
remain pending.
5. Under the Recapitalization Alternative, the Reorganized
Company shall have obtained the Exit Financing.
I. WAIVER OF CONDITIONS TO THE CONFIRMATION OF THE PLAN AND TO THE
CONSUMMATION DATE.
The conditions set forth in paragraph (H) and (I) of this Section may
be waived by the Plan Proponents without notice or a hearing. The failure to
satisfy or waive any condition to the Confirmation of the Plan or the date of
Consummation may be asserted by the Plan Proponents regardless of the
circumstances giving rise to the failure of such condition to be satisfied
(including any action or inaction by the Plan Proponents). The failure of the
Plan Proponents to
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exercise any of the foregoing rights shall not be deemed a waiver of any other
rights, and each such right shall be deemed an ongoing right, which may be
asserted at any time.
J. EFFECT OF CONFIRMATION.
1. DISCHARGE OF CLAIMS AND INTERESTS.
Except as otherwise provided in the Plan or in the
Confirmation Order, upon entry of the Confirmation Order the Company shall be
discharged from all Claims against or Interests in the Company, including any
rights of set off, that arose before the entry of the Confirmation Order. The
discharge of the Company shall be effective as to each Claim and Interest
(except as otherwise provided in the Plan and Confirmation Order), regardless of
whether a proof of Claim or Interest therefore was filed, whether the Claim or
Interest is a Disputed Claim or Interest or an Allowed Claim, Allowed
Administrative Claim or Allowed Interest, or whether the holder thereof votes to
accept or reject the Plan.
2. INJUNCTION.
Each holder of a discharged Claim or Interest shall be
permanently enjoined and precluded from taking certain actions, as described in
greater detail in the Plan, against the Reorganized Company or any of its
Affiliates on and after the Consummation Date.
3. EXCULPATION AND LIMITATION OF LIABILITY.
On the Consummation Date, the Company and all holders of
Claims against and Interests in the Company will be conclusively deemed to
release all Professionals retained by order of the Bankruptcy Court in the Case
and all members of the Committee appointed in the Case, and all of the
Professionals' and the Committee members' respective officers, directors,
employees, principals, partners and agents, and all officers and directors of
the Company holding such offices at anytime through the Distribution Date from
all liabilities, claims, costs, Damages (proximate or consequential) and
expenses (including attorneys' fees), except for claims arising from fraud,
willful misconduct or gross negligence of such persons.
4. INDEMNIFICATION.
From and after the Consummation Date, the Reorganized Company
shall indemnify and hold harmless (a) the Company, its officers, Professionals
and directors, (b) the Committee, its Professionals and (c) the Committee
members and their counsel, accountants and financial advisors (including each of
the above (a) (b) (c) indemnified party's officers, directors, partners and
employees) from and against any and all Liabilities, claims, costs, Damages
(proximate or consequential) and expenses (including attorneys' fees) which may
be made, assessed or otherwise incurred by the indemnified parties arising out
of or relating to obligations or from liabilities (fixed or contingent) arising
from events occurring post-petition which the Reorganized Company has agreed to
assume or perform pursuant to the Agreement or in
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connection with the transactions contemplated hereby (including, without
limitation, any liability which the Company or its affiliates may incur pursuant
to ERISA and any liability to the PBGC). In each instance where there is a claim
or potential claim for which any of the indemnified parties is or may be
entitled to seek indemnification, the indemnified party shall notify the
Reorganized Company or the Buyer in writing of such claim and shall furnish to
the Reorganized Company or the Buyer copies of all notices, service of process,
pleadings and other pertinent written communications from the party asserting
such claim. The Reorganized Company shall promptly defend, pay, discharge,
compromise or settle such claim at the Reorganized Company's expense, in such
manner that neither the indemnified party nor their business, equipment,
property or other assets, shall suffer any hindrance, loss, expense,
interference, jeopardy, lien, judgment, attachment, notice of violation,
injunction or judicial or other order.
5. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Executory contracts and unexpired leases shall either be
rejected or shall be assumed by the Reorganized Company, pursuant to the
provisions of sections 365 and 1123 of the Bankruptcy Code as provided in
Schedule 3.5(j) of the Agreement. Any party to an executory contract or
unexpired lease that is rejected shall be required to file a proof of Claim with
the Bankruptcy Court no later than fifteen (15) days after entry of the
Confirmation Order.
6. TRANSFER FREE OF CLAIMS, LIENS, CHARGES AND OTHER INTEREST.
Under the Purchase Alternative, except as otherwise provided
in the Plan or the Confirmation order, the Buyer is purchasing the New Common
Stock of the Reorganized Company, free and clear of all Claims, Liens, charges
and other interests of creditors arising prior to the date of Confirmation.
Under the Recapitalization Alternative, the Reorganization NVF
Common Stock shall be transferred to holders of Allowed Class 8A General
Unsecured Claims and Class 8B Unsecured Environmental Claims Allowed as of the
Distribution Date free and clear of all Claims, Liens, charges and other
interests of creditors arising prior to the date of Confirmation.
On the Distribution Date, the Indenture Trustee Claims shall
be paid in full in Cash as follows: to Bankers Trust Company, $297,693.53; to
Sterling National Bank and Trust Company, $_______. In addition to the
foregoing, which cover the Indenture Trustee Claims through December 31, 1995,
the Indenture Trustees may submit to the Company and the Committee invoices and
back-up for all expenses incurred thereafter through the Consummation Date. If
neither the Company nor the Committee has advised an Indenture Trustee in
writing of its specific objection to any such subsequent fees and expenses
within five (5) business days of receipt, then the Disbursing Agent shall pay
such additional Indenture Trustee Claims in Cash by the later of ten (10)
business days after submission of the invoice and backup or the Distribution
Date. In the event any such invoice is disputed, the Indenture Trustee may apply
for allowance of such disputed invoice as an Indenture Trustee Claim in
accordance with Article VI(D) of the Plan. Nothing contained herein shall
deprive the Indenture Trustees of their charging Liens under their
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respective Indentures as exercised by the Disbursing Agent under this Plan.
Bankers Trust currently estimates that its additional Indenture Trustee Claim
will not exceed $15,000 and Sterling currently estimates that its additional
Indenture Trustee Claim will not exceed $________.
After the Indenture Trustees or their agents perform their
obligations under the Plan, the Indenture Trustees and their agents, successors
and assigns shall be discharged of all their obligations associated with the
respective Indentures and agreements and released from all claims arising in the
Chapter 11 Case, and as of the Distribution Date, such Indentures or agreements
shall be deemed terminated, except that such termination shall not impair the
rights of holders of Claims under the Indentures to receive Distributions on
their Claims or the rights of the Indenture Trustees under their charging Liens
pursuant to their respective Indentures to the extent that they have not
received payment in full of amounts owed to the Indenture Trustees under their
Indentures.
7. CANCELLATION OF THE DEBENTURES AND EXISTING COMMON STOCK AND
DISCHARGE OF INDENTURE TRUSTEE.
As of the Consummation Date, the Debentures shall be canceled
and shall be null and void, and the holders thereof shall have no rights, and
such instruments shall evidence no rights, except the right to receive
Distributions under this Plan in accordance with the Allowed Claims of the
holders of such Debentures. As of the Consummation Date, the holders of
certificates for Existing Common Stock shall have no rights, and such
instruments shall evidence no rights.
No holder of a Debenture shall be entitled to any Distribution
under this Plan unless and until such holder shall have first surrendered or
caused to be surrendered, to the Disbursing Agent, the original Debentures
together with an appropriate letter of transmittal, or, in the event that such
original Debentures have been lost, destroyed, stolen or mutilated, unless such
holder shall have executed and delivered an affidavit of loss and an indemnity
with respect thereto in a form customarily utilized for such purposes.
After the Indenture Trustees or their agents perform their
obligations under the Plan the Indenture Trustees and their agents, successors
and assigns shall be discharged of all their obligations associated with the
respective Indentures and agreements and released from all claims arising in the
Company's Chapter 11 Case, and as of the Distribution Date, such Indentures or
agreements shall be deemed terminated, except that such termination shall not
impair the rights of holders of Claims under the Indentures to receive
Distributions on their Claims.
K. JURISDICTION.
The Plan provides that the Bankruptcy Court shall retain jurisdiction
for the following purposes:
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1. to determine the allowability of Claims and Interests upon the
timely objection thereto;
2. to approve, pursuant to section 365 of the Bankruptcy Code,
the assumption, assignment or rejection of any executory contract or unexpired
lease of the Company except as otherwise provided in the Plan;
3. to determine requests for payments of Claims entitled to
priority under section 507(a)(1) of the Bankruptcy Code, including compensation
of parties entitled thereto;
4. to resolve controversies and disputes regarding the
interpretation of the Plan or any exhibit thereto;
5. to implement the provisions of the Plan and enter orders in
aid of confirmation and consummation of the Plan;
6. to adjudicate any disputes with holders of Claims or Interests
or any causes of action; and
7. to hear and determine all pending or future controversies,
suits, and disputes that may arise under the Plan including, without limitation,
disputes between the Company and the Committee, and controversies arising in
connection with the interpretation of the Plan, including any and all schedules,
documents, and exhibits hereto, or any documents intended to implement the
provisions of the Plan;
8. to consider any modification to the Plan;
9. to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan, including any Exhibit thereto, or in any order of
the Bankruptcy Court, including the Confirmation Order, as may be necessary to
carry out the purposes and intent of the Plan and to implement and effectuate
the Plan;
10. to determine such other matters as may be provided for in the
Confirmation Order or other orders of the Bankruptcy Court as may be authorized
under the provisions of the Bankruptcy Code or any other applicable law;
11. to enforce all orders, judgments, injunctions, and rulings
entered in connection with the Chapter 11 Case, and
12. to enter a final decree closing the Chapter 11 Case.
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L. MISCELLANEOUS PROVISIONS.
1. AMENDMENT.
The Plan may be altered, amended or modified only by the Plan
Proponents with the consent of the Bankruptcy Court.
2. CREDITORS COMMITTEE DISBANDED.
The Plan provides that on the Distribution Date, the Committee
shall be disbanded.
3. GOVERNING LAW.
Except to the extent that the Bankruptcy Code, Bankruptcy
Rules or Delaware General Corporation Law are applicable, and subject to the
provisions of any contract, instrument, release or other agreement or document
entered into in connection with the Plan or this Disclosure Statement, the
rights and obligations arising under the Plan and this Disclosure Statement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware without giving effect to the principles of conflict of
laws of the State of Delaware.
4. POSTPETITION INTEREST.
Unless otherwise provided for in the Plan or Confirmation
Order, no holder of a Claim will be entitled to interest accruing on or after
the Petition Date on account of such Claim.
V.
LEGAL PROCEEDINGS
The following is a brief description of certain material proceedings
involving the Company.
A. ENVIRONMENTAL PROCEEDINGS AGAINST THE COMPANY.
All Off-site and On-site Environmental Liabilities will be assumed by
the Reorganized Company.
Bankruptcy Code section 362(a) provides that the filing of the petition
for relief under the Bankruptcy Code operates as a stay during the pendency of a
Chapter 11 Case of the commencement or continuation of any judicial or other
proceedings against the Company. Creditors seeking to assert Claims were
required to file proofs of Claim against the Estate in accordance with the Bar
Date Order. To the extent that such litigation results in Claims that are
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Allowed against the Estate prior to the Consummation Date, such allowance may
affect the distributions to certain creditors under the Plan.
1. TYBOUTS CORNER LANDFILL.
In October 1980, the EPA filed suit against New Castle County,
Delaware and others with respect to the disposal of waste at the Tybouts Corner
Landfill which is adjacent to the Army Creek Landfill described below. The EPA
sought injunctive relief and recovery of its clean up costs. The Company and
numerous other alleged potentially responsible parties ("PRP") were named in the
suit as third party defendants in 1985. A Consent Decree was approved by the
Court resolving the Company's liability.
The Company was also named as a defendant in an action brought
by certain residents in the vicinity of the Tybouts Corner Landfill arising out
of the alleged contamination of the site. In November 1992, the Company entered
into a settlement of such action with the Andrews Generator Settlement Group
providing for the payment by the Company of approximately $122,000 in twelve
equal monthly installments (of which three payments in the aggregate Amount of
$30,419.58 remain outstanding) (the "Tybouts Claim"). Such Claim shall be paid
Pro Rata in accordance with Section IV(B). The underlying action has been
dismissed. In the event of nonpayment by the Company, the settlement with the
Andrews Group provides for a Lien on the Company's property in New Castle County
as a remedy.
2. KENNETT SQUARE PLANT SITE AND NOZNESKY JUNK YARD.
The Company was notified in 1984 by the Pennsylvania
Department of Environmental Resources ("DER") of a discharge containing PCBs
from an outfall from its Kennett Square plant in Chester County, Pennsylvania to
an unnamed tributary of the west branch of Red Clay Creek. The Company responded
with an investigation and clean up of the potential source. The Company entered
into a consent order and agreement with the EPA with respect to on-site clean up
and the EPA advised the Company that it has fully complied with the order. The
DER subsequently requested that the Company clean up PCBs in the unnamed
tributary not located on the Company's property. With respect to alleged
off-site contamination, the EPA issued two unilateral orders requiring testing
and removal by the Company of certain contaminated soils. The Company filed a
final report with the EPA under the second unilateral order, which expressly
superseded the first order, stating that the Company believed its terms had been
complied with. The Company had remediated the site by the removal of tons of
soil, testing and developing an environmental solution to the PCB's in the rail
road ditch. The Company also discussed with the EPA a possible settlement with
respect to additional elevated concentrations of PCB's that were detected in an
off-site drainage ditch. On November 10, 1992, the EPA sent to the Company a
unilateral order requiring the prompt development and implementation of a
response action plan for (1) the evacuation and disposal of PCB contaminated
soils, sediments and debris from the off-site drainage ditch and (2) the
"sale/tributary PCB report" described above. The Company declined to undertake
the order for several reasons including financial and technical ones. EPA
incurred costs of approximately $2 million in performing part or all of the
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work. The EPA could seek to impose fines of $25,000 per day and/or treble
Damages for non-compliance with the order due to the Company's refusal to
perform the work.
The EPA plans further investigation and potentially additional
clean up at this site. Specifically EPA forwarded a consent order to the Company
by letter dated December 12, 1995 requesting the Company to construct a
sedimentation pond and related work. The Company and EPA are presently
negotiating over the scope of work and the terms of the consent order to govern
the Company's performance of that work. Further, the EPA has advised the Company
informally that it is reviewing Kennett Square and/or adjacent areas for
possible listing on the NPL as a Superfund Site. There have been allegations
that the total additional response costs could be $10 million or higher. The EPA
has declined to provide any information other than the NPL listing evaluation is
ongoing.
In March 1995, the Company also received notice of violation
letters and/or information requests from governmental agencies regarding alleged
hazardous waste management, air emission, and wastewater discharge violations.
The Company has retained consultants and is reviewing those matters with the
appropriate governmental agencies.
The Kennett Square PCB contamination may or may not be related
to property adjacent to the Kennett Square Plant site known as the Noznesky Junk
Yard. EPA has expressed its intention to investigate this site. The Company is
uncertain of its connection, if any, to the site or the scope of the problem.
3. LIPARI LANDFILL.
The EPA has filed an action against several PRPs not including
the Company to recover costs expended for the remediation of Lipari Landfill in
New Jersey. The Company is named as one of many third-party defendants with
respect to the landfill. The defendants are seeking to recover their past
response costs and future costs for performance of the remedy from the Company
and other third-party defendants.
In September 1989, the New Jersey Department of Environmental
Protection ("NJDEP") issued a directive to 20 parties, including the Company,
under the authority of the New Jersey Spill Compensation Control Act which is
stated to impose strict, joint and several liability and provides for treble
Damages for failure to comply with the requirements of a directive. The
directive requests payment to reimburse NJDEP for New Jersey's estimated 10%
cost share of certain remedial activities at the Lipari Landfill as well as for
certain administrative costs.
The principal defendant at the Lipari Landfill site -- Rohm &
Haas -- settled with the United States and the State of New Jersey and agreed to
pay most of the government's costs and to perform the remedy at the site.
Numerous potentially responsible parties named as third-party defendants settled
their liability as well. Approximately ten (10) third-party defendants remain in
the litigation, including the Company. The third-party defendants generally are
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substantial companies. The third-party plaintiffs and the ten third-party
defendants participated in court ordered mediation to resolve the matter
throughout much of 1994 and 1995. The mediation failed and a trial schedule is
expected to be set. The third-party plaintiffs allege joint and several
liability, and seek approximately $6 - $9 million from the third-party
defendants.
On or about August 30, 1995, the Company was served with a
summons in an action entitled Wilson v. Lipari in which the Company is named as
a defendant along with 16 other entities. The case is a class action seeking
Damages arising from alleged exposure to the Lipari Landfill. The Company has
filed a response indicating that action is subject to the bankruptcy automatic
stay, prohibiting the plaintiffs from proceeding against the Company.
4. GEMS LANDFILL.
The Company, along with numerous other parties, is a recipient
of a unilateral 106 order directing it to perform certain remedial actions at
the GEMS Landfill site in New Jersey as a result of alleged waste disposal at
such site. The Company has also been named a defendant in litigation commenced
by NJDEP with respect to the GEMS site and has entered into a partial settlement
with respect to Phase I of the GEMS site remediation, for which it paid
approximately $150,000. Subsequently, New Jersey issued a directive to existing
PRP's, including the Company, relating to the GEMs site Phase II (final)
remediation. The Company believes there may be a reallocation of waste volumes
attributable to participating parties which could affect the Company's share for
both Phase I and II settlement costs. Additionally, a class action involving 200
to 900 property owners received class certification and litigation is proceeding
against some PRPs at this site.
In conjunction with other PRPs, the Company made a settlement
offer to the State of New Jersey and the United States. The governments are
evaluating that group proposal. If the governments accept the proposal, all
liabilities of the Company would be settled.
5. HELEN KRAMER LANDFILL, MARVIN JONES TRANSFER STATION, P.J.P.
LANDFILL.
The Company, along with numerous other parties, has been named
by the EPA as a PRP with regard to the Helen Kramer Landfill in New Jersey as a
result of alleged waste disposal at such site. On May 31, 1989 NJDEP separately
issued a directive under the New Jersey Spill Act to 48 potentially responsible
parties, including the Company, and to 17 insurance carriers seeking
reimbursement for the state's expected share of construction costs to implement
remedial actions at the Helen Kramer Landfill. Thereafter, the EPA filed a
complaint in October 1989 against the Company and others seeking recovery of the
costs of cleanup of such site. A complaint seeking essentially similar relief
was also filed against the Company and 56 other defendants by the NJDEP. Those
actions were joined by the court. New Jersey and the United States seek an
alleged $184,373,549.18 plus interests and costs against some 48 direct
defendants, including the Company, and approximately 265 third-party defendants.
Through court order mediation last year, efforts were made to settle the case.
The settlement process failed and the magistrate has recently ruled that the
direct defendants are to proceed in the
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litigation as jointly and severally liable, but that the third-party defendants
may be only severally liable.
6. YORKLYN PLANT SITE AND NEWARK PLANT SITE.
In June 1993, the Company received notification from the State
of Delaware regarding potential liability for zinc contamination of the Red Clay
Creek and adjacent area. The State contends that historical plant operations
have contributed to increased levels of zinc in the stream and sediment. The
Company proposes to enter into a Consent Decree with the state to investigate
the alleged contamination.
In addition, by letter dated August 30, 1995, the EPA
requested information from the Company pursuant to the Clean Water Act,
pertaining to alleged zinc contaminated groundwater at the Yorklyn site. As an
information request, the Company has no indication of the cost, if any, that
might arise in connection with any alleged contamination.
7. BUZBY BROTHERS LANDFILL.
In October 1991, the NJDEP issued a directive to more than one
hundred PRPs, including the Company, notifying them that they are responsible
for cleanup of the Buzby Brothers Landfill in Voorhees, New Jersey, and ordering
the PRPs, including the Company, to reimburse NJDEP for the estimated costs of
the remedial investigation and feasibility study. The PRPs have discussed
settlement of the directive, and an intra-group allocation has been proposed
pursuant to which the Company paid $10,000 to settle its liability under the
directive for reimbursement of the estimated costs of such investigation and
feasibility study. To date, approximately $8.5 million has been spent by
owner/operators to remediate the site and there is pending federal and state
court litigation against some of the PRPs, not including the Company, in which
those who have incurred costs performing a remedy seek reimbursement from
others. It is possible that such an action could be pursued against the Company.
8. BOARHEAD FARMS SITE.
On June 10, 1988 and May 26, 1993, the EPA sent the Company
requests for information connecting the Company to the Boarhead Farms Site,
Bridgeton Township, Bucks County, Pennsylvania. The Company knows of no
information directly linking it to this site and has provided a response to that
effect to the EPA on August 8, 1994.
9. SPECTRON SITE.
The EPA named approximately 400 to 500 PRPs at this site.
Clean up of the site was divided into units and the Company and other PRPs have
entered settlements with respect to some units. On or about October 1, 1995, the
Company received a notice letter from the EPA inviting it to participate in the
negotiation of an agreement to conduct a remedial investigation/feasibility
study for this site. The Company is presently reviewing this matter.
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10. BOLSENSKI LANDFILL, MOUNTAINTOP LANDFILL, AND RIVERE CHEMICAL
SITE.
The Company received PRP notice letters from the EPA with
respect to each of these three sites as follows:
- Bolsenski Landfill Site, Chester County, PA,
Sept. 6, 1989.
- Mountaintop Landfill, Lancaster County, PA,
March 4, 1988.
- Rivere Chemical Site, Bucks County, PA,
Sept. 8, 1987 and April 12, 1988.
The Company responded to these notices denying liability.
11. PCB, INC.
By letter dated November 21, 1994, the Company was advised by
the EPA that it is potentially responsible for clean up costs at PCN Treatment
Inc. sites at Ewing Street, Kansas City, Kansas and Wyandotte Street, Kansas
City, Missouri under the Toxic Substances Control Act, and potentially CERCLA,
resulting from disposal of PCBs or PCB items at the site. NVF is identified in
the Wyandotte records for a single shipment of capacitors in 1985 which weighed
440 pounds. The Company has been advised that approximately 1400 generators have
been identified for this location, and that one set more than a million pounds
of PCB waste and forth other each sent over 100,000 pounds. NVF has a right to
contractual indemnification from its transporter for this liability, and has put
its transporter on notice. On October 5, 1995, NVF filed a response to an EPA
CERCLA 104(e) request for information which confirmed a single shipment in 1985
of 6 capacitors described on the manifest as "waste polychlorinated biphenyl."
12. ARMY CREEK LANDFILL.
As noted in Section II(B), the Delaware Sand and Gravel Decree
released NVF from any ground water remedy costs associated with Army Creek.
However, the Company may or may not have additional liability claims related to
the soil or other remedial activities at the Army Creek landfill.
13. DELAWARE SAND AND GRAVEL LANDFILL--PRIVATE PARTY LAWSUIT.
In June 1993, the Company, along with other PRPs, was named as
a defendant in an action brought in the Superior Court in the State of Delaware
in which the plaintiff, a former bulldozer operator at the Delaware Sand and
Gravel Landfill, seeks recovery for personal injuries arising out of alleged
exposure to various chemicals at the landfill. The matter is still pending.
14. OTHER SITES.
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The Company may have been, or may in the future be, alleged to
be liable for environmental costs at other sites in various states, including
Pennsylvania, New Jersey, and Delaware, and such potential liability arises out
of the Company's alleged use of waste hauling entities related to Marvin Jonas,
whose waste disposal practices have caused both government and private parties
to bring cost recovery actions against any and all former Jonas customers when
there is an allegation that Jonas disposed of waste at a particular site.
The Company's consolidated financial statements at December
31, 1995 include reserves of approximately $6.8 million for costs in connection
with the environmental matters described above. The Company based such reserve
upon its analysis of the estimated clean up costs for each site and estimated
allocations of the Company's share of liability for each site, relying upon
available information including that provided by the PRP groups for such sites.
In connection with the various claims asserted against the Company by the EPA
and others in connection with environmental matters, the Company has commenced
an action against various insurance companies for some or all of the Amounts for
which the Company might be held liable in connection therewith and the defense
costs thereof. Except as noted above, the Company is unable at this time to
predict the outcome of such action or the Amounts, if any, which may be paid by
such insurers. Because of the uncertain nature of the environmental liabilities,
particularly those related to the Kenneth Square facility and the Yorklyn Plant,
the Company is unable to assure that the outcome of the environmental matters
will not have a material adverse effect on its financial position or the results
of its operations.
B. SETTLEMENT DISCUSSIONS WITH THE EPA.
The Company and EPA have engaged in settlement discussions in an
attempt to avoid litigation in this Case and to provide a future framework for
dealing with the Company's environmental liabilities. Such settlement
discussions have contemplated a "pass through" of certain prepetition
environmental liabilities whereby such liabilities would be treated as General
Unsecured Claims and discharged under the Plan. The United States would retain
its right to undertake enforcement activities in the ordinary course and
liquidate certain prepetition Claims consistent with the terms of the Plan. The
Company in turn would reserve all rights and defenses it would have been
entitled to assert had the Claim been liquidated in the ordinary course and
during the course of this Case. The EPA has also proposed that certain
liabilities relating to the Company owned and operated sites would not be
treated as set forth above and would not be dischargeable under the Plan.
Settlement discussions between the Company and the EPA are continuing.
C. OTHER LEGAL MATTERS.
1. PREFERENCE ACTIONS.
The Company filed a class action complaint to recover
preferences from holders of Debentures. The complaint is based on transfers
occurring on or about June 11 through 18, 1993, in which the Company paid: (i)
to Banker's Trust, past due interest on the NVF 5% Debentures,
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interest on that interest, and various fees and expenses, totaling approximately
$1,331,734.71, and (ii) to Sterling, past due interest on the NVF 10%
Debentures, interest on that interest, and various fees and expenses, totaling
approximately $576,463.12.
In addition, the Company believes that it may have certain
causes of action against trade creditors pursuant to Bankruptcy Code section
547(b) as a result of certain transfers made to such trade creditors within the
ninety (90) day period prior to the Petition Date. The Company believes that the
trade creditors would raise as a defense to such action that the transfers were
made in the ordinary course of business.
The Company and the Committee determined that such causes of
action would be expensive and time-consuming to litigate and could damage the
Company's relationship with its trade creditors. The Company and the Committee
jointly decided not to pursue the preference actions because of the costs,
risks, and delay associated with the litigation. Pursuant to the Plan, the
complaint against the Indenture Trustees and the holders of Debentures will be
dismissed with prejudice.
2. APL BANKRUPTCY.
On June 25, 1993, an Involuntary Bankruptcy Petition was filed
against the Company's subsidiary APL Corporation ("APL"). The Company currently
owns 68.1% of the common stock of APL. On July 23, 1993 APL filed a motion in
the Bankruptcy Court for the Southern District of Florida and obtained an order
on July 27, 1993 converting the Involuntary Petition to a voluntary case under
Chapter 11 of the Bankruptcy Code. On July 27, 1993, a Chapter 11 trustee was
appointed for APL. The APL plan of reorganization was confirmed on June 8, 1995.
Confirmation of the APL plan eliminated the Company's ownership of APL.
3. DISPUTED CLAIM OF GLOBAL FINANCIAL CORPORATION.
On January 27, 1994, Global Financial Corporation ("Global
Financial") filed Claim no. 1313 in the Amount of $5,179,499.27 and Claim no.
1312 in the Amount of $8,912,581.20. Both Claims allegedly arose out of certain
consulting and litigation support services rendered by Global to affiliated
companies of the Company, including, but not limited to APL, DWG Corporation,
and Sharon Steel. Global contends the Company is jointly and severally liable
for these charges and filed similar Claims in the APL and Sharon Steel
bankruptcies. Global's Claims in the APL and Sharon Steel bankruptcies were
subsequently dismissed. The Company objected to Global's Claim on the grounds,
among other things, that the Company's book and records showed no Amount owing
to Global Financial and that DWG did not have the authority to bind the Company
to such an agreement. The Company believes that Global's Claims are without
merit.
Discovery has commenced and, unless the Claim is settled, an
evidentiary or other hearing will be held in the Bankruptcy Court with respect
to this Claim.
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4. INSURANCE & RISK MANAGEMENT.
The Company owns 60% of Insurance & Risk Management ("IRM").
IRM provided insurance placement and claims process services to the Company and
affiliates of the Company. On June 20, 1993, IRM terminated its operations and
commenced a liquidation of its assets. IRM, DWG and NVF were affiliated as a
result of common ownership and control by Victor Posner. As a result of a series
of transactions in April 1993, DWG is no longer affiliated with NVF and IRM. The
decision to liquidate IRM's business was due to the fact that IRM's business was
almost entirely conducted with affiliated companies. With DWG, the largest of
such affiliated companies, becoming disaffiliated and electing not to use IRM
for insurance placements and claims management, IRM's business would become too
small to be useful or profitable.
5. OTHER MATTERS.
The Company has also commenced numerous collection matters and
has commenced an action against Action Detective Guard Agency which relates to
losses caused by fires at NVF's Newark, Delaware and Yorklyn, Delaware plants.
VI.
CLAIMS INFORMATION AND ESTIMATES
A. CLAIMS ESTIMATES.
The Company filed its lists of creditors and equity security holders,
schedules of assets and liabilities and statements of financial affairs and
executory contracts (collectively, the "Schedules") on or before November 9,
1993. Thereafter, by order, dated November 3, 1993, the Bankruptcy Court
established January 31, 1994 as the last date to file Claims in the Chapter 11
Case (the "Bar Date").
To date, 1,992 Claims objections and settlement motions have been filed
and over 1,973 Claims have been disallowed or expunged.
The Company estimates the approximate aggregated final Allowed Amount
of each Class of Claims and Interests as follows (in Thousands):
<TABLE>
<S> <C>
Class 1 Claim.............................................. $8,225,643.74
Class 2 Claims............................................. $ 128,956.09
Class 3 Claims............................................. $ 412,000.00
Class 4 Claims............................................. $8,000,000.00
Class 5 Claims............................................. $1,813,507.25
Class 6 Claims............................................. $ 561,812.43
Class 7 Claims............................................. Contingent
</TABLE>
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<TABLE>
<S> <C>
Class 8A Claims........................................... $72,974,205.32
Class 8B Claims........................................... Contingent
Class 9 Claims............................................ $ 1,833.11
Class 10 Claims........................................... $ 480,997.00
Class 11 Interests........................................ $ .00
</TABLE>
In addition, the Company has estimated the Allowed Amount of Administrative to
be paid out of the Distribution Fund and Priority Tax Claims as follows (in
thousands):
<TABLE>
<S> <C>
Case Administrative Claims................................ $6,000,000.00
Priority Tax Claims....................................... $ 134,066.09
</TABLE>
B. OBJECTIONS TO CLAIMS.
Any Claim which is not timely objected to (except for any unliquidated
Unsecured Environmental Claims) and which has not previously been disallowed,
will be deemed to be an Allowed Claim upon the expiration of the applicable time
for making an objection. A Claim which is timely objected to will be considered
a Disputed Claim until such time as an order has been entered by the Bankruptcy
Court and such order has become a Final Order.
C. PROJECTED DISTRIBUTIONS ON ACCOUNT OF ALLOWED CLAIMS.
The estimated Cash Distributions in respect of Allowed Secured and
General Unsecured Claims under the Purchase Alternative are set forth below.
<TABLE>
<S> <C>
Secured Claims............................ 100%
General Unsecured Claims.................. 47%
</TABLE>
D. BAR DATE FOR CERTAIN ADMINISTRATIVE CLAIMS.
Except as otherwise provided in Confirmation Order, all applications by
Professionals for final compensation for services rendered and for reimbursement
of expenses incurred on or before the Consummation Date (including, without
limitation, any compensation requested by any Professional or other entity for
making a substantial contribution to the Chapter 11 Case) and all other requests
for payment of administrative claims and expenses not otherwise Allowed incurred
before the Consummation Date under section 507(a)(1) or 507(b) of the Bankruptcy
Code (except only for Claims in trade debt incurred in the ordinary course of
business and Claims under 28 U.S.C. section 1930) shall be Filed no later than
thirty (30) days after the Consummation Date, unless such date is extended by
order of the Bankruptcy Court entered upon motion Filed prior to the deadline
hereunder, on notice to the Reorganized Company and the Company. Any such Claim
that is not Filed by the deadline shall be forever barred. Holders of
Administrative Claims who are required to file applications or other requests
for payment of such Claims and who do not do so timely shall be forever barred
from asserting such Claims against the Company, the Reorganized Company or any
other entity in connection with their respective activities in the
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Reorganized Case or any of their respective property. The Bankruptcy Court shall
retain exclusive jurisdiction over any disputes concerning the Administrative
Claims set forth in Section IV.
VII.
RECAPITALIZATION ALTERNATIVE AND
ALTERNATIVES TO THE PLAN
A. INTRODUCTION.
If the sale to the Buyer is not consummated, the Plan Proponents will
implement the Recapitalization Alternative.
The Plan Proponents believe that the Plan incorporating the sale to the
Buyer enables creditors to realize the most value in the shortest time. Since
September 1994, the Company and the Committee have been working toward a
consensual plan of reorganization. The alternative that offers the greatest and
most certain return to creditors has always involved the sale of a portion or
all of the assets or stock of the Company. Under the Purchase Alternative,
creditors are to receive a Cash Distribution on the Distribution Date.
Formulation of other plans at this point will require substantial
additional expense and delay. Furthermore, there is no guarantee that a
commitment to fund an alternative plan could be obtained or, if obtained, would
provide the value offered under the Plan. Therefore, the Company and the
Committee propose that, in the event the sale to the Buyer is not consummated,
the Recapitalization Alternative shall serve as a default mechanism to avoid
further expense and delay in this Case.
B. THE RECAPITALIZATION ALTERNATIVE.
The purpose of the Recapitalization Alternative is to provide a default
mechanism whereby creditors can still realize going concern values and the Plan
can still be confirmed in the event the sale to the Buyer is not consummated.
The Plan Proponents' strategy in this regard is to maximize the value to
creditors by recapitalizing the Company without any further expense and delay
that is associated with the development of another plan. If the Recapitalization
Alternative is implemented (i) Allowed Secured Claimants will generally receive
the same treatment as set forth under the Purchase Alternative; (ii) Allowed
holders of General Unsecured Claims and Allowed Unsecured Environmental Claims
will receive distributions of the Reorganized NVF Common Stock, Secured
Debentures and some Cash constituting partial recovery on a Pro Rata basis,
(iii) certain Claims will be assumed by the Reorganized Company and (iv) certain
Claims, as well as Interests in the Company, will receive no Distribution.
Payment to the Classes may be in the form of Cash, securities and other
property, depending upon the particular Class.
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C. LIQUIDATION UNDER CHAPTER 7 OF THE BANKRUPTCY CODE.
If no plan can be confirmed, the Chapter 11 Case may be converted to a
case under Chapter 7 in which one or more trustees would be elected or appointed
to liquidate the assets of the Company for distribution to their creditors in
accordance with the priorities established by the Bankruptcy Code. The Company
believes that liquidation under Chapter 7 would result in substantially reduced
recovery of funds by the Estate because of (i) additional Administrative Claims
arising from the appointment of a trustee for the Company and attorneys and
other Professionals to assist such trustee; (ii) additional expenses and claims,
some of which would be entitled to priority, which would be generated during the
liquidations and from the resolution of the multitude of complex claims asserted
against the Company; (iii) depressed value due to compelled sales; (iv)
accelerated and increased transaction costs and other costs; (v) probable
cessation of operations; and (vi) further delay and uncertainties.
Attached as Exhibit "D" is a liquidation analysis. The estimates of
liquidation values set forth in the liquidation analysis are based on estimates
by the Company. Due to the numerous uncertainties and time delays associated
with a liquidation under Chapter 7, it is not possible to predict with certainty
the outcome of the liquidation of the Company or the timing or Amount of any
distribution to creditors. As the liquidation analysis indicates, however, it is
likely that liquidation under Chapter 7 would result in substantially smaller
distributions for creditors than that provided for in the Plan.
CREDITORS WILL RECEIVE GREATER VALUE UNDER THE RECAPITALIZATION
ALTERNATIVE THAN THEY WOULD UNDER LIQUIDATION OF THE COMPANY.
VIII.
CERTAIN FACTORS TO BE CONSIDERED
A. CERTAIN RISK FACTORS ASSOCIATED WITH THE PLAN.
1. INHERENT UNCERTAINTY IN THE FINANCIAL PROJECTIONS.
The Projections for Reorganized NVF for each of the 4 years in
the period ending December 31, 1999 are included in Exhibit "C" annexed hereto.
THE PROJECTIONS SET FORTH IN EXHIBIT "C" TO THIS DISCLOSURE
STATEMENT REPRESENT THE COMPANY'S BEST ESTIMATE OF FUTURE EVENTS BASED ON
CERTAIN ASSUMPTIONS SET FORTH WITH SUCH PROJECTIONS. THESE FUTURE EVENTS MAY OR
MAY NOT OCCUR, AND THE PROJECTIONS MAY NOT BE RELIED UPON AS A GUARANTEE,
REPRESENTATION OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. BECAUSE
OF THE NUMEROUS RISKS
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AND INHERENT UNCERTAINTIES THAT WILL AFFECT THE OPERATIONS OF REORGANIZED NVF,
THE ACTUAL RESULTS OF REORGANIZED NVF MAY BE DIFFERENT FROM THOSE PROJECTED AND
SUCH DIFFERENCES MAY BE MATERIAL AND MAY ADVERSELY AFFECT REORGANIZED NVF.
2. COMPETITION.
The Company is primarily engaged in the manufacture,
fabrication and sale of vulcanized fibre, industrial laminated plastics and
printed circuitry boards. The Company competes against numerous manufacturers of
such materials and other materials which may be alternatives, many of which are
larger than the Company and have significantly greater resources than the
Company.
3. DEPENDENCE ON KEY PERSONNEL.
The success of Reorganized NVF is dependent in large part upon
the continued service of John J. McNaboe, its chief operating officer, and on
its ability to continue to attract and retain additional qualified employees.
Competition for such employees is intense and their loss as employees,
particularly to a competitor, could have an adverse effect on Reorganized NVF.
Reorganized NVF will not maintain "keyman" insurance on any of its employees.
B. CERTAIN RISK FACTORS ASSOCIATED WITH THE RECAPITALIZATION ALTERNATIVE.
The following is intended to be a summary of certain material risks
associated with the Recapitalization Alternative, but is not exclusive. Although
the Plan Proponents do not expect to have to implement the Recapitalization
Alternative, each creditor should analyze and evaluate the Recapitalization
Alternative and the risks and the other information set forth in this Disclosure
Statement as a whole with his or her advisors in determining whether to vote to
accept or reject the Plan.
1. ENVIRONMENTAL LIABILITY EXPOSURE AND INSURANCE COVERAGE.
The Company has been, and may in the future be, alleged to be
liable for Environmental Claims at sites in various states, including
Pennsylvania, New Jersey and Delaware. See "Background and Description of
Business - Legal Proceedings." The Company's consolidated financial statements
at September 30, 1995 include reserves of approximately $6.8 million for costs
in connection with such environmental matters. There is no assurance that the
Company's $6.8 million reserve is sufficient. In connection with the various
claims asserted against the Company by the EPA and others in connection with
such environmental matters, the Company has commenced an action against various
insurance companies for some or all of the Amounts for which the Company might
be held liable in connection therewith and the defense costs thereof. The
Company is unable at this time to predict the outcome of such actions or the
Amounts, if any, which may be paid by such insurers.
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The Company's manufacturing operations have involved, and the
Reorganized Company's manufacturing operations after the Consummation Date will
continue to involve, the controlled use of hazardous materials and chemicals.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by federal,
state and local regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. Thus, the Reorganized Company's operations
after the Consummation Date shall continue to expose it to potential
environmental liability risks which are inherent in the manufacturing of the
Reorganized Company's products. The Company does not maintain environmental
liability insurance. The Company does however maintain general liability
insurance which it considers adequate for its needs, taking into account the
risk involved and cost of coverage
2. LIMITED MARKET FOR SECURITIES ISSUED UNDER THE
RECAPITALIZATION ALTERNATIVE.
The Reorganized NVF Common Stock and Secured Debentures to be
issued to General Unsecured Creditors under the Recapitalization Alternative
will be issued pursuant to section 1145 of the Bankruptcy Code, which generally
provides that such securities are fully transferable by parties other than
"underwriters" as such term is defined in section 1145(b). Certain restrictions
may be imposed on the accumulation of Reorganized NVF Common Stock by the Plan
Proponents. Further, even when unrestricted or with respect to the secured
Debentures, there is no established trading market for any of these securities
and there can be no assurance that any such market will develop. In addition, no
assurances can be given that the holders of Reorganized NVF Common Stock and
Secured Debentures will be able to sell securities in the future, or as to the
price at which any such sales will occur.
IX.
ISSUANCE OF SECURITIES AND
APPLICATION OF FEDERAL AND OTHER SECURITIES LAWS
A. ADOPTION OF THE REORGANIZED COMPANY'S CHARTER DOCUMENTS.
As of the Consummation Date, the adoption of the Reorganized Company's
restated certificate of incorporation and bylaws, the initial selection of
directors and officers of the Reorganized Company, and all other matters under
the Plan involving the capital stock or corporate governance of the Reorganized
Company will be authorized and approved in all respects without any requirement
of further action by stockholders or directors of the Company or the Reorganized
Company. All such instruments will be adopted pursuant to section 1123(a)(5)(I)
of the Bankruptcy Code and section 303 of the Delaware General Corporation Law
("DGCL"). The restated certificate of incorporation and bylaws of the
Reorganized Company will, prohibit the issuance of non-voting equity securities
to the extent required by section 1123(a) of the Bankruptcy Code. After the
Consummation Date, the Reorganized Company may further amend and restate its
certificate of incorporation or bylaws as permitted by the DGCL.
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<PAGE> 78
B. ISSUANCE AND DISTRIBUTION OF NEW COMMON STOCK UNDER THE PURCHASE
ALTERNATIVE.
Under the Purchase Alternative, on the Distribution Date or as soon as
practicable after the Consummation Date, the Reorganized Company will issue
__________ shares of New Common Stock, $__ par value per share, of the
Reorganized Company to the Buyer. Upon issuance and distribution, the New Common
Stock will be fully paid and nonassessable and will be authorized and approved
in all respects without any requirement of further action by stockholders or
directors of the Company or the Reorganized Company.
When issued pursuant to the Purchase Alternative, the New Common Stock
will constitute all of the outstanding shares of the Reorganized Company. Each
holder of New Common Stock will be entitled to one vote per share of New Common
Stock on all matters submitted for a vote of the stockholders of the Reorganized
Company.
C. ISSUANCE AND DISTRIBUTION OF THE REORGANIZED NVF COMMON STOCK AND
SECURED DEBENTURES UNDER THE RECAPITALIZATION ALTERNATIVE.
1. REORGANIZED NVF COMMON STOCK.
Under the Recapitalization Alternative, after the filing of
the Recapitalization Notice on the Distribution Date, on the Consummation Date
or as soon as practicable thereafter, the Reorganized Company will issue
__________ shares of Reorganized NVF Common Stock, $__ par value per share, to
the Allowed General Unsecured Creditors and Unsecured Environmental Claims
Allowed as of the Distribution Date. Certain restrictions may be imposed on the
accumulation of Reorganized NVF Common Stock by the Plan Proponents. Upon
issuance and distribution, the Reorganized NVF Common Stock will be fully paid
and nonassessable and will be authorized and approved in all respects without
any requirement of further action by stockholders or directors of the Company or
the Reorganized Company.
When issued pursuant to the Recapitalization Alternative, the
Reorganized NVF Common Stock will constitute all of the outstanding shares of
equity securities of the Reorganized Company. Each holder of Reorganized NVF
Common Stock will be entitled to one vote per share of Reorganized NVF Common
Stock on all matters submitted for a vote of the stockholders of the Reorganized
Company.
2. SECURED DEBENTURES.
Under the Recapitalization Alternative, after the filing of
the Recapitalization Notice, on the Distribution Date, on the Consummation Date
or as soon as practicable thereafter, Reorganized NVF will issue Secured
Debentures under a New Indenture with the following principal characteristics:
Principal Amount $28,000,000 aggregate principal amount of Secured
Debentures.
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Initial Issuance Up to $28,000,000 aggregate principal amount of Secured
Debentures.
Denominations Minimum denomination of $1,000 and integral multiples of
$1,000 per Secured Debenture.
Maturity Five years.
Amortization None.
Mandatory Prepayment Annually, Pro Rata, in the amount of "Excess Cash"
defined as the excess of (i) earnings before interest,
taxes, depreciation and amortization over (ii) the sum of
cash interest expenses, net change in working capital,
principal repayments, capital expenditures, and an annual
reserve of $1.0 million.
Optimal Prepayment At any time without premium or penalty.
Interest 9% per annum payable semi-annually in arrears.
Guarantors Parsons Paper and NVF Industries of Canada Ltd. (the
"Guarantors").
Security First-priority security interest in all available
unencumbered assets of the Reorganized Company and the
Guarantors. Junior security interest in all available
assets of the Reorganized Company and the Guarantors that
are subject to existing security interests.
Certain covenants The Reorganized Company will: (1) maintain a ratio of
current assets to current liabilities equal to or greater
than 1.8 to 1, (2) maintain a ratio of EBITDA (where
EBITDA equals the sum of: (a) net operating income before
taxes, interest expense, extraordinary and unusual items,
and income or loss attributable to equity in affiliates
and (b) depreciation and amortization to the extent
deducted in determining net operating income) to interest
expense equal to or in excess of 1.3 to 1, (3) continue
and maintain the businesses of the Reorganized Company
and its subsidiaries, (4) comply with the requirements of
ERISA, and (5) deliver quarterly and annual financial
statements.
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The Reorganized Company will not, subject to certain
exceptions: (1) incur additional indebtedness and
contingent obligations, except of certain types or below
certain limits, (2) incur additional liens or make
investments in securities, (3) enter into sale-leaseback
arrangements, (4) sell any assets other than in the
ordinary course of business, or (5) undergo a change in
control, merger, consolidation, or similar combination or
reorganization.
The above summary description of the Secured Debentures is qualified in its
entirety by reference to the form of Secured Debentures and related documents
available from the Company.
3. DEPOSIT WITH DISBURSING AGENT.
As of the Consummation Date, or as soon as practicable
thereafter, and after the filing of the Recapitalization Notice, the Reorganized
Company will deposit with the Disbursing Agent sufficient shares of Reorganized
NVF Common Stock and Secured Debentures to effect the distributions to be made
pursuant to the Recapitalization Alternative.
4. FRACTIONAL SECURITIES UNDER THE RECAPITALIZATION ALTERNATIVE.
The Reorganized NVF Common Stock and Secured Debentures will
be issued in whole shares and whole Secured Debentures only. Each creditor
entitled under the Recapitalization Alternative to receive Reorganized NVF
Common Stock or Secured Debentures will receive the total number of whole shares
of Reorganized NVF Common Stock or Secured Debentures to which such creditor is
entitled. Whenever any Distribution to a particular creditor would otherwise
call for Distribution under the Recapitalization Alternative of a fraction of a
share of Reorganized NVF Common Stock, the fractional portion of an entitlement
to a share will be canceled.
The Disbursing Agent will allocate the aggregate remaining
principal amount of the Secured Debentures in $1,000 denominations to creditors
otherwise entitled under the Recapitalization Alternative to a fraction of a
Secured Debenture. Such Secured Debentures shall be allocated in order of the
size of the fractional portion of the entitlements for all creditors, starting
with the largest such fractional portion, until all remaining whole Secured
Debentures in the minimum denomination of $1,000 have been allocated. If two or
more creditors are entitled to equal fractional entitlements and the number of
creditors so entitled exceeds the number of whole Secured Debentures in the
minimum denomination of $1,000 which remain to be allocated, the Disbursing
Agent will allocate the remaining whole Secured Debentures in the minimum
denomination of $1,000 to such creditors by random lot or such other impartial
method that the Disbursing Agent deems fair. Upon the allocation of a whole
Secured Debenture in the minimum denomination of $1,000 to a creditor in respect
of the fractional portion of its entitlement, such fractional portion will be
canceled.
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Upon the allocation of all of the whole Secured Debentures,
the Disbursing Agent will pay creditors Cash for any of their respective
remaining fractional portion of entitlements. The amount of such Cash will be
equal to the amount of such creditor's Claim giving rise to such fractional
portion of entitlements to a whole Secured Debenture multiplied by ____ cents
per dollar.
D. RESALE OF SECURITIES RECEIVED UNDER THE PURCHASE ALTERNATIVE OR THE
RECAPITALIZATION ALTERNATIVE.
1. REGISTRATION OF SECURITIES.
Under section 1145(a) of the Bankruptcy Code, the issuance of
the New Common Stock or Reorganized NVF Common Stock and Secured Debentures to
be distributed under the Plan and the subsequent resale of such securities by
entities which are not "underwriters" (as defined in section 1145(b) of the
Bankruptcy Code), is not subject to the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act").
BECAUSE OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF
WHETHER A PARTICULAR HOLDER OF SECURITIES ISSUED UNDER THE PLAN IS AN
UNDERWRITER, NEITHER THE COMPANY NOR THE COMMITTEE MAKES ANY REPRESENTATION
CONCERNING THE ABILITY OF ANY PERSON TO DISPOSE OF THE NEW COMMON STOCK, THE
REORGANIZED NVF COMMON STOCK, OR THE SECURED DEBENTURES TO BE DISTRIBUTED UNDER
THE PLAN. MOREOVER, SUCH SECURITIES, OR THE DOCUMENTS THAT ESTABLISH THEIR TERMS
AND CONDITIONS, MAY CONTAIN TERMS AND LEGENDS THAT RESTRICT, OR INDICATE THE
EXISTENCE OF RESTRICTIONS ON, THE TRANSFER OF SUCH SECURITIES AND INSTRUMENTS.
THE COMPANY AND THE COMMITTEE RECOMMEND THAT RECIPIENTS OF SUCH SECURITIES UNDER
THE PLAN CONSULT WITH LEGAL COUNSEL CONCERNING THE LIMITATIONS ON THEIR ABILITY
TO DISPOSE OF SUCH SECURITIES.
The Company has no present intention to register under the
Securities Act the New Common Stock to be distributed under the Purchase
Alternative or the Reorganized NVF Common Stock and Secured Debentures to be
distributed under the Recapitalization Alternative. The certificates
representing the shares of New Common Stock or Reorganized NVF Common Stock and
the Secured Debentures will bear the following legend and may bear other
restrictive legends:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "ACT"), OR THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD UNLESS
REGISTERED AND QUALIFIED PURSUANT TO THE APPLICABLE PROVISIONS OF FEDERAL AND
STATE SECURITIES OR BLUE SKY LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
OR
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QUALIFICATION APPLIES. THE SECURITIES REPRESENTED BY THIS INSTRUMENT WERE
ISSUED PURSUANT TO AN EXEMPTION PROVIDED BY 11 U.S.C. SECTION 1145, UNDER AN
ORDER CONFIRMING THE PLAN IN THE CASE ENTITLED IN RE NVF COMPANY, DEBTOR, CASE
NO. 93- 1020, IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF
DELAWARE. THE HOLDER OF THIS INSTRUMENT IS REFERRED TO 11 U.S.C. SECTION
1145(b) AND (c) FOR GUIDANCE AS TO THE SALE OF THESE SECURITIES.
2. LACK OF ESTABLISHED MARKET FOR REORGANIZED NVF COMMON STOCK
AND SECURED DEBENTURES.
Reorganized NVF Common Stock and Secured Debentures will be
issued pursuant to Recapitalization Alternative to persons who may prefer to
liquidate their investment rather than hold such securities on a long-term
basis. In the event of the Recapitalization Alternative, following the
Consummation Date, the Reorganized Company intends to explore the possibility of
obtaining a listing of the Recapitalized NVF Common Stock and/or Secured
Debentures on a regional or national securities exchange or automated
inter-dealer quotation system. At present, the Company has no specific plans
with respect to obtaining any such listing and its ability to obtain any listing
is uncertain. There is currently no established trading market for the
Recapitalized NVF Common Stock and Secured Debentures and in the absence of such
a listing, it is unlikely that any such market will develop. Moreover, even if
such a listing is obtained, there is no assurance that there will be sufficient
market interest to create a liquid market.
E. RISKS ASSOCIATES WITH THE RECAPITALIZATION ALTERNATIVE.
See Section VIII for a discussion of certain risk factors associated
with the Recapitalization Alternative. Each creditor should review such factors
carefully before voting to accept or reject the Plan.
X.
INFORMATION CONCERNING THE BUYER
A. FIRST SECURITY.
The Buyer is a holding company controlled by Victor Posner. Victor
Posner was formerly the Chairman of the Board, Chief Executive Officer,
President and director of the Company and Mr. Posner, along with entities which
he may be deemed to control, beneficially owned approximately 36,672,000 shares
of the Existing Common Stock. Mr. Posner resigned as an officer and director of
the Company in December 1993. Mr. Melvin C. Calvin and Ms. Brenda C.
Castellano, who are currently on the Board of the Company are also directors of
the Buyer.
On December 1, 1993, in Securities and Exchange Commission v. Drexel
Burnham Lambert Inc., et al., 837 F. Supp. 587 (S.D.N.Y. 1993), aff'd, 16 F.3d
520 (2d Cir. 1994), an
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action brought by the Securities and Exchange Commission, a federal judge in the
United States District Court for the Southern District of New York barred Victor
Posner and Steven Posner from serving as officers and directors of any company
reporting under the Securities Exchange Act of 1934, as amended, and ordered
that the stock Victor Posner and Steven Posner own in corporations under their
control be placed in voting trusts. For a description of additional litigation
against Victor Posner and his affiliates see Securities and Exchange Commission
v. Drexel Burnham Lambert Inc., et al. For a description of the Committee's
adversary proceeding against, among others, Mr. Posner, and the settlement
thereof, see Section ___ above.
XI.
CORPORATE GOVERNANCE AND MANAGEMENT OF NVF
A. CURRENT BOARD OF DIRECTORS OF NVF.
NVF'S current Board of Directors consists of 9 directors:
Richard L. Beltzhoover, Brenda C. Castellano, Melvin R. Colvin, Kim Del
Fabro, Marco B. Loffredo, Martin Posner, Bernard I. Posner, Dr. Willie
C. Robinson, Thomas M. Thompson,
B. CHANGES IN NVF'S BOARD OF DIRECTORS.
Until the Consummation Date, the current composition of the NVF Board
of Directors and their respective officers shall remain unchanged.
C. BOARD OF DIRECTORS OF THE REORGANIZED COMPANY UNDER THE PURCHASE
ALTERNATIVE.
The Board of Directors of the Reorganized Company shall consist of the
following: Melvin R. Colvin -- Chairman, John J. McNaboe, and Brenda C.
Castellano.
D. BOARD OF DIRECTORS OF REORGANIZED COMPANY UNDER RECAPITALIZATION
ALTERNATIVE.
The Board of Directors of the Reorganized Company will be appointed on
the Confirmation Hearing Date, or as soon thereafter as is practical. The Board
shall consist of five members. The Committee shall appoint three members and the
Company shall appoint two.
E. OFFICERS OF REORGANIZED NVF.
The respective officers of Reorganized NVF initially shall be as
follows:
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<PAGE> 84
<TABLE>
<CAPTION>
NAME TITLE
- ---- -----
<S> <C>
John J. McNaboe President, Chief Executive Officer, and
Chief Operating Officer
William J. Campbell Executive Vice President and Secretary
Donald Slesinski Vice President and Chief Financial
Officer
</TABLE>
1. MANAGEMENT COMPENSATION.
As indicated above, the respective officers of Reorganized NVF
shall be Messrs. McNaboe, Campbell and Slesinski. Mr. McNaboe shall receive an
annual salary of $380,000 and shall be entitled to bonuses determined by
Reorganized NVF's Board of Directors. Mr. McNaboe shall be primarily responsible
of the day-to-day management of operations of the Reorganized Company. Donald
Slesinski shall receive an annual salary of $68,004. William J. Campbell shall
receive an annual salary of $80,040.
F. OFFICERS OF THE REORGANIZED COMPANY UNDER RECAPITALIZATION ALTERNATIVE.
The officers of the Reorganized Company will be designated on the
Confirmation Hearing Date, or as soon thereafter as is practical.
G. POST-CONSUMMATION OPERATIONS.
After the Consummation Date, the operation of the business of the
Company shall be the sole responsibility of the Reorganized Company. The
operation of the Reorganized Company will become the general responsibility of
its board of directors, who will have the responsibility for the overall
direction of Reorganized NVF.
XII.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A. GENERALLY
The following discussion summarizes some of the significant federal
income tax consequences of the transactions described herein and in the Plan.
This discussion is for informational purposes only, does not represent an
opinion of counsel, and is based on the Tax Code, the Treasury Regulations
promulgated thereunder, judicial authority interpreting the Tax Code, and
current administrative rulings and pronouncements of the Internal Revenue
Service
75
<PAGE> 85
("IRS"), any of which may be altered with retroactive effect, thereby changing
the federal income tax consequences discussed below. The following discussion
does not address foreign, state, or local tax consequences of the Plan, nor does
it address special classes of taxpayers (such as S corporations, mutual funds,
insurance companies, financial institutions, small business investment
companies, foreign companies, nonresident alien individuals, regulated
investment companies, broker-dealers, and tax-exempt organizations). This
discussion is limited to taxpayers that own Claims against or Interests in the
Company as capital assets (generally, property held for investment) within the
meaning of section 1221 of the Tax Code. Due to the lack of applicable legal
precedent, the possibility of changes in law, and differences in the nature of
the Claims and methods of accounting, the tax consequences described herein are
subject to significant uncertainties. No ruling will be sought from the IRS
prior to the [Effective Date] with respect to any of the tax aspects of the
Plan. EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT WITH HIS
OR HER TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES OF THE PLAN.
B. FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY.
1. ISSUANCE OF NEW COMMON STOCK.
The $24.5 million paid by the Buyer to the Distribution Fund
in exchange for the issuance of the Company's New Common Stock would not cause a
recognition of income by the Company or the Buyer pursuant to section 1032 of
the Tax Code. If the Buyer (rather than the Reorganized Company) pays some of
the Claims, such payments could be considered additional consideration for the
Company's Common Stock. However, such additional consideration also would not be
recognized as income to the Company, pursuant to section 1032 of the Tax Code.
2. REORGANIZED NVF'S USE OF COMPANY'S EXISTING TAX ATTRIBUTES
In general, although the Company may realize taxable income as
a result of the implementation of the Plan, it does not expect to incur any
substantial tax liability, because any such taxable income should be largely
sheltered by its existing net operating losses, capital losses, and tax credit
carryovers ("Tax Attributes"), subject to the rules of section 382 of the Tax
Code, discussed further below.
3. DISCHARGE OF INDEBTEDNESS.
Under the Tax Code, a taxpayer generally must include in gross
income the Amount of any discharge of indebtedness income realized during the
taxable year, except to the extent payment of such indebtedness would have
resulted in a tax deduction. Section 108 of the Tax Code provides, however, that
when, as in this Chapter 11 Case, the discharge of indebtedness occurs in a case
under the Bankruptcy Code, gross income does not include any Amount that
otherwise would be included in gross income by reason of the discharge of
indebtedness. However, a taxpayer is required to reduce certain Tax Attributes
for federal income tax purposes by the Amount of discharge of indebtedness
income it is allowed to exclude from income.
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<PAGE> 86
Under the Plan, holders of Administrative Claims, Tax Claims,
the NVF 10% Secured Note Claims, the Hartwell Secured Claim, the Reed Smith
Secured Claim, the CIT DIP Financing, the New Castle County Secured Claim,
Priority Unsecured Claims (Class 6 Claims), General Unsecured Claims in an
Amount equal to or less than $100 (Class 9 Claims), the Pension Fund Claims
(Class 7) and the assumed unexpired leases and executory contracts generally
will be paid in Cash or assumed by the Reorganized Company, except as otherwise
provided in the Plan, the full Amount of their Allowed Claims on or after the
Consummation Date. Claims that are paid in full on the Consummation Date or that
are assumed should not result in any discharge of indebtedness income.
In contrast, satisfaction of the Allowed General Unsecured
Claims in an Amount Greater than $100, the Unsecured Environmental Claims, and
the persons having interests in the rejected unexpired leases and executory
contracts will (to the extent treated as indebtedness for federal income tax
purposes) result in a discharge of indebtedness. Because the discharge of Claims
will occur pursuant to the Plan in a Chapter 11 case, the Company will not,
pursuant to the section 108 of the Tax Code, be required to include the
discharge of indebtedness income in its taxable income. Certain of the Company's
Tax Attributes, however, will be reduced by the excess, if any, of the Amount of
the discharge of indebtedness over the fair market value of property transferred
in satisfaction of such Claims unless the discharged Claims would have resulted
in a deduction had they been paid in full. After a reduction in Tax Attributes
pursuant to section 108 of the Tax Code, the Company's remaining Tax Attributes
would be subject to limitations as a result of an ownership change.
4. LIMITATION ON TAX ATTRIBUTES AS A RESULT OF AN OWNERSHIP
CHANGE
The Company has filed federal income tax returns reflecting
net operating loss carry forwards of approximately $[116,351,626] million as of
the end of its taxable year ended December 31, 1994. The Company currently
estimates that its cumulative net operating loss carry forward at the end of its
taxable year ended December 31, 1995 is approximately $[113,462,000] million.
Such carryovers will expire in various years through the taxable year ending in
[2007]. In addition, these tax returns reflect investment tax credit carry
forwards of approximately $1.5 million.
The Company has filed federal income tax returns reflecting
capital loss carry forwards of $[94,468,591] million as of the end of its
taxable year ended December 31, 1994. The Company currently estimates that its
capital loss carry forward at the end of its taxable year ended December 31,
1995 will be $13,029,000.
Section 382 (in conjunction with section 383) of the Tax Code
generally restricts a corporation's use of its Tax Attributes by limiting the
Amount of income earned by the corporation after an "ownership change" that may
be offset by Tax Attributes that arose prior to the ownership change (the
"Section 382 Limitation"). In general, under section 382(g) of the Tax Code an
"ownership change" occurs if the percentage of the value of the loss
corporation's stock owned by one or more direct or indirect "five percent
shareholders" has increased by more than
77
<PAGE> 87
50 percentage points over the lowest percentage of that value owned by such five
percent shareholder or shareholders 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).
In general, when the Section 382 Limitation applies, a
corporation's use of its pre-change date Tax Attributes (including certain
Amounts that otherwise would be allowable as deductions during the five-year
period beginning on the change date that are attributable to pre-change date
periods) for taxable periods following the change date is limited to an annual
Amount of Tax Attributes equal to the product of (i) the value of the
corporation immediately before the ownership change multiplied by (ii) the
long-term tax-exempt rate (as announced each month by the Treasury Department)
on the date of the ownership change plus any unused portion of the Section 382
Limitation from prior years. Pursuant to section 382(l)(6), the value of the
Company would be determined immediately after the reorganization. (For this
purpose, the value of the corporation is generally the fair market value of the
corporation's stock). The long-term tax-exempt rate is 5.65 percent for January
1996. (The limitation is also increased by the Amount of any net unrealized
built-in gain on the change date that is recognized in subsequent taxable years.
Furthermore, certain losses recognized by the Company after the change date may
be subject to the Section 382 Limitation if the Company has a net unrealized
built-in loss on the change date. The Company does not know whether it will have
a net unrealized built-in gain or loss on the change date.)
Pursuant to the Plan, there would be an ownership change since
the Buyer stock ownership in the Company by 5% or greater shareholders would
undergo a greater than 50 percentage point increase. The effect of the Plan will
be that the shareholdings of the Buyer will increase from 0% to 100%, a 100
percentage point increase. Therefore, the Section 382 Limitation would restrict
the Company's use of its Tax Attributes.
Under the Recapitalization Alternative, an exception under
section 382(l)(5) (the "Bankruptcy Exception") may provide relief from the
Section 382 Limitation. The Bankruptcy Exception, provides that the Section 382
Limitation does not apply under certain circumstances but requires that Tax
Attributes be reduced by certain interest deductions taken by the loss
corporation on indebtedness exchanged for stock.
The Bankruptcy Exception provides that the Section 382
Limitation will not apply to limit a loss corporation's use of pre-ownership
change NOLs and recognized built-in losses if (i) such loss corporation is under
the jurisdiction of a Bankruptcy Court in a Chapter 11 case and (ii) qualifying
shareholders and creditors of the loss corporation (determined immediately
before the ownership change) receive stock of the reorganized corporation which
represents at least 50 percent of the total value and voting power of the
corporation's stock (determined immediately after the ownership change). For
purposes of the Bankruptcy Exception, all stock owned by stockholders of the
corporation after the reorganization as a result of their being stockholders
prior to the reorganization will be counted toward the 50% requirement. Stock
received by creditors in satisfaction of their debt Claims against the
corporation will only be counted,
78
<PAGE> 88
however, to the extent that such creditors received such stock in satisfaction
of (i) indebtedness held by such creditors for at least 18 months before the
filing of the bankruptcy petition with respect to such corporation or (ii)
indebtedness which arose in the ordinary course of the trade or business of the
corporation and which at all times has been beneficially held by such creditors.
If the Bankruptcy Exception applies to the Recapitalization
Alternative, the NOLs available to the reorganized corporation following an
ownership change will be recomputed without deductions for interest paid or
accrued by the loss corporation on the indebtedness that is converted into
stock, and for which the loss corporation previously had claimed deductions for
federal income tax purposes during (i) the three taxable years prior to the
taxable year in which the ownership change occurs and (ii) the portion of the
taxable year of the ownership change up to, but not including, the change date.
In addition, if the Bankruptcy Exception applies, the Company would be required
to reduce its Tax Attributes by an Amount equal to 50% of the Amount excluded
from taxable income under section 108(e)(10)(B) (the "Stock-for-Debt
Exception"). Under the Recapitalization Alternative, the Stock-for-Debt
Exception could apply to certain creditors who receive stock in exchange for
their debt Claims relating to indebtedness held for at least 18 months prior to
the filing of the bankruptcy petition or which arose in the ordinary course of
business and has not been transferred since so arising. (The Stock-for-Debt
Exception was repealed for discharges of debt in bankruptcy with respect to
bankruptcies filed on or after January 1, 1994; since the bankruptcy petition
was filed on August 27, 1993, the Stock-for Debt Exception could apply under the
Recapitalization Alternative and the Bankruptcy Exception).
If the Bankruptcy Exception applies, the Company runs the risk
that its Section 382 Limitation would be zero if a second ownership change were
to occur during the two-year period following the change date. Section
382(e)(5)(D) of the Tax Code. A second ownership change that occurs after the
two-year period following the change date, however, would only subject the
Company's utilization of its Tax Attributes thereafter to the general Section
382 Limitation, and would not cause the complete elimination of the benefit of
the Company's Tax Attributes by reducing its Section 382 Limitation to zero. For
this reason, it is necessary to preclude any of the creditors receiving shares
from increasing their individual share ownership. The risk of a second ownership
change cannot be eliminated, however, because even with stock transfer
restrictions in place, a second ownership change within the two-year period
following the change date could occur due to, among other things, changes in the
ownership of the stock (or other ownership interests) of entities that are
holders of the Company's stock. The rules regarding attribution of stock
ownership and the other Treasury regulations promulgated under section 382 of
the Tax Code are very complex and subject to interpretation by the Internal
Revenue Service in ways that might lead to inadvertent ownership changes.
On the basis of a preliminary analysis, it appears that the
Bankruptcy Exception may be available to the Company in the event that the
Recapitalization Alternative is pursued. In such an event, but prior to
consummating the Company's Plan, the Plan Proponents reserve the right to
perform a further analysis of the applicability of the Bankruptcy Exception, and
to restructure the Recapitalization Alternative by varying the ratio of
aggregate debt to equity, and
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<PAGE> 89
the terms of any debt or equity instruments, to be issued under the
Recapitalization Alternative, as necessary to meet the requirements of the
Bankruptcy Exception without adversely affecting the value of the Distribution
to holders of Allowed Claims under the Recapitalization Alternative.
5. OTHER CONSIDERATIONS.
Section 269 of the Tax Code grants the IRS the power to
disallow any deduction, credit, or allowance (including the utilization of Tax
Attributes) when a corporation undertakes certain transactions for the principal
purpose of avoiding or evading federal income taxes. Application of section 269
of the Tax Code depends upon an evaluation of the facts and circumstances, and
the Company believes that utilization of its Tax Attributes should not be denied
by section 269 of the Tax Code, although the IRS and the courts could adopt a
different view.
6. ALTERNATIVE MINIMUM TAX.
An alternative minimum tax ("AMT") is imposed by the Tax Code
at a rate of twenty percent (20%) of a corporation's alternative minimum taxable
income ("AMTI") in excess of an exemption Amount to the extent that such
corporation's AMT liability exceeds its federal income tax liability. NOLs, as
recomputed for AMT purposes ("AMT-NOLs"), may be used to offset ninety percent
(90%) of AMTI. Thus, at a minimum, the Company will be subject to AMT at an
effective rate of two percent (2%) on AMTI. AMTI generally equals regular
taxable income, increased or decreased by certain specified items. AMTI is
increased or decreased by seventy-five percent (75%) of the difference between
adjusted current earnings ("ACE") and AMTI (computed without the adjustment for
ACE, and without the deduction for AMT-NOLs). Discharge of indebtedness income
excluded pursuant to the bankruptcy discharge exemption under section 108
(discussed above), however, is not included in computing AMTI for AMT purposes,
although the Company may be required to reduce its Tax Attributes for AMT
purposes. Any AMT that the Company pays generally will be allowed as a credit
against regular federal income tax liability for the first taxable year in which
Reorganized NVF becomes subject to regular federal income tax.
C. FEDERAL INCOME TAX CONSEQUENCES TO CREDITORS.
The federal income tax consequences of the consummation of the Plan to
each creditor will depend, among other things, on the consideration to be
received by the creditor, whether the creditor reports income using the accrual
or cash method, and on whether the creditor has taken a bad debt deduction or
worthless security deduction with respect to its Claim.
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<PAGE> 90
1. TAX CHARACTERIZATION OF EXCHANGES.
a. CREDITORS HOLDING ALLOWED CLAIMS ON THE DISTRIBUTION
DATE.
(1) CREDITORS RECEIVING CASH ONLY.
Those creditors receiving Cash only on the
Distribution Date, generally will recognize gain or loss equal to the difference
between the Amount of Cash received and the adjusted tax basis of the Claim
exchanged therefor. For those holders of Claims who acquired their Claims at a
significant discount or who have taken a bad debt or worthless security
deduction with respect to all or a portion of their Claims, it is possible that
gain may be recognized as a result of this exchange.
(2) CREDITORS HOLDING CLAIMS THAT WILL BE
PARTIALLY OR COMPLETELY UNSATISFIED.
Holders of Claims that will not be
completely satisfied, which include General Unsecured Creditors, and persons
having interests in the rejected unexpired leases and executory contracts,
generally will recognize gain or loss equal to the difference between the Amount
of Cash received and the adjusted tax basis of the Claim exchanged therefor. For
those holders of Claims who acquired their Claims at a significant discount or
who have taken a bad debt or worthless security deduction with respect to all or
a portion of their Claims, it is possible that gain may be recognized as a
result of this exchange.
b. HOLDERS OF DISPUTED CLAIMS.
Although not free from doubt, holders of Disputed
Claims should not recognize any gain or loss on the Distribution Date. Holders
whose Disputed Claims become Allowed Claims will receive payments in discharge
of such Allowed Claims from Reorganized NVF in Cash. Such holders receiving Cash
will be subject to the same tax treatment as the holders of Allowed Claims on
the Distribution Date, as discussed above.
c. HOLDERS OF EXISTING COMMON STOCK.
Holders of Existing Common Stock, whose shares of
such stock will be extinguished without their receiving any consideration for
their shares, would recognize loss in an Amount equal to the holder's tax basis
in such extinguished shares.
2. CHARACTER AND TIMING OF GAIN OR LOSS.
The character of any gain or loss as capital or ordinary gain
or loss and, in the case of capital gain or loss, as short-term or long-term,
will depend on a number of factors. Each creditor recognizing gain or loss
pursuant to the Plan should consult his or her tax advisor as to the
applicability of these factors to such creditors.
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<PAGE> 91
3. RECEIPT OF INTEREST.
Creditors will recognize ordinary income to the extent that
they receive any Cash or property that is attributable to accrued but unpaid
interest that has not already been included for federal income tax purposes in
such creditor's taxable income. A holder of a Claim which includes accrued
interest who receives consideration which is less than the Amount of the Allowed
Claims must allocate such consideration between principal and interest for
federal income tax purposes. In the event that the Amount of Cash and other
property attributable to interest on a creditor's Claim is less than the Amount
previously included as interest on the Claim in the creditor's federal taxable
income, the unpaid interest may be deducted, generally as a loss or as an
adjustment to a reserve for bad debts.
The Company intends to take the position that the Amounts
distributed to holders of Allowed Claims on the Distribution Date are allocable
first to principal, up to the full Amount of such principal, with only the
excess, if any, being allocated to interest. However, the proper allocation
between principal and interest of Amounts received in exchange for the discharge
of a Claim at a discount is unclear and may be affected by, among other things,
the rules in the Code related to imputed interest, original issue discount and
accrued market discount. In connection with the allocation of consideration
between principal and interest, creditors should consult their tax advisors to
determine the Amount of consideration received under the Plan that is
attributable to interest.
4. WITHHOLDING AND REPORTING.
The Disbursing Agent will withhold all Amounts required by law
to be withheld from payments to holders of Claims. In addition, such holders may
be required to provide certain tax information to the Company as a condition of
receiving distributions under the Plan. The Company will comply with all
applicable reporting requirements of the Code.
5. MARKET DISCOUNT.
Section 1276 of the Tax Code generally requires holders of
"market discount bonds" to treat as ordinary income, rather than as capital
gain, any gain recognized on the disposition of such bonds to the extent of the
market discount accrued during the holder's period of ownership. A "market
discount bond" is a debt obligation purchased at a market discount, subject to
certain exceptions, including a de minimis exception. For this purpose, a
purchase at a market discount includes a purchase after the original issuance at
a price below the stated redemption price at maturity. The Amount of market
discount on a bond generally equals the excess of (i) the stated redemption
price at maturity of a debt obligation (or, in the case of a debt instrument
issued with original issue discount, its "revised issue price") over (ii) the
tax basis in the hands of the holder immediately after the bond's acquisition.
The accrued market discount generally equals a ratable portion of the bond's
market discount, based on the number of days the taxpayer has held the bond at
the time of such disposition, as a percentage of the number of days from the
date the taxpayer acquired the bond to its date of maturity. Also, holders of
market
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<PAGE> 92
discount bonds are required, under certain circumstances, to defer the deduction
of all or a portion of the interest on any indebtedness incurred or maintained
to acquire or carry market discount bonds. Neither the rule treating accrued
market discount as ordinary income on a disposition nor the rule deferring
interest deductions applies if the holder of a "market discount bond" elects to
include the accrued market discount in income currently. The rule treating
accrued market discount as ordinary income does not apply to bonds issued on or
before July 18, 1984, unless they were purchased after April 30, 1993.
If a creditor receives property in exchange for his Allowed
Claim pursuant to the Plan in a transaction that qualifies as a
"recapitalization," the accrued market discount treated as ordinary income is
limited to the Amount of any gain the creditor recognizes as a result of this
exchange. To the extent that the Amount of market discount that accrued prior to
the recapitalization exceeds the gain recognized, such excess will be allocated
to the Reorganized NVF Common Stock or "securities" received in the
recapitalization. Upon a subsequent disposition of such Reorganized NVF Common
Stock or "securities," any realized gain will be treated as ordinary income or
interest income, respectively, to the extent of the allocable portion of the
accrued market discount not recognized at the time of the recapitalization.
6. TAX CONSEQUENCES TO CREDITORS OF THE RECAPITALIZATION
ALTERNATIVE.
Under the Recapitalization Alternative, the exchange of Claims
for the Reorganized NVF Common Stock should be a nonrecognition event to the
extent such Claims constitute "securities" within the meaning of section 354 of
the Tax Code. In addition, the exchange of Claims for the Secured Debentures
should also constitute a nonrecognition event to the extent such Claims
constitute "securities" within the meaning of section 354 of the Tax Code,
provided that the amount of principal obligation received under the
Recapitalization Alternative does not exceed the principal amount of the Claim
exchanged therefor. Any such excess principal Amount would be treated as taxable
income to such creditor, with such income treated as a dividend to the extent
such income had the effect of a distribution, and the remainder, if any, treated
as income from the exchange of property. The creditors' basis in the Reorganized
NVF Common Stock and Secured Debentures would be equal to their basis in
securities surrendered. The issue of whether a Claim constitutes a "security"
for purposes of section 354 of the Tax Code depends on all the facts and
circumstances, and no determination has been made in this regard with respect to
Claims under the Plan. In the event that a creditor's Claim does not constitute
a "security" for purposes of section 354 of the Tax Code, the exchange will be
treated as a taxable event in the manner described above "Federal Income Tax"
Consequences to Creditors -- Tax Characterization of Exchanges."
D. IMPORTANCE OF OBTAINING PROFESSIONAL ASSISTANCE.
AS INDICATED ABOVE, THE FOREGOING IS INTENDED TO BE A SUMMARY ONLY AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN ARE COMPLEX, AND, IN MANY
AREAS,
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<PAGE> 93
UNCERTAIN. ACCORDINGLY, EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO
CONSULT WITH HIS OR HER TAX ADVISOR REGARDING SUCH TAX CONSEQUENCES.
XIII.
CONCLUSION
THE PLAN PROPONENTS URGE ALL HOLDERS OF CLAIMS IN THE VOTING CLASSES TO
ACCEPT THE PLAN AND RETURN THEIR BALLOTS SO THAT THEY WILL BE RECEIVED BY
___________ BY 5:00 P.M. EASTERN STANDARD TIME ON ______, 1995.
Dated: Yorklyn, Delaware
January __, 1996
NVF COMPANY,
a Delaware corporation
By
-----------------------------------
Name: John J. McNaboe
Title: Chief Operating Officer
BAKER & MCKENZIE
By /s/Katherine S. Kruis for
------------------------------
Ali M. M. Mojdehi
101 W. Broadway 12th Floor
San Diego, California
(619) 235-7780
Co-Counsel for Debtor and Debtor-in-Possession
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<PAGE> 94
MORRIS, JAMES, HITCHENS & WILLIAMS
/s/ EDWARD M. McNALLY
----------------------------------
Edward M. McNally
222 Delaware Avenue
P.O. Box 2306
Wilmington, DE 19899
302/888-6880
Attorneys for Official Committee
of Unsecured Creditors
OF COUNSEL:
LeBOEUF, LAMB, GREENE &
MacRAE, L.L.P.
Angela J. Somers
125 W. 55th Street
New York, NY 10019-5389
212/424-8000
<PAGE> 95
EXHIBIT INDEX
EXHIBIT A PLAN OF REORGANIZATION (SEE EXHIBIT 2 TO FORM 8-K)
EXHIBIT B LIST OF PROPERTIES
EXHIBIT C PROJECTIONS
EXHIBIT D LIQUIDATION ANALYSIS
EXHIBIT E STOCK PURCHASE AGREEMENT
86
<PAGE> 96
EXHIBIT A
PLAN OF REORGANIZATION
(SEE EXHIBIT 2 TO FORM 8-K)
<PAGE> 97
EXHIBIT B
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
OWNED
OR APPROXIMATE
LOCATION LEASED USE SQUARE FEET
-------- ------ --- -----------
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NVF FACILITIES
- -----------------------------------------------------------------------------------------------------------------
Multi-Segment Facilities
- -----------------------------------------------------------------------------------------------------------------
Kennett Square, PA (1) Owned Manufacturing/Fabrication 342,000
- -----------------------------------------------------------------------------------------------------------------
Yorklyn, DE (2) Owned Manufacturing/Fabrication 552,000
- -----------------------------------------------------------------------------------------------------------------
Wilmington, DE (1)(2) Owned Fabrication 186,000
- -----------------------------------------------------------------------------------------------------------------
Hartwell, GA (2)(3) Owned Manufacturing/Fabrication 144,300
- -----------------------------------------------------------------------------------------------------------------
Broadview, IL (1)(2) Owned Warehouse and Distribution Center 27,000
- -----------------------------------------------------------------------------------------------------------------
Toronto, Canada (1)(2)(3) Leased Manufacturing/Fabrication 40,000
(expires
4/96)
- -----------------------------------------------------------------------------------------------------------------
Paper Products Segment
- -----------------------------------------------------------------------------------------------------------------
Holyoke, MA Owned Manufacturing 313,000
- -----------------------------------------------------------------------------------------------------------------
Inactive
- -----------------------------------------------------------------------------------------------------------------
Newark, DE (4)(5) Owned Closed 356,000
- -----------------------------------------------------------------------------------------------------------------
Unimproved Land
- -----------------------------------------------------------------------------------------------------------------
Kennett Township and New Castle County Owned Unimproved Land 130-160 acres
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Industrial Laminated Plastics Segment
(2) Vulcanized Fibre Segment. Fire damage occurred in January 1993
to a small warehouse at Yorklyn, DE.
(3) Material Handling Container Segment
(4) Newark, DE operations were terminated in September, 1991. The
Debtor has commenced the transfer of the operations of the
Newark facility to the Yorklyn, DE facility. The Company
anticipates completing the transfer of operations by December
31, 1994.
(5) Fire damage occurred in January, 1993 to a vacant warehouse at
NVF's inactive Newark, DE facility. There was also minor damage
to certain surrounding buildings at Newark, DE.
<PAGE> 98
EXHIBIT C
REORGANIZED NVF COMPANY
PRO FORMA BALANCE SHEETS REFLECTING
REORGANIZATION ADJUSTMENTS
(UNAUDITED, IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ESTIMATED
PRE- PLAN CONSUMMATION
ASSETS CONFIRMATION ADJUSTMENTS DATE
------ ------------ ----------- ----
<S> <C> <C> <C>
CURRENT ASSETS:
CASH & CASH RESERVES $ 152 $ 541 (a)(b)(g) $ 693
RESTRICTED CASH $ 0 $ 1,915 (h) $ 1,915
RECEIVABLES, NET $ 15,012 $ 15,012
INVENTORIES $ 13,776 $ 13,776
OTHER CURRENT ASSETS $ 525 $ 525
--------- --------- --------
TOTAL CURRENT ASSETS $ 29,465 $ 2,456 $ 31,921
INVESTMENT IN AFFILIATES $ 87 $ 87
PLANT, PROPERTY & EQUIPMENT $ 87,753 $ 87,753
LESS: ACCUMULATED DEPRECIATION $ (68,996) $(68,996)
--------- --------- --------
NET PLANT, PROPERTY & EQUIPMENT $ 18,757 $ 18,757
OTHER ASSETS $ 5,859 $ 5,859
--------- --------- --------
TOTAL ASSETS $ 54,168 $ 2,456 $ 56,624
========= ========= ========
LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE & ACCRUED
LIABILITIES $ 2,261 $ (690) (g) $ 1,571
ACCRUED EMPLOYEE BENEFITS $ 3,433 $ 3,433
CURRENT PORTION OF DEBT $ 0 $ 7,816 (f) $ 7,816
SECURED LINE OF CREDIT $ 0 $ 6,000 (d) $ 6,000
CIT FINANCING $ 4,769 $ (4,769) (d) $ 0
OTHER CURRENT LIABILITIES $ 1,651 $ (480) (j) $ 1,171
--------- --------- --------
TOTAL CURRENT LIABILITIES $ 12,114 $ 7,877 $ 19,991
LONG-TERM DEBT:
HARTWELL SECURED NOTE $ 129 $ (80) (f) $ 49
REED SMITH SECURED CHARGING LIEN $ 275 $ (275) (f) $ 0
NEW CASTLE COUNTY NOTE $ 1,567 $ 315 (e) $ 1,882
NVF 10% SECURED NOTES $ 7,461 $ (7,461) (f) $ 0
--------- --------- --------
$ 9,432 $ (7,501) 1,931
ACCRUED PENSION - LONG TERM $ 4,422 $ 4,422
ACCRUED POST RETIREMENT BENEFITS $ 4,706 $ 4,706
ENVIRONMENTAL LIABILITY $ 6,800 $ (2,839) (i) $ 3,961
DEFERRED AND OTHER TAXES $ 1,722 $ 1,722
LIABILITIES SUBJECT TO COMPROMISE $ 72,548 $ (72,548) (b) $ 0
--------- --------- --------
TOTAL LIABILITIES $ 111,744 $ (75,011) $ 36,733
--------- --------- --------
COMMON STOCK $ 956 $ 19,044 (a)(b) $ 20,000
PAID IN CAPITAL - NEW $ 0 $ 109 (a)(e)(h)(j) (109)
PAID IN CAPITAL - OLD $ 234,943 $(234,943) (e) 0
RETAINED EARNINGS (DEFICIENCY) $(362,238) $ 362,238 (c) 0
NET APL DECONSOLIDATION $ 77,115 $ 77,115 (c) 0
TREASURY STOCK $ (8,352) $ 8,352 (c) 0
--------- --------- --------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIENCY) $ (57,576) $ 77,467 $ 19,891
--------- --------- --------
TOTAL LIABILITIES & STOCKHOLDERS
EQUITY $ 54,168 $ 2,456 $ 56,624
========= ========= ========
</TABLE>
THESE PRO FORMA BALANCE SHEETS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING NOTES
1
<PAGE> 99
EXHIBIT C
REORGANIZED NVF COMPANY
UNAUDITED PRO FORMA BALANCE SHEETS REFLECTING
REORGANIZATION ADJUSTMENTS
(Unaudited, in thousands of dollars)
NOTES
(a) Represents initial capitalization to the Plan - including $20,000 received
for common shares of Reorganized NVF and $4,500 of contributed capital and the
net proceeds from the settlement of certain litigation.
(b) Represents the settlement of Liabilities Subject to Compromise pursuant to
terms of the Plan.
(c) Represents the effect of cancellation of the outstanding shares of the NVF
Company's Common Stock (including Treasury Stock), write-down of the opening
balance of capital in excess of par value and elimination of APL.
(d) Represents the refinance of the Secured DIP lender.
(e) Represents the capitalization of accrued unpaid interest through the
Consummation Date.
(f) Represents the reclassification of the current and long-term portions of the
respective notes.
(g) Represents the payment of Priority Claims by the Debtor on the Consummation
Date.
(h) Represents additional proceeds from First Security and Investment Corp.
being used to satisfy specific liabilities.
(i) Represents environmental liabilities being satisfied pursuant to the Plan.
(j) Represents an affiliate claim being satisfied pursuant to the Plan.
2
<PAGE> 100
EXHIBIT C
REORGANIZED NVF COMPANY
PRO FORMA PROJECTED
BALANCE SHEETS
(UNAUDITED, IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CONSUMMATION
ASSETS DATE YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
CASH & CASH RESERVES $ 693 $ 2,510 $ 1,768 $ 2,798 $ 3,713
RESTRICTED CASH $ 1,915 $ 0 $ 0 $ 0 $ 0
RECEIVABLES, NET $ 15,012 $ 15,762 $ 16,762 $ 17,762 $ 18,762
INVENTORIES $ 13,776 $ 14,376 $ 15,176 $ 15,976 $ 16,776
OTHER CURRENT ASSETS $ 525 $ 450 $ 425 $ 400 $ 375
-------- -------- -------- -------- --------
TOTAL CURRENT ASSETS $ 31,921 $ 33,098 $ 34,131 $ 36,936 $ 39,626
INVESTMENT IN AFFILIATES $ 87 $ 87 $ 87 $ 87 $ 87
PLANT, PROPERTY & EQUIPMENT $ 87,753 $ 89,253 $ 91,553 $ 93,553 $ 96,353
LESS: ACCUMULATED DEPRECIATION $(68,996) $(70,802) $(72,999) $(75,204) $(77,498)
-------- -------- -------- -------- --------
NET PLANT, PROPERTY &
EQUIPMENT $ 18,757 $ 18,451 $ 18,554 $ 18,349 $ 18,855
OTHER ASSETS $ 5,859 $ 5,679 $ 5,439 $ 5,199 $ 4,959
-------- -------- -------- -------- --------
TOTAL ASSETS $ 56,624 $ 57,315 $ 58,211 $ 60,571 $ 63,527
======== ======== ======== ======== ========
LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE & ACCRUED
LIABILITIES $ 1,571 $ 3,021 $ 3,421 $ 3,821 $ 4,221
ACCRUED INTEREST PAYABLE $ 0 $ 135 $ 109 $ 84 $ 56
ACCRUED EMPLOYEE BENEFITS $ 3,433 $ 3,433 $ 3,433 $ 3,433 $ 3,433
CURRENT PORTION OF DEBT $ 7,816 $ 2,709 $ 2,938 $ 3,014 $ 514
SECURED LINE OF CREDIT $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000
OTHER CURRENT LIABILITIES $ 1,171 $ 33 $ 33 $ 33 $ 33
-------- -------- -------- -------- --------
TOTAL CURRENT LIABILITIES $ 19,991 $ 15,331 $ 15,934 $ 16,385 $ 14,257
LONG TERM DEBT:
HARTWELL SECURED NOTE $ 49 $ 0 $ 0 $ 0 $ 0
NEW CASTLE COUNTY NOTE $ 1,882 $ 1,563 $ 1,125 $ 650 $ 135
REFINANCED SECURED NOTES $ 0 $ 5,038 $ 2,538 $ 0 $ -
-------- -------- -------- -------- --------
$ 1,931 $ 6,601 $ 3,663 $ 650 $ 135
ACCRUED PENSION - LONG TERM $ 4,422 $ 4,422 $ 4,422 $ 4,422 $ 4,422
ACCRUED POST RETIREMENT BENEFITS $ 4,706 $ 4,753 $ 4,815 $ 4,877 $ 4,939
ENVIRONMENTAL LIABILITY $ 3,961 $ 2,046 $ 1,046 $ 1,046 $ 1,046
DEFERRED AND OTHER TAXES $ 1,722 $ 1,722 $ 1,722 $ 1,722 $ 1,722
-------- -------- -------- -------- --------
TOTAL LIABILITIES $ 36,733 $ 34,875 $ 31,602 $ 29,102 $ 26,521
-------- -------- -------- -------- --------
COMMON STOCK $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
PAID IN CAPITAL $ (109) $ (109) $ (109) $ (109) $ (109)
RETAINED EARNINGS, BEGINNING
OF PERIOD $ 0 $ 0 $ 2,549 $ 6,718 $ 11,578
EARNINGS FOR PERIOD $ 0 $ 2,549 $ 4,169 $ 4,860 $ 5,537
-------- -------- -------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $ 19,891 $ 22,440 $ 26,609 $ 31,469 $ 37,006
-------- -------- -------- -------- --------
TOTAL LIABILITIES & STOCKHOLDERS
EQUITY $ 56,624 $ 57,315 $ 58,211 $ 60,571 $ 63,527
======== ======== ======== ======== ========
</TABLE>
THESE PRO FORMA BALANCE SHEETS SHOULD BE READ IN CONJUNCTION WITH THE
ACCOMPANYING PRINCIPAL ASSUMPTIONS.
3
<PAGE> 101
EXHIBIT C
REORGANIZED NVF COMPANY
PRO FORMA PROJECTED
STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FROM THE CONSUMMATION DATE
-----------------------------------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
GROSS SALES $ 71,953 $100,734 $105,771 $111,059
LESS: FREIGHT, RETURNS AND
ALLOWANCES $ 1,139 $ 1,712 $ 1,798 $ 1,888
-------- -------- -------- --------
NET SALES $ 70,814 $ 99,022 $103,973 $109,171
COST AND EXPENSES:
COST OF GOODS SOLD $ 57,359 $ 80,208 $ 84,218 $ 88,429
-------- -------- -------- --------
GROSS PROFIT $ 13,455 $ 18,814 $ 19,755 $ 20,742
-------- -------- -------- --------
SELLING EXPENSES $ 3,541 $ 4,951 $ 5,199 $ 5,459
ADMINISTRATIVE $ 4,224 $ 5,856 $ 6,090 $ 6,334
-------- -------- -------- --------
TOTAL SG&A $ 7,765 $ 10,807 $ 11,289 $ 11,793
-------- -------- -------- --------
DEPRECIATION $ 1,806 $ 2,197 $ 2,205 $ 2,294
-------- -------- -------- --------
INCOME FROM OPERATIONS $ 3,884 $ 5,810 $ 6,261 $ 6,655
-------- -------- -------- --------
INTEREST EXPENSE:
HARTWELL SECURED NOTE $ 5 $ 3 $ 0 $ 0
NEW CASTLE COUNTY NOTE $ 113 $ 130 $ 109 $ 73
NVF 10% SECURED
NOTES/REFINANCED $ 599 $ 674 $ 421 $ 139
SECURED LINE OF CREDIT $ 484 $ 615 $ 615 $ 615
-------- -------- -------- --------
TOTAL INTEREST EXPENSE $ 1,201 $ 1,422 $ 1,145 $ 827
-------- -------- -------- --------
INCOME BEFORE TAXES $ 2,683 $ 4,388 $ 5,116 $ 5,828
TAXES $ 134 $ 219 $ 256 $ 291
-------- -------- -------- --------
NET INCOME $ 2,549 $ 4,169 $ 4,860 $ 5,537
======== ======== ======== ========
</TABLE>
THESE PRO FORMA PROJECTED STATEMENTS OF INCOME SHOULD BE READ IN
CONJUNCTION WITH THE ACCOMPANYING PRINCIPAL ASSUMPTIONS.
4
<PAGE> 102
REORGANIZED NVF COMPANY
PRO FORMA FINANCIAL PROJECTIONS
PROJECTED FINANCIAL INFORMATION
The projections are based on the Debtor emerging from Chapter 11 and having its
Plan confirmed and approved by the Court on or about March 30, 1996 ("the
Effective Date").
As a condition to confirmation of a plan of reorganization, section 1129 of the
Bankruptcy Code requires, among other things, the bankruptcy court to determine
that confirmation is not likely to be followed by the liquidation, or need for
further financial reorganization, of the Debtor or any successor to the Debtor
under the Plan. In connection with the development of the Plan, and for purposes
of determining whether the Plan satisfies this feasibility standard, the Debtor
has analyzed the ability of the Reorganized NVF to meet future obligations under
the Plan with sufficient liquidity and capital resources to conduct its
business.
In this regard, the Debtor has developed an operating plan and prepared certain
projections of its operating profit, cash flow, and certain other items for the
nine (9) months ended December 31, 1996 and three (3) years thereafter,
commencing with the Effective Date, ("the Projection Period").
The Debtor does not publish its operating plans and strategies or make external
projections or forecasts of its anticipated financial position or results of
operations. Accordingly, the Debtor does not anticipate that it will, and
disclaims any obligations to furnish updated operating plans or projections to
holders of Claims or Interests prior to the Effective Date, or to stockholders
or debt holders after the Effective Date, or to include such information in
documents required to be filed with the Securities and Exchange Commission, or
otherwise make such information public in the future.
PRINCIPAL ASSUMPTIONS
The principal assumptions underlying the Projections should be read in
conjunction with the Debtor's historical financial information.
The Projections reflect the anticipated operations of the Debtor and do not
include any results of operations of non-debtor affiliated entities.
The Projections are based primarily on the actual unaudited results of
operations for the year ended December 31, 1995, as well as, the
anticipated results of the product lines manufactured through the Debtor's
divisions - Circuitry, Primary Products and Hartwell. As such, any unusual
and non-recurring transactions which had taken place during 1995 have been
isolated and excluded for purposes of the Projections. The major product
lines by Division are as follows:
Circuitry Division: (Kennett Square)
- Ridged Laminated Plastics
- Thin Laminated Plastics
- Prepeg Laminated Plastics
1
<PAGE> 103
Primary Products Division:
Phenolite Operating Unit - (Kennett Square)
- Phenolite Sheets
- Phenolite Tubes
- Filamite Tubes
Wilmington Plant Operating Unit: (Wilmington)
- Fibre Products
- Phenolite Products
- Railroad Insulation
- Polyester Products
Yorklyn Plant Operating Unit: (Yorklyn)
- Abrasive Fibre
- Commercial Fibre
- Yorkite Fibre
- Fibre Tubing
Hartwell Division: (Georgia)
- Fabrication
- Cans and Springs
- Polyester
- Roto Mold
- Vacuum Form
- Reaction Injection Molding (RIM)
- Tooling
The Projections do not include any costs to be incurred as a result of
negotiations surrounding the Debtor's existing union contract scheduled to
expire in April 1996. Management believes changes, if any, will not be material
in relation to the Projections.
The Debtor's operating plan and its Projections reflect numerous assumptions
with respect to the anticipated future performance of the Debtor, industry
performance, general business and economic conditions, and other matters, some
of which are beyond the control of the Debtor. The Debtor expects to continue to
review and revise its operating plan from time to time. Unanticipated events and
circumstances may affect the actual financial results of the Debtor.
For reasons set forth above, while the Projections are necessarily presented
with numerical specificity, the actual results achieved by the Reorganized NVF
throughout the Projection Period will vary from the projected results. These
variations may be material. Accordingly, no representation can be, or is being
made by the Debtor or the Debtor's professionals with respect to the accuracy of
the Projections or the ability of the Debtor to achieve the projected results.
While the Debtor believes that the assumptions underlying the Projections for
the Projection Period, considered on an overall basis, are reasonable in light
of current circumstances, no assurances can be, or are being given, that the
Projections will be realized. Holders of Claims and Interest are required to
make their own determinations as to the reasonableness of such assumptions and
the reliability of the Projections in reaching their determinations whether to
accept of reject the Plan.
2
<PAGE> 104
PROFIT AND LOSS
SALES:
Management continues to secure market share and negotiate long term sales
contracts. In addition, management continues to eliminate unprofitable product
lines and increase the profitability of existing core products. Management has
focused on these key product lines and is continuing the process of
restructuring its current marketing strategies to address current customer
needs. Based upon recent performance, market conditions and customer acceptance,
management believes a 5.0% annual increase in sales growth is reasonable.
COST OF SALES AND GROSS PROFIT:
Cost of sales and gross profit previously achieved are assumed to remain stable
throughout the Projections. It is assumed both cost of sales and gross profit
will remain in relative proportion to any increases in net sales volume as the
non-profitable product lines have been eliminated by management.
SELLING EXPENSES:
Selling expenses, primarily salaries and incentives, are anticipated to equal
5.0% of net sales throughout the Projections. This is based upon the Debtor's
redesign of its sales compensation structure. Management has eliminated most of
their traditional salesman type positions and is currently using manufacturing
representatives who are paid a 5.0% sales commission. Selling expenses include
advertising expenses which are not expected to be significant.
ADMINISTRATIVE EXPENSES:
These costs include the indirect cost of running the individual operating plants
and the corporate office. Management believes the cost of the operations will
increase approximately 4.0% per year to adjust for wages, benefits and insurance
premiums. The corporate office expenses represent the cost of the headquarters
located in Yorklyn, Delaware as well as, shared corporate expenses such as
professional fees, insurance, etc. which are allocated to the individual
divisions. Management has determined that the overall cost of the Corporate
administrative costs will increase approximately 4.0% per year.
During 1996, management anticipates closing the Miami corporate offices.
Management does not anticipate significant costs associated with winding down
these operations.
DEPRECIATION EXPENSE:
Depreciation expense is calculated utilizing the straight line method. A
separate basis has been determined for capital expenditures incurred during the
Post Confirmation period. These expenditures are deemed necessary to the
continued operations of the Debtor and to allow for the Debtor to meet
anticipated sales projections.
Capital spending for Post Confirmation is anticipated as follows:
1996 $2,000,000
* Maintenance and repairs at the Yorklyn Plant
* Replacement of machinery and equipment at the Kennett
Square and Hartwell Plants
* Rebuild machines #5 and #2 - (production equipment)
* Reconstruction of #1 mill
3
<PAGE> 105
1997 $2,300,000
* Maintenance and repairs at the Yorklyn Plant
* Relocation of the fabrication processes in the
Wilmington Plant to the Kennett Square Plant
* Replacement of machinery and equipment at the Kennett
Square Plant (new treater) and at Yorklyn (new boiler
and laminator)
1998 $2,000,000
* Maintenance and repairs at the Yorklyn Plant and Kennett
Square Plant
* Replacement of machinery and equipment at the Yorklyn
Plant, Kennett Square
* Upgrade existing computer at Corporate and interface with
individual plants
1999 $2,800,000
* Maintenance and repairs at the Yorklyn Plant and
Kennett Square Plant
* Replacement of machinery and equipment at the Yorklyn
Plant, Kennett Square and Wilmington Plants
* Replace water systems at Yorklyn and Marshall Brothers
* New floors at Yorklyn
INTEREST EXPENSE:
NVF 10.0% SECURED NOTES - The NVF 10.0% Secured Notes were originally
issued in November 1989 and were scheduled to mature in November 1996.
As of filing date, the total principal amount of the obligation was
approximately $7,461,000. Unpaid accrued interest through the Effective
Date is approximately $1,138,000. the new NVF 10.0% Secured Notes in
the principal amount of $7,461,000 are being assumed by the Reorganized
NVF. The Plan provides for the holders of these notes to receive
semi-annual interest payments commencing on the Effective Date. Post
Confirmation interest on these notes will accrue at 10.0% based on the
outstanding principal and interest as of the Effective Date. The Plan
also requires Reorganized NVF to fully satisfy all amounts outstanding
related to notes on or about November 22, 1996. Proceeds to retire the
notes will be provided by a combination of refinance and cash flow from
operations.
NVF 11-3/4% SECURED NOTES - The NVF 11-3/4% Secured Notes were
originally issued in December 1991 and were scheduled to mature in
December 2001. As of the filing date, the total principal amount of the
obligation including accrued interest was approximately $2,311,000.
Unpaid accrued interest through the Effective Date is approximately
$227,000. Prior to Confirmation and as a result of the Litigation
Settlement, as defined, NVF has exchanged the NVF 11-3/4% Secured Notes
in the approximate face amount of $2,538,000 for certain APL 10-3/4%
Subordinated Sinking Fund Debentures also in the face amount of
$2,538,000. As a result of this exchange, interest will not accrue
during the Projections on the above obligation.
4
<PAGE> 106
CIT GROUP/BUSINESS CREDIT FACTORING ARRANGEMENT (CIT): The Projections
assume this DIP lender will be fully satisfied at Confirmation.
CONGRESS FINANCIAL SECURED LINE OF CREDIT: The Debtor's management has
negotiated a post-petition secured line of credit in the amount of
$8,000,000 for a minimum term of three years, with an option to renew
for an additional year, commencing on the Effective Date. Negotiated
interest on this line will be at a rate of 2% per annum above the prime
rate. This line of credit is secured by the company's accounts
receivable, inventory and certain of its machinery, equipment and
intangibles.
UDAG LOAN/(HARTWELL SECURED NOTE): Urban Development Action Grant
(UDAG) loan was used by the Debtor to expand its existing plant
facilities at the Hartwell, Georgia plant in 1984. This 7.0% Secured
Note was originally issued in July 1985 and was scheduled to mature in
June 1995. As of the filing date, the total amount of the obligation
was approximately $129,000. Pursuant to the Plan, this note will be
assumed at 7.0% and be repaid over nineteen (19) months commencing with
the Effective Date.
SECURED REED, SMITH CLAIM: This represents a charging lien. The lien
secures proceeds which may become available as a result of the
resolution of litigation against the Company's insurance carrier for
failure to pay environmental claims. The Plan provides for the
outstanding balance of this obligation at time of Confirmation to be
paid in twelve (12) equal monthly installments commencing thirty (30)
days after the Effective Date.
NEW CASTLE COUNTY SECURED NOTE: Represents a secured claim related to
sewer utility services in the aggregate amount of approximately
$1,882,000, consisting of initial principal, pre-petition penalty and
accrued interest of approximately $1,442,000, $125,000 and 315,000,
respectively. Pursuant to terms of the Plan, the secured note will
receive payments for the first twelve months of the Plan (i) interest
only payments at a rate of 8.0% and thereafter shall receive (ii) equal
monthly installments consisting of principal and interest until paid in
full. NVF has reserved the right to assert any available setoff.
TAXES: Represents Alternative Minimum Taxes (AMT) and an estimate for
state taxes. The Projections reflect the Debtor's utilization of its
remaining net operating loss carryforwards which the Debtor believes
will be available subject to certain limitations pursuant to 382 of the
Tax Code.
BALANCE SHEET ASSETS
CASH AND CASH RESERVES: The Debtor believes that its existing cash
reserves, anticipated insurance proceeds and available borrowings will
provide adequate resources for working capital. During the Projection
Period, the Debtor anticipates through the earnings of the business to
increase its cash balances. The growth in cash balances provides the
Debtor with the future resources to pay existing liabilities, primarily
environmental, that are not fixed and determinable in amount or terms
as of the Confirmation Date. The Debtor believes that it is in the best
interest of continuing creditors to maintain such cash reserves.
RESTRICTED CASH: Represents additional proceeds from First Security and
Investment Corp. This cash will be used by the Reorganized NVF to
satisfy certain environmental liabilities.
RECEIVABLES, NET: Net trade receivables will increase directly with
sales with collection periods approximating the same experienced in
prior years.
5
<PAGE> 107
INVENTORIES: Post Confirmation, Management anticipates continuing its
efforts in maximizing its inventory cost controls while selectively
increasing its inventory levels to maximize its product mix and demand.
No significant changes in inventory turnover rates are expected.
OTHER CURRENT ASSETS: A significant portion of other current assets
represents prepayments for goods and services. The reduction in other
current assets will be directly attributable to the ability of the
Reorganized NVF to negotiate more favorable terms.
INVESTMENT IN AFFILIATES: Represents the net investment in the
Company's wholly owned non-debtor subsidiary - NVF Limited of Canada
and its wholly owned subsidiary - Parson's Paper Company. Management
estimates Post Confirmation, the affiliates will breakeven and require
no significant funding.
PROPERTY, PLANT AND EQUIPMENT: Includes required forecasted capital
expenditure, net of depreciation for each respective year as approved
by management. These needs are subject to change during the annual
budgeting process.
OTHER ASSETS: Represents the intangible assets associated with pension
and post retirement accounting in accordance with FASB 87 and FASB 106,
respectively. The change each year represents the amortization of post
retirement assets. These amounts may change significantly depending
upon actuarial assumptions.
BALANCE SHEET LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: Accounts payable and accrued
liabilities represents operating liabilities anticipated to be incurred
in the normal course of business. Management believes the Reorganized
NVF will be able to, over time, negotiate and re-establish customary
credit terms from most of its vendors.
ACCRUED INTEREST PAYABLE: Interest on and repayment of all secured debt
conforms to the provisions of the Plan. In addition, refer to the
PROFIT AND LOSS section of these assumptions for additional discussions
regarding the treatment of the Company's Post Confirmation debt
structure.
CONGRESS FINANCIAL SECURED LINE OF CREDIT: Interest on the secured line
of credit is accrued at 2.0% above prime rate on the outstanding
balance. Borrowings under the line will be used to satisfy existing DIP
lender and for additional working capital post-Confirmation.
OTHER CURRENT LIABILITIES: Represent normal recurring liabilities for
audit, legal, returned goods and other miscellaneous items.
ACCRUED POST RETIREMENT BENEFITS: Represents a 10% increase in the
actual cash liability associated with the prior year.
DEFERRED AND OTHER TAXES: Represents reserves for contingent tax
claims, primarily state. Timing of a resolution of disputes is not
currently estimable.
6
<PAGE> 108
ENVIRONMENTAL LIABILITY: Represents management's current estimate
related total post and pre-petition environmental liabilities of
approximately $1,427,000 and $2,534,000 respectively. The Debtor
believes cash reserves and insurance proceeds will be adequate to cover
its estimated obligation for those claims that may be resolved during
the Projection Period.
7
<PAGE> 109
EXHIBIT D
NVF COMPANY
(DEBTOR IN POSSESSION)
LIQUIDATION ANALYSIS
($000 OMITTED)
<TABLE>
<CAPTION>
9/30/95
UNAUDITED ESTIMATED
BOOK LIQUIDATION
ASSETS VALUE (F) VALUE (A)
------ ---------- -----------
<S> <C> <C>
CASH & CASH EQUIVALENTS $ 241 $ 241
TRADE ACCOUNTS RECEIVABLE, NET $ 13,957 $ 11,151
INVENTORY, NET $ 12,347 $ 4,812
OTHER CURRENT ASSETS $ 435 $ 0
INVESTMENT IN AFFILIATE (B) $ 7,506 $ 0
PLANT, PROPERTY & EQUIPMENT, NET $ 18,921 $ 7,999
OTHER ASSETS $ 2,289 $ 0
---------- ----------
TOTAL NET ASSETS $ 55,696 $ 24,203
NET PROCEEDS FROM LITIGATION SETTLEMENT: $ 15,717
----------
TOTAL $ 39,920
----------
SECURED CLAIMS:(AT CONFIRMATION DATE)
CIT SECURED CLAIM $ 4,769
10% SECURED NOTES (G) $ 8,599
HARTWELL SECURED CLAIM $ 129
NEW CASTLE COUNTY SECURED CLAIM (H) $ 1,882
REED, SMITH SECURED CLAIM $ 275
----------
TOTAL SECURED CLAIMS $ 15,654
PRIORITY CLAIMS: (AT CONFIRMATION DATE)
PRIORITY CLAIMS $ 2,090
POST-PETITION PAYABLE $ 1,600
PBGC PENSION CLAIM (C) $ 9,000
TOTAL UNPAID ADMINISTRATIVE CLAIMS (E) $ 6,000
----------
TOTAL PRIORITY CLAIMS $ 18,690
----------
OTHER LIQUIDATION EXPENSES $ 1,996
----------
SECURED AND PRIORITY CLAIMS IN EXCESS OF NET ASSETS: $ 3,580
==========
TOTAL UNSECURED CLAIMS (D) $ 77,948
----------
ESTIMATED RECOVERY OF UNSECURED CREDITORS: 4.59%
==========
</TABLE>
(A) Refer to assumption for valuation adjustments.
(B) Debtor's net investment in subsidiaries and intercompany receivables.
(C) Amount represents actuarial estimate as of February 15, 1995 of NVF's
liability which would result from termination of Plans. PBGC has
asserted the claim could be as much as approximately $21,000.
(D) Represents: "Liabilities Subject to Compromise" of $72,548 plus an
estimated $5,400 for pre-petition environmental liability.
(E) Represents an estimate of administrative claims expected to be paid at
Confirmation.
(F) Liquidation values utilizing 9/30/95 book values are representative of
the estimated recovery of unsecured creditors as of the filing of this
amended disclosure statement.
(G) Includes accrued interest of $1,138
(H) Includes accrued interest of $315
Page 1
<PAGE> 110
EXHIBIT D
NVF COMPANY
(DEBTOR IN POSSESSION)
(IN THOUSANDS)
LIQUIDATION ANALYSIS ASSUMPTIONS
The Debtor has determined that confirmation of the Plan will provide each
Creditor with a greater recovery than it would receive if the Debtor was
liquidated under Chapter 7. This determination is based upon the effects that a
Chapter 7 liquidation would have on the ultimate proceeds available for
distribution to Creditors, including (i) the increased costs and expenses of a
liquidation under Chapter 7 arising from fees payable to one or more trustees in
bankruptcy and professional advisors to such trustees; (ii) the erosion in value
of assets in a Chapter 7 case in the context of the liquidation process required
under Chapter 7 and the "forced sale" atmosphere that would prevail; and (iii)
the substantial increases in claims that would have to be satisfied on a
priority basis or on parity with creditors in the Chapter 11 case.
The unaudited book value of the Debtor's assets, as of September 30, 1995 was
approximately $55,696 with an estimated liquidation value of approximately
$24,203 as follows:
<TABLE>
<CAPTION>
UNAUDITED NET
9/30/95 ESTIMATED
HISTORICAL LIQUIDATION
ASSETS BOOK VALUE VALUE
------ ---------- -----------
<S> <C> <C>
Cash & cash equivalents $ 241 $ 241
Trade receivables, net 13,957 11,151
Inventory 12,347 4,812
Other current assets 435 0
Investment in affiliate 7,506 0
Property, plant & equip, net 18,921 7,999
Other assets 2,289 0
------- -------
Total Assets $55,696 $24,203
======= =======
</TABLE>
In the event of liquidation, the Debtor believes that 100% of the
eligible CIT trade receivables, 50% of the ineligible trade receivables and 10%
of the receivables over 60 days will be collectible. Inventory consists
primarily of finished goods inventory. In the event that the Debtor was
liquidated, it is estimated that the inventory would yield an approximate 40%
recovery. Prepaid expenses represent prepaid workers compensation, insurance and
taxes which would not yield any recovery in event of a liquidation. The sale of
Property, Plant & Equipment includes the assets utilized by the Debtor's 100%
owned subsidiary NVF Canada Limited and its 100% owned subsidiary Parson's Paper
Inc. The liquidation value represents proceeds received from the sale of
all property, net of closing costs and real estate taxes. Other assets represent
deferred assets related to post retirement benefits and deferred pensions. The
assets have no cash value
Page 2
<PAGE> 111
EXHIBIT D
upon liquidation. In regard to NVF's pension plans, if the plans were
terminated, it is estimated the PBGC would have a claim of approximately $9
million.
Estimated liquidation proceeds must first be applied to Secured and
Priority Claims prior to making a distribution to Unsecured Creditors. Estimated
distribution after payment of Secured and Priority Claims as follows:
<TABLE>
<S> <C>
Gross Estimated liquidation value $ 24,203
Net Proceeds from liquidation Settlement 15,717
--------
Total $ 39,920
Estimated cost of liquidation and current
administrative expenses 7,996
Secured & priority claims 28,344
--------
Available for Unsecured Claim holders $ 3,580
--------
Estimated Recovery for Unsecured Claim
holders 4.59%
--------
</TABLE>
In addition, other potential claims, which management is unable to quantify at
the present time, would further reduce the net assets available for distribution
to Secured and Priority Creditors.
Page 3
<PAGE> 112
EXHIBIT E
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BETWEEN
FIRST SECURITY AND INVESTMENT CORP.,
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS,
AND
NVF COMPANY
---------------------------------------
DATED AS OF JANUARY 11, 1996
---------------------------------------
PURCHASE OF THE STOCK OF REORGANIZED NVF COMPANY
- -------------------------------------------------------------------------------
<PAGE> 113
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
"ACCOUNTS PAYABLE POSTPETITION CLAIM" . . . . . . . . . . . 2
"ADMINISTRATIVE CLAIMS" . . . . . . . . . . . . . . . . . . 2
"AGREEMENT" . . . . . . . . . . . . . . . . . . . . . . . . 3
"ALLOWED" . . . . . . . . . . . . . . . . . . . . . . . . . 3
"AMENDED DISCLOSURE STATEMENT" . . . . . . . . . . . . . . . 3
"AMENDED PLAN" . . . . . . . . . . . . . . . . . . . . . . 3
"APL BONDS" . . . . . . . . . . . . . . . . . . . . . . . . 3
"ASSUMED CLAIMANT" . . . . . . . . . . . . . . . . . . . . . 3
"ASSUMED LIABILITIES" . . . . . . . . . . . . . . . . . . . 3
"BANKRUPTCY CODE" . . . . . . . . . . . . . . . . . . . . . 3
"BANKRUPTCY COURT" . . . . . . . . . . . . . . . . . . . . 3
"BANKRUPTCY RULES" . . . . . . . . . . . . . . . . . . . . . 3
"BUSINESS" . . . . . . . . . . . . . . . . . . . . . . . . . 4
"BUSINESS DAYS" . . . . . . . . . . . . . . . . . . . . . . 4
"BUSINESS RECORDS" . . . . . . . . . . . . . . . . . . . . 4
"BUYER" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"CASE" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"CASH PURCHASE PRICE" . . . . . . . . . . . . . . . . . . . 4
"CHAPTER 11 PROCEEDING" . . . . . . . . . . . . . . . . . . 4
"CIT DIP FINANCING" . . . . . . . . . . . . . . . . . . . . 4
"CLAIM" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"CLOSING" . . . . . . . . . . . . . . . . . . . . . . . . . 4
"CLOSING DATE" . . . . . . . . . . . . . . . . . . . . . . . 4
"CODE" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"COMMITTEE" . . . . . . . . . . . . . . . . . . . . . . . . 4
"COMPANY" . . . . . . . . . . . . . . . . . . . . . . . . . 4
"CONFIDENTIALITY AGREEMENT" . . . . . . . . . . . . . . . . 4
"CONFIRMATION HEARING DATE" . . . . . . . . . . . . . . . . 5
"CONFIRMATION ORDER" . . . . . . . . . . . . . . . . . . . 5
"CONTINGENT LIABILITIES" . . . . . . . . . . . . . . . . . 5
"DAMAGES" . . . . . . . . . . . . . . . . . . . . . . . . . 5
"DISBURSING AGENT" . . . . . . . . . . . . . . . . . . . . 5
"DISTRIBUTION FUND" . . . . . . . . . . . . . . . . . . . . 5
"EFFECTIVE DATE" . . . . . . . . . . . . . . . . . . . . . . 5
"ENVIRONMENTAL CLAIM" . . . . . . . . . . . . . . . . . . . 5
"ENVIRONMENTAL CLAIM FOR KENNETT SQUARE" . . . . . . . . . 5
"ENVIRONMENTAL LAW" . . . . . . . . . . . . . . . . . . . . 6
"ENVIRONMENTAL POSTPETITION CLAIM AT KENNETT SQUARE" . . . . 6
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"ESCROW AGENT" . . . . . . . . . . . . . . . . . . . . . . 6
"ESCROW AGREEMENT" . . . . . . . . . . . . . . . . . . . . 6
"ESTATE" . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
-i-
<PAGE> 114
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
"FINAL AUCTION DATE" . . . . . . . . . . . . . . . . . . . 7
"FINAL ORDER" . . . . . . . . . . . . . . . . . . . . . . . 7
"5% DEBENTURES" . . . . . . . . . . . . . . . . . . . . . . 7
"GLOBAL FINANCIAL CLAIM" . . . . . . . . . . . . . . . . . . 7
"GOVERNMENT BODY" . . . . . . . . . . . . . . . . . . . . . 7
"HARTWELL SECURED CLAIM" . . . . . . . . . . . . . . . . . 7
"HAZARDOUS MATERIAL" . . . . . . . . . . . . . . . . . . . . 7
"HSR ACT" . . . . . . . . . . . . . . . . . . . . . . . . . 8
"I.N.A. CLAIM" . . . . . . . . . . . . . . . . . . . . . . 8
"INCREMENTAL BID" . . . . . . . . . . . . . . . . . . . . . 8
"INITIAL DEPOSIT" . . . . . . . . . . . . . . . . . . . . . 8
"LEGAL PROCEEDING" . . . . . . . . . . . . . . . . . . . . 8
"LIABILITY" . . . . . . . . . . . . . . . . . . . . . . . . 8
"LIEN" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"LITIGATION SETTLEMENT" . . . . . . . . . . . . . . . . . . 8
"LITIGATION SETTLEMENT PROCEEDS" . . . . . . . . . . . . . 8
"MISCELLANEOUS PRIORITY CLAIMS" . . . . . . . . . . . . . . 8
"NEW CASTLE SECURED CLAIM" . . . . . . . . . . . . . . . . 9
"NEW STOCK" . . . . . . . . . . . . . . . . . . . . . . . . 9
"NVF PENSION PLANS" . . . . . . . . . . . . . . . . . . . . 9
"OFF-SITE AND ON-SITE ENVIRONMENTAL LIABILITY" . . . . . . . 9
"OTHER UNSECURED CLAIMS" . . . . . . . . . . . . . . . . . 9
"OVERBID SALE" . . . . . . . . . . . . . . . . . . . . . . . 9
"PARSONS" . . . . . . . . . . . . . . . . . . . . . . . . . 9
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"PERSON" . . . . . . . . . . . . . . . . . . . . . . . . . 9
"PETITION DATE" . . . . . . . . . . . . . . . . . . . . . . 9
"POSTPETITION ACCRUED WAGES AND OTHER CLAIMS" . . . . . . . 9
"PURCHASE PRICE" . . . . . . . . . . . . . . . . . . . . . 9
"REED SMITH SECURED CLAIM" . . . . . . . . . . . . . . . . 10
"RECAPITALIZATION ALTERNATIVE" . . . . . . . . . . . . . . . 10
"REORGANIZED COMPANY" . . . . . . . . . . . . . . . . . . . 10
"SALES AGENT" . . . . . . . . . . . . . . . . . . . . . . . 10
"SECURED OR PRIORITY TAX CLAIM" . . . . . . . . . . . . . . 10
"10% DEBENTURES" . . . . . . . . . . . . . . . . . . . . . 10
"10% SECURED NOTES" . . . . . . . . . . . . . . . . . . . . 10
"UNDERFUNDED PENSION CONTINGENT LIABILITY" . . . . . . . . 10
Section 2
Purchase and Sale of Shares . . . . . . . . . . . . . . . . 10
2.1 Purchase and Sale of New Stock. . . 10
2.2 Purchase Price. . . . . . . . . . . 11
2.3 Payment of Cash Purchase Price . . 11
2.4 Assumed Liabilities. . . . . . . . 11
</TABLE>
-ii-
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 3
Bankruptcy Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Amended Plan and Amended Disclosure
Statement. . . . . . . . . . . . . . . . . . . . 13
3.2 Confirmation Order. . . . . . . . . . . . . . . . 13
3.3 Bankruptcy Undertakings by the Company. . . . . . 14
3.4 Bankruptcy Undertakings by the Buyer. . . . . . . 14
3.5 Terms of the Amended Plan. . . . . . . . . . . . 14
3.6 Overbid Procedures. . . . . . . . . . . . . . . . 16
Section 4
Representations and Warranties of the Buyer . . . . . . . . . . . . . . . 17
4.1 Authorization and Enforceability. . . . . . . . . 17
4.2 Compliance. . . . . . . . . . . . . . . . . . . . 18
4.3 Consents. . . . . . . . . . . . . . . . . . . . . 18
4.4 Legal Proceedings. . . . . . . . . . . . . . . . 18
4.5 Brokers. . . . . . . . . . . . . . . . . . . . . 18
4.6 Purchase Not for Distribution. . . . . . . . . . 19
4.7 Investigation by the Buyer. . . . . . . . . . . . 19
4.8 As-Is Sale; Limitation on Company's
Representations. . . . . . . . . . . . . . . . . 19
4.9 Financing. . . . . . . . . . . . . . . . . . . . 19
4.10 No Misrepresentations . . . . . . . . . . . . . . 19
4.11 Financial Ability of Buyer to Consummate
Transaction. . . . . . . . . . . . . . . . . . . 20
Section 5
Covenants of the Company and the Buyer . . . . . . . . . . . . . . . . . . 20
5.1 Expenses. . . . . . . . . . . . . . . . . . . . . 20
5.2 Access to Business. . . . . . . . . . . . . . . . 20
5.3 Access to Books and Records. . . . . . . . . . . 20
5.4 Financial Information. . . . . . . . . . . . . . 21
5.5 Consummation and Further Assurances. . . . . . . 21
Section 6
Additional Agreements Between the Buyer and the Company . . . . . . . . . 21
6.1 Conduct of Business Pending Closing. . . . . . . 21
6.2 Transfer or Sales Taxes. . . . . . . . . . . . . 22
6.3 Hart-Scott-Rodino. . . . . . . . . . . . . . . . 22
6.4 Payment of Administrative Expenses Prior to
Closing . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
-iii-
<PAGE> 116
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 7
Conditions to Obligations of the Buyer . . . . . . . . . . . . . . . . . . 22
7.1 Delivery of Shares and Other Documents. . . . . . 22
7.2 Change of Law . . . . . . . . . . . . . . . . . . 22
7.3 Entry of the Confirmation Order; Consummation
of the Plan . . . . . . . . . . . . . . . . . . . 23
7.4 Governmental Approvals. . . . . . . . . . . . . . 23
7.5 Adverse Proceedings . . . . . . . . . . . . . . . 23
Section 8
Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . 23
8.1 Governmental Approvals. . . . . . . . . . . . . . 23
8.2 Representations, Warranties and Covenants. . . . 24
8.3 Adverse Proceedings. . . . . . . . . . . . . . . 24
8.4 Cash Purchase Price. . . . . . . . . . . . . . . 24
8.5 Higher or Better Offers. . . . . . . . . . . . . 24
8.6 Entry of the Confirmation Order; Consummation
of the Plan. . . . . . . . . . . . . . . . . . . 24
Section 9
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 Right of Parties to Terminate. . . . . . . . . . 24
9.2 Effect of Termination on Funds Held in
Escrow. . . . . . . . . . . . . . . . . . . . . . 25
9.3 Effect of Termination Due to Breach by the
Company or the Committee . . . . . . . . . . . . 25
Section 10
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Time and Place of Closing. . . . . . . . . . . . 26
10.2 Obligations of the Company at Closing. . . . . . 26
10.3 Obligations of the Buyer at Closing. . . . . . . 26
10.4 Transfer . . . . . . . . . . . . . . . . . . . . 27
Section 11
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1 Indemnification. . . . . . . . . . . . . . . . . 27
</TABLE>
-iv-
<PAGE> 117
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 12
Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Benefit and Assignment. . . . . . . . . . . . . 28
12.2 Survival. . . . . . . . . . . . . . . . . . . . 28
12.3 Entire Agreement. . . . . . . . . . . . . . . . 28
12.4 Amendment, Waiver. . . . . . . . . . . . . . . 28
12.5 Headings, Sections, References. . . . . . . . . 28
12.6 Waiver. . . . . . . . . . . . . . . . . . . . . 28
12.7 Governing Law, Jurisdiction. . . . . . . . . . 29
12.8 Notices. . . . . . . . . . . . . . . . . . . . 29
12.9 Attorneys' Fees. . . . . . . . . . . . . . . . 30
12.10 Counterparts. . . . . . . . . . . . . . . . . . 30
SCHEDULE 2.4
ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SCHEDULE 3.5
ESTIMATED CLAIMS PAID FROM THE DISTRIBUTION FUND . . . . . . . . . . . . 34
SCHEDULE 3.5(j)
EXECUTORY CONTRACTS TO BE ASSUMED UNDER AMENDED PLAN . . . . . . . . . . 1
SCHEDULE 4.3
BUYER CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
-v-
<PAGE> 118
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
DATED: October 16, 1995
PARTIES: First Security and Investment Corp.,
a Florida corporation "BUYER"
NVF Company,
a Delaware corporation "COMPANY"
Official Committee of Unsecured
Creditors of NVF Company "COMMITTEE"
RECITALS
A. The Company is engaged, both domestically and internationally,
in, among other things, the business of producing and selling vulcanized fibre
and laminated plastics (the "BUSINESS").
B. The Company is a debtor and debtor in possession in a case
(the "CASE") filed in the United States Bankruptcy Court for the District of
Delaware (the "BANKRUPTCY COURT") entitled "In re NVF Company, Debtor," Case
No. 93-1020, under Chapter 11, Title 11 of the United States Code (the
"BANKRUPTCY CODE").
C. The Company operates its business and manages its properties
as a debtor in possession in accordance with sections 1107(a) and 1108 of the
Bankruptcy Code.
D. The Company and the Committee agreed jointly on September 15,
1994 to retain an investment banking firm to market and sell assets of the
Company or recapitalize the Company. Alex. Brown & Sons Incorporated
subsequently was selected jointly by the Company and the Committee to serve as
sales agent (the "SALES AGENT"). This retention was approved by the Bankruptcy
Court on or about November 2, 1994.
E. The Company filed its second amended plan of reorganization
and disclosure statement with the Bankruptcy Court in the Case on September 7,
1994.
F. The Buyer desires to purchase and acquire and the Company and
the Committee desire the Reorganized Company (as hereinafter defined) to issue
and the Disbursing Agent (as hereinafter defined) to transfer and sell to the
Buyer all of the New Stock (as hereafter defined). The Company, consistent
with its fiduciary duties as a debtor in possession, wishes to carry out the
transactions contemplated by this Agreement and to file
<PAGE> 119
with the Bankruptcy Court an amended plan of reorganization jointly with the
Committee (this plan, together with its modifications and amendments, the
"AMENDED PLAN") and an amended disclosure statement (this disclosure statement,
together with its modifications and amendments, the "AMENDED DISCLOSURE
STATEMENT"), in each case based on and incorporating the transactions
contemplated by this Agreement, and to consummate the transactions contemplated
hereby as promptly as practicable. The Amended Plan shall, among other things,
provide for the issuance of shares of New Stock of the Reorganized Company
which shares of New Stock shall be transferred to the Buyer by the Disbursing
Agent. The Buyer's purchase of the New Stock will be made in connection with
and as part of the transactions to be consummated pursuant to the Amended Plan
and an order (the "CONFIRMATION ORDER") confirming the Amended Plan issued by
the Bankruptcy Court.
In consideration of the respective promises, mutual covenants
and agreements of the parties hereto, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1
DEFINITIONS
For the purposes of this Agreement, except as expressly
provided herein or unless the context otherwise requires, the following terms
shall have the following meanings:
"ACCOUNTS PAYABLE POSTPETITION CLAIM" means Claims of third
parties arising after the Petition Date for the purchase of merchandise,
supplies, utilities and other non-employee related expenses incurred in the
ordinary course of business.
"ADMINISTRATIVE CLAIMS" means a Claim for costs and expenses
of administration allowed under sections 503, 507(a)(1), 507(b) and 1114(e)(2)
of the Bankruptcy Code, including: (a) the actual and necessary costs and
expenses incurred after the commencement of the Case of preserving the
Company's estate and operating the business of the Company (such as wages,
salaries or commissions for services); (b) compensation for legal, accounting
and other services and reimbursement of expenses awarded or allowed under
section 330(a) or 331 of the Bankruptcy Code; (c) all payments made to cure
defaults under executory contracts and leases which have been assumed by the
Company; and (d) all fees and charges assessed against the Company under
Chapter 123 of Title 28 of the United States Code.
-2-
<PAGE> 120
"AGREEMENT" means this Stock Purchase Agreement, including all
exhibits and schedules hereto, as it may from time to time be amended.
"ALLOWED" when used with respect to a Claim, means a Claim
against the Company:
(a) which has been scheduled as undisputed, not
contingent and liquidated in the Company's schedule of liabilities or any
amendments thereto, and as to which no proof of Claim or objection has been
timely filed;
(b) as to which a proof of Claim has been timely filed
and either:
(i) no objection thereto has been timely filed; or
(ii) the Claim has been allowed (but only to the
extent allowed) by a Final Order; or
(c) which is a Claim for compensation for legal,
accounting and other services and reimbursement of expenses incurred under
section 330(a) or 331 of the Bankruptcy Code for which a fee award amount has
been approved by a Final Order.
"AMENDED DISCLOSURE STATEMENT" has the meaning assigned to
that term in Section F of the Recitals.
"AMENDED PLAN" has the meaning assigned to that term in
Section F of the Recitals.
"APL BONDS" means the $2,538,000 in aggregate principal amount
of the 10 3/4% bonds issued by APL Corporation due August 1, 1997 that are
currently held by the Company.
"ASSUMED CLAIMANT" means each claimant that holds a Claim
against the Company listed on Schedule 2.4.
"ASSUMED LIABILITIES" has the meaning assigned to that term in
Section 2.4.
"BANKRUPTCY CODE" has the meaning assigned to that term in
Section B of the Recitals.
"BANKRUPTCY COURT" has the meaning assigned to that term in
Section B of the Recitals.
"BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, and any local rules of the Bankruptcy
Court.
-3-
<PAGE> 121
"BUSINESS" has the meaning assigned to that term in Section A
of the Recitals.
"BUSINESS DAYS" means each Monday, Tuesday, Wednesday,
Thursday and Friday, which is not a day on which banking institutions in New
York, New York, are authorized or obligated by law, governmental decree, or
executive order to be closed.
"BUSINESS RECORDS" has the meaning assigned to that term in
Section 5.3.
"BUYER" means First Security and Investment Corp., a Florida
corporation.
"CASE" has the meaning assigned to that term in Section B of
the Recitals.
"CASH PURCHASE PRICE" has the meaning assigned to that term in
Section 2.2
"CHAPTER 11 PROCEEDING" means the Company's reorganization
proceeding under the Bankruptcy Code in Case No. 93-1020 before the Bankruptcy
Court.
"CIT DIP FINANCING" means the working capital facility entered
into between the Company and The CIT Group/Business Credit, Inc. dated as of
April 27, 1995.
"CLAIM" means claim as that term is defined in section 101(5)
of the Bankruptcy Code, against the Company.
"CLOSING" means the closing of the purchase and sale of the
New Stock pursuant to this Agreement.
"CLOSING DATE" means the date of the Closing determined as set
forth in Section 10.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Official Committee of Unsecured
Creditors of the Company.
"COMPANY" means NVF Company, a Delaware corporation.
"CONFIDENTIALITY AGREEMENT" means any confidentiality
agreement entered into by the Sales Agent or the Company and the Buyer with
respect to the materials and information furnished by the Sales Agent or the
Company to the Buyer in connection with the transaction proposed herein.
-4-
<PAGE> 122
"CONFIRMATION HEARING DATE" means the date of the hearing
before the Bankruptcy Court on the confirmation of the Amended Plan and the
date(s) upon which such hearing continues.
"CONFIRMATION ORDER" has the meaning assigned to that term in
Section F of the Recitals.
"CONTINGENT LIABILITIES" means a right to payment or remedy
which is contingent, unliquidated or unmatured.
"DAMAGES" means any loss, liability, claim, damage, expense
(including, without limitation, costs of investigation and defense and
reasonable attorneys' fees and expenses) or diminution of value.
"DISBURSING AGENT" means the person appointed by the Company
and the Committee pursuant to the Amended Plan for the purpose of overseeing
and making distributions from the Distribution Fund and taking such other
action as is described herein or as is necessary to effectuate the Amended
Plan.
"DISTRIBUTION FUND" means the fund containing an amount equal
to (i) the Cash Purchase Price and (ii) the Litigation Settlement Proceeds,
which fund will be established pursuant to the Amended Plan and held in escrow,
will be administered by the Disbursing Agent and out of which fund will be made
distributions with respect to Allowed Claims not listed in Schedule 2.4 and
listed in Schedule 3.5 herein against the Company under the Amended Plan.
"EFFECTIVE DATE" means the date of the first distribution of
cash as determined by the Company and the Committee under the Amended Plan to
holders of Other Unsecured Claims.
"ENVIRONMENTAL CLAIM" means any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial, or private in nature) arising (a) pursuant to, or in
connection with, an actual or alleged violation of, any Environmental Law, (b)
in connection with any Hazardous Material, (c) from any abatement, removal,
remedial, corrective, or other response action in connection with a Hazardous
Material, Environmental Law or other order of governmental authority or (d)
from any actual or alleged damage, injury, threat, or harm to health, safety,
natural resources, or the environment.
"ENVIRONMENTAL CLAIM FOR KENNETT SQUARE" means any
Environmental Claim incurred by the Environmental Protection
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Agency at Kennett Square prior to the Petition Date and identified in writing
to the Company as of the Closing Date.
"ENVIRONMENTAL LAW" means any current or future legal
requirement pertaining to (a) the protection of health, safety, and the indoor
or outdoor environment, (b) the conservation, management, or use of natural
resources and wildlife, (c) the protection or use of surface water and
groundwater, (d) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, release, threatened
release, abatement, removal, remediation or handling of, or exposure to, any
Hazardous Material or (e) pollution (including any release to air, land,
surface water and groundwater), including, but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC
9601 et seq, Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
USC 6901 et seq, Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1977, 33 USC 1251 et seq, Clean Air Act of 1966, as amended, 42
USC 7401 et seq, Toxic Substances Control Act of 1976, 15 USC 2601 et seq,
Hazardous Materials Transportation Act, 49 USC App. 1801 et seq, Occupational
Safety and Health Act of 1970, as amended, 29 USC 651 et seq, Oil Pollution Act
of 1990, 33 USC 2701 et seq, Emergency Planning and Community Right-to-Know Act
of 1986, 42 USC 11001 et seq, National Environmental Policy Act of 1969, 32 USC
4321 et seq, Safe Drinking Water Act of 1974, as amended, 42 USC 300(f) et seq,
any similar, implementing or successor law, any similar or analogous state laws
and regulations, and any amendment, rule, regulation, order, or directive
issued thereunder.
"ENVIRONMENTAL POSTPETITION CLAIM AT KENNETT SQUARE" means any
Environmental Claim incurred by the Environmental Protection Agency related to
the facility owned and operated by the Company in Kennett Square, Chester
County, Pennsylvania (the "KENNETT SQUARE SITE") and arising after the Petition
Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" has the meaning assigned to that term in the
Escrow Agreement.
"ESCROW AGREEMENT" means the escrow agreement entered into by
the Company and the Buyer substantially in the form of Exhibit A hereto for the
purpose of the payment of the Cash Purchase Price.
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"ESTATE" means the estate created for the Company in the Case
pursuant to section 541 of the Bankruptcy Code.
"FINAL AUCTION DATE" means the date upon which the final
auction for the common stock or the New Stock of the Reorganized Company or
substantially all the assets of the Company shall be held, provided, however,
that such date shall be (i) a Business Day and (ii) at least no later than 30
days after the terms of this Agreement are approved by the Bankruptcy Court.
"FINAL ORDER" means an order or a judgment which has not been
reversed or stayed and as to which (i) the time to appeal or seek review,
rehearing or certiorari has expired and (ii) no appeal or petition for review,
rehearing or certiorari is pending.
"5% DEBENTURES" means the subordinated debentures issued by
the Company, due January 1, 1994, under an indenture dated as of January 1,
1969, between the Company and Bankers Trust Company, as trustee, and bearing an
interest rate of five percent (5%).
"GLOBAL FINANCIAL CLAIM" means the proofs of claim filed on
behalf of Global Financial Corporation.
"GOVERNMENT BODY" means any domestic or foreign national,
state or municipal or other local government or multi-nation body (including,
without limitation, the European Union), any subdivision, agency, commission,
or authority thereof, or any quasi-governmental or private body exercising any
regulatory or taxing authority.
"HARTWELL SECURED CLAIM" means the Claim arising out of or
related to the secured promissory note dated November 13, 1984 issued by the
Company in favor of Hartwell, in the original aggregate principal amount of
Seven Hundred Fifty Thousand Dollars ($750,000).
"HAZARDOUS MATERIAL" means any substance, chemical, compound,
product, solid, gas, liquid, waste, byproduct, pollutant, contaminant, or
material which is hazardous or toxic, including, but not limited to (a)
asbestos, polychlorinated biphenyls, and petroleum (including crude oil or any
fraction thereof) and (b) any such material classified or regulated as
"hazardous" or "toxic" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 USC 9601 et seq, Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous
and Solid Waste Amendments of 1984, 42 USC 6901 et seq, Federal Water Pollution
Control Act, as amended by the Clean Water Act of
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1977, 33 USC 1251 et seq, Clean Air Act of 1966, as amended, 42 USC 7401 et seq,
Toxic Substances Control Act of 1976, 15 USC 2601 et seq, Hazardous Materials
Transportation Act, 49 USC App. 1801 et seq, and any similar, implementing or
successor law, any similar or analogous state laws and regulations, and any
amendment, rule, regulation, order, or directive issued thereunder.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the related regulations and published
interpretations.
"I.N.A. CLAIM" means the proof of Claim filed on behalf of
Insurance Company of North America.
"INCREMENTAL BID" means a bona fide offer to the Company to
purchase the common stock or the New Stock of the Reorganized Company or the
assets of the Company complying with the overbid procedures outlined in Section
3.6.
"INITIAL DEPOSIT" has the meaning assigned to that term in
Section 3.6.
"LEGAL PROCEEDING" means any judicial, administrative, or
arbitral actions, suits, proceedings (public or private), Claims or
governmental proceedings.
"LIABILITY" means all indebtedness, obligations and other
liabilities of any kind, character or description, whether known or unknown,
absolute or contingent.
"LIEN" means, with respect to any property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind or any
agreement to give, or notice of, any of the foregoing.
"LITIGATION SETTLEMENT" means the settlement of the adversary
proceeding captioned, Official Committee of Unsecured Creditors of NVF Company
v. Victor Posner, et. al., Civil Action No. 94-400 (RRM) pending in the
District Court for the District of Delaware pursuant to the terms of that
certain Stipulation and Agreement of Compromise and Settlement among the
parties hereto and others.
"LITIGATION SETTLEMENT PROCEEDS" means proceeds obtained from
the Litigation Settlement.
"MISCELLANEOUS PRIORITY CLAIMS" means all unsecured Claims
against the Company, however arising, entitled to priority under Bankruptcy
Code section 507(a).
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"NEW CASTLE SECURED CLAIM" means the secured Claim of New
Castle County against the Company for sewer service provided to the Company's
Yorklyn, Delaware plant.
"NEW STOCK" means the common stock of the Reorganized Company
issued on the Closing Date to the Buyer.
"NVF PENSION PLANS" means the following defined benefit plans
maintained by the Company: the Frozen Salaried Plan, the Hourly Union Plan,
the Broadview Union Plan, the Holyoke Union Plan, the Los Angeles Union Plan,
the Parsons Pension Plan and the NVF Canada Plan.
"OFF-SITE AND ON-SITE ENVIRONMENTAL LIABILITY" means any
Environmental Claim relating in any manner to an environmental condition on or
from a site or property owned by NVF or from which it operates ("ON-SITE") or
from any other site or property ("OFF-SITE").
"OTHER UNSECURED CLAIMS" means all unsecured Claims against
the Company, however arising, not entitled to priority under Bankruptcy Code
section 507(a), including Claims for Contingent Liabilities, and which are not
Claims being assumed pursuant to Section 2.4.
"OVERBID SALE" shall have the meaning ascribed to that term in
Section 3.6.
"PARSONS" means Parsons Paper Company, Inc., a Delaware
corporation, a wholly-owned subsidiary of NVF Canada, which is in turn
wholly-owned by the Company.
"PBGC" means the Pension Benefit Guaranty Corp.
"PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, trust, association, unincorporated
organization, other entity or Government Body.
"PETITION DATE" means August 27, 1993.
"POSTPETITION ACCRUED WAGES AND OTHER CLAIMS" means Claims
arising after the Petition Date for employee related costs incurred in the
ordinary course of business, including wages, salaries, commissions, payroll
withholdings and contributions to any employee benefit plan.
"PURCHASE PRICE" has the meaning assigned to that term in
Section 2.2.
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"REED SMITH SECURED CLAIM" means the Claim of the law firm
Reed, Smith, Shaw & McClay against the Company which is secured by that certain
Charging Lien Agreement dated May 18, 1992.
"RECAPITALIZATION ALTERNATIVE" means a default plan of
reorganization set forth in the Amended Plan as an alternative to the plan
contemplated by the sale of the New Stock to the Buyer, which default plan
shall be consistent with the terms and conditions of the Litigation Settlement.
"REORGANIZED COMPANY" means the Company as reorganized pursuant
to the Amended Plan.
"SALES AGENT" has the meaning assigned to that term in Section
D of the Recitals.
"SECURED OR PRIORITY TAX CLAIM" means an Allowed secured or
priority Claim for taxes of the kind specified in section 507(a)(8) of the
Bankruptcy Code.
"10% DEBENTURES" means the subordinated debentures issued by
the Company, due November 15, 2003, under an indenture dated as of January 14,
1974 between the Company and Sterling National Bank & Trust Co. of New York, as
trustee, and bearing an interest rate of ten percent (10%).
"10% SECURED NOTES" means the secured promissory notes issued
by the Company, due November 22, 1996, and bearing an interest rate of ten
percent (10%).
"UNDERFUNDED PENSION CONTINGENT LIABILITY" means contributions
required to be made to the NVF Pension Plans to adequately fund accrued
benefits under such plans, and to satisfy the requirements of Code sections
401(a) and 412.
SECTION 2
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of New Stock. Subject to the terms and
conditions of this Agreement and the Amended Plan, on the Closing Date, the
Company shall issue or cause to be issued to the Disbursing Agent the New
Stock. On the Closing Date, the Buyer shall pay the Cash Purchase Price to the
Disbursing Agent, pursuant to Section 2.2, and the Disbursing Agent shall sell
and deliver the New Stock to the Buyer on the terms and conditions of this
Agreement.
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2.2 Purchase Price. The total consideration (the "PURCHASE
PRICE") for the purchase of the New Stock shall be (a) US$24.5 Million cash
(the "CASH PURCHASE PRICE") and (b) the assumption by Reorganized Company or
payment by the Buyer, as the case may be, of the Assumed Liabilities as defined
in Section 2.4 herein.
2.3 Payment of Cash Purchase Price. Upon the execution of this
Agreement and entry of an order by the Bankruptcy Court approving this
Agreement and the Escrow Agreement, the Buyer shall, by wire transfer of
immediately available funds, deposit $24.5 Million cash in an account
designated in writing by the Company to the Buyer which funds will be held and
released in accordance with the terms of the Escrow Agreement.
2.4 Assumed Liabilities. As part of the Purchase Price for the
New Stock, effective as of the Closing Date, in accordance with the terms and
conditions of the Amended Plan, the liabilities set forth on Schedule 2.4 (the
"ASSUMED LIABILITIES") shall be assumed, paid or otherwise treated, as set
forth below:
(a) with respect to the liabilities listed on Schedule
2.4 subsection (A), these liabilities shall be either (i) assumed by the
Reorganized Company pursuant to an agreement between the Assumed Claimant, the
Company, and the Buyer or (ii) paid in full in cash by the Buyer, or paid in
full in cash by the Reorganized Company through any exit financing obtained by
the Reorganized Company which funds raised by such financing shall be other
than and in addition to the Cash Purchase Price and Litigation Settlement
Proceeds, on the Closing Date;
(b) with respect to the liabilities listed on Schedule
2.4 subsection (B), these liabilities either shall be(i) assumed by the
Reorganized Company pursuant to an agreement between the Assumed Claimant, the
Company and the Buyer reached no later than 20 days after the Final Auction
Date; or (ii) paid in full in cash by the Buyer, or paid in full in cash by the
Reorganized Company through any exit financing obtained by the Reorganized
Company which funds raised by such financing shall be other than and in
addition to the Cash Purchase Price and Litigation Settlement Proceeds, on the
Closing Date;
(c) with respect to the liability listed on Schedule 2.4
subsection (C), this liability shall be either (i) assumed by the Reorganized
Company pursuant to an agreement between the Assumed Claimant, the Company and
the Buyer or (ii) paid a cash distribution by the Buyer or by the Reorganized
Company through any exit financing obtained by the Reorganized Company, which
funds raised by such financing shall be other than and in addition to the Cash
Purchase Price and Litigation Settlement Proceeds equal to the percentage cash
distribution paid to holders of Allowed Other Unsecured Claims under the
Amended Plan;
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(d) with respect to the liabilities listed on Schedule
2.4 subsection (D)(1), these liabilities shall be assumed by the Reorganized
Company pursuant to the Amended Plan and paid by the Reorganized Company in the
ordinary course of business; with respect to the liabilities listed on Schedule
2.4 subsection (D)(2), these liabilities either shall be (x) assumed by the
Reorganized Company pursuant to an agreement between the Assumed Claimant, the
Company and the Buyer or (y) paid in full in cash by the Buyer or paid in full
in cash by the Reorganized Company through any exit financing obtained by the
Reorganized Company, which funds raised by such financing, shall be other than
and in addition to the Cash Purchase Price and the Litigation Settlement
Proceeds, on the Closing Date;
(e) with respect to the liabilities listed on Schedule
2.4 subsection (E)(1), these liabilities shall be assumed by the Reorganized
Company and paid in the normal course of business pursuant to the Amended Plan.
With respect to the liabilities listed on Schedule 2.4 subsection (E)(2), when
these Claims become Allowed, due and payable, they shall be (x) paid a
percentage distribution equal to the percentage cash distribution paid to
holders of Allowed Other Unsecured Claims under the Amended Plan, if the
assumed Claims are not entitled to priority or secured, or (y) paid in full in
cash, if the assumed Claims are entitled to priority or to the extent secured.
The liabilities on Schedule 2.4 subsection (E)(2) shall be paid (a) if Allowed,
due and payable prior to the Effective Date, by the Buyer, or by the
Reorganized Company, with funds provided by the Buyer, which funds shall be
other than and in addition to the Cash Purchase Price and the Litigation
Settlement Proceeds, on the Closing Date, or (b) if Allowed and due and payable
after the Effective Date, by the Reorganized Company.
(f) (i) with respect to the liabilities listed on
Schedule 2.4 subsection (F), these liabilities either shall be (i) assumed by
the Reorganized Company pursuant to an agreement between the Assumed Claimant,
the Company, and the Buyer or (ii) paid in full in cash by the Buyer or the
Reorganized Company, with funds provided by the Buyer, which funds shall be
other than and in addition to the Cash Purchase Price and the Litigation
Settlement Proceeds, on the Closing Date; and
(g) to the extent the Assumed Liabilities fluctuate in
value from the estimates listed on Schedule 2.4, the Reorganized Company or
Buyer shall assume all the risk or realize all the benefit of such fluctuation.
(h) whenever an option as to the payment, treatment or
assumption of an Assumed Liability exists, the option may be exercised by the
Buyer or Reorganized Company, provided, however, that five (5) Business Days
before the first scheduled date for a
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confirmation hearing on the Amended Plan, the Buyer or the Reorganized Company
must provide written evidence to the Company and the Committee of the agreement
reached with respect to the treatment of the Assumed Liability, otherwise such
option as to the payment, treatment or assumption shall be waived
notwithstanding the requirements of Section 12.6.
SECTION 3
BANKRUPTCY MATTERS
3.1 Amended Plan and Amended Disclosure Statement.
(a) Not later than thirty (30) days after the Final
Auction Date (unless such date is extended by mutual written consent of the
Company, the Committee and the Buyer), the Company and the Committee shall
jointly file with the Bankruptcy Court the Amended Disclosure Statement and the
Amended Plan, together with any papers required or desirable (as reasonably
determined by the Company, the Committee and the Buyer or ordered by the
Bankruptcy Court or required by law) in order to obtain a Final Order approving
the Amended Disclosure Statement. The Amended Plan and the Amended Disclosure
Statement shall be consistent with this Agreement. The Buyer shall have an
opportunity to participate in the preparation and review of drafts of the
Amended Plan. The Company and the Committee shall make good faith efforts to
deliver to the Buyer a copy of the Amended Disclosure Statement and each other
document (and each amendment or modification thereto) proposed to be filed and
as filed by the Company and/or the Committee in connection with the Amended
Disclosure Statement and the Amended Plan, including the proposed form of the
Confirmation Order in substantially the form proposed to be filed as soon as
practicable, but in any event, three (3) Business Days, if practicable, prior to
such filing, and a copy of the Confirmation Order as filed with the Bankruptcy
Court.
(b) Subsequent to the filing of the Amended Disclosure
Statement and the Amended Plan, the Company and the Committee shall file any
amendment to the Amended Disclosure Statement or the Amended Plan reasonably
requested by the Buyer and necessary to effect the transactions contemplated by
this Agreement.
(c) The Company and the Committee shall use their best
efforts to obtain prompt approval by the Bankruptcy Court of the Amended
Disclosure Statement under section 1125 of the Bankruptcy Code.
3.2 Confirmation Order. Upon approval of the Amended Disclosure
Statement by the Bankruptcy Court, the Company and the Committee shall use their
best efforts to obtain (and shall refrain from taking any action that would
prevent, impede or
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result in a revocation or stay of) the entry by the Bankruptcy Court of an
order, in form and substance satisfactory to the Buyer, confirming the Amended
Plan pursuant to section 1129 of the Bankruptcy Code.
3.3 Bankruptcy Undertakings by the Company.
(a) The Company, the Committee and the Buyer shall use
their best efforts to effect the transactions contemplated by this Agreement and
to confirm and consummate the Amended Plan expeditiously. The Company and the
Committee shall refrain from proposing an alternative Amended Plan until this
Agreement is terminated by the Company, the Committee or the Buyer in accordance
with its terms. In no event shall any of the obligations of the Committee
hereunder be a financial obligation of the Committee and the Committee has no
financial obligations under this Agreement.
(b) If the Bankruptcy Court determines or states that it
will not enter an order confirming the Amended Plan because any provision of the
Amended Plan violates any provision of the Bankruptcy Code, then the Company and
the Committee shall consult with the Buyer and, at the request of the Buyer,
shall modify the Amended Plan (including deletion of any such provision) in a
manner consistent with this Agreement and acceptable to the Company, the
Committee, and the Buyer so as to render the Amended Plan confirmable under the
Bankruptcy Code and so long as the impediment to confirmation is not caused by
the Buyer or cannot be remedied by the Buyer without increasing its financial
obligations under this Agreement. This Agreement may only be terminated
consistent with the provisions of Section 9 hereof.
3.4 Bankruptcy Undertakings by the Buyer. The Buyer agrees to use
its best efforts to cooperate with the Company and the Committee to effectuate
this Agreement as promptly as practicable, including but not limited to (i)
providing the Company or the Committee with such information relating to the
Buyer as may be necessary or appropriate in connection with the preparation of
the Amended Disclosure Statement or Amended Plan and (ii) providing a senior
officer of the Buyer to attend and participate in hearings before the Bankruptcy
Court related to this Agreement, the Amended Disclosure Statement and the
Amended Plan.
3.5 Terms of the Amended Plan. The Amended Plan shall be proposed
jointly by the Company and the Committee and shall contain terms and conditions
reasonably satisfactory to the Buyer, the Company and the Committee, and include
the following provisions:
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(a) Distribution Fund - The Amended Plan shall provide for
the establishment of the Distribution Fund. All Allowed Claims not listed on
Schedule 2.4 and listed on Schedule 3.5 shall be paid from proceeds in the
Distribution Fund plus consideration, if any, as otherwise provided in Section
3.5(g);
(b) Debtor In Possession Financing - The Company's CIT DIP
Financing shall be treated as set forth in Section 2.4 herein;
(c) Administrative Claims - All Allowed Administrative
Claims shall be paid in cash from the Distribution Fund on the Closing Date as
required pursuant to section 1129(a) of the Bankruptcy Code;
To the extent the Committee has concluded that
Administrative Claims of its current and former members, the professionals
retained by the Committee, and the indenture trustees are reasonable and the
services performed were necessary, and that the allowance of their compensation
otherwise complies with all applicable provisions of the Bankruptcy Code,
neither the Buyer nor any successor to the Buyer shall object to the payment of
such claims. Similarly, to the extent the Company has concluded that
Administrative Claims of its professionals are reasonable and the services
performed were necessary, and that the allowance of their compensation
otherwise complies with all applicable provisions of the Bankruptcy Code,
neither the Buyer nor any successor to the Buyer shall object to the payment of
such claims. Finally, to the extent the Sales Agent seeks fees in accordance
with its retention agreement and such fees are reasonable and the services
performed were necessary and that the allowance of its compensation otherwise
complies with all applicable provisions of the Bankruptcy Code, neither the
Buyer nor any successor to the Buyer shall object to the payment of such
claims;
(d) Postpetition Unsecured Claims - The Allowed
postpetition unsecured Claims set forth in Schedule 2.4 shall be treated as set
forth in Section 2.4 herein;
(e) Priority Claims - The Allowed priority Claims set
forth in Schedule 2.4 shall be treated as set forth in Section 2.4 herein;
(f) Secured Prepetition Claims - The Allowed secured
prepetition Claims set forth in Schedule 2.4 shall be treated as set forth in
Section 2.4 herein;
(g) Unsecured Prepetition Claims - The Allowed unsecured
prepetition Claim listed on Schedule 2.4(C) shall be treated in accordance with
Section 2.4 herein. The Allowed Other
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Unsecured Claims listed on Schedule 3.5(B) shall be paid pro rata from the
Distribution Fund as required by section 1129(a) of the Bankruptcy Code;
(h) Contingent Claims - Allowed Contingent Liabilities
Claims listed on Schedule 2.4(E) shall be treated as set forth in Section 2.4
herein and all other contingent Claims, if Allowed, shall be treated as set
forth in Section 3.5;
(i) Equity Holders - All existing shares of common stock
held by shareholders shall be canceled, as set forth in the Amended Plan;
(j) Executory Contracts - The executory contracts listed
on Schedule 3.5(j) shall be assumed by the Reorganized Company pursuant to the
Amended Plan. Any executory contracts not listed on Schedule 3.5(j) shall be
rejected by the Company pursuant to the Amended Plan. Any Allowed Claims
arising from such rejection shall be treated as required by the Bankruptcy Code;
(k) Exculpation - The Amended Plan shall contain customary
exculpation provisions for the benefit of the Company, the Committee and their
respective professionals;
(l) Disputed Claims Reserve - The Amended Plan and its
confirmation shall not contemplate or require a disputed Claims reserve in
excess of One Million Five Hundred Thousand Dollars ($1,500,000). This
condition may be waived on a Claim by Claim basis by the Committee; and
(m) Recapitalization Plan - The Amended Plan shall also
provide for a Recapitalization Alternative to be employed only in the event this
Agreement is terminated, which shall be consistent with the terms and conditions
of the Litigation Settlement.
3.6 Overbid Procedures. Buyer acknowledges that the Company's
obligation to consummate this Agreement is subject to higher or better offers
for the shares of common stock or New Stock of the Reorganized Company or the
assets of the Company presented to the Sales Agent (the "OVERBID SALE"). The
Buyer, the Company and the Committee agree that any Incremental Bid must offer
consideration having a fair market value, as determined by the Sales Agent,
initially at least Two Hundred Thousand Dollars ($200,000) higher or better than
the Cash Purchase Price and must be evidenced by an initial deposit of Three
Million Dollars ($3,000,000) (the "INITIAL DEPOSIT"). The Initial Deposit shall
be (i) fully refundable within eleven (11) days of the determination by the
Bankruptcy Court that such Incremental Bid is not the highest and best bid; (ii)
fully refundable within
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twenty-five (25) days of its submission if the Bankruptcy Court fails to make a
determination that the Incremental Bid is the highest and best bid; and (iii)
subject to forfeiture in the event such bidder withdraws its Incremental Bid.
The party or entity who is deemed by the Sales Agent to have submitted the
highest and best bid (if other than the Buyer) shall immediately deposit an
additional One Million Dollars ($1,000,000) (the "FINAL DEPOSIT") with the
Sales Agent. The Final Deposit and the Initial Deposit shall be subject to
forfeiture in the event such bidder withdraws its Incremental Bid. In
addition, the Incremental Bid shall:
(a) have no financial contingencies;
(b) be accompanied by written evidence satisfactory to
the Sales Agent of a commitment for financing or other evidence of ability to
consummate the overbid;
(c) not be conditioned on the outcome of any unperformed
due diligence by the bidder;
(d) include in its terms the assumption of all contingent
environmental liabilities; and
(e) be accompanied by a marked-up version of this
Agreement or another definitive written agreement setting forth the terms and
conditions of such Incremental Bid.
Any subsequent Incremental Bid must offer consideration at least equal to Fifty
Thousand Dollars ($50,000) more than the highest then pending Incremental Bid.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company as follows:
4.1 Authorization and Enforceability. The Buyer is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Florida, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted. The Buyer has taken all action necessary to
authorize its execution, delivery and performance of this Agreement and all
other agreements and instruments reasonably necessary to complete the
transactions contemplated by this Agreement and has full power and authority to
enter into this Agreement and such other agreements and carry out the terms
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hereof and thereof. The Buyer has duly executed and delivered this Agreement
and at or prior to the Closing it will be the valid and binding obligation of
the Buyer enforceable in accordance with its terms, except as enforceability
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, relating to
creditors' rights generally or by the availability of equitable remedies.
4.2 Compliance. The execution, delivery and performance by the
Buyer of this Agreement and the consummation of the transactions described in
this Agreement will not conflict with or result in the breach of any of the
terms or provisions of or constitute a default under: (a) the articles of
incorporation or bylaws of the Buyer; (b) any note, indenture, mortgage, deed of
trust, loan agreement, lease or other material agreement or instrument to which
the Buyer is a party or by which the Buyer is bound; (c) any statute or any
order, rule or regulation or any decision of any court or regulatory authority
or Government Body applicable to the Buyer; or (d) any investing guidelines or
limitation to which the Buyer is bound.
4.3 Consents. Except as set forth on Schedule 4.3, no consent,
approval, authorization, order, designation or declaration of any court or
regulatory authority or Government Body, federal or other, or third person is
required to be obtained by the Buyer nor is any filing or registration required
to be made therewith by the Buyer for the consummation of the transactions
contemplated by this Agreement. The Buyer has obtained, or shall have obtained
prior to the Closing, all consents, authorizations or approvals of any third
parties required in connection with the execution, delivery or performance of
this Agreement (other than any filings required under the HSR Act). The Buyer
has made or will make all registrations or filings with any Government Body
required for the execution or delivery of this Agreement and the consummation of
the transactions contemplated hereby.
4.4 Legal Proceedings. There are no claims, actions, suits,
inquiries, investigations or proceedings pending or threatened against the Buyer
relating to the transactions contemplated hereby before any federal, state or
local court or other Government Body or regulatory authority, United States or
foreign.
4.5 Brokers. The Buyer has no obligation to pay any fees or
commissions to any broker, finder, agent or other intermediary in connection
with the negotiation or consummation of the transactions contemplated hereby.
Neither the Company, the Committee nor the Reorganized Company shall be
responsible for any such obligations of the Buyer.
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4.6 Purchase Not for Distribution. The Buyer acknowledges that the
shares of New Stock have not been and will not be registered under the
Securities Act of 1933, as amended, or under any state or foreign securities
law. Buyer is purchasing the New Stock for its own account and not with a view
to distribution. Subject to the requirements of Section 12.1, Buyer agrees that
it cannot otherwise assign the New Stock or its rights to the New Stock to any
entity other than an affiliate of the Buyer, provided, the identity of the
affiliate is disclosed to the Company and the Committee ten (10) Business Days
prior to assignment. Buyer will not resell, transfer, assign or distribute the
New Stock, except in compliance with the registration requirements of the
Securities Act of 1933, as amended, to the extent applicable, or pursuant to an
available exemption therefrom.
4.7 Investigation by the Buyer. The Buyer acknowledges that (a) it
has made an investigation into the Company and the Business and has been offered
the opportunity to ask such questions of appropriate officers of the Company
relating to the Company as it deems appropriate to enter into this Agreement,
and (b) it is entering into this Agreement freely.
4.8 As-Is Sale; Limitation on Company's Representations. THE BUYER
IS A SOPHISTICATED AND EXPERIENCED INVESTOR AND HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTION CONTEMPLATED
HEREBY. BUYER ACKNOWLEDGES AND AGREES THAT IT HAS REVIEWED AND CONDUCTED SUCH
INDEPENDENT ANALYSES, STUDIES, REPORTS, INVESTIGATIONS AND INSPECTIONS AS IT
DEEMS APPROPRIATE IN CONNECTION WITH THE PURCHASE OF THE NEW STOCK AND THE
ASSUMPTION OF THE ASSUMED LIABILITIES. THE NEW STOCK IS PURCHASED AND SOLD "AS
IS."
4.9 Financing. The Buyer acknowledges that its obligations
contained herein are not subject to Buyer's obtaining financing.
4.10 No Misrepresentations. No written representation or warranty
of the Buyer and no statement or certificate furnished to the Company or any of
its agents by or on behalf of the Buyer or any of its directors, officers,
employees or agents pursuant to this Agreement or any other document
contemplated or required hereby or thereby in connection with the transactions
contemplated herein or therein contains or will contain any untrue statement of
a material fact or omit to state any material statement of fact necessary to
make the statements contained herein or therein not misleading. All schedules,
certificates, affidavits, documents and instruments furnished, or to be
furnished, by the Buyer or any of its directors, officers or employees in
connection with this Agreement, are and will be true and complete in all
material respects, and neither this Agreement
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<PAGE> 137
nor any schedule, certificate, affidavit, document or instrument furnished or
to be furnished by the Buyer or any of its directors, officers or employees in
connection with this Agreement, or any other transaction contemplated by this
Agreement, contains or will contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary in order to make the
statements included herein or therein not misleading.
4.11 Financial Ability of Buyer to Consummate Transaction. Buyer
has sufficient financial capability and capitalization to consummate the
transaction contemplated herein, including, but not limited to, the obligations
with respect to the Assumed Liabilities and to the extent the Buyer requires
additional capitalization as provided above, Buyer has entered into an
agreement with Security Management Corporation pursuant to which Security
Management Corporation is obligated to provide any credit enhancement necessary
to consummate the transaction herein.
SECTION 5
COVENANTS OF THE COMPANY AND THE BUYER
The Buyer and the Company covenant and agree that they will act in
accordance with the following:
5.1 Expenses. All professional fees and expenses incurred by the
Company and the Committee in connection with the sale of the New Stock shall be
paid by the Company in accordance with Section 6.4 and thereafter out of the
Distribution Fund subject to the provisions of the Bankruptcy Code. All fees
and expenses incurred by the Buyer in connection with the purchase of the New
Stock shall be paid by the Buyer.
5.2 Access to Business. Prior to the Closing Date, the Company
shall, at the Buyer's request, afford or cause to be afforded to the Buyer and
its authorized representatives reasonable access during normal business hours to
the Business for the purpose of inspecting the Business. The Buyer shall treat,
and shall cause all of its authorized representatives to treat, all information
obtained pursuant to this Section and Section 5.3 as confidential in accordance
with the Confidentiality Agreement, which the Buyer shall enter into upon the
request of the Company or the Committee.
5.3 Access to Books and Records. Prior to the Closing Date, the
Company shall afford to the Buyer and its accountants, counsel and other
representatives reasonable access during normal business hours to all of the
properties, books, contracts, commitments and records (including but not limited
to tax
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returns) relating to the Business ("BUSINESS RECORDS"), and, during such
period, the Company shall furnish to the Buyer all such other information
concerning the Business, properties and personnel of the Business as the Buyer
may reasonably request. After the Closing, the Reorganized Company shall keep
and maintain for a period of six (6) years from the Closing Date all documents
and records relating to the Business. Upon request, Reorganized Company shall
make such documents and records available to the Estate for inspection and
copying, at the Estate's expense, during regular business hours in order to
permit the Estate to (i) prepare for, dispute or respond to any Claim or
proceeding, including, without limitation, audits in connection with tax
returns or proceedings under the Code or the Bankruptcy Code and (ii) comply
with governmental requirements applicable to the Company; provided, however,
that any such inspection pursuant to this Section shall be conducted in such a
manner so as not to unreasonably interfere with the normal course of the
Business by the Reorganized Company.
5.4 Financial Information. The Company shall provide to the Buyer
any and all periodic financial statements and operating reports of the Company
prepared by the Company.
5.5 Consummation and Further Assurances.
(a) During the period from the date of this Agreement to
the Closing Date and without limiting the effect of Section 3, the parties
hereto shall use their reasonable best efforts to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things proper,
necessary or advisable under applicable law and regulations to consummate and
make effective the transactions contemplated by this Agreement, including the
obtaining of third party and governmental consents and approvals. The parties
hereto shall provide to each other the necessary information to effect the
foregoing.
(b) Each of the parties shall take such actions and
execute and deliver to the other party such further documents, instruments of
assignment, conveyance and transfer as, in the reasonable opinion of counsel to
the requesting party, may be necessary to fully and completely consummate the
transactions contemplated by this Agreement.
SECTION 6
ADDITIONAL AGREEMENTS BETWEEN THE BUYER AND THE COMPANY
6.1 Conduct of Business Pending Closing. The Company covenants and
agrees that, prior to the earlier of the Closing or termination of this
Agreement, except as otherwise agreed to in
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writing by the Buyer, as required by law or otherwise expressly contemplated by
this Agreement:
(a) The Company shall cause the Business to be conducted
in the ordinary course of business and consistent with past practice, and shall
use all reasonable efforts to maintain and preserve the assets and business
relationships of the Business; and
(b) The Company shall comply in all material respects with
all applicable laws, statutes, rules, ordinances, and regulations, the
compliance with which is required for consummation of this Agreement.
6.2 Transfer or Sales Taxes. All taxes shall be paid in accordance
with applicable law.
6.3 Hart-Scott-Rodino. The Buyer and the Company shall each as
soon as practicable prepare and file with the Antitrust Division of the Federal
Trade Commission all reports required to be filed in connection with the
transactions contemplated hereby pursuant to the HSR Act.
6.4 Payment of Administrative Expenses Prior to Closing. The
Company hereby covenants and agrees that it will pay, on a pro-rata basis,
outstanding and unpaid professional fees which have been previously incurred by
professionals retained by the Company or the Committee and approved by the
Bankruptcy Court, at the rate of Two Hundred Fifty Thousand Dollars ($250,000)
per month from the date of execution of this Agreement until the Closing Date
out of cash generated by the Company and not out of the Cash Purchase Price or
the Litigation Settlement Proceeds.
SECTION 7
CONDITIONS TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer to purchase the New Stock and the
Reorganized Company or the Buyer to assume or pay, as the case may be, the
Assumed Liabilities under this Agreement are subject to satisfaction or written
waiver of each of the following conditions:
7.1 Delivery of Shares and Other Documents. Upon consummation of
the Closing, Buyer shall receive good and marketable title to the New Stock,
free and clear from Liens.
7.2 Change of Law. There shall not be any statute, rule or
regulation promulgated or enacted which makes it illegal for the Company to sell
the New Stock or any order or judgment enjoining
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<PAGE> 140
the Company from consummating all or any portion of the transactions
contemplated hereby.
7.1 Entry of the Confirmation Order; Consummation of the Plan. The
Amended Plan shall have been confirmed by the Bankruptcy Court without any
material alterations that have a material adverse effect on the Buyer and the
Confirmation Order shall have become a Final Order. Additionally, the
Confirmation Order shall be in full force and effect on the Closing Date and,
without the necessity of any further action or proceedings by the Company, the
Bankruptcy Court shall have (x) as of the Closing Date, effected a full and
complete discharge and release of, and thereby extinguished, all debts of the
Company (to the fullest extent possible under section 1141(d)(1) of the
Bankruptcy Code) to the extent specified in the Amended Plan and consistent with
this Agreement, (y) extinguished all shares of common stock of the Company,
effected the issuance of the New Stock to the Buyer as registered owner thereof,
free and clear of all Claims and interests of claimants and Liens in accordance
with the Amended Plan and the Confirmation Order.
7.4 Governmental Approvals. All authorizations, consents and
approvals of all Government Bodies and regulatory authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained and be reasonably satisfactory in form
and content to the Buyer. The applicable waiting period under the HSR Act, if
applicable, with respect to the transactions contemplated by this Agreement
shall have expired or been terminated by appropriate governmental authorities.
7.5 Adverse Proceedings. There shall not be in effect any
injunction or restraining order issued by a court of competent jurisdiction
against the consummation of this Agreement.
SECTION 8
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to sell, issue, and deliver the
New Stock under this Agreement are subject to satisfaction or waiver of each of
the following conditions:
8.1 Governmental Approvals. All authorizations, consents and
approvals of all Government Bodies and regulatory authorities required to be
obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained and be reasonably satisfactory in form
and content to the Company. The applicable waiting period under the HSR Act,
if applicable, with respect to the transactions contemplated by the
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Agreement shall have expired or been terminated by appropriate governmental
authorities.
8.2 Representations, Warranties and Covenants. All representations
and warranties of the Buyer made in this Agreement shall in all material
respects be true and correct on and as of the Closing Date with the same force
and effect as if made on and as of that date, except for changes contemplated,
permitted or required by this Agreement. On the Closing Date, all of the terms,
covenants, conditions and agreements to be complied with and performed by the
Buyer on or prior to the Closing shall in all material respects have been
complied with or performed.
8.3 Adverse Proceedings. There shall not be in effect any
injunction or restraining order issued by a court of competent jurisdiction
against the consummation of this Agreement.
8.4 Cash Purchase Price. The Buyer shall have delivered the Cash
Purchase Price to the Escrow Agent and the Escrow Agent shall have delivered the
Cash Purchase Price to the Disbursing Agent pursuant to the Confirmation Order
and in accordance with this Agreement.
8.5 Higher or Better Offers. The Company shall not have received
and accepted an Incremental Bid or a subsequent Incremental Bid from another
buyer.
8.6 Entry of the Confirmation Order; Consummation of the Plan. The
Amended Plan shall have been confirmed by the Bankruptcy Court and the
Confirmation Order shall have become a Final Order.
SECTION 9
TERMINATION
9.1 Right of Parties to Terminate. This Agreement may be
terminated at any time prior to the Closing Date: (a) by mutual written
agreement of the Company, the Committee and the Buyer; (b) by either the
Company, with the consent of the Committee, or the Buyer if by Final Order the
Company or the Buyer is enjoined (through no action or inaction of Buyer) from
consummating this Agreement; (c) by either the Company, with the consent of the
Committee, or the Buyer if the Closing shall not have occurred 30 days after the
Confirmation Order becomes a Final Order; provided, however, that the party
seeking to terminate this Agreement pursuant to this clause (c) shall be
permitted to do so only if the delay in the Closing shall not have resulted from
the failure of such party to comply with any of the terms of this
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<PAGE> 142
Agreement or from the inaccuracy of any representation or warranty of such
party; (d) by the Company, with the consent of the Committee, if the Buyer is
in breach of any material provision of this Agreement and the Buyer fails to
cure such breach within ten (10) Business Days of receiving written notice
thereof; (e) by the Buyer if either the Company or the Committee is in breach
of any material provision of this Agreement and such party fails to cure such
breach within ten (10) Business Days of receiving written notice thereof; (f)
by either the Company, with the consent of the Committee, or the Buyer if the
Case shall be dismissed or converted to a case under Chapter 7 of the
Bankruptcy Code, or a trustee shall be appointed in the Case unless the Chapter
7 trustee or the Chapter 11 trustee, as the case may be, within twenty (20)
days of his or her appointment, agrees to honor the terms of this Agreement;
(g) by the Buyer, in the event the Amended Plan is altered in such a manner
that the alteration has a material adverse effect on the Buyer; (h) by the
Buyer, in the event the Overbid Sale as set forth in Section 3.6 herein is not
completed within thirty (30) days of the date this Agreement is approved by the
Bankruptcy Court; or (i) by the Buyer, in the event the Buyer's bid is not
deemed to be the highest and best bid within thirty-five (35) days of the
commencement of the Overbid Sale. If the Buyer or the Company decides to
terminate this Agreement pursuant to this Section 9.1, such party shall
promptly give written notice to all other parties to this Agreement of such
decision.
9.2 Effect of Termination on Funds Held in Escrow. In the event of
(i) a termination of this Agreement pursuant to Section 9.1 (b) which
termination results from Buyer's acts or failure to act or (ii) a termination of
this Agreement by the Company pursuant to Section 9.1 (c) which delay results
from Buyer's acts or failure to act or from the inaccuracy of any representation
or warranty of the Buyer, or (iii) a termination of this Agreement by the
Company pursuant to Section 9.1 (d), the Company and the Committee shall direct
the Escrow Holder (i) to retain the amount of $3 Million for the benefit of the
Estate as liquidated damages and the parties shall be released from all
liabilities and obligations arising under this Agreement and (ii) to deliver the
balance of the Cash Purchase Price plus interest accrued thereon, net of escrow
fees and expenses, to the Buyer.
9.3 Effect of Termination Due to Breach by the Company or the
Committee. In the event of (i) a termination of this Agreement by the Buyer
pursuant to Section 9.1 (c) which delay results from the Company's or the
Committee's acts or failure to act or (ii) a termination of this Agreement by
the Buyer pursuant to Section 9.1 (e), at the election of Buyer, (i) the
Company shall pay to the Buyer the amount of Two Hundred Fifty Thousand Dollars
($250,000) as liquidated damages, and the parties shall be released from all
liabilities and obligations arising under
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this Agreement or (ii) Buyer shall have the right to specific performance under
the terms of this Agreement. The Company and the Committee each acknowledges
and agrees that specific performance is an appropriate remedy in the event of a
breach of Section 9.1 (c) or 9.1 (e) as such a breach would (i) cause great and
irreparable harm and injury to the Buyer and (ii) make it extremely difficult
to ascertain the amount of compensation which would afford adequate relief for
such harm and injury.
SECTION 10
CLOSING
10.1 Time and Place of Closing. The closing of the transactions
contemplated by this Agreement shall take place at the offices of Baker &
McKenzie, 805 Third Avenue, New York, New York 10022 or LeBoeuf, Lamb, Greene &
MacRae, L.L.P., 125 West 55th Street, New York, New York 10019, as agreed to by
the parties, unless any other location is agreed to in writing by the parties,
within five (5) Business Days after the Confirmation Order becomes a Final Order
or such other date as shall be agreed to by the parties (the "CLOSING DATE").
10.2 Obligations of the Company at Closing. At the Closing, the
Company shall deliver or cause to be delivered the following documents, and
take such other actions as are identified below:
(a) all stock certificates, with all necessary stock
transfer stamps affixed, representing the New Stock duly endorsed in blank or
accompanied by duly executed instruments of transfer, or registered in the name
of the Buyer; and
(b) all other documents and instruments to be executed or
prepared by the Company or the Committee necessary to consummate the
transactions contemplated by this Agreement.
10.3 Obligations of the Buyer at Closing. At the Closing, the
Buyer shall deliver or cause to be delivered the following documents, and take
such other actions as are identified below:
(a) the Cash Purchase Price to be paid pursuant to Section
2.2;
(b) deliver to the Company a certificate, dated the
Closing Date and executed by the president and the secretary of the Buyer
substantially in the form and to the effect of Exhibit B attached hereto;
(c) any documentation required for the assumption of the
Assumed Liabilities; and
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<PAGE> 144
(d) all other documents and instruments to be executed or
prepared by the Buyer necessary to consummate the transactions contemplated by
this Agreement.
10.4 Transfer. The conveyance of the New Stock and the simultaneous
transfer of control pursuant to this Agreement shall be made "as is, where is,"
without recourse and except as otherwise specifically provided in this
Agreement, without any warranties with respect to such Business, whether
express or implied, including but not limited to the implied warranties of
merchantability and fitness for a particular purpose.
SECTION 11
INDEMNIFICATION
11.1 Indemnification. From and after the Closing, the Reorganized
Company shall indemnify and hold harmless the Company and its officers, the
Committee and any of its members and officers and their respective professionals
(including officers, directors, partners and employees of such professionals)
from and against any and all Liabilities, claims, costs, damages (proximate or
consequential) and expenses (including attorneys' fees) which may be made,
assessed or otherwise incurred by the Company, its officers, the Committee, or
any of its members and their respective professionals arising out of or relating
to obligations or Liabilities (fixed or contingent) arising from events
occurring post-petition which the Reorganized Company or the Buyer, as the case
may be, has agreed to assume or perform pursuant to this Agreement or in
connection with the transactions contemplated hereby (including, without
limitation, any liability which the Company or its affiliates may incur pursuant
to ERISA and any liability to the PBGC). In each instance where there is a
claim or potential claim for which the Company or any of its affiliates or the
Committee or any of its members and their respective professionals is or may be
entitled to seek indemnification, the Company, the Committee or its members
shall notify the Buyer in writing of such claim and shall furnish to the Buyer
copies of all notices, service of process, pleadings and other pertinent written
communications from the party asserting such claim. The Reorganized Company
shall promptly defend, pay, discharge, compromise or settle such claim at the
Reorganized Company's expense, in such manner that neither the Company, the
Committee, any of its members, any of the Company's affiliates nor their
business, equipment, property or other assets, shall suffer any hindrance, loss,
expense, interference, jeopardy, lien, judgment, attachment, notice of
violation, injunction or judicial or other order.
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SECTION 12
OTHER PROVISIONS
12.1 Benefit and Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except as provided in the Confirmation Order, no party
hereto may voluntarily or involuntarily assign such party's interest under this
Agreement without the prior written consent of the other parties.
12.2 Survival. The representations and warranties in this
Agreement shall not survive the Closing. All other obligations under this
Agreement shall survive the Closing.
12.3 Entire Agreement. This Agreement and the Schedules and
Exhibits referred to herein constitute the entire agreement and understanding
of the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein.
12.4 Amendment, Waiver. The provisions of this Agreement may be
amended or waived by the Company only after consultation with the Committee and
by an instrument in writing signed by the party against which enforcement of
such amendment or waiver is sought. Any waiver of any term or condition of
this Agreement or any breach hereof shall not operate as a waiver of any other
such term, condition or breach, and no failure to enforce any provision hereof
shall operate as a waiver of such provision or of any other provision hereof.
12.5 Headings, Sections, References. The headings are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement. When a reference is made in this Agreement
to a Section, Article, Exhibit or Schedule such reference shall be to a
Section, Article, Exhibit or Schedule of this Agreement unless otherwise
indicated. Whenever "include," "includes," or "including" is used in this
Agreement, it shall be deemed to be followed by the words "without limitation."
Whenever "or" is used in this Agreement it shall be construed in the
nonexclusive sense.
12.6 Waiver. No failure or delay by any party at any time to
enforce one or more of the terms, conditions or obligations of this Agreement
shall constitute a waiver of such terms, conditions or obligations or shall
preclude such party from requiring performance by the other party at any time.
No waiver of the provisions hereof shall be effective unless in writing and
signed by the party to be charged with such waiver. No waiver shall be deemed
a continuing waiver or waiver in respect of any
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<PAGE> 146
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
12.7 Governing Law, Jurisdiction. The construction and performance
of this Agreement will be governed by the laws of the State of Delaware. The
Bankruptcy Court shall have exclusive jurisdiction with regard to all matters
relating to the interpretation and enforcement of this Agreement for a period
of two years following the Closing. Thereafter, jurisdiction shall lie in any
court of competent jurisdiction.
12.8 Notices. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement (a) shall be in writing; (b)
shall be delivered personally, including by means of facsimile, overnight
express delivery, or mailed by registered or certified mail, postage prepaid
and return receipt requested; (c) shall be deemed given on the date of personal
delivery or on the date set forth on the return receipt; and (d) shall be
delivered or mailed to the addresses set forth below or to such other address
as any party may from time to time direct in writing:
(a) If to the Buyer:
First Security and Investment Corp.
6917 Collins Avenue
Miami Beach, Florida 33141
Fax: (305) 865-3346
Attention: Donald J. Glazer
with a copy to:
Stroock & Stroock & Lavan
200 S. Biscayne Boulevard
33rd Floor
Miami, Florida 33131
Fax: (305) 789-9302
Attention: Scott L. Baena, Esq.
(b) If to the Company:
NVF Company
1166 Yorklyn Road
Yorklyn, Delaware 19736
Fax: (619) 239-4323
Attention: John J. McNaboe
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<PAGE> 147
with a copy to:
Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
Fax: (619) 236-0429
Attention: Ali M.M. Mojdehi, Esq.
(c) If to the Committee:
BEA Associates
153 East 53rd Street
57th Floor
New York, New York 10022
Fax: (212) 759-3772
Attention: Misia K. Dudley
with a copy to
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Fax: (212) 424-8500
Attention: Angela J. Somers, Esq.
12.9 Attorneys' Fees. If suit or action is filed by any party to
enforce the provisions of this Agreement or otherwise with respect to the
subject matter of this Agreement, the prevailing party shall be entitled to
recover from the other party reasonable attorneys' fees as fixed by the trial
court and, if any appeal is taken from the decision of the trial court,
reasonable attorneys' fees as fixed by the appellate court. For purposes of
this Agreement, the term "prevailing party" shall be deemed to include a party
that successfully opposes a petition for review filed with an appellate court.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed via facsimile, with originals to follow via overnight courier.
[Balance of page intentionally left blank]
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<PAGE> 148
IN WITNESS WHEREOF, the parties have executed this Stock
Purchase Agreement as of the day and year first written above.
"Buyer"
First Security and
Investment Corp.
-----------------------------------
Name
------------------------------
Title
-----------------------------
"Company"
NVF Company /s/ John J. McNaboe
-----------------------------------
Name John J. McNaboe
------------------------------
Title
-----------------------------
"Committee"
-----------------------------------
Official Committee of Name
Unsecured Creditors of ------------------------------
NVF Company
Chair
-----------------------------
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<PAGE> 149
SCHEDULE 2.4
ASSUMED LIABILITIES(1)
<TABLE>
<CAPTION>
Estimated
Value
---------
<S> <C> <C>
A. CIT DIP FINANCING $8,000,000(2)
B. SECURED PREPETITION CLAIMS
Secured or Priority Tax Claim 134,000
New Castle Secured Claim 1,582,000
Reed Smith Secured Claim 413,000
Hartwell Secured Claim 136,000
10% Secured Notes(3) 8,225,000
C. UNSECURED PREPETITION CLAIM
Environmental Claim for Kennett Square 1,035,000
D. POSTPETITION UNSECURED CLAIMS
(1) Ordinary Course
Accounts Payable Postpetition Claim 2,786,000
Postpetition Accrued Wages and Other Claims 1,654,000
</TABLE>
__________________________________
(1) Except for the 10% Secured Notes, the dollar amounts reflected in this
Schedule are estimates and used for illustrative purpose only. They do
not definitively reflect the actual amount of the Assumed Liabilities.
Consistent with Section 2.4(g) and except for the 10% Secured Notes,
the Buyer or the Reorganized Company shall assume such lesser or
greater amount of these liabilities as of the Closing Date.
(2) Such amount represents the maximum liability possible under such
financing.
(3) Claim reflects accrued amounts for principal and interest under the
pending Litigation Settlement pursuant to the Stipulation and Agreement
of Compromise and Settlement and may include additional interest as
provided for therein.
<PAGE> 150
<TABLE>
<S> <C>
(2) Environmental
Environmental Postpetition Claim 1,427,000(4)
at Kennett Sq.
E. CONTINGENT LIABILITIES
(1) Employment Related
Underfunded Pension Contingent Liabilities
Postpetition Accrued Wages and Other Claims
(2) Environmental
All Environmental Claims, including but not limited to,
all Off-Site and On-Site Environmental Liability
F. PREPETITION PRIORITY CLAIMS
Miscellaneous Priority Claims 560,534
</TABLE>
- -----------------------------
(4) Amount of costs actually incurred through November 8, 1994 by the
Environmental Protection Agency. The EPA has informed the Company that
it expects to incur additional expenses (approximately $750,000) in
connection with this site.
<PAGE> 151
SCHEDULE 3.5
ESTIMATED CLAIMS PAID FROM THE DISTRIBUTION FUND
<TABLE>
<S> <C> <C>
(A) ADMINISTRATIVE CLAIMS (EST.)(1)
Administrative Claims $ 7,000,000
(B) OTHER UNSECURED CLAIMS
5% Debentures 48,076,000
10% Debentures 11,697,000
Miscellaneous Unsecured Claims (including the
I.N.A. Claim and the Global Financial Claim
and any accrued pre-petition interest
on debentures) 13,726,000
</TABLE>
- -----------------------------
(1) Estimated balance as of May 31, 1995.
<PAGE> 152
SCHEDULE 3.5(j)
EXECUTORY CONTRACTS TO BE ASSUMED UNDER AMENDED PLAN
LEASES
<TABLE>
<CAPTION>
Vehicle Leases Description
- -------------- -----------
<S> <C>
Meridian Leasing, Inc. 95 Chevy Lumina 2G1WL52M389109858
P.O. Box 16009 94 Chevy Lumina 2G1WL54T2R1100257
Reading, PA 19612 93 Chevy Lumina 2G1WL54TXP9253614
93 Chevy Lumina 2G1WL54T2P9166905
93 Chevy Lumina 2G1WL54TXP1162129
Leasit 94 Buick Park Ave. 1G4CW52L5RH618537
- ------
P.O. Box 8500 50015
Philadelphia, PA 19178
Wilmington Trust Company 95 Chevy Lumina 2G1WL52M959121660
Personal Finance Leasing
P.O. Box 8893
Wilmington, DE 19899-8893
Winner Infinti, Inc. 94 Infiniti Q45 JNKNG01D8RM264087
1821 Ogletown Road
Newark, DE 019711
GMAC 91 Chevy Lumina Van 1GNCU06D6MT135684
P.O. Box 53014 95 Chevy Lumina Sedan 2G1WL52M798314520
Charlotte, NC 28253-3014
Fork Truck Leases
- -----------------
Modern Handling Equipment Co. Lse. #425 Hyster Model S50XL Lift Truck
P.O. Box 8500 S-1880 Lse. #424 Big Joe Model PDC 40-130
Philadelphia, PA 19178 Lse. #426 Big Joe Model PDC 40-130
Lse. #427 Hyster Model H25XM Lift Truck
and Cascade Roll Clamp Model 25F-RC-02A
Lse. #429 Hyster Model H35XM Lift Truck
Lse. #429 Hyster Model H35XM Lift Truck
Lse. #431 Hyster Model H50XM Lift Truck
</TABLE>
1
<PAGE> 153
SCHEDULE 3.5(j)
EXECUTORY CONTRACTS TO BE ASSUMED UNDER AMENDED PLAN
Continued
<TABLE>
<S> <C>
Fax Machines, Copiers, Postage Machines, etc.
- ---------------------------------------------
Pitney Bowes Credit Corporation Lse. #411 Pitney Bowes Mailroom Equip.
P.O. Box 38460 Lse. #412 Pitney Bowes Fax Machines
Louisville, KY 40233 Lse. #416 Pitney Bowes Digital Scale
Lse. #423 Pitney Bowes Star 170 Freight
Carrier Management System
Lanier Worldwide, Inc. Lse. #418 Lanier Copier Mod. No. 6532
P.O. Box 105533 Lse. #421 Lanier Copier Mod. No. 6540
Atlanta, GA 30348-5533 Lse. #417 Lanier Copier Mod. No. 6540
Lse. #420 Lanier Copier Mod. No. 6550
Lse. #419 Lanier Copier Mod. No. 6540
Lse. #432 Lanier Copier Mod. No. 6725
COPELCO Lse. #428 Canon LC 7000 Fax Machine
1313 Riley Industrial Dr.
Moberly, MO 65270
Computers
- ---------
Meridian Leasing, Inc. Lse. #422 IBM AS400 Computer
P.O. Box 16009
Reading, PA 19612
</TABLE>
CONTRACTS - SALES REPS
<TABLE>
<S> <C> <C>
Accurate Plastics Advanced Technical Marketing Amelex, Inc.
91 While Plains Road P.O. Box 433 509 S. Cavalier
Bronxville, NY 10708 Westford, MA 01886 Springfield, MO 65802
Atlantic Track & Turnout Co. Chicago Circuitry Products Circuit Supply, Inc.
270 Broad Street 1868 Maine Drive 815 N. Hwy 169
Bloomfield, NJ 07003 Elk Grove Village, IL 60007 Minneapolis, MN 55441
Complete Lamina Systems Dilecto Materials, Inc. Dyess Co.
872 S. Milwaukee Avenue #255 4221 Bridgewood Lane P.O. Box 9226
Libertyville, IL 60048 Charlotte, NC 28226 Ft. Worth, TX 76147
</TABLE>
2
<PAGE> 154
SCHEDULE 3.5(j)
EXECUTORY CONTRACTS TO BE ASSUMED UNDER AMENDED PLAN
Continued
<TABLE>
<S> <C> <C>
Electronic Technology FVN Company G&G Industrial Sales
Connection P.O. Box 418 11748 Van Buren St., NE
3101 Montana Lane Glastonbury, CT 06033 Blaine, MN 55434
Claremont, CA 91711
Insul Reps Interstate Circuit Products, JAC Industrial Sales
8330 Woodfield Crossing East & West 229 Aspen Trail Drive
Suite 130 3040 SW Tenth Street Ballwin, MO 63011
Indianapolis, IN 46240 Pompano Beach, FL 33069
JS Reps Unlimited Metro Marketing Midwest Composites, Inc.
3820 Valleybrook Road P.O. Box 698 869 E. Schaumburg Road #154
Wilmington, DE 19808 Boonton, NJ 07005 Schaumburg, IL 60194
Photo Chemical Systems, Inc. Foly Products Southwood Engineered Materials
105 Forest Drive 1276 W. 3rd St., Suite 222 P.O. Box 913
Knightdale, NC 27545 Cleveland, OH 44133 Hockessin, DE 19707
Tri-Tech & Associates West Mark Service Thomas Stephens
10128 Crowley Road, Suite J 2562 Seaboard Avenue P.O. Box 36386
Crowley, TX 76036 San Jose, CA 95131 Dallas, TX 75235
Don Anderson Associates C.F. Bunton, Inc. Carr & Associates
P.O. Box 410280 P.O. Box 2588 9020 C Mendenhall Court
Melbourne, FL 32941 Phoenix City, AL 36867 Columbia, MD 21045
Concept Systems, Inc. Creative Container Systems Ergonomic Systems
P.O. Box 1865 17 Cliffview Drive P.O. Box 349
Roswell, GA 30077 Norwalk, CT 06850 Independence, MO 64051
Patrick L. Neeley & Associates Ross Whitehead, Inc. Panelectric
110 Willowbrook Lane 9620 B. Ignace 44 Sunset Cresent
Mauldin, SC 29662 Brossard, Quebec J4Y2R4 Hudson Acres, Quebec
Canada JOP1HO
Sourcetec
150 Fenside Drive
North York, Ontario
Canada M3A 2V8
</TABLE>
3
<PAGE> 155
SCHEDULE 3.5(j)
EXECUTORY CONTRACTS TO BE ASSUMED UNDER AMENDED PLAN
Continued
CONTRACTS - INTERNATIONAL SALES REPS
<TABLE>
<S> <C> <C>
C. Bagge's Aksjeselskap H&A Company Hanma Corporation
Postboks 146 50 Victoria Avenue #201 P.O. Box 416
2020 Skedsmokorset Millbrae, CA 94030 Yoido, Seoul
Norway Korea
Hermes International JIT, Inc. Latinam Associates
160 Front Street, Apt. 5-G 1260 Lake Boulevard 2655 Collins Avenue
New York, New York 10038 Suite 221 Suite 1211
Davis, CA 95616 Miami, Florida 33140
Mecondor, S.P.A. Wayne, S.A.
Via Pierelli, 30 Pareja 4339
20124 Milano Buenos Aires
Italy Argentina
</TABLE>
COLLECTIVE BARGAINING AGREEMENT
Agreement between NVF Company and United Paperworkers International -
expiration date is April 27, 1996 (covers hourly employees at Delaware and
Pennsylvania plants).
AIR EASEMENT
Historic Red Clay Valley
P.O. Box 5787
Wilmington, DE 19808
ORAL EMPLOYMENT CONTRACT
John J. McNaboe
6846 Cypress Cove Circle
Jupiter, Florida 33458
4
<PAGE> 156
SCHEDULE 4.3
BUYER CONSENTS
<PAGE> 157
EXHIBIT "A"
ESCROW AGREEMENT
<PAGE> 158
EXHIBIT "B"
CERTIFICATE
We, ________________ and _______________, the President and Secretary,
respectively, of First Security & Investment Corp., a Florida corporation (the
"Buyer"), do each hereby certify on behalf of Buyer that:
1) All representations and warranties made or given by Buyer in the
Stock Purchase Agreement between First Security & Investment Corp. and NVF
Company dated as of October __, 1995, as the same has been amended and restated
(the "Agreement"), were true and correct in all material respects when made or
given and are true and correct in all material respects on and as of the date
hereof.
2) Attached hereto as Addendum "A" is a true, complete and correct
copy of resolutions adopted by the Board of Directors of Buyer with respect to
the Agreement and the transactions contemplated thereby, which resolutions were
duly and validly adopted at a meeting of the Board of Directors of Buyer on
___________, 199__, at which a quorum was present and acting throughout. All
such resolutions are in full force and effect as of the date hereof in the form
in which adopted, and no other resolutions have been adopted by the Board of
Directors of Buyer or any committee thereof relating to the Agreement and the
transactions contemplated thereby.
IN WITNESS WHEREOF, Buyer has caused this Certificate to be executed
on its behalf by the undersigned on and as of the ___ day of ____________,
199__.
FIRST SECURITY & INVESTMENT CORP.
By:
-----------------------------
Name:
---------------------------
President
By:
-----------------------------
Name:
---------------------------
Secretary
