SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): October 30, 1997
VERTEX COMPUTER CABLE & PRODUCTS, INC.
(exact name of registrant as specified in its charter)
Delaware 1-9263 11-2816128
(state or other jurisdiction (Commission File Number)
(IRS Employer I.D. No.)
of incorporation)
920 Conklin Street, Farmingdale, New York 11735
(Address of principal executive offices)
Registrant's telephone number, including area code (516) 293-1610
VTX Electronics, Corp.
61 Executive Boulevard, Farmingdale, NY 11735
(former name or former address, if changed since last report)
ITEM 3. Bankruptcy or Receivership.
The Registrant, which filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code in
the Eastern District of the State of New York on January 10, 1997,
consummated its Plan of Reorganization on January 12, 1998 (the
"Effective Date") after obtaining exit financing with Congress
Financial Corporation.
Pursuant to Registrant's Second Amended Joint Plan of
Reorganization dated September 24, 1997 (the "Plan"), which Plan
was confirmed by the Bankruptcy Court, Eastern District on October
30, 1997, the following actions were to be taken by the Registrant
by the Effective Date:
(a) The Registrant's wholly owned subsidiary, Vertex Computer
Cable & Products, Inc. was merged with and into the Registrant on
November 20, 1997;
(b) The name of the Registrant was changed to Vertex Computer
Cable and Products, Inc. as of November 20, 1997;
(c) The officers and directors of the Registrant are: Edward
Goodstein (Chief Executive Officer and Chairman of the Board);
Howard M. Griffith (President and Director); Nicholas T. Hutzel
(Controller and Secretary); Abraham Mendez (Vice President of
Sales); Carl G. Palazzolo (Director); Ron Martyn (Director) and
Albert Roth (Director).
(d) All of Registrant's outstanding preferred stock, stated
value $100.00 ("Preferred Stock") was canceled. The holder of all
of the Preferred Stock, TW Cable, L.L.C., shall receive a
sufficient number of shares of the common stock, $.10 par value
("Common Stock") of the Registrant representing ninety (90%) of the
issued and outstanding Common Stock.
(e) The Registrant declared a one-for-five reverse stock
split of all of its issued and outstanding common stock, $.10 par
value ("Common Stock"), effective as of December 29, 1997. As a
result, holders of the Registrant's outstanding 12,652,000 pre-
reorganization shares of Common Stock will receive 2,530,400 shares
of the Registrant's post-reorganization shares.
(f) As of the Effective Date, the Registrant's authorized
capital stock consists of 40 million non-assessable shares of
common stock, $.10 par value per share and 5 million shares of
preferred stock, stated value $100.00. After all issuances of
Common Stock under the Plan, including the issuance to TW Cable,
L.L.C. and the use of the reverse stock split, 25,304,000 shares of
Common Stock will be outstanding and no shares of Preferred stock
will be outstanding.
ITEM 5. Other Events.
As of January 21, 1998, the NASDAQ changed the Registrant's
OTC ticker symbol from "VTXL" to "VCCP"
On December 10, 1997, Mike Recca became a Director of The
Company.
ITEM 7. Exhibits.
2.1 Second Amended Joint Plan of Reorganization dated
September 24, 1997
2.2 Second Amended Joint Disclosure Statement dated
September 24, 1997
2.3 Order of United States Bankruptcy Court, Eastern
District dated October 30, 1997
3.1(d) Certificate of Ownership and Merger dated November
20, 1997
3.1(e) Amendment to Registrant's Certificate of
Incorporation dated December 29, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
By:
Date: February , 1998
Jaspan Schlesinger Silverman & Hoffman LLP
300 Garden City Plaza
Garden City, New York 11530
(516) 746-8000
Salvatore LaMonica, Esq. (SL #2148)
Andrew S. Muller, Esq. (ASM #6168)
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
AT WESTBURY
- ----------------------------------------------------x
In re:
Chapter 11
VERTEX TECHNOLOGIES, INC. and Case Nos. 897-80197-478
VTX ELECTRONICS CORP., 897-80198-478
Debtors.
- ----------------------------------------------------x
DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
DATED SEPTEMBER 24, 1997
TABLE OF CONTENTS
ARTICLE I -
DEFINITIONS..................................................................1
ARTICLE II - SUBSTANTIVE
CONSOLIDATION................................................................13
2.1 Motion for Substantive
Consolidation................................................................13
ARTICLE III - CLASSIFICATION OF CLAIMS AND
INTERESTS....................................................................14
3.1 General Classification
Rule.........................................................................14
3.2 Acceptance of
Classification...............................................................14
3.3 Classification...........................................................14
3.3.1 Class 1 Claims-Administrative
Expenses............................ .......................................14
3.3.2 Class 2 Claims-Priority
Claims.......................................................................14
3.3.3 Class 3 Claims-Tax
Claims.......................................................................14
3.3.4 Class 4 Claims-Congress' Secured
Claims.......................................................................14
3.3.5 Class 5 Claims-Debenture
Claims.......................................................................15
3.3.6 Class 6 Claims-Administrative Convenience
Claims.......................................................................15
3.3.7 Class 7 Claims-Unsecured
Claims.......................................................................15
3.3.8 Class 8 Interests-Preferred Stock
Interests................................................................... 15
3.3.9 Class 9 Interests-Common Stock
Interests....................................................................15
3.3.10 Class 10 Claims-Warrant
Claims.......................................................................15
ARTICLE IV - TREATMENT OF CLASSES OF CLAIMS AND
INTERESTS....................................................................16
4.1 Class 1 Claims (Administrative
Expenses)....................................................................16
4.2 Class 2 Claims (Priority
Claims)......................................................................16
4.3 Class 3 Claims (Tax
Claims)......................................................................16
4.4 Class 4 Claims (Secured Claims of
Congress)....................................................................17
4.5 Class 5 Claims (Debenture
Claims)......................................................................17
4.6 Class 6 Claims (Administrative Convenience
Claims)......................................................................18
4.7 Class 7 Claims (Unsecured
Claims)......................................................................18
4.8 Class 8 Interests (Preferred
Stock).......................................................................19
4.9 Class 9 Interests (Common
Stock).......................................................................19
4.10 Class 10 Claims (Warrant
Claims)......................................................................20
ARTICLE V - IDENTIFICATION OF CLAIMS AND EQUITY INTERESTS
IMPAIRED BY THE
PLAN.........................................................................21
5.1 Unimpaired
Classes......................................................................21
5.2 Impaired
Classes......................................................................21
ARTICLE VI - EXECUTION AND IMPLEMENTATION OF
PLAN.........................................................................22
6.1 Sources of
Funding......................................................................22
6.2 Effective Date
Transactions.................................................................22
ARTICLE VII - CONDITIONS PRECEDENT TO
OCCURRENCE OF EFFECTIVE
DATE.........................................................................23
7.1 Substantive
Consolidation................................................................23
7.2 Entry of Confirmation
Order........................................................................23
7.3 Closing of Exit Financing and Deposits into Distribution
Fund.........................................................................23
ARTICLE VIII - AMENDMENTS AND
MODIFICATION.................................................................24
8.1 Amendment of
Plan.........................................................................24
ARTICLE IX - EXECUTORY
CONTRACTS....................................................................25
9.1 Assumption of Executory
Contracts....................................................................25
9.2 Rejection of Warrants and Stock
Options......................................................................26
9.3 Classification of
Claims.......................................................................26
ARTICLE X - VESTING OF PROPERTY; CORPORATE STRUCTURE;
DISCHARGE;
INJUNCTION...................................................................27
10.1 Vesting of
Property.....................................................................27
10.2 Corporate
Action.......................................................................27
10.3 Corporate
Structure....................................................................28
10.4 Amendment of Debtors' Corporate
Charters.....................................................................28
10.5 Issuance of New Common
Stock........................................................................29
10.6
Discharge...................................................................29
10.7
Injunction..................................................................30
ARTICLE XI - CREDITORS'
COMMITTEE....................................................................32
11.1 Composition of Creditors'
Committee....................................................................32
11.2 Continued Existence of Creditors'
Committee....................................................................32
11.3 Compensation of Creditors' Committee's
Professionals................................................................32
11.4 Replacement of
Members......................................................................32
11.5 Resignation of Members;
Vacancies....................................................................33
11.6 Quorum; Meetings;
Proxy........................................................................33
11.7 Actions of Creditors'
Committee....................................................................34
11.8
Liability...................................................................34
11.9 Consent of Creditors'
Committee....................................................................34
11.10 Compensation of
Members......................................................................34
11.11 Retention of
Professionals................................................................35
11.12 Exercise of
Rights.......................................................................35
ARTICLE XII - MISCELLANEOUS
PROVISIONS...................................................................36
12.1 Filing of Objections to Claims Within 90 Days After Effective
Date.........................................................................36
12.2 Claims
Reserve......................................................................36
12.3 Unclaimed
Distributions................................................................37
12.4 Payments Made Within 10 Days of Distribution
Dates........................................................................38
12.5 Method of
Payment......................................................................38
12.6
Prepayment..................................................................38
12.7 Post-Confirmation Effect of Evidences of Claims or
Interests....................................................................39
12.8
Construction................................................................39
12.9
Time........................................................................39
12.10 Governing
Law..........................................................................39
12.11
Headings....................................................................40
12.12
Severability................................................................40
12.13
Notices.....................................................................40
12.14 Successors and
Assigns......................................................................41
ARTICLE XIII - RETENTION OF
JURISDICTION.................................................................42
13.1 Retention of Exclusive
Jurisdiction.................................................................42
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
AT WESTBURY
- ----------------------------------------------------x
In re:
Chapter 11
VERTEX TECHNOLOGIES, INC. and Case Nos. 897-80197-478
VTX ELECTRONICS CORP., 897-80198-478
Debtors.
- ----------------------------------------------------x
DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
DATED SEPTEMBER 24, 1997
Vertex Technologies, Inc. and VTX Electronics Corp., the debtors and debtors-in-
possession, propose the following joint plan of reorganization, pursuant to
Sec.1121(a) of the Bankruptcy Code.
ARTICLE I
DEFINITIONS
For purposes of this plan of reorganization, the following terms shall have the
respective meanings set forth below (such meanings shall be equally applicable
to the singular and plural forms of the terms defined), unless a different
meaning is clearly required by and explained in the context. Terms used in this
Plan which are defined in the Bankruptcy Code shall have the meanings assigned
therein unless otherwise defined below.
1.1 "Administrative Expense" shall mean any cost or expense of administration
of the Reorganization Cases entitled to priority in payment under Sec.507(a)(1)
of the Bankruptcy Code, or as may be allowed by Final Order, including, without
limitation: (a) the actual and necessary costs and expenses of preserving the
Estates of the Debtors and operating the business(es) of the Debtors (other than
such Claims or portions thereof which, by their express terms are not due or
payable by the Effective Date), pursuant to Sec.503(b) of the Bankruptcy Code,
(b) Fee Claims,(c) any indebtedness or obligations incurred or assumed by any of
the Debtors, and (d) fees or charges assessed against the Estate of either of
the Debtors under Chapter 123 of Title 28 of the United States Code. To the
extent permitted under Sec.506(b) of the Bankruptcy Code, an Administrative
Expense shall include unpaid interest and any reasonable unpaid fees, costs or
charges provided for under the agreements under which such Claim arose.
1.2 "Allowed Administrative Convenience Claim" shall mean an Allowed Unsecured
Claim against the Debtors which is for an amount less than or equal to$1,000.00.
1.3 "Allowed Administrative Expense" shall mean any Administrative Expense, or
portion thereof,which has been allowed by a Final Order of the Bankruptcy Court.
1.4 "Allowed Claim" shall mean a Claim, other than an Administrative Expense or
an Interest, which is: (a) listed in either of the Debtors' schedules, including
any amendments thereto, filed in this Chapter 11 Case as of the Effective Date
and not listed therein as disputed, contingent, unliquidated or unknown; (b) set
forth in a proof of Claim timely and properly filed in either of the Debtor's
Chapter 11 cases on or before the date fixed by the Bankruptcy Court, or by
applicable rule or statute, as of the last day for filing such proof of Claim,
or late filed with leave of the Bankruptcy Court after notice and opportunity
for hearing having been given and as to which no objection to the allowance
thereof is filed; or (c) determined to be allowed by a Final Order of the
Bankruptcy Court. To the extent permitted under Sec.506(b) of the Bankruptcy
Code, an Allowed Claim shall include unpaid interest on such Claim and any
reasonable unpaid fees, costs or charges provided for under the agreements under
which such Claim arose.
1.5 "Allowed Debenture Claim" shall mean any Allowed Claim, or portion thereof,
arising under, from or based upon ownership of a Subordinated Debenture.
1.6 "Allowed Interest" shall mean any Interest which: (a) is listed in either of
the Debtor's schedules, including any amendment thereto filed in these Chapter
11 cases,as of the Effective Date and not listed therein as disputed,contingent,
unliquidated or unknown; or (b) is provided by or established in the records of
VTX's Stock Transfer Agent on the Record Date; or (c) is set forth in a proof of
Interest, timely and properly filed in either of the Chapter 11 cases on or
before the date fixed by the Court, applicable rule or statute, as the last day
for filing such proof, or late filed with leave of the Bankruptcy Court after
notice and opportunity for a hearing having been given and as to which no
objection to the allowance thereof has been filed; or (d) is determined to be
allowed by Final Order of the Bankruptcy Court.
1.7 "Allowed Priority Claim" shall mean any Allowed Claim or portion thereof,
except an Administrative Expense, that is entitled to priority in payment over
Allowed Unsecured Claims pursuant to Sec's.507(a)(3),507(a)(4), 507(a)(5),507(a)
(6) and 507(a)(7) of the Bankruptcy Code.
1.8 "Allowed Secured Claim" shall mean any Allowed Claim, or portion thereof,
that is secured by a valid, perfected lien, security interest or other charge
against or interest in property in which either of the Debtors has an interest,
or which is subject to set-off under Sec.553 of the Bankruptcy Code, to the
extent of the value of the interest of the holder of such Claim in the
particular Debtor's property as determined by the Bankruptcy Court pursuant to
Sec. 506(a) of the Bankruptcy Code, including interest accrued on or after the
Filing Date, fees, costs and charges as may be allowed by the Bankruptcy Court
under Sec.506(b) of the Bankruptcy Code.
1.9 "Allowed Tax Claim" shall mean any Allowed Claim, or portion thereof,
except an Administrative Expense, that is entitled to priority in payment over
Allowed Unsecured Claims pursuant to Sec.507(a)(8) of the Bankruptcy Code.
1.10 "Allowed Unsecured Claim" shall mean any Allowed Claim, or portion thereof,
against the Debtors, which is not an Allowed Administrative Expense, an Allowed
Priority Claim, an Allowed Administrative Convenience Claim, an Allowed Tax
Claim, an Allowed Secured Claim, an Allowed Debenture Claim, an Allowed Warrant
Claim, or an Allowed Fee Claim, and not entitled to priority in payment under
Sec.507(a) of the Bankruptcy Code.
1.11 "Allowed Warrant Claim" shall mean any Claim, or portion thereof, which
arises under, or as a result of, a Warrant, stock option or any other right to
purchase or otherwise acquire stock of any of the Debtors and any Claim arising
as a result of the cancellation, termination, revocation, nullification or
rejection of a Warrant, stock option or any other right to purchase or otherwise
acquire stock of any of the Debtors.
1.12 "Bankruptcy Code" shall mean Title 11 of the United States Code, Sections
101 et seq., and any amendment thereof applicable to the Reorganization Cases.
1.13 "Bankruptcy Court" shall mean the United States District Court for the
Eastern District of New York and, to the extent of any reference made by such
court pursuant to 28 U.S.C. Sec.157, the United States Bankruptcy Court for the
Eastern District of New York, or any other court having lawful jurisdiction over
the Reorganization Cases.
1.14 "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure
applicable to the Reorganization Cases, as supplemented by any local bankruptcy
rules adopted by the Bankruptcy Court.
1.15 "Business Day" shall mean any day except Saturday, Sunday or any other day
on which commercial banks in New York State are authorized by law to close.
1.16 "Cash Flow" shall mean "net after tax income", set forth in the Reorganized
Debtor's certified annual financial statement, plus all "non-cash charges", plus
any interest on the Subordinated Debentures to the extent such interest was a
charge to arrive at "net after tax income". "Net After Tax Income" and "Non-
Cash Charges" shall have the meaning provided in accordance with Generally
Accepted Accounting Principles.
1.17 "Chapter 11" shall mean Chapter 11 of the Bankruptcy Code.
1.18 "Claim" shall mean a claim as defined in Sec.101(5) of the Bankruptcy Code
whether or not asserted, against the Debtors.
1.19 "Claimant" shall mean the holder of a Claim.
1.20 "Claims Reserve" shall mean the account maintained by the Reorganized
Debtor for the escrow of sufficient funds pending resolution of Disputed Claims
and unclaimed Distributions established pursuant to Article XII of the Plan.
1.21 "Class" shall mean any class into which Claims or Interests are classified
pursuant to Article III of the Plan.
1.22 "Class 1 Claim", "Class 2 Claim", "Class 3 Claim", "Class 4 Claim","Class 5
Claim", "Class 6 Claim", "Class 7 Claim", "Class 8 Interest", "Class 9 Interest"
and "Class 10 Claim" shall mean any of the Claims and Interests so classified in
Article III of the Plan.
1.23 "Common Stock" shall mean all common stock having a par value of $.10 per
share, of VTX and all common stock having a par value of $.10 per share, of
Vertex.
1.24 "Confirmation Date" shall mean the date on which the Confirmation Order is
entered by the Bankruptcy Court.
1.25 "Confirmation Order" shall mean the order entered by the Bankruptcy Court
confirming this Plan in accordance with the provisions of Chapter 11.
1.26 "Congress" shall mean Congress Financial Corporation, the Debtors' senior
secured lender.
1.27 "Congress Pre-Petition Loan" shall mean all obligations of the Debtors
relating to or arising under the loan documents by and between the Debtors and
Congress all dated December 31, 1992, the amendments dated November 15, 1993,
October 26, 1993, February 10, 1995, March 15, 1996 and June 19, 1996, the
blocked account agreement dated May 6, 1993, together with the associated UCC-1
financing statements, guarantor agreements,and related intercreditor agreements,
all of which are set forth in the Debtors' motion to obtain interim post-
petition financing on file with the Court.
1.28 "Consolidated Estate" shall mean the Estates,after a motion for substantive
consolidation thereof shall have been granted by the Bankruptcy Court by Final
Order.
1.29 "Creditors' Committee" shall mean the Official Committee of Unsecured
Creditors and its members appointed in the Reorganization Cases by the Office of
the United States Trustee.
1.30 "Debtors" shall mean Vertex and VTX.
1.31 "Debtors-in-Possession" shall mean Vertex and VTX as debtors-in-possession.
1.32 "Deficiency Amount" shall mean, with respect to a Claim, the amount,if any,
by which the Allowed Claim exceeds the amount of such Claimant's Allowed Secured
Claim.
1.33 "Deficiency Claim" shall mean any Allowed Claim representing a Deficiency
Amount.
1.34 "DIP Financing" shall mean the "Financing Agreements", as amended by the
"Ratification and Amendment Agreement", as those terms are defined in the Final
Order of the Court dated March 28, 1997, whereby Congress provided the Debtors
with post-petition loans, advances and other financial accommodations in
accordance with the formulas set forth in said Financing Agreements and
Ratification and Amendment Agreement.
1.35 "Disputed Claim" shall mean any Claim, including any Fee Claim and
Administrative Expense but excluding all Allowed Claims and Allowed
Administrative Expenses: (a) which is scheduled in either of the Debtors'
schedules as disputed, contingent or unliquidated: or,(b)(i) as to which a proof
of Claim has been filed, (ii) an objection has been timely filed (and not
withdrawn) by the Debtors or any other party in interest, and (iii) no Final
Order has allowed or disallowed such Claim or portion thereof. If any part of a
Claim or an Administrative Expense is disputed, such Claim or Administrative
Expense in its entirety shall be deemed a Disputed Claim for purposes of
distribution under the Plan unless the Debtors and the holder thereof agree
otherwise.
1.36 "Distribution" shall mean the cash or New Common Stock to be paid or
distributed pursuant to the Plan to holders of Allowed Administrative Expenses,
Allowed Claims and Allowed Interests.
1.37 "Distribution Fund" shall mean the account formed and maintained by the
Reorganized Debtor for the purpose of making Distributions under the Plan.
1.38 "Effective Date" shall mean a date designated by the Debtors after the
Confirmation Date for the funding of the Plan, which date shall occur no later
than thirty (30) days after the Confirmation Order becomes a Final Order;
provided, however, that the Debtors, in their sole discretion, may waive the
requirement that the Confirmation Order be a Final Order. In the event of a
stay of the Confirmation Order, "Effective Date" shall mean the thirtieth
Business Day following the date on which an order vacating or terminating such
stay shall become a Final Order.
1.39 "Estates" shall mean the estates of the Debtors created pursuant to Sec.541
of the Bankruptcy Code.
1.40 "Executory Contract" shall mean any of the contracts and unexpired leases
to which either of the Debtors is a party and was a party as of the Filing Date
and which are executory within the meaning of Sec.365 of the Bankruptcy Code.
1.41 "Executory Contract Claim" shall mean any Claim entitled to payment as cure
for or compensation in respect of a pecuniary loss directly resulting from the
occurrence of a default existing under and pursuant to an Executory Contract
heretofore or hereafter assumed by the Debtors, pursuant to Sec.365(b)(1) of the
Bankruptcy Code, and specifically shall not mean or include any Claims arising
as a result of any Debtor's rejection of an Executory Contract pursuant to
Sec.365(a) of the Bankruptcy Code.
1.42 "Exit Financing" shall mean the secured financing credit loan facility
extended to the Reorganized Debtor by NationsCredit in accordance with its
commitment letter dated August 26, 1997.
1.43 "Fee Applications" shall mean applications of Professional Persons under
Sec's.330, 331 or 503 of the Bankruptcy Code for allowance of compensation and
reimbursement of expenses in the Reorganization Cases.
1.44 "Fee Claim" shall mean a Claim under an applicable provision of the
Bankruptcy Code or otherwise allowed by the Bankruptcy Court, for allowance of
compensation and reimbursement of expenses to a Professional in the
Reorganization Cases.
1.45 "Filing Date" shall mean January 10, 1997, the date on which the
Reorganization Cases were commenced.
1.46 "Final Order" shall mean an order, judgment or decree of the Bankruptcy
Court as entered on the docket that has not been reversed, stayed, modified or
amended and as to which the time to appeal, petition for certiorari, or seek
reargument or rehearing has expired and as to which no appeal, reargument,
petition for certiorari, or rehearing is pending, or as to which any right to
appeal, reargue, petition for certiorari or seek rehearing has been waived in
writing in a manner satisfactory to the Debtors or, if an appeal, reargument,
petition for certiorari, or rehearing has been sought, the order, judgment or
decree of the Bankruptcy Court which has been affirmed by the highest court to
which the order was appealed from for which the reargument or rehearing was
sought, or certiorari has been denied, and the time to take any further appeal
or to seek certiorari or further reargument or rehearing has expired.
Notwithstanding the foregoing, with respect to an order providing for
substantive consolidation of the Estates, Final Order shall mean an order,
judgment or decree entered on the docket with respect to which no stay thereof
is in effect.
1.47 "Initial Distribution Date" shall mean a date designated by the Reorganized
Debtor after the Effective Date, but in no event shall such date be more than 10
days after the Effective Date unless the tenth day after the Effective Date is
not a Business Day, in which case, the first Business Day thereafter shall be
the Initial Distribution Date.
1.48 "Interest" shall mean any ownership interest in either of the Debtors based
upon ownership of either Preferred Stock or Common Stock in either of the
Debtors.
1.49 "NationsCredit" shall mean NationsCredit Commercial Corporation and
NationsCredit Commercial Funding Division, the Debtors' secured Exit Financing
lender.
1.50 "New Common Stock" shall mean the 40 million non-assessable shares of
common stock of the Reorganized Debtor having a par value of $.10 per share
authorized under the Plan.
1.51 "Person" shall mean an individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization, or a government or any agency or
political subdivision thereof.
1.52 "Periodic Distribution Dates" shall mean: (a) initially, the first Business
Day that is 90 days after the Initial Distribution Date; and (b) subsequently,
the first Business Day that is 90 days after the immediately preceding Periodic
Distribution Date.
1.53 "Plan" shall mean this joint plan of reorganization and any amendments
permitted in accordance with Sec.1127 of the Bankruptcy Code.
1.54 "Preferred Stock" shall mean all senior redeemable cumulative convertible
preferred stock having a stated value of $100.00 per share, of VTX.
1.55 "Pro Rata" shall mean the proportion that the amount of an Allowed Claim
bears to the aggregate amount of all Allowed Claims in the particular Class
receiving a Distribution.
1.56 "Professional" shall mean any of the attorneys, accountants, consultants
and other professionals retained pursuant to a Final Order of the Bankruptcy
Court on behalf of the Debtors or the Creditors' Committee.
1.57 "Record Date" shall mean the date of the entry of an order approving the
Debtors' disclosure statement.
1.58 "Reorganization Cases" shall mean the Debtors'Chapter 11 cases bearing Case
Nos. 897-80197-478 and 897-80198-478 before the Bankruptcy Court.
1.59 "Reorganized Debtor" shall mean the entity that exists after and as a
result of confirmation of the Plan.
1.60 "Representatives" shall mean with respect to an entity, as may be
applicable to such entity, such entity's directors, officers, employees,
partners, joint ventures, attorneys, accountants, investment bankers,
consultants, agents and legal representatives.
1.61 "Sale Order" shall mean the Final Order of the Court dated June 17, 1997,
which authorized and approved the sale of the assets of Vertex's distribution
business to TW for the sum of approximately $1,875,000.00.
1.62 "Stock Transfer Agent" shall mean American Stock Transfer Company or their
successor.
1.63 "Subordinated Debenture" shall mean any secured subordinated debenture
issued by either of the Debtors.
1.64 "Subordinated Debenture Holder" shall mean a Person named in the
Subordinated Debenture as the obligee or their heirs, successors or assigns, as
the case may be.
1.65 "Subsequently Allowed Claim" shall mean any Claim or Administrative Expense
that becomes an Allowed Claim after the Initial Distribution Date.
1.66 "TW" shall mean T.W. Cable LLC; a New York limited liability company.
1.67 "TW Corp." shall mean T.W. Communication Corporation; a New York
corporation.
1.68 "TW Guarantee" shall mean the guarantee of TW Corp. to provide sufficient
funds to the Debtors in order to fund the Distribution to holders of Class 6
Claims and Class 7 Claims which are to be made on the Initial Distribution Date
and Periodic Distribution Dates.
1.69 "Vertex" shall mean Vertex Technologies, Inc., a New York corporation.
1.70 "VTX" shall mean VTX Electronics Corp., a Delaware corporation.
1.71 "Warrant" shall mean any right to purchase, redeem, convert or otherwise
acquire Common Stock pursuant to any warrant issued by either of the Debtors or
any stock option or other right by virtue of ownership of Preferred Stock.
ARTICLE II
SUBSTANTIVE CONSOLIDATION
2.1 Motion for Substantive Consolidation. The Plan contemplates and is
conditioned upon the entry of a Final Order of the Bankruptcy Court providing
for the substantive consolidation of the Estates into one Consolidated Estate
for the purposes of the Reorganization Cases and all actions with respect to
confirmation, consummation and implementation of the Plan. Pursuant to such
Final Order and for purposes of the Reorganization Cases, on the Effective
Date: (i) all Claims by and among the Debtors against each other will be
eliminated; (ii) all assets and liabilities of the Debtors will be merged or
treated as though they were merged; (iii) any obligation of the Debtors and all
guarantees thereof will be deemed to be one obligation of the Consolidated
Estate; (iv) any Claims filed or to be filed in connection any such obligations
and such guarantees will be deemed one Claim against the Consolidated Estate;(v)
each and every Claim against the individual Reorganization Cases shall be deemed
to be one Claim against the Consolidated Estate; and (vi) for purposes of
determining the availability of the right of set-off under Sec.553 of the
Bankruptcy Code, the Debtors shall be treated as one entity so that, subject to
the other provisions of the Bankruptcy Code, debts due either of the Debtors may
be set-off against the debts of the other Debtor. On the Effective Date, and in
accordance with the terms of the Plan and the Bankruptcy Court order authorizing
the consolidation of the assets and liabilities of the Debtors, all Claims based
upon guarantees of collection, payment or performance made by the Debtors as to
the obligations of a Debtor shall be discharged, released and of no further
force or effect.
ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS
3.1 General Classification Rule
A Claim or Interest which is properly includable in more than one Class is in a
Class to the extent it qualifies within the description of such Class and is in
a different Class to the extent it qualifies within the description of such
different Class.
3.2 Acceptance of Classification
Any holder of a Claim or Interest who fails to object in writing to the
classification of Claims and Interests provided in the Plan, and who has not
filed such objection with the Bankruptcy Court and served such objection upon
counsel for the Debtors and counsel for the Creditors' Committee, at least
twenty (20) days prior to the hearing on confirmation of the Plan shall be
deemed to have accepted such classification and shall be bound thereby.
3.3 Classification
For purposes of the Plan, all Allowed Administrative Expenses, Allowed Claims
and Allowed Interests shall be placed in the following Classes, which Classes
shall be mutually exclusive:
3.3.1 Class 1-Administrative Expenses: This Class shall consist of all Allowed
Administrative Expense Claims.
3.3.2 Class 2-Priority Claims: This Class shall consist of all Allowed Priority
Claims.
3.3.3 Class 3-Tax Claims: This Class shall consist of all Allowed Tax Claims.
3.3.4 Class 4-Congress' Secured Claims: This Class shall consist of all Allowed
Secured Claims of Congress arising out of or relating in any manner to the
Congress Pre-Petition Loan, including without limitation, outstanding principal,
interest, fees, and costs.
3.3.5 Class 5-Debenture Claims: This Class shall consist of all Allowed
Debenture Claims.
3.3.6 Class 6-Administrative Convenience Claims: This Class shall consist of all
Allowed Administrative Convenience Claims.
3.3.7 Class 7-Unsecured Claims: This Class shall consist of all Allowed
Unsecured Claims.
3.3.8 Class 8-Preferred Stock Interests: This Class shall consist of all Allowed
Interests of owners of Preferred Stock.
3.3.9 Class 9-Common Stock Interests: This Class shall consist of all Allowed
Interests of owners of Common Stock listed in the records of the Stock Transfer
Agent as of the Record Date.
3.3.10 Class 10-Warrant Claims: This Class shall consist of all Allowed Warrant
Claims.
ARTICLE IV
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS
4.1 Class 1 Claims (Administrative Expenses)
Class 1 Claims are not impaired. Each holder of a Class 1 Claim shall be paid
in full, in cash, on the Initial Distribution Date or at such other date and
upon such other terms as may be agreed upon between any holder of a Class 1
Claim and the Debtors; provided, however, that an Allowed Administrative Expense
representing indebtedness or other obligation incurred or assumed by the
Debtors-in-Possession in the ordinary course of business shall be assumed and
paid or performed by the Reorganized Debtor in accordance with the terms and
conditions of any agreements relating thereto, except as may be otherwise
provided herein.
4.2 Class 2 Claims (Priority Claims)
Class 2 Claims are not impaired. Each holder of a Class 2 Claim shall be paid in
full, in cash, on the Initial Distribution Date or at such other date and upon
such other terms as may be agreed upon between any holder of a Class 2 Claim and
the Debtors.
4.3 Class 3 Claims (Tax Claims)
Class 3 Claims are not impaired. In accordance with Sec.1129(a)(9)(C) of the
Bankruptcy Code, each holder of an Allowed Tax Claim, at the Debtors' option,
shall be paid in full, in cash on the Initial Distribution Date or shall
receive deferred cash payments over a period not exceeding six (6) years after
the Effective Date, of a value, as of the Effective Date of the Plan, equal to
the amount of the Allowed Tax Claim. Interest on such deferred payments shall
be at the rate of 8% per annum.
4.4 Class 4 Claims (Secured Claims of Congress)
Class 4 Claims are not Impaired. All Class 4 Claims of Congress shall be paid
in full, in cash on the Effective Date.
Notwithstanding the foregoing, the holder of a Class 4 Claim may receive such
less favorable treatment as may be agreed upon by each such holder and the
Debtors.
4.5 Class 5 Claims (Debenture Claims)
Class 5 Claims are impaired. All holders of Allowed Debenture Claims will
receive certain Distributions on account of the interest due on each
Subordinated Debenture and all Subordinated Debenture Holders as of the Filing
Date, will have their rights to payment under each Subordinated Debenture
modified as follows:
(a) On the Initial Distribution Date, each holder of a Class 5 Claim for accrued
unpaid interest shall be paid a Pro Rata Distribution of 13.5% of its
Allowed Claim in full and final satisfaction, release and discharge; and
(b) All Subordinated Debenture Holders as of the Filing Date, shall have their
right to payment of the principal amount of the Subordinated Debenture
modified on the Effective Date such that each Subordinated Debenture
shall be due and payable seven (7) years after the Effective Date, and
accrue interest at a rate of eight (8%) percent per annum, payable semi-
annually over the life of the Subordinated Debenture. The Subordinated
Debentures will remain secured by all of the assets of the Reorganized
Debtor but subordinated to all current and future institutional loan facilities
whether revolving, asset based or otherwise.
All other rights pursuant to the Subordinated Debentures will be canceled.
4.6 Class 6 Claims (Administrative Convenience Claims)
Class 6 Claims are impaired. Each holder of an Allowed Administrative
Convenience Claim will receive a Distribution totaling 20% of the amount of each
Allowed Administrative Convenience Claim (the "Class 6 Distribution") in full
and final satisfaction, release and discharge of such Claim. The Class 6
Distribution shall be made in cash as follows: twenty-five (25%) of the Class 6
Distribution will be made on the Initial Distribution Date, with the balance of
the Class 6 Distribution to be paid in three (3) equal installments on the
Periodic Distribution Dates. The Class 6 Distribution is guaranteed by the TW
Guarantee.
4.7 Class 7 Claims (Unsecured Claims)
Class 7 Claims are impaired. Each holder of an Allowed Unsecured Claim will
receive a Distribution of the lesser of: (i) its Pro Rata share of the sum of
$790,000.00; or (ii) thirteen and one-half (13.5%) percent of each Allowed
Unsecured Claim (the "Class 7 Partial Distribution"). The Class 7 Partial
Distribution shall be made as follows: On the Initial Distribution Date, and
subject to the Disputed Claims reserve procedure set forth in Article XII of the
Plan, each holder of a Class 7 Claim shall be paid in cash its Pro Rata share
equal to one-fourth (1/4) of the Class 7 Partial Distribution on the Initial
Distribution Date, with the balance of the Class 7 Partial Distribution to be
paid in three (3) equal installments on the Periodic Distribution Dates. The
Class 7 Partial Distribution is guaranteed by the TW Guarantee. Further,
holders of Class 7 Claims will receive their Pro Rata share of additional cash
payments which will be determined upon the cumulative Cash Flow of the
Reorganized Debtor equal to: (a) 0% of the first $500,000.00; (b) plus 25% of
the next $1 Million; (c) plus 15% of the balance thereafter, for three (3) years
following receipt of the first $250,000.00 distributed in subsections (a) and
(b) above, or until the fifth (5th) anniversary of the Effective Date, which
ever is earlier. The total of these payments will be in full and final
satisfaction, release and discharge of Allowed Class 7 Claims.
4.8 Class 8 Interests (Preferred Stock)
Class 8 Interests are impaired. No cash Distributions shall be made to holders
of Class 8 Interests. All Class 8 Preferred Stock Interests shall be canceled
on the Effective Date and in full and final satisfaction, release and discharge
of all Class 8 Preferred Stock Interests, the holder of the Preferred Stock, TW,
shall receive a sufficient number of shares of New Common Stock Debtor
representing ninety(90%) percent of the issued and outstanding New Common Stock.
All other rights or Claims arising under the Preferred Stock are terminated or
canceled as of the Effective Date.
4.9 Class 9 Interests (Common Stock)
Class 9 Interests are impaired. No cash Distributions shall be made to holders
of Class 9 Interests. All Class 9 Common Stock Interests shall be canceled on
the Effective Date and in full and final satisfaction, release and discharge of
all Class 9 Common Stock Interests, the holders of the Common Stock of record,
as of the Record Date, with the Stock Transfer Agent, shall receive their pro
rata portion of shares of New Common Stock representing, in total, ten (10%)
percent of the issued and outstanding New Common Stock. All other rights or
claims arising under the Common Stock are terminated or canceled as of the
Effective Date.
4.10 Class 10 Claims (Warrant Claims)
Class 10 Claims are Impaired. No Distributions shall be made with respect to
Class 10 Claims. All Warrants, stock options, or other rights to acquire shares
of Common Stock or other capital stock of the Debtors are canceled as of the
Effective Date. To the extent that any Warrants, stock options, or other rights
to acquire shares of Common Stock or other capital stock of the Debtors are
deemed to be Executory Contracts, in accordance with Section 9.2 of the Plan,
such Warrants, stock options, or other rights to acquire shares of Common Stock
or other capital stock of the Debtors shall be rejected on the Effective Date.
No Distributions shall be made in respect of Class 10 Claims.
ARTICLE V
IDENTIFICATION OF CLAIMS AND
EQUITY INTERESTS IMPAIRED BY THE PLAN
5.1 Unimpaired Classes
Claims in Classes 1, 2, 3 and 4 are not impaired under the Plan and are deemed
to have accepted Plan.
5.2 Impaired Classes
Claims in Classes 5, 6, and 7 are impaired under the Plan and entitled to accept
or reject the Plan. Interests in Classes 8 and 9 are impaired under the Plan
and entitled to accept or reject the Plan. Claims in Class 10 are impaired and
deemed to have rejected the Plan.
ARTICLE VI
EXECUTION AND IMPLEMENTATION OF PLAN
6.1 Sources of Funding. The Debtor will have cash totaling approximately
$565,000.00 available on the Effective Date for Distribution to holders of
Allowed Claims as set forth in Article III of the Plan. On the Effective Date,
all funds necessary to make the Distributions set forth in Article IV of the
Plan will be deposited into the Distribution Fund. The funds necessary for
Distribution on the Initial Distribution Date and Periodic Distribution Dates
will be generated from the continued operation of the Debtors' business(es), the
installment payments from TW for its purchase of the Debtors' Distribution
Business pursuant to the Sale Order, and from loans taken under the Exit
Financing with NationsCredit or, if necessary, from the TW Guarantee.
6.2 Effective Date Transactions. On the Effective Date, the following
transactions shall occur in furtherance of consummation of the Plan:
(a) All funds necessary to fund the Distribution, on the Initial Distribution
Date shall be deposited into the Distribution Fund by either the Debtors or TW
Corp. in accordance with the TW Guarantee;
(b) All Preferred Stock will be canceled;
(c) All Common Stock will be canceled;
(d) Subordinated Debentures will be modified for Subordinated Debenture Holders
on the Effective Date;
(e) All Warrants will be canceled; and
(f) All necessary amendments to the charters, by-laws and certificates of
incorporation of the Debtors will have been made.
ARTICLE VII
CONDITIONS PRECEDENT TO OCCURRENCE OF EFFECTIVE DATE
The following shall be conditions precedent to the occurrence of the Effective
Date:
7.1 Substantive Consolidation
The Estates shall have been substantively consolidated pursuant to a Final
Order.
7.2 Entry of Confirmation Order
The Confirmation Order, in form and substance reasonably acceptable to the
Debtors and the Creditors' Committee, shall have been entered by the Bankruptcy
Court and shall have become a Final Order; provided, however, that the Debtor
and the Creditors' Committee may waive the requirement that the Confirmation
Order be a Final Order.
7.3 Closing of Exit Financing and Deposits into Distribution Fund
The Debtors shall have closed on their Exit Financing with NationsCredit and, if
necessary, TW Corp. shall have deposited into the Distribution Fund, on or
before the Effective Date, the funds necessary for making the Distributions on
the Initial Distribution Date, according to Article IV of the Plan.
ARTICLE VIII
AMENDMENTS AND MODIFICATION
8.1 Amendment of Plan. The Debtors reserve the right to amend and modify the
Plan prior to the Confirmation Date in any manner they determine is necessary to
obtain confirmation of the Plan, to the extent permitted by the Bankruptcy Code,
the Bankruptcy Rules and the Bankruptcy Court. Such amendments may be made at
or prior to the hearing on confirmation of the Plan without further notice to
any party in interest except for an announcement in open court made on the
record at such hearing. After the Confirmation Date, the Debtors may, upon
order of Bankruptcy Court, in accordance with Sec.1127(b) of the Bankruptcy
Code, remedy any defects, or omissions or reconcile any inconsistency in this
Plan in such manner as may be necessary to carry out the purposes and intent of
the Plan.
ARTICLE IX
EXECUTORY CONTRACTS
9.1 Assumption of Executory Contracts
Except as provided in Section 9.2 hereof, any Executory Contracts not expressly
assumed or rejected by the Debtors hereunder or upon motion filed by the Debtors
with the Bankruptcy Court prior to the Effective Date or as to which no motion
to assume or reject is pending on the Effective Date, shall be deemed to be
assumed by the Debtors on the Effective Date in accordance with the provisions
of Sec.365 of the Bankruptcy Code. Unless an objection to assumption of an
Executory Contract or a statement as to the amount of a party's Executory
Contract Claim is filed with the Bankruptcy Court on or before the date fixed
by the Bankruptcy Court for the filing of objections to confirmation of the
Plan, all requirements of Sec.365 of the Bankruptcy Code with respect to the
assumption by the Debtors of such Executory Contract shall be deemed to have
been satisfied in full upon payment by the Debtors on the Initial Distribution
Date of any Executory Contract Claim reflected in the Debtors' books and records
as of such date. If a party objects to the Debtors' assumption of an Executory
Contract or files with the Court a statement as to the amount of such party's
Executory Contract Claim and the amount of such Executory Contract Claim is
disputed by the Debtors, all requirements of Sec.365 of the Bankruptcy Code with
respect to the assumption by the Debtors of such Executory Contract shall be
deemed to have been satisfied in full upon the payment by the Debtors of the
amount of such party's Allowed Executory Contract Claim promptly after entry of
a Final Order approving the assumption of the Executory Contract and/or
determining the amount of such Allowed Executory Contract Claim.
9.2 Rejection of Warrants and Stock Options
All Warrants, stock options and other rights to acquire Common Stock or any
other capital stock of either of the Debtors, to the extent such Warrants, stock
options or other rights are deemed Executory Contracts shall be deemed to be
rejected by the Debtors on the Effective Date of the Plan in accordance with the
provisions of Sec.365 of the Bankruptcy Code. Claims arising from the rejection
of Warrants, stock options or other rights to acquire Common Stock or any other
capital stock of either of the Debtors are classified in Class 10 under the
Plan. No Distributions shall be made to holders of any Class 10 Claims based on
such rejection.
9.3 Classification of Claims.
Claims arising from the rejection of Executory Contracts, other than claims
classified in Classes 8, 9 and 10 shall be Class 7 Claims. Claims arising from
the cancellation of Warrants are classified in Class 10 under the Plan.
ARTICLE X
VESTING OF PROPERTY; CORPORATION STRUCTURE;
DISCHARGE; INJUNCTION
10.1 Vesting of Property
Except as otherwise provided in this Plan or the Confirmation Order, on the
Effective Date, all assets of the Estates of the Debtors shall vest in the
Reorganized Debtor, and subsequently shall be retained by the Reorganized Debtor
subject to the provisions of the Confirmation Order. After the Effective Date,
all assets retained by the Reorganized Debtor pursuant hereto shall be free and
clear of all Claims and Interests, except the obligations to be performed
according to the Plan, the Confirmation Order and any liens and security
interests granted pursuant to the Plan. Except as otherwise provided in this
Plan or the Confirmation Order, on the Effective Date and thereafter, the
Reorganized Debtor may operate its businesses free of any restrictions imposed
by the Bankruptcy Code.
10.2 Corporate Action
Upon entry of the Confirmation Order by Bankruptcy Court, all actions
contemplated by this Plan shall be authorized and approved in all respects
(subject to the provisions of this Plan). The issuance of securities pursuant
to this Plan, the election and/or appointment of directors and officers as a
result of Plan, and the other matters provided for under this Plan involving the
corporate structure of the Debtors (including any corporate action required
in connection with this Plan) shall be deemed to have occurred and shall be in
effect, without any requirement of further action by the shareholders or
directors of the Debtors. On the Effective Date, the appropriate officers and
directors of the Debtors are authorized and directed to execute and deliver the
agreements, documents and instruments contemplated by this Plan in the name of
and on behalf of the Debtors.
10.3 Corporate Structure
On the Effective Date, all stock of Vertex, which is owned entirely by VTX, will
be canceled and the corporate structure of Vertex will be merged with VTX. This
Reorganized Debtor will consist of one corporation named and identified as
Vertex Computer Cable & Products, Inc. ("VCCP"). VCCP's authorized capital stock
will consist of 40 million non-assessable shares of common stock,$.10 per value,
per share and 5 million shares of preferred stock, stated value $100.00, per
share. VCCP's preferred stock may be issued by its Board of Directors without
further action by VCCP's shareholders, in one or more series having such powers,
preferences and rights (including, without limitation, voting rights), and such
qualifications, limitations or restrictions, as VCCP's Board of Directors may
hereafter prescribe. After all issuances of New Common Stock under the Plan,
25,304,000 shares of New Common Stock will be outstanding and no shares of
VCCP's preferred stock will be outstanding.
10.4 Amendment of Debtors' Corporate Charters
As required by Sec.1123(a)(6) of the Bankruptcy Code, the Debtors' charters, by
laws and certificates of incorporation will be amended as of the Effective Date,
to the extent necessary to reflect the termination and consolidation of the
Vertex corporate structure into and by VTX and to recognize the name and
identity of the Reorganized Debtor, subject to further amendment of the charters
as permitted by applicable law.
10.5 Issuance of New Common Stock
As of the Effective Date, there shall be authorized for issuance by the
Reorganized Debtor, 40 million shares of New Common Stock. The Reorganized
Debtor shall issue: (a) 22,773,600 shares of New Common Stock to TW as
designated on Article IV of the Plan; and (b) 2,530,400 shares of New Common
Stock to the holders of Common Stock of VTX. On the Effective Date, or as soon
as thereafter as is practicable, the Reorganized Debtor shall execute all
documents required, and shall have executed, or cause, to have been executed on
its behalf, all documents required, contemplated or necessary for implementation
of the provisions of this Plan, including any and all such documents required
for registration of the New Common Stock not subject to the exemption provisions
of Sec.1145 of the Bankruptcy Code. On the Effective Date, each of such
documents, agreements and instruments shall be deemed to become effective
simultaneously. Pursuant to Sec.1145(a)(1) and (2) of the Bankruptcy Code, the
New Common Stock actually issued to holders of Interest Holders under this Plan
in exchange for such Preferred Stock or Common Stock, shall be exempt from any
and all federal, state or local laws requiring registration of a security.
10.6 Discharge
Except as otherwise provided in the Plan or Confirmation Order, the issuance of
a Confirmation Order and the occurrence of the Effective Date, shall operate as
a discharge, pursuant to Sec.1141(d)(1) of the Bankruptcy Code, effective as of
the Effective Date, of any and all debts (a such term is defined in Sec.101 of
the Bankruptcy Code) against the Debtors that arose at any time before the
Effective Date, including, but not limited to, all principal and interest,
whether accrued before, on, or after the Filing Date. On the Effective Date, as
to every discharged debt and Claim, the Claimant that held such debt or Claim
shall be permanently precluded from asserting against the Debtors, or against
the Debtors' assets or properties, any other or further Claim based upon any
document, instrument or act, omission, transaction or other activity of any
kind or nature that occurred prior to the Effective Date. Without limiting the
generality of the foregoing, on the Effective Date, the Debtors shall be
discharged from any debt that arose before the Effective Date, and any debt of a
kind specified in Sec's.502(g), 502(h) or 502(i) of the Bankruptcy Code, to the
full extent permitted by Sec.1141(d)(1)(A) of the Bankruptcy Code. Except as
otherwise specifically provided herein, nothing in this Plan shall be deemed to
waive, limit or restrict in any way the discharge granted upon confirmation of
the Plan pursuant to Sec.1141 of the Bankruptcy Code.
10.7 Injunction
Effective on the Confirmation Date, all Persons who have held, hold or may hold
Claims or Interests are enjoined from taking any of the following actions
against or affecting the Debtors, the Debtors' Representatives, the assets of
the Debtors or the assets of the Debtors with respect to such Claims or
Interests (other than actions brought to enforce any rights or obligations under
the Plan or appeals, if any, from the Confirmation Order): (i) commencing,
conducting or continuing in any manner, directly or indirectly, any suit,
action or other proceeding of any kind against the Debtors, the Debtors'
Representatives or the assets of the Debtors' or the Debtors Representatives or
any direct or indirect successor in interest to the Debtors, or any assets of
any such transferee or successor; (ii) enforcing, levying, attaching, collecting
or otherwise recovering by any manner or means whether directly or indirectly
any judgment, award, decree or order against the Debtors or the Debtors'
Representatives, or the assets of the Debtors or the Debtors' Representative or
any direct or indirect successor in interest to the Debtors, or any assets of
such transferee or successor; (iii) creating, perfecting or otherwise enforcing
in any manner, directly or indirectly, any encumbrance of any kind against the
Debtors or the Debtors' Representatives or the assets of the Debtors or the
Debtors' Representatives, or any direct or indirect successor in interest to
the Debtors, or any assets of any such transferee or successor other than as
contemplated by the Plan; (iv) asserting any set-off, right of subrogation or
recoupment of any kind directly or indirectly against any obligation due the
Debtors or the Debtors' Representatives or the assets of the Debtors or Debtors'
Representatives, or any direct or indirect transferee of any assets of, or
successor in interest to, the Debtors; and (v) proceeding in any manner in any
place whatsoever that does not conform to or comply with the provisions of the
Plan.
ARTICLE XI
CREDITORS' COMMITTEE
11.1 Composition of Creditors' Committee
From and after the Effective Date and until such date as all Distributions are
made on account of Allowed Unsecured Claims as required by the Plan, the
Creditors' Committee shall be composed of the members appointed by the Office of
the United States Trustee for the Eastern District of New York.
11.2 Continued Existence of Creditors' Committee
The Creditors' Committee shall remain in existence solely for the purposes of
monitoring all deferred Distributions to be made pursuant to Article IV of the
Plan. The Professionals currently retained by the Creditors' Committee shall
continue to represent the Creditors' Committee.
11.3 Compensation of Creditors' Committee's Professionals
The Creditors' Committee's Professionals shall provide invoices to the
Reorganized Debtor for the costs of the services provided to the Creditors'
Committee, which invoices shall not exceed the sum of $1,000.00 per annum.
11.4 Replacement of Members
In the event of the death or resignation of any person representing a member of
the Creditors' Committee, the creditor whom or which such person represented may
substitute a successor in his or her place. In the event that such member shall
fail to designate a successor within thirty (30) days after such vacancy shall
have occurred, the remaining members of the Creditors' Committee shall have the
right to designate a successor from among the holders of Allowed Unsecured
Claims. In the event that the Creditors' Committee is notified in writing that
any person representing a member of the Creditors' Committee is no longer
associated with the member by whom or which he or she was designated, such
member of the Creditors' Committee shall be deemed to have resigned from the
Creditors' Committee, and the vacancy may be filled in the manner set forth
above.
11.5 Resignation of Members; Vacancies
If a Creditors' Committee member assigns its Claim or releases the Debtors from
payment of the balance of its Claim, such act shall constitute a resignation
from the Creditors' Committee. Likewise, if a Creditors' Committee member
acquires the Claim held by another claimant other than in the ordinary course of
its business or by merger or consolidation with such claimant, such act shall
constitute a resignation from the Creditors' Committee. Until a vacancy on the
Creditors' Committee is filled, the Creditors' Committee shall function in its
reduced number. In the event of the death or resignation of the chairperson of
the Creditors' Committee, its successor shall be elected by the remaining
members of the Creditors' Committee from their membership.
11.6 Quorum; Meetings; Proxy
A majority of the Creditors' Committee shall constitute a quorum. Meetings of
the Creditors' Committee shall be called by the chairperson of the Creditors'
Committee or its attorneys, on such notice and in such manner as the Creditors'
Committee may deem advisable. The Creditors' Committee shall function by
decisions made by a majority of the Creditors' Committee members in attendance
at any meeting. Any member of the Creditors' Committee may designate a proxy
for all such meetings.
11.7 Actions of Creditors' Committee
The Creditors' Committee shall have the right to: (i) extend the time of any
payment or distribution provided for in the Plan; and (ii) waive any of the
covenants set forth in the Plan. Notwithstanding anything to the contrary
contained herein, the Creditors' Committee may refuse or abstain from exercising
any power or right granted it by the provisions of this Article, and defer
such powers or rights to the holders of outstanding and unpaid Allowed Unsecured
Claims and act in accordance with the vote of the majority in number of such
holders.
11.8 Liability
Neither the Creditors' Committee nor any member thereof, nor its Professionals,
nor its agents shall be liable to the Debtor, to any Creditor or to any person
for an error or erroneous judgment or any act or omission other than willful
misconduct, gross negligence or fraud. Anything done or omitted to be done by
the Creditors' Committee or any agent, in reliance upon the opinion of the
Creditors' Committee attorneys, shall be sufficient justification for the same.
11.9 Consent of Creditors' Committee
Whenever a written consent by the Creditors' Committee is required, a written
consent of the chairperson of the Creditors' Committee or of counsel to the
Creditors' Committee shall be deemed to constitute such consent.
11.10 Compensation of Members
The individual members of the Creditors' Committee shall serve without
compensation after confirmation of the Plan.
11.11 Retention of Professionals
The Creditors' Committee shall have the power and authority to retain counsel,
accountants and other agents and to direct counsel to act on its behalf instead
of the Creditors' Committee in any matter requiring the attention or action of
the Creditors' Committee, including, but not limited to, the pursuit,
compromise or settlement of adversary proceedings, objections to claims and
assertions of counterclaims and the enforcement of the provisions of the Plan.
11.12 Exercise of Rights
Any action taken by the Creditors' Committee in furtherance of any of the
provisions of the Plan or in connection with the exercise of any rights under
the Plan, may be taken by mail or telephone so long as all of the Creditors'
Committee are notified in advance of the proposed action and a majority thereof
has approved such action.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Filing Of Objections to Claims Within 90 Days After Effective Date
Objections to Claims and Interests shall be made by the Debtors only and shall
be served upon each holder of the Claims and Interests to which objections are
made and filed with the Bankruptcy Court as soon as practicable, but in no event
later than ninety (90) days after the Effective Date. The Debtors shall
litigate to judgment, settle or withdraw objections to Disputed Claims and
Interests.
12.2 Claims Reserve
(a) Reserve for Disputed Claims
On the Effective Date, the Debtors shall establish a Claims Reserve and reserve
therein, for the account of each holder of a Disputed Claim, cash which would
otherwise be distributed to such holder on the Initial Distribution Date were
such Disputed Claim an Allowed Claim on the Initial Distribution Date; provided,
however, that to the extent the Bankruptcy Court shall determine that a good and
sufficient reserve for a Disputed Claim less than the full amount thereof (or in
the case of Disputed Claims which are Unsecured Claims the appropriate Pro Rata
portion of the lesser of $800,000.00 or 13.5% of the total amount of Unsecured
Claims) the Debtors shall reserve such lesser amount with respect to such
Disputed Claim. The property so reserved for the holder of such Disputed Claim
shall be distributed to such holder, only after and to the extent such Disputed
Claim becomes an Allowed Claim.
(b) Investment of Reserve Funds
All cash in the Claims Reserve may be invested in such interest bearing accounts
or obligations as the Reorganized Debtor may determine from time with due regard
for the need for liquidity to pay Subsequently Allowed Claims. The earnings on
such investments shall be first applied to reimburse the Reorganized Debtor for
costs and expenses incurred in connection with the maintenance of the Claims
Reserve and the making of Distributions subsequent to the Initial Distribution
Date. All earnings in excess of such costs and expenses (the "Net Interest")
shall be held in trust in the Claims Reserve and shall be distributed only in
the manner set forth below.
(c) Payments of Subsequently Allowed Claims
At such time as a Disputed Claim becomes a Subsequently Allowed Claim in whole
or in part by Final Order, the Distributions due on account of such Subsequently
Allowed Claim shall promptly be released from the Claims Reserve and delivered
to the holder of such Subsequently Allowed Claim together with the portion of
the Net Interest allocable to such Distributions.
(d) Return of funds in Claims Reserve to Debtors
The funds in the Claims Reserve allocable to the portion of such Disputed Claim
(including Net Interest) that is ultimately disallowed by Final Order shall be
returned to the Reorganized Debtor.
12.3 Unclaimed Distributions
(a) Deposit in Claim Reserve
Unclaimed Distributions shall be deposited in the Claims Reserve to be held in
trust for the benefit of the holders of Allowed Claims entitled thereto under
the terms of the Plan. For a period of one (1) year following the Effective
Date, unclaimed Distributions, including the net interest thereon, if any, shall
be held in the Claims Reserve solely for the benefit of the holders of Allowed
Claims which have failed to claim such Distributions. During such one-year
period following the Initial Distribution Date, unclaimed Distributions due the
holder of an Allowed Claim shall be released from the Claims Reserve and
delivered to such holder upon presentation of proper proof by such holder of its
entitlement thereto.
(b) Return of Unclaimed Distributions to Reorganized Debtor
At the end of one (1) year following the Initial Distribution Date, the holders
of Allowed Claims theretofore entitled to unclaimed Distributions shall cease to
be entitled thereto, and the unclaimed Distributions in the Claims Reserve shall
then be returned to the Reorganized Debtor.
12.4 Payments Made Within Ten (10) Days of Distribution Dates
Distributions to be made by the Reorganized Debtor on the Initial Distribution
Date and Periodic Distribution Dates pursuant to the Plan shall be deemed made
on the Initial Distribution Date or Periodic Distribution Date, as the case
may be, if made on the such date or as soon as practicable thereafter, but in
no event later than ten (10) days after such date, except as otherwise provided
for in the Plan, or as may be ordered by the Bankruptcy Court.
12.5 Method of Payment
Payments to be made by the Reorganized Debtor pursuant to the Plan shall be made
by check drawn on or by wire transfer from a domestic bank or savings and loan
association. The Reorganized Debtor shall not make any Distribution less than
$5.00 (five dollars) except on written request therefor, provided, however, that
if the aggregate Distributions to a holder of an Allowed Unsecured Claim exceed
$5.00, such aggregate amount shall be paid to the holder of such Allowed Claim.
12.6 Prepayment
The Reorganized Debtor shall have the right to prepay in whole or in part,
without the imposition of any penalty or other charge as a consequence of such
prepayment all or any portion of the Allowed Claims at any time.
12.7 Post-Confirmation Effect of Evidences of Claims or Interests
Except as otherwise provided in the Plan, effective upon the Effective Date, all
evidences of Claims or Interests shall represent only the right to participate
in the Distributions, if any, contemplated by the Plan.
12.8 Construction
The rules of construction set forth in Sec.102 of the Bankruptcy Code shall
apply to the construction of the Plan.
12.9 Time
In computing any period of time prescribed or allowed by this Plan, the day of
the act, event, or default from which the designated period of time begins to
run shall not be included. The last day of the period so computed shall be
included, unless it is not a Business Day or, when the act to be done is the
filing of a paper in court, a day on which weather or other conditions have
made the clerk's office inaccessible, in which event the period runs until the
end of the next day which is not one of the aforementioned days.
12.10 Governing Law
Except to the extent the Bankruptcy Code or Bankruptcy Rules are applicable, the
rights and obligations arising under this Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to the principles of conflicts of law thereof.
12.11 Headings
The headings of the Articles, paragraphs, and sections of this Plan are inserted
for convenience only and shall not affect the interpretation hereof.
12.12 Severability
Should the Bankruptcy Court determine, prior to the Confirmation Date, that any
provision in the Plan is either illegal on its face or illegal as applied to any
Claim or Interest, such provision shall be unenforceable either as to all
holders of Claims or Interests or as to the holder of such Claim or Interest as
to which the provision is illegal. Such a determination of unenforceability
shall in no way limit or affect the enforceability and operative effect of any
other provision of the Plan.
12.13 Notices
All notices, requests, elections or demand in connection with this Plan shall be
in writing and be mailed by registered or certified mail, return receipt
requested to:
VTX Electronics Corp.
920 Conklin Street
Farmingdale, New York 11735
Attn: Mr. Howard Griffith
With copies to:
Jaspan Schlesinger Silverman & Hoffman LLP
300 Garden City Plaza
Garden City, NY 11530
Attn: Salvatore LaMonica, Esq.
- -and-
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556
Attn: Scott Y. Stuart, Esq.
- -and-
Ruskin, Moscou, Evans & Faltischeck
170 Old Country Road
Mineola, New York 11501
Attn: Jeffrey Wurst, Esq.
12.14 Successors and Assigns
The rights, benefits and obligations of any Person named or referred to in this
Plan will be binding upon and will inure to the benefit of, the heir, executor,
administrator, representative, successor or assign of such Person.
ARTICLE XIII
RETENTION OF JURISDICTION
13.1 Retention of Exclusive Jurisdiction. The Bankruptcy Court shall retain and
have exclusive jurisdiction over the Reorganization Cases for the purposes set
forth in Sec.1127(b) of the Bankruptcy Code, including, but not limited to the
following purposes:
(a) Allowance of Claims and Equity Interests
To determine any and all objections to the allowance of Administrative Expense
Claims or Interests;
(b) Allowance of Compensation to Professionals
To determine any and all Fee Applications of Professionals for services rendered
prior to the Confirmation Date and any other fees and expenses authorized to be
paid or reimbursed under the Bankruptcy Code or the Plan;
(c) Resolution of Disputes
To determine all questions and disputes regarding title to the assets of the
Debtors, and the determination of all causes of action, preferences, fraudulent
or avoidable transfers, controversies, disputes or conflicts, whether or not
subject to action pending as of the Confirmation Date, between any of the
Debtors and other party;
(d) Correction of Errors
To correct any defect or omission or to reconcile any inconsistency in this Plan
or in the Confirmation Order, as may be necessary to carry out the purpose and
intent of this Plan;
(e) Enforcement of Plan
To enforce and interpret the terms and conditions of this Plan;
(f) Issuance of Necessary Orders
To enter such orders in aid of execution of the Plan as permitted by applicable
law, including orders for injunctive relief necessary to enforce the rights,
title, interests, and powers of the Reorganized Debtor and imposition of such
limitations to, restrictions on, or terms and conditions of such rights, title,
interests, and powers as the Bankruptcy Court may deem necessary; and
(g) Determination of Other Matters
To determine such other matters as may be set forth in the Confirmation Order or
which may arise in connection with the Plan or the Confirmation Order.
Dated: Farmingdale, New York
September 24, 1997
VTX Electronics Corp.
Debtor and Debtor-in-Possession
920 Conklin Street
Farmingdale, New York 11735
By: /s/ Ed Goodstein
Ed Goodstein, Director
Vertex Technologies, Inc.
Debtor and Debtor-in-Possession
920 Conklin Street
Farmingdale, New York 11735
By: /s/ Ed Goodstein
Ed Goodstein, Director
Dated: Garden City, New York
September 24, 1997
Jaspan Schlesinger Silverman & Hoffman LLP
Attorneys for the Debtors and
Debtors-in-possession
By: /s/ Salvatore LaMonica
Salvatore LaMonica (SL #2148)
A Member of the Firm
300 Garden City Plaza
Garden City, New York 11530
(516) 746-8000
D#72362v2
F#28679
Jaspan Schlesinger Silverman & Hoffman LLP
300 Garden City Plaza
Garden City, New York 11530
(516) 746-8000
Salvatore LaMonica, Esq. (SL #2148)
Andrew S. Muller, Esq. (ASM #6168)
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
AT WESTBURY
----------------------------------------------------x
In re:
Chapter 11
VERTEX TECHNOLOGIES, INC. and Case Nos. 897-80197-478
VTX ELECTRONICS CORP., 897-80198-478
Debtors.
----------------------------------------------------x
DEBTORS' SECOND AMENDED JOINT DISCLOSURE STATEMENT,
PURSUANT TO Sec.1125 OF THE BANKRUPTCY CODE,
REGARDING DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION
DATED SEPTEMBER 24, 1997
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT AUTHORIZED BY
THE BANKRUPTCY COURT TO BE USED IN CONNECTION WITH THE SOLICITATION
OF VOTES TO ACCEPT OR REJECT THE SECOND AMENDED JOINT PLAN OF
REORGANIZATION PROPOSED BY THE DEBTORS (THE "PLAN"). NO OTHER
REPRESENTATIONS CONCERNING THE DEBTORS, THEIR BUSINESS OPERATIONS,
THE VALUE OF THEIR ASSETS OR THE VALUE OF ANY SECURITIES TO BE ISSUED
OR BENEFITS OFFERED PURSUANT TO THE PLAN HAS BEEN AUTHORIZED BY THE
DEBTORS.
THIS IS A SOLICITATION FOR ACCEPTANCE OR REJECTION OF THE PLAN.
THIS DISCLOSURE STATEMENT HAS BEEN SUBMITTED TO THE BANKRUPTCY
COURT AND HAS BEEN APPROVED BY THE BANKRUPTCY COURT.
THE APPROVAL OF THE DISCLOSURE STATEMENT MEANS THAT THE
BANKRUPTCY COURT HAS FOUND THAT THE DISCLOSURE STATEMENT
CONTAINS ADEQUATE INFORMATION TO PERMIT CREDITORS AND
STOCKHOLDERS OF THE DEBTORS TO MAKE A REASONABLY INFORMED DECISION IN
EXERCISING THEIR RIGHT TO VOTE UPON THE PLAN. BANKRUPTCY
COURT APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE A
RECOMMENDATION ON THE MERITS OF THE PLAN, WHICH IS ANNEXED HERETO
AS EXHIBIT "A" AND DESCRIBED HEREIN.
ANY REPRESENTATIONS OR INDUCEMENTS MADE TO OBTAIN YOUR
ACCEPTANCE WHICH ARE OTHER THAN, OR INCONSISTENT WITH, THE
INFORMATION CONTAINED HEREIN SHOULD NOT BE RELIED UPON BY YOU IN
ARRIVING AT YOUR DECISION WHETHER TO APPROVE THE PLAN.
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 HEREIN. THERE HAS BEEN NO INDEPENDENT AUDIT
OF THE FINANCIAL INFORMATION CONTAINED IN THE DISCLOSURE STATEMENT
EXCEPT AS EXPRESSLY INDICATED HEREIN. THIS DOCUMENT WAS COMPILED
FROM INFORMATION OBTAINED BY THE DEBTORS FROM NUMEROUS SOURCES
BELIEVED TO BE ACCURATE TO THE BEST OF THE DEBTORS' KNOWLEDGE,
INFORMATION AND BELIEF.
THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE
PLAN. ALL CREDITORS, STOCKHOLDERS AND OTHER INTERESTED PARTIES ARE
ENCOURAGED TO REVIEW THE FULL TEXT OF THE PLAN AND TO READ
CAREFULLY THE ENTIRE DISCLOSURE STATEMENT, INCLUDING ALL EXHIBITS,
BEFORE DECIDING TO VOTE EITHER TO ACCEPT OR REJECT THE PLAN.
THE DEBTORS AND THE UNSECURED CREDITORS' COMMITTEE
BELIEVE CONFIRMATION OF THE PLAN IS IN THE BEST INTERESTS OF THE
DEBTORS, CREDITORS AND STOCKHOLDERS AND RECOMMEND THAT ALL
CREDITORS AND STOCKHOLDERS ENTITLED TO VOTE, VOTE TO ACCEPT THE
PLAN.
TABLE OF CONTENTS
I. INTRODUCTION.......................................................1
A. Background....................................................1
B. The Plan Confirmation
Process.................................................................2
II. THE PRE-PETITION BUSINESS OF THE
DEBTORS.................................................................5
A. General Information Regarding the
Debtors.................................................................5
B. Description of
Operations..............................................................7
1. Products and
Services................................................................7
2. Company
Locations...............................................................7
3. Sales and
Marketing...............................................................8
4. Pre-Petition
Capitalization..........................................................10
5. Subsequent Pre-Petition
Investments.............................................................11
6. Sale of Headquarters at Farmingdale, New
York....................................................................12
III. EVENTS LEADING TO THE FILING OF THE CHAPTER 11
PETITION................................................................13
IV. THE CHAPTER 11
PROCEEDINGS.............................................................15
A. Appointment of the Creditors'
Committee...............................................................15
B. Debtor-in-Possession
Financing...............................................................16
C. Sale of Distribution
Business................................................................17
D. Exit
Financing...............................................................19
E. Miscellaneous Legal
Proceedings.............................................................19
1. Assumption and Rejection of Unexpired Leases and
Executory
Contracts...............................................................19
2. The Setting of the Bar Date and Notice
Thereof.................................................................20
V. SUBSTANTIVE
CONSOLIDATION...........................................................21
VI. THE JOINT PLAN OF
REORGANIZATION..........................................................23
A. Explanation of Chapter
11......................................................................23
B. Claims and
Interests...............................................................24
C. Introduction and
Summary.................................................................25
D. Classes of Claims and
Interests...............................................................25
1. Class 1-Administrative
Expenses............................................25
2. Class 2-Priority
Claims..................................................................26
3. Class 3-Tax Claims
........................................................................27
4. Class 4-Secured Claims of
Congress................................................................27
5. Class 5-Debenture
Claims..................................................................27
6. Class 6-Administrative Convenience Claims................27
7. Class 7-Unsecured
Claims..................................................................28
8. Class 8-Preferred Stock
Interests...............................................................28
9. Class 9-Common Stock
Interests...............................................................28
10. Class 10-Warrant
Claims..................................................................28
E. Treatment of Allowed Claims and
Interests...............................................................29
1. Class 1-Administrative
Expenses............................................29
2. Class 2-Priority
Claims..................................................................29
3. Class 3-Tax Claims
........................................................................29
4. Class 4-Secured Claims of
Congress................................................................30
5. Class 5-Debenture
Claims..................................................................30
6. Class 6-Administrative Convenience Claims................30
7. Class 7-Unsecured
Claims..................................................................31
8. Class 8-Preferred Stock
Interests...............................................................32
9. Class 9-Common Stock
Interests...............................................................32
10. Class 10-Warrant
Claims..................................................................32
F. Miscellaneous Plan Provisions
........................................................................32
1. Assumption of Executory
Contracts...............................................................32
2. Discharge of
Debtors.................................................................33
3. Title to Assets and Discharge of
Liabilities.............................................................33
4. Amendment of Debtors' Corporate Charters, By-Laws and
Certificate of
Incorporation...........................................................34
VII. IMPLEMENTATION OF THE
PLAN....................................................................35
VIII. CONDITIONS PRECEDENT TO THE EFFECTIVE
DATE....................................................................36
IX. DIRECTORS AND MANAGEMENT OF REORGANIZED
DEBTOR..................................................................37
A. Directors and
Officers......................................................37
X. EVALUATION OF FUTURE
OPERATIONS..............................................................38
XI. ALTERNATIVES TO THE PLAN AND OTHER
CONSIDERATIONS..........................................................39
A. Alternatives to the
Plan....................................................................39
1. Alternative
Plans...................................................................39
2. Liquidation as an
Alternative.............................................................39
B. Best Interests of Unsecured Creditors and
Stockholders............................................................40
C. Avoidance
Claims..................................................................42
1. Payments of Antecedent Debts Within 90 Days of the Filing Date....43
XII. VOTING THE
PLAN....................................................................44
A. Creditors and Stockholders Entitled to
Vote....................................................................44
B. General Voting
Instructions............................................................44
C. Soliciting for
Votes...................................................................46
D. Acceptance....................................................47
E. Non-Acceptance and
"Cramdown"..............................................................47
F. Confirmation of
Plan....................................................................49
G. Confirmation
Hearing.................................................................50
XI. CONCLUSION.........................................................51
EXHIBIT "A" -- Joint Plan of Reorganization
EXHIBIT "B" -- Order Approving Disclosure Statement
EXHIBIT "C" -- Financial Projections
EXHIBIT "D" -- Estimated Liquidation Analysis; and
EXHIBIT "E" -- Quarterly Report on Form 10-Q for the Quarter ending
March 31, 1997.
I.
INTRODUCTION
A. Background
VTX Electronics Corp. ("VTX") and Vertex Technologies, Inc. ("Vertex")
(collectively, the "Debtors") submit this second amended disclosure statement
(the "Disclosure Statement"), pursuant to Sec.1125 of Title 11 of the United
States Code (the "Bankruptcy Code"), to creditors of the Debtors (the
"Creditors") and holders of equity securities of the Debtors (the "Equity
Security Holders") in connection with: (i) the solicitation of acceptances of
the Second Amended Joint Plan of Reorganization, dated September 24, 1997,
jointly proposed and filed by the Debtors (the "Plan") with the United States
Bankruptcy Court for the Eastern District of New York (the "Bankruptcy Court");
and (ii) the hearing on confirmation of the Plan scheduled for October 28,1997
at 10:00 a.m. Unless otherwise defined herein, all capitalized terms contained
herein will have the meanings ascribed to them in the Plan.
Attached as Exhibits to and accompanying this Disclosure Statement are copies
of the following:
(i) Exhibit "A"- The Plan;
(ii) Exhibit "B"- Order of the Bankruptcy Court dated September 29,
1997, approving this Disclosure Statement;
(iii) Exhibit "C"- Financial Projections;
(iv) Exhibit "D"- Estimated Liquidation Analysis; and
(v) Exhibit "E"- Quarterly Report on Form 10-Q for the Quarter ending
March 31, 1997.
BALLOTS ARE BEING PROVIDED ONLY TO HOLDERS OF ALLOWED
CLAIMS IN CLASS 5, CLASS 6 AND CLASS 7 AND INTERESTS IN CLASS 8 AND
CLASS 9 BECAUSE THEY ARE THE ONLY CLAIMS OR INTERESTS WHICH
MAY VOTE TO ACCEPT OR REJECT THE PLAN.<PAGE>
B. The Plan Confirmation Process
On September 29, 1997, after notice and a hearing, the Bankruptcy Court
approved this Disclosure Statement as containing information of a kind and in
sufficient detail which is adequate to enable a hypothetical,reasonable investor
typical of the Class 5, Class 6 or Class 7 Creditor and Class 8 or Class 9
Equity Security Holder to make an informed judgment whether to accept or reject
the Plan. Approval of this Disclosure Statement does not, however, constitute a
determination by the Bankruptcy Court as to the fairness or merits of the Plan.
Each Creditor and Equity Security Holder should read this Disclosure
Statement and the
Plan in their entirety before voting to accept or reject the Plan.
Pursuant to various provisions of the Bankruptcy Code, only classes of
claims or equity interests which are "impaired" under the terms and provisions
of a plan of reorganization are entitled to vote to accept or reject such plan.
Pursuant to the Plan, only Creditors in Class 5, Class 6 and Class 7 and Equity
Security Holders in Class 8 and Class 9 are impaired and entitled to vote. Other
Creditors of the Debtors are not entitled to vote to accept or reject the Plan
either because they are not impaired or because they will not receive a
distribution under the Plan and are deemed to have rejected the Plan. See
Article XII. below -- Voting on the Plan.
After carefully reviewing this Disclosure Statement, including the Exhibits,
each Creditor and Equity Security Holder entitled to vote should vote on the
enclosed ballot and return the ballot to counsel for the Creditors' Committee so
that it is received by 5:00 p.m. Eastern Standard
Time on October 23, 1997. Please vote and return your ballot to:
Counsel for the Committee:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556
Attn: Scott Y. Stuart, Esq.
Telephone: (516) 357-3000
Facsimile: (516) 357-3333
IMPORTANT NOTE TO STOCKHOLDERS: ONLY REGISTERED HOLDERS
OF VTX STOCK LISTED IN THE STOCK TRANSFER AGENT'S OFFICIAL RECORDS AS
OF SEPTEMBER 29, 1997, THE DATE THE DISCLOSURE STATEMENT IS APPROVED
BY THE BANKRUPTCY COURT (THE "RECORD DATE"), MAY CAST BALLOTS. IF
YOUR VTX STOCK IS BENEFICIALLY OWNED BY YOU BUT IS HELD IN "STREET
NAME" (I.E., REGISTERED IN THE NAME OF YOUR BROKER) OR IN THE NAME OF
ANOTHER THIRD PARTY, THEN YOU MUST VOTE THROUGH THE REGISTERED
HOLDER OF YOUR STOCK WHO WILL CAST A BALLOT IN ACCORDANCE WITH
YOUR WRITTEN INSTRUCTIONS. IF THE REGISTERED HOLDER PROVIDES YOU
WITH A BALLOT, THE BALLOT MAY SERVE AS THOSE WRITTEN INSTRUCTIONS,
BUT ONLY A BALLOT SIGNED BY THE REGISTERED HOLDER MAY BE CAST.
VTX HAS ATTEMPTED TO PROVIDE THOSE REGISTERED HOLDERS KNOWN
TO VTX TO HOLD STOCK FOR THE BENEFICIAL INTERESTS OF THEIR CUSTOMERS
OR OTHER THIRD PARTIES WITH INSTRUCTIONS CONCERNING VOTING ON THE
PLAN. VTX IS NOT RESPONSIBLE FOR THE FAILURE OF A BROKER OR OTHER
REGISTERED HOLDER TO NOTIFY ITS CUSTOMER OR THE BENEFICIAL OWNERS
OF VTX STOCK OF THEIR RIGHT TO VOTE THROUGH THEIR RESPECTIVE
REGISTERED HOLDERS.
If you are an impaired Creditor or Equity Security Holder entitled to vote
(i.e., a member of Classes 5, 6, 7, 8 or 9) and did not receive a ballot,
received a damaged ballot, or lost your ballot, you may contact counsel for the
Debtors between 10:00 a.m. and 5:00 p.m. Eastern
Standard Time.
THE DEBTORS, AS WELL AS THE OFFICIAL UNSECURED CREDITORS'
COMMITTEE, BELIEVE THAT ACCEPTANCE OF THE PLAN IS IN THE BEST
INTERESTS OF CREDITORS AND EQUITY SECURITY HOLDERS AND URGE THAT
CREDITORS AND EQUITY SECURITY HOLDERS VOTE TO ACCEPT THE PLAN.
TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED BY COUNSEL FOR
THE CREDITORS' COMMITTEE BY 5:00 P.M. EASTERN STANDARD TIME ON
OCTOBER 23, 1997. ANY BALLOTS RECEIVED WHICH ARE SIGNED BUT DO NOT
INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN WILL BE
DEEMED TO CONSTITUTE AN ACCEPTANCE OF THE PLAN.
Pursuant to Sec.1128 of the Bankruptcy Code,the Bankruptcy Court has scheduled
a hearing to consider the confirmation of the Plan (the "Confirmation Hearing")
on October 28, 1997, at 10:00 a.m. in the courtroom of the Honorable Dorothy
Eisenberg, United States Bankruptcy Judge,at the United States Bankruptcy Court,
1635 Privado Road, Westbury, New York 11590. The Bankruptcy Court has directed
that objections, if any, to confirmation of the Plan be served and filed with
the Bankruptcy Court on or before October 24, 1997 by 12:00 p.m., in the manner
described in Section XII.G. below entitled "Voting on The Plan -- Confirmation
Hearing". The Confirmation Hearing may be adjourned from time to time by the
Bankruptcy Court without further notice except for the announcement of the
adjourned hearing date made at the Confirmation Hearing or at any subsequent
adjourned Confirmation Hearing.
II.
THE PRE-PETITION BUSINESS OF THE DEBTORS
A. General Information Regarding the Debtors
VTX is a Delaware corporation incorporated on or about July 30, 1986. VTX
has authorized and issued 40,000,000 shares of common stock, of which 12,652,000
shares are publicly traded on the OTC Bulletin Board. Vertex is a New York
corporation incorporated on October 28, 1970, and is a wholly owned subsidiary
of VTX. VTX, through Vertex, is a multi-regional value-added specialty
distributor of electronic components and cable, and a manufacturer of custom-
made electronic cable assemblies used in providing connectivity solutions which
include system integration for customers operating a wide range of data
communications. The Debtors add value to their goods and services by providing
connectivity solutions for customers. This includes linking or connecting
standard or proprietary electronic devices and peripheral components from
different manufacturers to provide solutions for various customer requirements
and system integration. These may include sales of passive or active electronic
components or the manufacture of custom-made electronic cable assemblies which
the Debtors design specifically to meet individual customer's unique and complex
connectivity requirements.
Management believes that the Debtors' technical ability for providing
connectivity solutions between the data system capabilities of many
manufacturers and the specific connectivity needs of their customers, along with
their reputation for providing the design and manufacture of custom-made
electronic cable assemblies that are subject to 100% computerized quality
control testing, will be the principal factors on which the Debtors will plan
their future growth.
The Debtors expect internal growth to be enhanced by what the Debtors
perceive to be three continuing trends: (i) the increasing demand for data
communications to provide timely information in the office environment and
factory floor that requires connectivity solutions; (ii) the growing number of
alternatives available to organizations of all sizes in all types of industries
to increase productivity through improved or upgraded computer data
communications; and (iii) the increasing number of manufacturers of passive and
active components preferring distributors, such as the Debtors, which are
capable of offering complete connectivity solutions to the end user.
The Debtors' executive offices are located at 920 Conklin Street,
Farmingdale, New York 11735, and their telephone number is (516) 293-1610.
Unless the context requires otherwise, all references to the Debtors means VTX
and Vertex, its subsidiary. VTX is presently subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended(the "1934 Act"),
and regularly files reports with the United States Securities and Exchange
Commission (the "SEC"). A detailed description of the Debtors' present business
is set forth in VTX's Annual Report on Form 10-K for the fiscal year ended June
30, 1996. The latest Quarterly Report on Form 10-Q was filed for the quarter
ending March 31, 1997. A copy of the March 31, 1997 Quarterly Report on Form
10-Q is annexed hereto as Exhibit "E". If the Plan is confirmed, VTX intends to
continue to file all reports as required. Publicly filed reports and forms
which contain information concerning VTX can be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the SEC.
B. Description of Operations
1. Products and Services
On the Filing Date, Vertex's products and services consisted principally of
the distribution of a broad range of passive and active electronic components
(the "Distribution Business") and the design and manufacture of custom-made
electronic cable assemblies (the "Manufacturing Business") used as solutions for
connectivity requirements in data communications. Typically, passive components
carry data signals without any processing or filtering of the data (e.g.,
electronic connectors, electronic wire and cable, cabinets and racks, and patch
panels) while active components generate, regenerate, or filter data signals
(e.g., hubs, bridges, routers, gateways, and modems). Vertex's principal product
lines focused on connectivity solutions for data communications.
Vertex also designs and manufacturers custom-made cable assemblies tailored
to a customer's requirements and offers project management and installation of
structured wiring and network design for data communications. Vertex employs
design, engineering, and technical support personnel to develop alternative
connectivity solutions including system integration and manufacture of custom-
made electronic cable assemblies.
2. Company Locations
On the Filing Date, the Debtors operated out of 8 locations. During the
pendency of the Chapter 11 case, the Debtors closed 3 of their locations and
assigned their leases for 2 other locations to TW as part of the sale of the
Distribution Business, pursuant to an Order of the Bankruptcy Court dated June
17, 1997. A detailed explanation of the Debtors' sale of the Distribution
Business to TW is found in Section IV.C. below entitled "The Chapter 11
Proceedings--Sale of Distribution Business." Thus, currently the Debtors only
operate out of three locations which are: Farmingdale, New York; San Jose,
California; and Elkridge, Maryland, all of which are leased.
3. Sales and Marketing
The products manufactured and previously distributed by the Debtors for
connectivity solutions are offered to: (a) "end-users", professionals who
install and service data communications; and (b) original equipment
manufacturers.
In order to effectively meet each customer's needs, the Debtors' sales
force first gains an understanding of the customer's system connectivity
requirements before recommending one or more possible solutions. The variety of
products offered by the Debtors often allows the salesperson to add value by
providing alternative, or more complete, solutions to customers' requirements,
thereby gaining add-on sales. Where necessary, technical support personnel
assist salespeople in recommending the most appropriate solution. The Debtors
generally do not participate in the design of computer applications but rather
participate in the design and implementation of the connectivity solutions
required for data communications, including system integration.
The field sales force is supported by inside sales personnel who handle
incoming customer calls, perform sales estimates, provide rapid responses to
customer questions and assist in sales prospecting. Sales leads are typically
generated by ongoing interaction with existing customers, sales calls to
companies not currently customers, referrals from suppliers, and by advertising
and promotional efforts. The Debtors' advertising and promotion program
consists of: (i) exhibits at national and regional trade shows; (ii) company
sponsored seminars and product demonstrations in regional areas; (iii)
advertisements in trade publications; and (iv) direct mail campaigns to targeted
market niches.
The Debtors have focused their sales and marketing strategies to
concentrate their efforts in certain market niches in which they only distribute
the products of preferred suppliers. These products represent passive
components such as category 5 wiring products, fiber optics, wireless
communication products, and active components such as bridges, hubs, modems and
routers, included in the design and implementation of structured wiring
solutions for network applications. The majority of the products distributed by
the Debtors are readily adaptable to various end-users in all industries.
As of July 18, 1997, there are 115 full-time employees. Of these, 14 are
sales and marketing personnel; 4 are engineering personnel; 18 are purchasing,
warehouse and cutting personnel; 58 are cable assembly manufacturing personnel;
10 are quality assessment and control personnel; and 11 are accounting, data
processing and other administrative personnel. Approximately 30 employees
working at the Farmingdale, New York facility are employed under a collective
bargaining agreement with the International Brotherhood of Electrical Workers,
Local Union No. 3. In addition to its employees, the Debtors use other workers
on a contract basis, as its needs require and the Debtors consider their
relations with their employees to be good.
4. Pre-Petition Capitalization
Under a Capitalization Agreement dated December 1, 1995 (the"Capitalization
Agreement"), VTX received a capital infusion of $2,475,000.00 from an
unaffiliated investor group (the "New Investors") in exchange for: (a)
Subordinated Debentures with a principal face amount of $1,237,500; (b) 12,375
shares Preferred Stock with a stated value of $100 per share; and (c) Warrants
to purchase 19.8 million shares of common stock of VTX. The Subordinated
Debentures are due and payable on June 19, 2001 and accrue interest at an annual
rate of 2% over the published prime rate of interest (10.25% at June 30, 1996),
payable quarterly over the life of the Subordinated Debentures. The
Subordinated Debentures, by there own terms, are secured by all the assets of
the Debtors, but are subordinated to the secured debt under the revolving asset-
based loan agreement with Congress Financial Corporation ("Congress"), another
institutional investor.
The Preferred Stock is redeemable on December 1, 2000, for $1,237,500 in
cash or Common Stock, based upon the lower of 70% of the fair market value of
the underlying Common Stock on such date and $.25 per share, at the option of
VTX. Holders of Preferred Stock are entitled to receive dividends quarterly at
an annual fixed rate of 12%, the effect of which is cumulative to the extent VTX
does not make such quarterly payment on the prescribed basis. On or after June
1, 1996 and through December 1, 2000, each share of Preferred Stock may be
converted into Common Stock at a conversion rate of $.25 per share (400 common
shares for each preferred share converted). Each share of Preferred Stock
contains 1,500 votes on all matters being voted on by the shareholders, other
than the election of directors. Additionally, the holders of the Preferred
Stock, voting as a class, shall in each year elect seventy-five (75%) percent of
the members of the Board of Directors of VTX. Effective December 1, 1995, and
pursuant to the Capitalization Agreement, the then existing Board of Directors
resigned in favor of a new Board of Directors.
Warrants to purchase 4.95 million shares of Common Stock of VTX issued
pursuant to the Capitalization Agreement are currently exercisable from June 1,
1996 through December 1, 2000 at $.125 per share. Warrants to purchase 14.85
million shares of Common Stock of VTX issued pursuant to the Capitalization
Agreement are currently exercisable from April 1, 1999 through March 21, 2009 at
$.125 per share.
5. Subsequent Pre-Petition Investments
Notwithstanding the previous infusion of capital, the Debtors required
additional capital investments to fund operations. Thus, on March 21, 1996 and
June 19, 1996, VTX obtained an additional $1,237,500 and $1,290,000,
respectively, from the New Investors and certain additional individual and
institutional investors, in exchange for additional Subordinated Debentures in
the principal face amounts of $1,237,500 and $1,290,000, respectively, and
Warrants to purchase 24,750,000 and 25,800,000 shares of Common Stock of VTX,
respectively.
The Subordinated Debentures are substantially identical and pari passu with
the Subordinated Debentures issued under the Capitalization Agreement.
Accordingly, these Subordinated Debentures are also due on June 19, 2001 and
accrue interest at an annual rate of 2% over the published prime rate of
interest, payable quarterly over the life of the Subordinated Debentures.
Similarly, these Subordinated Debentures are secured by all the assets of the
Debtors, but are subordinated to the secured debt under the revolving asset-
based loan with Congress.
Warrants to purchase 50,550,000 shares of Common Stock of VTX are
exercisable from April 1, 1999 through March 31, 2009 at $.125 per share.
On the Filing Date, there were approximately 12,652,000 issued and
outstanding shares of Common Stock of VTX held by approximately 250 entities
and/or persons. VTX has never paid a cash dividend on its Common Stock.
Pursuant to the terms of its revolving credit facility with Congress, VTX is not
permitted to pay or declare any dividends or otherwise make any distribution of
capital.
6. Sale of Headquarters at Farmingdale, New York
On December 20, 1996,VTX sold its 45,000 square foot corporate headquarters
located in Farmingdale, New York to JFB Lithograph Company. Under the agreement,
the Debtors received gross cash proceeds of approximately $2,332,000 for the
sale of the property, and used those funds to satisfy the first and second
mortgages and a portion of the Subordinated Debentures which were secured by the
Farmingdale, New York property by virtue of a third mortgage. Specifically, at
the closing on the sale of the Farmingdale property, the sum of $1,160,000 was
paid to Sterling Commercial Capital, Inc., the holder of the first mortgage, and
the sum of $226,000 was paid to Fundex Capital Corporation, the holder of the
second mortgage, and the sum of $750,000 was paid pro rata to retire a portion
of the secured Subordinated Debentures which constituted a third mortgage on the
property. Finally, the sum of $196,000 was paid for various professional fees
and closing costs including legal fees and broker's commissions. The Debtors
recognized a loss from the sale of the Farmingdale location of approximately
$122,000.00.
III.
EVENTS LEADING TO THE FILING OF THE CHAPTER 11 PETITIONS
Asset Sale to Elcan
On or about September, 1996, after suffering continued losses from
operations, it became very apparent that a sale or merger of the Debtors was
required to provide them with a larger platform in a highly competitive
marketplace.
On October 3, 1996, VTX signed a letter of intent to purchase the assets of
and effectively merge with Elcan Technologies, Inc. ("Elcan"), a privately owned
company principally owned by Mr. Scott Cannold based out of Rye, New York. The
transaction would have provided the Debtors with approximately $4,000,000 of
additional cash assets, primarily through Elcan's revolving line of credit with
its lending institution. The Debtors and Elcan were and continue to be direct
competitors in several significant markets.
The proposed deal with Elcan was memorialized in a letter of intent that
contemplated equal ownership with the existing investor group in VTX by issuing
two classes of debt and preferred stock to the shareholders of Elcan in exchange
for their assets, in addition to equal board representation between Elcan's
representatives and certain of the then existing board members. The letter of
intent provided for a reasonable time period for Elcan representatives to
complete their due diligence of the Debtors. Unfortunately, representatives of
Elcan unilaterally approached the Debtors' largest customer, Bloomberg Business
Wire ("Bloomberg"), even before finalizing and signing the letter of intent with
VTX. This ultimately led to Bloomberg's severe dissatisfaction with the Debtors
and resulted in significantly decreased sales to Bloomberg. Approximately 40
days after signing the letter of intent, Elcan representatives began "posturing"
their perspective of the Debtors and began demanding significant changes to the
original letter of intent including changes in ownership percentages, cash
requirements and vendor concession demands. Throughout these proposed changes,
Elcan's counsel had not provided either the Debtors or the Debtors' lending
institution with any revised "asset purchase agreements". On or about December
18, 1996, it became apparent to the Debtors that a deal with Elcan was not
achievable and a press announcement was made shortly thereafter. Subsequent
thereto, TW Corp., a competitor to both the Debtors and Elcan, expressed an
interest in acquiring the Debtors. After the failure of the Elcan deal, TW, an
affiliate of TW Corp., offered to purchase all the Subordinated Debentures,
Preferred Stock, and Warrants from the pre-petition investor group. This sale
would provide TW with control of the VTX's Board of Directors and management of
the Debtors. TW's intent was to ultimately own the Debtors. Thus,on December 1,
1996, TW closed on its purchase of the outstanding Subordinated Debentures,
Preferred Stock and Warrants held by the investor group.
At the time, the Debtors' liabilities were substantial and thus, TW's
acquisition of certain of the Debtors' assets had to be accomplished in a
bankruptcy reorganization. On January 10, 1997 (the "Filing Date"), VTX and
Vertex filed voluntary petitions for reorganizations under Chapter 11 of the
Bankruptcy Code and by Order of the Court dated January 10, 1997, their cases
were consolidated for procedural purposes only.
IV.
THE CHAPTER 11 PROCEEDINGS
A. Appointment of the Creditors' Committee
During the course of the Debtors' Chapter 11 cases, the United States Trustee
for the Eastern District of New York appointed, pursuant to Sec.1102 of the
Bankruptcy Code, an Official Committee of Unsecured Creditors (the "Creditors'
Committee") to represent the interests of Creditors of each of the Debtors. The
Creditors' Committee was appointed by designation of the United States Trustee
on January 23, 1997. The membership of the Creditors' Committee as of the date
of this Disclosure Statement is as follows:
Lucent Technologies AMP Products Corp.
283 King George Road P.O. Box 3608
Warren, NJ 07059 Harrisburg, PA 17105
Siecor Corporation Tech Data Corp.
489 Siecor Park Terrace 5301 Tech Data Drive
Hickory, NC 28603 Clearwater, FL 34620
Montrose Products Co. Times Microwave Systems
28 Sword Street 358 Hall Avenue
Auburn, MA 01501 Wallingford, CT 06492-5039
Ingram Micro Remittance Center
1759 Wehile Drive
Williamsville, NY 14221
The Creditors' Committee has retained Rivkin, Radler & Kremer, EAB Plaza,
Uniondale, New York 11556, (516) 357-3000, Attn: Scott Y. Stuart, Esq., as its
counsel and Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New
York 10036, (212) 596-7000, Attn: Mr. Richard Davis, as its accountants.
During the course of these cases, the Creditors' Committee and its
professionals have investigated the affairs of the Debtors and closely monitored
their operations so as to discharge their statutory responsibilities. The
Debtors have met with the Creditors' Committee and their professionals and have
regularly provided them with current financial information with respect to
the Debtors' ongoing operations.
The Creditors' Committee has reviewed the Plan and urges all Creditors and
Equity Security Holders entitled to vote, to vote to accept the Plan.
B. Debtor-in-Possession Financing
Prior to the Filing Date, the Debtors entered into a series of loan
agreements, modification agreements, security agreements, pledge agreements and
guarantees with Congress which provided the Debtors with an asset based
revolving loan facility in order to fund their operations (the "Congress Pre-
Petition Loan" as defined in the Plan). Pursuant to the Congress Pre-Petition
Loan, the Debtors were authorized to borrow funds from Congress based upon a
formula consisting of 80% of eligible accounts receivable and 40% of the cost of
Vertex's inventory. On the Filing Date, the Debtors owed the sum of
approximately $5.1 Million under the Congress Pre-Petition Loan.
As a result of the filing of the Debtors' petitions under Chapter 11 of the
Bankruptcy Code and in order to continue their operations, the Debtors moved for
and obtained Orders of the Bankruptcy Court dated February 21, 1997 and March
28, 1997, which authorized Congress to provide the Debtors with post-petition
loan financing on the same terms as the Congress Pre-Petition Loan (the "DIP
Financing" as defined in the Plan"). The DIP Financing is on a secured
and super-priority basis, pursuant to Sec.364(c) and (d) of the Bankruptcy Code.
Inasmuch as the Debtors were unable to obtain unsecured credit which would be
allowable as an Administrative Expense in the Reorganization Cases, the Debtors
agreed to grant to Congress, in exchange for the DIP Financing, senior security
interests in and liens on all of their assets, including accounts and notes
receivable, installment paper, inventory, fixed assets, general intangibles,
income tax refunds, patents, licenses and trademarks, subject only to any
existing pre-petition security interests in such collateral. Congress received
an administrative expense claim having priority in payment over all
Administrative Expense Claims against the Debtors of a kind set forth in
Sec.503(b), 507(a) and 507(b) of the Bankruptcy Code. The liens and priorities
granted to Congress were subject to the prior Administrative Expense Claims of
the attorneys and accountants for both the Debtors and Committee, up to
$150,000.00 in the aggregate.
The proceeds of the DIP Financing have been used as working capital for the
Debtors to fund the continued operation of their businesses. As of September 18,
1997, the DIP Financing loan balance was approximately $1,624,000.00. Congress
has lowered the loan advance rate from 80% to 75% on eligible accounts
receivables and maintained a 40% loan advance rate for certain eligible
inventory, but has only allowed the Debtors to borrow against 20% of certain
other slower moving inventory.
C. Sale of Distribution Business
Notwithstanding the Debtors' attempts to reduce their operating expenses,
during the pendency of the Chapter 11 case, the Debtors continued to suffer
substantial operating losses which were attributable primarily to the
distribution aspect of its business. Thus, the Debtors determined, in their
business judgment, that the immediate sale of the Debtors' Distribution Business
was necessary for a successful reorganization. Accordingly, the Debtors' moved,
pursuant to Sec.363 of the Bankruptcy Code,for the entry of an order authorizing
the sale of the Debtors' Distribution Business to TW. At the hearing, after an
opportunity for the tendering of higher and better offers, the Bankruptcy Court
authorized and approved the Debtors' motion. Thus, by Order of the Court dated
June 17, 1997 (the "Sale Order"), the Debtors were authorized to sell their
Distribution Business to TW.
Pursuant to the Sale Order, TW purchased $1.5 Million of the Debtors'
distribution inventory for a total purchase price of $1,237,500.00, representing
82.5% of the net book value of the inventory. TW also purchased the "Vertex
Technologies, Inc." name, together with the furniture, fixtures, and equipment
located at the Debtors' Marlboro, Massachusetts, Folcroft, Pennsylvania and
Torrance, California premises and retired $500,000.00 worth of the Subordinated
Debentures held by TW. Payments by TW for each installment of inventory will be
received by the Debtors on June 30, 1997, September 30, 1997, December 31, 1997,
and March 31, 1998. Pursuant to the terms of the Sale Order, the proceeds of
the sale of the inventory are to be paid to Congress in satisfaction of its
Secured Claims unless otherwise agreed to by the Debtors and Congress. The
installment from TW due June 30, 1997 was received by the Debtors and the
proceeds have been turned over to Congress.
In addition, as part of the asset sale to TW, the Debtors assumed and
assigned to TW all of the unexpired non-residential real property leases and
Executory Contracts for and related to the Marlboro, Massachusetts,and Torrance,
California locations. At the closing, TW cured any arrearages on account of
these real property leases and executory contracts. Thus, as previously stated,
the Debtor currently operates out of three locations: Farmingdale, New York,
Elkridge, Maryland and San Jose, California.
D. Exit Financing
Prior to the Debtors' having filed bankruptcy petitions and throughout the
reorganization period, the Debtors have maintained their credit facility with
Congress. However, in order to complete the reorganization process, the Debtors
have determined to seek alternative financing. In this regard, on August 26,
1997, the Debtors obtained a commitment letter for Exit Financing from Nations
Credit Commercial Funding Division, a division of NationsCredit Commercial
Corporation ("NationsCredit"). NationsCredit has agreed to extend secured
financing to the Reorganized Debtor for the purpose of: (i) repaying Congress'
Claims; (ii) financing the Plan; and (iii) providing the Reorganized Debtor with
general working capital. The Reorganized Debtor's maximum loan facility with
NationsCredit shall be $4 Million for the first and second year of the credit
facility and $5 Million for the third and fourth year of the credit facility.
These amounts will be borrowed as revolving loans and term loans subject to
certain loan sublimits and advance rates based on the Reorganized Debtor's
acceptable and eligible accounts receivable, inventory, cash collateral and
equipment. Generally, and subject to certain conditions, the advance rates will
be 85% of acceptable and eligible accounts receivable and 60% against eligible
raw material and finished goods inventory. Closing with NationsCredit on the
Exit Financing is a condition to making the Distributions contemplated under
Article IV of the Plan.
E. Miscellaneous Legal Proceedings
1. Assumption and Rejection of Unexpired Leases and Executory Contracts
Under the Bankruptcy Code, unless a debtor assumes an unexpired lease of
non-residential real property within sixty (60) days after the filing of a
Chapter 11 petition or within such additional time as the Bankruptcy Court for
cause shown may permit, then such lease is deemed rejected and the debtor is
required to immediately surrender such non-residential real property to the
lessor.
During the course of the bankruptcy cases, the Debtors obtained Orders of
the Bankruptcy Court dated April 11, 1997 and June 8, 1997, authorizing the
rejection of the unexpired real property leases for their premises located in
Elmwood Park, New Jersey and Folcroft, Pennsylvania, respectively. In addition,
as stated above, the Sale Order authorized the assumption and assignment of the
Debtors' leases for the Marlboro, Massachusetts and Torrance, California
premises to TW. The Debtors' lease for its San Jose, California premises had
expired under its own terms on May 31, 1997 and the Debtors have entered into a
new, less costly lease for smaller space in the same geographical area. Finally,
with regard to the Debtors' lease for their Elkridge, Maryland premises, by
Order of the Court dated September 19, 1997, the Debtors' time to decide whether
to assume or reject this lease was extended until confirmation of the Plan. The
Debtors intend to assume the Elkridge,Maryland lease when the Plan is confirmed.
2. The Setting of the Bar Date and Notice Thereof
In accordance with Bankruptcy Rule 3003(c)(3), the Bankruptcy Court fixed
May 30, 1997 as the last date by which creditors would be permitted to file
Claims which arose prior to the Filing Date in the Debtors' Chapter 11 cases
(the "Bar Date"). Pursuant to Bankruptcy Rule 3003(c)(2), any creditor whose
Claim was not listed in the Debtors' schedules filed with the Court or whose
Claim was listed therein as disputed, contingent or unliquidated, and who failed
to file a proof of Claim on or before the Bar Date, will not be treated as a
creditor with respect to such Claim for purposes of voting on and receiving a
Distribution under the Plan.
V.
SUBSTANTIVE CONSOLIDATION
Substantive consolidation is an equitable remedy which a bankruptcy court
may be asked to apply in Chapter 11 cases involving affiliated debtors. As
contrasted with procedural consolidation, substantive consolidation may affect
the substantive rights and obligations of creditors and debtors. Substantive
consolidation involves the pooling and merging of the assets and liabilities of
the affected debtors (to be substantively consolidated); all debtors in the
substantively consolidated group are treated as if they were a single corporate/
economic entity. Consequently, a creditor of one of the substantively
consolidated debtors is treated as a creditor of the substantively consolidated
debtors. Issues of individual corporate ownership of property and individual
corporate liability on obligations are ignored.
Substantive consolidation has the effect of eliminating: (i)cross-corporate
guarantees by one debtor of the obligation of another debtor in the
substantively consolidated group; (ii) duplicate claims against more than one
debtor in the substantatively consolidated group; and (iii) intercompany claims
between the substantively consolidated debtors. Absent substantive
consolidation, the allowance of these multiple claims has the effect of diluting
the amounts payable to holders of general unsecured claims generally, as a
consequence of such unsecured creditors having to share their distributions with
additional creditors or creditors holding larger claims.
In the instant case, the Debtors' propose to merge and consolidate their
corporate structure such that the Reorganized Debtor shall be a single corporate
entity. In this regard, the Debtors will file a motion with the Bankruptcy
Court seeking substantive consolidation. The anticipated hearing date to
consider approval of this motion will be the same date as that scheduled for
confirmation of the Plan.
The Plan provides that, as a condition to confirmation of such Plan, an
order of the Bankruptcy Court will be entered providing for the substantive
consolidation of the Debtors. By voting in favor of the Plan, creditors and
equity security holders indicate their support for, or have no objection to, the
substantive consolidation of the Debtors into a single reorganized corporate
entity.
For substantive consolidation to be ordered by the Bankruptcy Court, one or
more of the following factors must be demonstrated to the satisfaction of the
Bankruptcy Court: (i) the Debtors are an economically integrated group; (ii) the
Debtors' creditors reasonably believed they were dealing with the corporate
enterprise as a group; (iii) accounts of the affiliated corporations have been
intermingled; (iv) assets of the affiliated corporations have been intermingled;
and (v) substantive consolidation will enhance reorganization. The Debtors and
Creditors' Committee believe that an adequate basis exists for the Bankruptcy
Court to grant such relief.
VI.
THE JOINT PLAN OF REORGANIZATION
A. Explanation of Chapter 11
Chapter 11 is the principal reorganization chapter of the Bankruptcy Code.
Under Chapter 11, a debtor seeks to reorganize its business and financial
affairs. A debtor may also liquidate its assets and wind up its affairs in
Chapter 11. Since the Filing Date, the Debtors have operated their business and
managed their affairs as a debtor and debtor-in-possession under Sec.1107 and
1108 of the Bankruptcy Code. These sections of the Bankruptcy Code permit the
management of a debtor to continue as an operating entity within the structure
of Chapter 11.
The formulation and confirmation of a plan of reorganization is the
principal purpose of a Chapter 11 case. A plan of reorganization sets forth the
means of satisfying or discharging the holders of claims against, and interests
in, a Chapter 11 debtor. Chapter 11 does not require that each holder of a
claim against a debtor vote in favor of a plan in order for the Bankruptcy Court
to approve a plan. If any class of claimants is impaired by a plan, the plan
must be accepted by at least one "impaired" class of claims. A claim that will
not be repaid in full or as to its legal rights are altered, or an interest that
is adversely affected, is deemed impaired. The holder of an impaired claim or
interest is entitled to vote to accept or reject the plan if the claim or
interest has been allowed under Sec.502 of the Bankruptcy Code, or temporarily
allowed for voting purposes under Rule 3018 of the Federal Rules of Bankruptcy
Procedure. Acceptance by a particular class must be by a majority in number and
two-thirds (2/3) of the amount of the total claims or interests actually voting
in the class.
B. Claims and Interests
In accordance with Bankruptcy Rule 3003(c), the Court fixed May 30, 1997
(the "Bar Date") as the last day by which Creditors would be permitted to file
proofs of Claims and Interests in the Debtors' Chapter 11 cases. Pursuant to
Bankruptcy Rule 3003(c)(2), any Creditor or Equity Security Holder whose Claim
or Interest had not been scheduled by the Debtors in their petitions or had been
scheduled as disputed, contingent or unliquidated, and who failed to file a
proof of Claim or proof of Interest on or before the Bar Date, cannot be treated
as a Creditor or Equity Security Holder with respect to such Claim or Interest
for purposes of voting on and receiving a Distribution under the Plan.
As of this date, the following claims have been filed with the Clerk of the
Court or scheduled by either of the Debtors in their schedules:
44 creditors filed secured claims totaling approximately $5 million;
68 creditors filed priority unsecured claims totaling approximately
$575,000.00; and
779 creditors filed general unsecured claims totaling approximately
$6.3 million.
All of the Claims and Interests filed in these cases at this time have not
been reviewed and analyzed in detail. It is anticipated, however, that various
motions seeking to reduce, expunge or reclassify claims, as the facts may
warrant, will be filed, after a thorough review of the relevant documents by the
Debtors, Debtors' counsel and its accountants. The Debtors' expressly reserve
their rights to object to any Claim or Interest filed in these cases which do
not reflect amounts owed to such creditor on the Debtors' books and records or
which do not reflect ownership of stock as recorded in VTX's Stock Transfer
Agent's records. Although there can be no assurances that the Debtors will be
successful, the Debtors anticipate that after all motions objecting to Claims
have been resolved, there will be a total of approximately $6 Million in Allowed
Unsecured Claims.
C. Introduction and Summary
The Debtors believe that the Distributions provided under the Plan to
impaired Classes of Claims and Interests are significantly greater than are
otherwise available to each impaired Class of Claims and Interests of the
Debtors in a liquidation (See Section XI., Alternatives to the Plan and Other
Considerations). The Distributions provided for in the Plan are based upon cash
projected to be available as of the Effective Date. A summary of the principal
provisions of the Plan and the treatment of the Classes of Allowed Claims and
Allowed Interests is set forth below. The summary is qualified in its entirety
by reference to the Plan, which is annexed hereto as Exhibit "A" and
incorporated by reference into this Disclosure Statement.
D. Classes Of Claims And Interests
The Plan provides for the division of Claims and Interests into separate
Classes as follows:
1. Class 1 - Administrative Expenses: Class 1 consists of Administrative
Expenses which generally are obligations of the Debtors that arose after the
commencement of the Chapter 11 cases (i.e. after January 10, 1997, the Filing
Date). Administrative Expenses are claims against the Debtors for any costs or
expenses of the Chapter 11 cases allowed and entitled to priority under
Sec.503(b) and 507(a)(1) of the Bankruptcy Code, including, but not limited to,
all actual and necessary expenses of preservation of the Debtors' Estates,
operation of the Debtors' business(es) and all allowances of compensation or
reimbursement of expenses of Professionals retained by the Debtors and the
Committee to the extent permitted and allowed by the Bankruptcy Court.
This class consists of: (a) claims of Bankruptcy Court approved
Professionals assisting in the administration of this case; and (b) unpaid
claims of Creditors of the Debtors which were incurred in the ordinary course of
operations during the period of time beginning from the Filing Date through and
including the date of the Confirmation Hearing. The Debtors estimate that
Administrative Expense Claims in this Class will total $250,000.00. This sum
includes the fees and expenses of Professionals retained pursuant to orders of
the Bankruptcy Court estimated as follows:
(i) Jaspan Schlesinger Silverman & Hoffman LLP $100,000.00
Attorneys for the Debtors
(ii) Grant Thornton, LLP $50,000.00
Accountants for the Debtors
(iii) Rivkin, Radler & Kremer $50,000.00
Attorneys for the Creditors' Committee
(iv) Price Waterhouse LLP $50,000.00
Accountants for the Creditors' Committee
2. Class 2 - Priority Claims: Class 2 consists of all allowed unsecured
claims which arose prior to the Filing Date which are entitled to priority in
payment over other prepetition allowed unsecured claims,pursuant to Sec.507(a)
(3),507(a)(4), 507(a)(5), 507(a)(6) and 507(a)(7) of the Bankruptcy Code. Claims
to be included in Class 2 which are entitled to priority include claims for:(i)
accrued employee compensation earned within ninety (90) days prior to the Filing
Date, to a maximum amount of $4,000.00 per employee; (ii) contributions to
employee benefit plans arising from services rendered to the Debtors within 180
days prior to the Filing Date; and (iii) the return of deposits of money, prior
to the Filing Date, made in connection with the purchase, lease, or rental of
property, or the purchase of services, for the personal, family, or household
use, that were not delivered or provided. The Debtors estimate that the total
of Allowed Priority Claims in this Class will be less than $25,000.00.
3. Class 3 - Tax Claims: Class 3 consists of allowed unsecured claims of
governmental units for "taxes" which arose prior to the Filing Date and which
are entitled to priority in payment over other prepetition allowed unsecured
claims, pursuant to Sec.507(a)(8) of the Bankruptcy Code. The Debtors estimate
that the total of Allowed Tax Claims in this Class will be less than $75,000.00,
and will include claims filed by the states of New York, New Jersey,
Massachusetts, Florida, Maryland, and California.
4. Class 4 - Secured Claims of Congress: Class 4 consists of the allowed
claims of Congress, the Debtors' senior secured creditor, which claims are
secured by substantially all assets of the Debtors. As previously stated, on
the Filing Date, Congress was owed the sum of approximately $5.1 Million. As of
September 18, 1997, the Debtors owed Congress approximately $1.6 Million.
5. Class 5 - Debenture Claims: Class 5 consists of the allowed claims of
the holders of the Subordinated Debentures which claims are secured by
substantially all assets of the Debtors but which are junior to Congress'
allowed secured claims referred to in Class 4. Claims in this Class consist of
and include all claims arising prior to the Filing Date for accrued and unpaid
interest up to the Filing Date on account of, from, or under, each Subordinated
Debenture, as well as the principal amount of each Subordinated Debenture. As
of August 31, 1997, the Debtors owe approximately $2.615 Million in principal to
TW, the Subordinated Debenture Holder, and approximately $93,000.00 in accrued
but unpaid interest.
6. Class 6 - Administrative Convenience Claims ($1,000.00 or less):
Class 6 consists of all allowed unsecured claims in the amount of $1,000.00 or
less which do not qualify as administrative expenses, secured claims, priority
claims, tax claims or warrant claims (described below), or any other claim which
arose prior to the Filing Date which is not entitled to priority in payment
pursuant to Sec.507(a) of the Bankruptcy Code,and which is equal to or less than
$1,000.00 in amount. The Debtors estimate that the total of Allowed
Administrative Convenience Claims in this Class will be approximately
$80,000.00, representing claims held by approximately 220 creditors.
7. Class 7 - Unsecured Claims: Class 7 consists of all allowed unsecured
claims which do not qualify as administrative expenses, secured claims, priority
claims, tax claims or warrant claims (described below), or any other claim which
arose prior to the Filing Date which is not entitled to priority in payment
pursuant to Sec.507(a) of the Bankruptcy Code, and which is more than $1,000.00
in amount. The Debtors estimate that the total of Allowed Unsecured Claims in
this Class will be approximately $5.9 Million, held by approximately 257
creditors.
8. Class 8 - Preferred Stock Interests: Class 8 consists of the
Preferred Stock Interests in the Debtors. As previously discussed, all
Preferred Stock Interests in VTX are owned by TW.
9. Class 9 - Common Stock Interests: Class 9 consists of the Common
Stock Interests in the Debtors.
10. Class 10 - Warrant Claims: Class 10 consists of allowed claims based
on, under, or as a result of any Warrants, stock options or other rights to
acquire shares of common stock or other capital stock of the Debtors and any
claim arising from the cancellation, nullification or rejection of same.
E. Treatment of Allowed Claims and Interests
1. Class 1 - Administrative Expenses: Each holder of an Allowed
Administrative Expense Claim, will be paid in full, in cash on or before the
Initial Distribution Date or at such other date and upon such other terms as may
be agreed upon between any holder of an Allowed Administrative Expense and the
Debtors; provided, however, that Allowed Administrative Expenses representing
indebtedness or other obligations incurred or assumed by the Debtors-in-
Possession will be assumed and paid or performed by the Reorganized Debtor in
accordance with the terms and conditions of any agreements relating thereto.
Administrative Expenses consisting of Fee Claims of Professionals approved by
the Bankruptcy Court will be paid in full no later than thirty (30) days after
the entry of an order allowing such payment.
2. Class 2 - Priority Claims: Each holder of an Allowed Class 2 Claim
will be paid in full, in cash on the Initial Distribution Date or at such other
date and upon such other terms as may be agreed upon between any holder of such
a claim and the Debtors.
3. Class 3 - Tax Claims: In accordance with Sec.1129(a)(9)(C) of the
Bankruptcy Code, each holder of an Allowed Class 3 Claim will, at the Debtors'
option, be paid in full, in cash on the Initial Distribution Date or will
receive deferred cash payments over a period not exceeding six years after the
Effective Date, of a value, as of the Effective Date of the Plan, equal to the
amount of such Class 3 Claim. Interest on such deferred payments will be at the
rate of 8% per annum.
4. Class 4 - Secured Claims of Congress: Each holder of an Allowed Class
4 Claim will be paid the amount of such Allowed Secured Claim in full, in cash
on the Effective Date.
5. Class 5 - Debentures Claims: All holders of Allowed Class 5 Claims
will receive certain Distributions on account of the interest due on each
Subordinated Debenture and all Subordinated Debenture Holders, as of the Filing
Date, will have their rights to payment of each Subordinated Debenture modified
as follows:
(a) On the Initial Distribution Date, each holder of a Class 5 Claim
for accrued unpaid interest shall be paid a Pro Rata
Distribution of 13.5% of its Allowed Claim in full and
final satisfaction, release and discharge; and
(b) All Subordinated Debenture Holders as of the Filing Date, shall
have their right to payment of the principal amount of the
Subordinated Debenture modified on the Effective Date such
that each Subordinated Debenture shall be due and payable
seven (7) years after the Effective Date,and accrue interest
at a rate of eight (8%) percent per annum, payable semi-
annually over the life of the Subordinated Debenture. The
Subordinated Debentures will remain secured by all of the
assets of the Reorganized Debtor but will be subordinated to
all current and future institutional loan facilities whether
revolving asset based or otherwise.
All other rights pursuant to the Subordinated Debentures will be canceled.
6. Class 6 - Administrative Convenience Claims: Each holder of an Allowed
Class 6 Claim shall receive a Distribution totaling 20% of the amount of their
Allowed Class 6 Claim, in full and final satisfaction, release and discharge of
such Claim, which Distribution will be made as follows: 25% of the Distribution
will be made on the Initial Distribution Date, with the balance to be paid in
three (3) equal installments, ninety (90) days, one hundred eighty (180) days
and two hundred seventy (270) days after the Initial Distribution Date. The
Distribution on account of Class 6 Claims is guaranteed by the TW Guarantee.
7. Class 7 - Unsecured Claims: Each holder of an Allowed Unsecured Claim
will receive a Distribution of the lesser of: (i) its Pro Rata share of the sum
of $790,000.00; or (ii) thirteen and one-half (13.5%) percent of each Allowed
Unsecured Claim (the "Class 7 Partial Distribution"). The Class 7 Partial
Distribution shall be made as follows: On the Initial Distribution Date, and
subject to the Disputed Claims reserve procedure set forth in Article XII of
the Plan, each holder of a Class 7 Claim shall be paid in cash its Pro Rata
share equal to one-fourth (1/4) of the Class 7 Partial Distribution on the
Initial Distribution Date, with the balance of the Class 7 Partial Distribution
to be paid in three (3) equal installments ninety (90) days, one hundred eighty
(180) days and two hundred seventy(270)days after the Initial Distribution Date.
The Class 7 Partial Distribution is guaranteed by the TW Guarantee. Further,
holders of Class 7 Claims will receive their Pro Rata share of additional cash
payments which will be determined upon the cumulative Cash Flow of the
Reorganized Debtor equal to: (a) 0% of the first $500,000.00; (b) plus 25% of
the next $1 Million; (c) plus 15% of the balance thereafter, for three (3) years
following receipt of the first $250,000.00 distributed in subsections (a) and
(b) above, or until the fifth (5th) anniversary of the Effective Date, which
ever is earlier. The total of these payments will be in full and final
satisfaction, release and discharge of Allowed Unsecured Claims.
8. Class 8 - Preferred Stock Interests: All holders of Class 8 Interests
will have their Preferred Stock canceled on the Effective Date and a sufficient
number of New Common Stock will be issued representing ninety (90%) percent of
the issued and outstanding common stock of the Reorganized Debtor. All other
rights or claims arising by virtue of ownership of Preferred Stock are
terminated and/or canceled as of the Effective Date.
9. Class 9 - Common Stock Interests: All holders of Class 9 Interests
listed in the records of the Stock Transfer Agent as of the Record Date will
have their Common Stock canceled on the Effective Date and a sufficient number
of New Common Stock will be issued Pro Rata to those holders representing ten
(10%) percent of the issued and outstanding common stock of the Reorganized
Debtor. All other rights or claims arising by virtue of ownership of Common
Stock are terminated or canceled as of the Effective Date.
10. Class 10 - Warrant Claims: All Warrants, stock options, or other
rights to purchase common shares or other capital stock of the Debtors shall be
terminated and canceled on the Effective Date and all claims arising thereunder
will not receive a Distribution. To the extent that any Warrants, stock options
or other rights to acquire Common Stock or other capital stock of the Debtors
are deemed to be Executory Contracts, they shall be rejected under the Plan as
of the Effective Date. No Distributions shall be made in respect of any Claims
arising therefrom. The Debtors believe that the exercise prices of the
outstanding Warrants, stock options or other rights to acquire Common Stock or
other capital stock of the Debtors are sufficiently high so that the Claims in
this Class have no value.
F. Miscellaneous Plan Provisions
1. Assumption of Executory Contracts: Except as set forth in section 9.2
of the Plan, any Executory Contracts not expressly assumed or rejected by the
Debtors upon motion filed by the Debtors with the Bankruptcy Court prior to the
Effective Date or as to which no motion to assume or reject is pending on the
Effective Date will be deemed to have been assumed by the Debtors on the
Effective Date in accordance with the provisions of Sec.365 of the Bankruptcy
Code.
2. Discharge of Debtors: Except as otherwise provided herein, the rights
afforded in the Plan will be in exchange for and in complete satisfaction,
discharge and release of all Claims or Interests of any nature whatsoever,
including any interest accrued thereon from and after the Petition Date, against
the Debtors, the Debtors-in-Possession or any of their assets or properties.
Except as otherwise provided herein, in accordance with Sec.1141 of the
Bankruptcy Code, all such Claims or Interests against the Debtors and the
Debtors-in-Possession will be satisfied, discharged and released in full on the
Effective Date. Except as otherwise provided herein, all holders of Allowed
Claims and Allowed Interests will be precluded from asserting against the
Debtors or their assets or properties any other or further Claim based on any
act or omission, transaction or other activity of any kind or nature that
occurred prior to the Effective Date; provided, however, that nothing contained
in the Plan will alter the legal, equitable or contractual rights of the holder
of any Claim or Interest specifically designated as not being impaired under the
Plan, it being specifically intended that all such rights are to remain
unaltered by the Plan.
3. Title to Assets and Discharge of Liabilities: Except as otherwise
provided for in the Plan, on the Effective Date, title to all assets and
properties dealt with by the Plan will vest in the Reorganized Debtor in
accordance with Sec.1141 of the Bankruptcy Code,free and clear of all Claims and
Interests and the Confirmation Order will be a judicial determination of
discharge of the Debtors' liabilities except as provided for in the Plan.
4. Amendment of Debtors' Corporate Charters, By-Laws, and Certificate of
Incorporation: As required by Sec.1123(a)(6) of the Bankruptcy Code,the Debtors'
charters will be amended as of the Effective Date to the extent necessary to
allow for the merger of the corporate structure of Vertex into VTX and for the
name of the Reorganized Debtor.
VII.
IMPLEMENTATION OF THE PLAN
Funding for the Plan has been provided from the continued operations of the
Debtors as Debtors-in-Possession, the installment payments from TW for its
purchase of the Debtors Distribution Business pursuant to the Sale Order, and
from loans taken under the Exit Financing with NationsCredit, or, if necessary
by the TW Guarantee.
On or before the Effective Date of the Plan, the Debtors shall have closed
on the Exit Financing with NationsCredit and deposited in a Distribution Fund
all funds necessary for Distribution to holders of Allowed Claims on the Initial
Distribution Date, in accordance with the Plan.
In addition, all Preferred Stock and Common Stock will be canceled, the
Subordinated Debentures will be modified, all Warrants will be canceled and all
necessary amendments, if any, to the Debtors' corporate charters, by-laws and
certificates of incorporation will have been made.
Distributions to be made on the Periodic Distribution Dates shall be
generated from the continued operations of the Reorganized Debtor, the
installment payments from TW for its purchase of the Debtors Distribution
Business pursuant to the Sale Order, and loans made under the Exit Financing
with NationsCredit, or, if necessary, by the TW Guarantee.
VIII.
CONDITIONS PRECEDENT TO THE EFFECTIVE DATE
In order for the Effective Date to occur, each of the following conditions
precedent must be satisfied unless waived by the Debtors:
(a) An order authorizing the substantive consolidation of the Debtors'
Estates must become a Final Order of the Bankruptcy Court.
(b) The Confirmation Order, in form and substance reasonably acceptable
to the Debtors and the Creditors' Committee shall have been entered by the
Bankruptcy Court and shall have become a Final Order.
(c) The Debtors must have closed on the Exit Financing with NationsCredit.
IX.
DIRECTORS AND MANAGEMENT OF REORGANIZED DEBTOR
A. Directors and Officers
As a result of the contemplation in the Plan for the issuance of more then
a majority of the new shares in the Reorganized Debtor to TW as the owner of the
Preferred Stock, TW will be able to elect a majority of the directors of the
Reorganized Debtor and appoint the Reorganized Debtors' management. TW has
advised the Debtors that the following individuals will serve as the directors
and corporate officers of the Reorganized Debtors after the Effective Date of
the Plan: CEO: Edward Goodstein; President: Howard Griffith; Secretary:
Nicholas Hutzel; Directors: Edward Goodstein, Howard Griffith, Carl Palazzolo,
Ron Martyn and Al Roth.
X.
EVALUATION OF FUTURE OPERATIONS
The Debtors prepared financial data which they deem material for their
Creditors and Equity Security Holders to make an informed judgment about the
Plan and to exercise their right to vote to accept or reject the Plan. The
financial data is set forth in Exhibit "C" annexed hereto. The Debtors believe
that the Reorganized Debtor will be a viable enterprise upon emerging from the
instant reorganization proceedings. The projected financial statements are
based on the assumption that the Plan will be confirmed by the Bankruptcy Court
in October, 1997. Many of the assumptions upon which these projections are
based are subject to significant uncertainties. Some assumptions may not
materialize and unanticipated events and circumstances may affect the Debtors'
actual financial status. Therefore, the actual results achieved throughout the
projection period may vary from the projected results and the variations may be
material. In addition, in order to assist creditors in evaluating the financial
information regarding the Debtors, annexed hereto as Exhibit "E" is the
Quarterly Report on Form 10-Q for the quarter ending March 31, 1997.
XI.
ALTERNATIVES TO THE PLAN AND OTHER CONSIDERATIONS
A. Alternatives to the Plan
The Debtors believe that the Plan provides Creditors and Equity Security
Holders with the earliest and greatest possible value that can be realized on
their respective Claims and Interests.The principal alternatives to confirmation
of the Plan are: (i) confirmation of alternative plans submitted by the Debtors
or by another party in interest; or (ii) liquidation of the Debtors under
Chapter 7 of the Bankruptcy Code.
1. Alternative Plans: By Bankruptcy Court Order dated May 20, 1997, the
Debtors' exclusive period to file a plan has been extended until August 8, 1997.
Thus, no competing plans can be filed. However, if the Plan is not confirmed by
the Bankruptcy Court, other parties in interest may have an additional
opportunity to file a plan. The Debtors are not aware of any party prepared or
interested in filing an alternative plan which provides, on the whole, greater
recoveries for Creditors and Equity Security Holders. Moreover, any alternative
plan may not generally be acceptable to Congress, TW, the Debentures Holders,
the Committee or the Debtors and would likely result in costly and time-
consuming litigation detrimental to all Creditors and Equity Security Holders.
2. Liquidation as an Alternative: The Debtors believe, based upon the
estimated liquidation analysis annexed hereto as Exhibit "D", that a liquidation
of the Debtors would not be in the best interest of the Debtors, Creditors and
Equity Security Holders. As described in Section XI.B. below ("Best Interests
of Unsecured Creditors and Stockholders"), liquidation of the Debtors would
provide the vast majority of Claim holders with little or no return and leave
nothing for Interest holders. Liquidation under Chapter 7 of the Bankruptcy
Code would entail the appointment of a trustee likely to have no historical
experience or knowledge of the Debtors' businesses, records or assets. The
additional administrative costs incurred by a trustee and his attorneys could
also be substantial.
The Debtors believe that confirmation of the Plan is preferable to the
alternatives described above because the Plan maximizes the property available
for distribution to all Classes of Claims and Interests and provides for a
distribution to Unsecured Creditors. Moreover, the Debtors believe that any
alternative to confirmation of the Plan would result in substantial delays and
lesser recoveries for all constituencies.
B. Best Interests of Unsecured Creditors and Stockholders
Notwithstanding acceptance of the Plan by Classes of Claims and Interests, in
order to confirm the Plan the Bankruptcy Court must independently determine that
the Plan is in the best interests of all Classes of Claims and Interests. The
"best interests" test requires that the Bankruptcy Court find that the Plan
provides to each member of each impaired Class of Claims and Interests a
recovery which has a present value at least equal to the present value of the
distribution which each such person would receive from his/her respective Debtor
if that Debtor were instead liquidated under Chapter 7 of the Bankruptcy Code.
THE DEBTORS BELIEVE THAT THE PLAN MEETS THE BEST INTERESTS TEST
WITH RESPECT TO ALL CLAIMS AND INTERESTS.
To calculate what members of each impaired Class of Unsecured Claims and
Interests would receive if the Debtors were liquidated, the Bankruptcy Court
must first determine the dollar amount that would be generated from the forced
liquidation of each Debtor (the "Liquidation Fund"). The Liquidation Fund of
each Debtor would consist of the proceeds from the disposition of the assets of
such Debtor, augmented by the cash held by that Debtor and recoveries on actions
against third parties. Monies in the Liquidation Fund constituting collateral
of secured creditors such as Congress and the holders of Subordinated Debenture
would be paid to them as their respective interests appear. Each Liquidation
Fund would next be reduced by the costs of the liquidation. A Debtor's costs of
liquidation under Chapter 7 would likely include the fees of a trustee, as well
as those of counsel and other professionals that might be retained by each
Debtor's trustee; selling expenses; any unpaid expenses incurred by the Debtor
during its Chapter 11 case (such as fees for attorneys, financial advisors and
accountants); and claims arising by reason of the trustee's rejection of
contracts and leases entered into or assumed by such Debtor during the pendency
of its Chapter 11 case. These Claims, and such other Claims as might arise in
the liquidation or result from each Debtor's chapter 11 case, would be paid in
full out of each Liquidation Fund before the balance of a Liquidation Fund would
be made available to pay Unsecured Claims.The present value of the distributions
out of the Liquidation Fund (after subtracting the amounts described above) are
then compared with the present value of the property offered to each of the
impaired Classes of Allowed Administrative Convenience Claims, Allowed Unsecured
Claims and Allowed Interests under the Plan to determine if the Plan is in the
best interests of each creditor.
The Debtors also believe that Claims in a liquidation would be
significantly greater than would be the case if the Plan were confirmed and the
businesses continued, thereby significantly diminishing the recovery on account
of all unsecured claims. For example, many contracts and leases which the
Debtors propose to assume pursuant to the Plan would probably be rejected in a
liquidation and would give rise to unsecured claims against a Liquidation Fund.
Severance pay claims of terminated employees would be payable ahead of Unsecured
Claims. Other potential Claims against a Liquidation Fund may arise upon the
Debtor's rejection of its obligations under employee benefit plans.
The Debtors also believe that the value of any distributions from a
Liquidation Fund to each Class of Allowed Claims and Interests of each Debtor
would be less than the value of distributions under the Plan because
distributions from a Liquidation Fund would not occur until well after the
completion of the liquidation of such Debtor.
The Debtors have concluded that a liquidation of each of the Debtors would
result in a lesser distribution to Creditors and Holders than that provided for
under the Plan, and, in particular, that holders of Class 6 Claims and Class 7
Claims would receive no distribution in respect of their Allowed Claims in a
liquidation contrasted with approximately 13.5% under the Plan not including
additional distributions based on cash flow performance. A liquidation analysis
of the Debtors is annexed hereto as Exhibit "D" as if the liquidation was
conducted on a substantively consolidated basis. Relative results would not be
materially different if the liquidation were conducted on an unconsolidated
basis. For further discussion, see Exhibit "D".
THE DEBTORS BELIEVE THAT THE PLAN PROVIDES THE GREATEST AND
EARLIEST POSSIBLE RECOVERIES ON ACCOUNT OF CLAIMS AND THAT
CONFIRMATION OF THE PLAN IS IN THE BEST INTERESTS OF CREDITORS AND
INTEREST HOLDERS AND RECOMMEND THAT YOU VOTE TO ACCEPT THE PLAN.
C. Avoidance Claims
Pursuant to Sec.550 of the Bankruptcy Code, the Debtors may recover property
for the benefit of their estates the transfer of which has been avoided as,
inter alia, a preference under Sec.547 of the Bankruptcy Code or a fraudulent
conveyance under Sec.548 or 544 of the Bankruptcy Code. The Debtor has
investigated its pre-petition transactions to determine if any such actions may
exist and should be brought to avoid such transactions.
1. Payments of Antecedent Debts within 90 Days of the Filing Date:
During the 90-day period prior to the Filing Date, the Debtors made various
payments to creditors on account of antecedent debts. Pursuant to Sec.547 of the
Bankruptcy Code, such payments may be avoided and recovered for the benefit of
the estates of the Debtors under certain circumstances. Valid defenses may be
asserted, inter alia, to the extent: (i) payments were made in the ordinary
course of business or (ii) the recipient gave new value to the Debtors. The
Debtors have not asserted such claims for some or all of the following reasons:
(1) most such payments are small and the cost of pursuing such claims would be
substantial; (2) the recipient would in most cases be able to establish either
an "ordinary course of business" defense or a "new value" defense, because of
the Debtors' payment practices in the months before the Chapter 11 cases were
commenced; and (3) many of the recipients are important trade vendors critical
to the Debtors' ongoing business and whose continued goodwill and cooperation
will be vital to the Debtors' viability.
The Creditors' Committee has also analyzed the payments made by the Debtors
during the 90-day period prior to the Filing Date, as well as the potential
defenses which may be asserted to an alleged avoidable payment. The Creditors'
Committee agrees that most of the payments previously made on account of
antecedent debts should be allowed due to the Debtors' continued relationship
with those creditors. These creditors are also necessary for the Debtors'
ongoing business. However, the Debtors and the Creditors' Committee have agreed
that all potential preference actions will be deemed settled for all purposes
and neither the Debtors nor the Creditors will pursue these actions.
XII.
VOTING ON THE PLAN
A. Creditors and Stockholders Entitled to Vote
Under the Bankruptcy Code, only creditors and equity security holders whose
claims or equity interests belong to an impaired class are entitled to vote to
accept or reject a plan of reorganization such as the Plan. Creditors or equity
security holders whose claims or interests are not impaired under a plan are
deemed to have accepted the plan and do not need to vote. Essentially, a claim
or equity interest is impaired unless a plan: (i) leaves unaltered the legal,
equitable and contractual rights to which such claim or interest entitles its
holder; (ii) reinstates the claim or interest pursuant to its original terms and
cures any defaults; or (iii) pays the amount of the claim or interest in full in
cash.
Pursuant to Rule 3018(a) of the Bankruptcy Rules, the holder of an impaired
Claim or Interest in Classes 5, 6, 7, 8 or 9 which was not a Disputed Claim or
Disputed Interest as of the date this Disclosure Statement was approved by the
Bankruptcy Court is entitled to vote on the Plan. Moreover, notwithstanding the
interposition of an objection to a Claim or Interest, the Bankruptcy Court may
temporarily allow the Claim or Interest in an amount which the Bankruptcy Court
deems proper for the purpose of voting on the Plan.
B. General Voting Instructions
Impaired creditors in Classes 5, 6, and 7 and impaired Interest holders in
Classes 8 and 9 should complete and sign each enclosed ballot and return it to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556
Attn: Scott Y. Stuart, Esq.
Telephone: (516) 357-3000
Facsimile: (516) 357-3333
Ballots must be received on or before 5:00 p.m. Eastern Standard Time on
October 23, 1997.
IMPORTANT NOTE TO STOCKHOLDERS: ONLY REGISTERED HOLDERS
OF VTX STOCK LISTED IN THE STOCK TRANSFER AGENT'S OFFICIAL RECORDS AS
OF SEPTEMBER 29, 1997, THE DATE THE BANKRUPTCY COURT APPROVES THIS
DISCLOSURE STATEMENT (THE "RECORD DATE"), MAY CAST BALLOTS. IF YOUR
VTX STOCK IS BENEFICIALLY OWNED BY YOU BUT IS HELD IN "STREET NAME"
(I.E., REGISTERED IN THE NAME OF YOUR BROKER) OR IN THE NAME OF
ANOTHER THIRD PARTY, THEN YOU MUST VOTE THROUGH THE REGISTERED
HOLDER OF YOUR STOCK WHO WILL CAST A BALLOT IN ACCORDANCE WITH
YOUR WRITTEN INSTRUCTIONS. IF THE REGISTERED HOLDER PROVIDES YOU
WITH A BALLOT, THE BALLOT MAY SERVE AS THOSE WRITTEN INSTRUCTIONS,
BUT ONLY A BALLOT SIGNED BY THE REGISTERED HOLDER MAY BE CAST. VTX
HAS ATTEMPTED TO PROVIDE THOSE REGISTERED HOLDERS KNOWN TO VTX TO
HOLD STOCK FOR THE BENEFICIAL INTERESTS OF THEIR CUSTOMERS OR OTHER
THIRD PARTIES WITH INSTRUCTIONS CONCERNING VOTING ON THE PLAN. VTX
IS NOT RESPONSIBLE FOR THE FAILURE OF A BROKER OR OTHER REGISTERED
HOLDER TO NOTIFY ITS CUSTOMER OR THE BENEFICIAL OWNERS OF VTX STOCK
OF THEIR RIGHT TO VOTE THROUGH THEIR RESPECTIVE REGISTERED HOLDERS.
A ballot and a copy of this Disclosure Statement is being sent to each
holder of an impaired Claim that filed a proof of Claim or was scheduled by
either of the Debtors, and to each registered holder of Common Stock or
Preferred Stock. The date for determining which holders of Common Stock are
entitled to vote on the Plan is the Record Date.
DO NOT RETURN THE STOCK CERTIFICATES REPRESENTING YOUR
SECURITIES WITH YOUR BALLOT.
If a Creditor or Equity Security Holder has a Claim or Interest in more
than one voting Class under the Plan, such Creditor or Equity Security Holders
will receive multiple ballots. If you receive more than one ballot, you should
assume that each ballot is for a separate Class and you should complete and
return all of them. If a ballot is damaged or lost, or if you have any questions
concerning any voting procedures, you may contact:
Counsel for the Debtors at:
Jaspan Schlesinger Silverman & Hoffman LLP
300 Garden City Plaza
Garden City, New York 11530
Attn: Salvatore LaMonica, Esq.
Telephone: (516) 746-8000
Facsimile: (516) 393-8282
-or-
Counsel for the Creditors' Committee at:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556
Attn: Scott Y. Stuart, Esq.
Telephone: (516) 357-3000
Facsimile: (516) 357-3333
C. Soliciting for Votes
The process of soliciting acceptance of and voting upon the Plan must be
fair and open without outside influence in the form of representations,
inducement or duress of any kind. To the extent that you believe solicitation
of your vote from any party is being sought outside of the judicially approved
and statutorily defined disclosure requirements and voting procedures, please
contact counsel for the Debtors or Counsel for the Creditors' Committee.
NO REPRESENTATIONS, EXCEPT THOSE SET FORTH IN THE DISCLOSURE
STATEMENT, CONCERNING THE DEBTORS, THEIR ASSETS, THEIR PAST OR
FUTURE OPERATIONS OR THE PLAN ARE AUTHORIZED BY THE DEBTORS OR THE
BANKRUPTCY COURT, NOR ARE ANY SUCH REPRESENTATIONS EXCEPT THOSE IN
THE DISCLOSURE STATEMENT TO BE RELIED UPON IN ARRIVING AT A DECISION
WITH RESPECT TO THE PLAN. ANY REPRESENTATIONS MADE TO SECURE
ACCEPTANCE OR REJECTION OF THE PLAN OTHER THAN AS CONTAINED IN THIS
DISCLOSURE STATEMENT SHOULD BE REPORTED TO COUNSEL FOR THE
DEBTORS.
D. Acceptance
Acceptance of the Plan requires that each impaired Class of Claims or
Interests (Classes 5, 6, 7, 8, 9 and 10) accepts the Plan, with certain
exceptions hereinafter discussed in Subsection E below. Thus, acceptance of the
Plan is tested on a Class by Class basis. Classes of Claims and Interests that
are not impaired under the Plan (Classes 1, 2, 3 and 4) are deemed to have
accepted the Plan. Acceptance of the Plan is being solicited only from those
Persons who hold Claims or Interests of impaired Classes which are not, by
operation of law, deemed to have rejected the Plan. Claims in Classes 5, 6 and
7 and Interests in Classes 8 and 9 are entitled to vote to accept or reject the
Plan. Class 10 is deemed to have rejected the Plan.
The Bankruptcy Code defines acceptance of a plan by a class of claims as
acceptance by the holders of two-thirds (2/3) in dollar amount and a majority in
number of claims of that class, but only those claims actually voted to accept
or reject the plan are counted in determining whether the class has accepted or
rejected the plan. The Bankruptcy Code defines acceptance of a plan by a class
of equity interests as acceptance by the holders of two-thirds (2/3) in number
of shares or other equity securities actually voted.
E. Non-Acceptance and "Cramdown"
In some circumstances, the Bankruptcy Court may confirm a plan despite the
non-acceptance of the plan by an impaired class. This is commonly referred to
as a "cramdown." Section 1129(b) of the Bankruptcy Code provides that upon the
request of the proponent of a plan, the bankruptcy court will confirm the plan
despite the lack of acceptance by an impaired class if: (a) the plan does not
"discriminate unfairly" with respect to each impaired class of claims or
interests that has not accepted the plan; (b) the plan is "fair and equitable"
with respect to each impaired non-accepting class; and (c) if any class of
claims is impaired, at least one impaired class of claims has voted
affirmatively to accept the plan.
A plan does not "discriminate unfairly" if claims or interests in different
classes but with similar priorities and characteristics receive or retain
property of similar value under the plan.
The Bankruptcy Code sets forth three different standards for establishing
that a plan is "fair and equitable" with respect to a dissenting class,depending
on whether the class is comprised of secured claims or unsecured claims or
interests. In general, Sec.1129(b) permits confirmation notwithstanding non-
acceptance by an impaired class if that class and all classes junior to it are
treated in accordance with the "absolute priority" rule, which requires that the
dissenting class be paid in full before a junior class may receive or retain
property under the plan.
Specifically,pursuant to Sec.1129(b)(2)(B) of the Bankruptcy Code,if a class
of unsecured claims rejects a plan it may still be confirmed so long as the plan
provides that: (i) each holder of a claim included in the rejecting class will
receive or retain on account of that claim property which has a value as of the
effective date of the plan, equal to the allowed amount of such claim; or (ii) a
holder of any claim or interest that is junior to the claims of such class will
not receive or retain on account of such junior claim or interest any property
at all.
Pursuant to Sec.1129(b)(2)(C) of the Bankruptcy Code, if a class of equity
security interests rejects a plan, such plan may still be confirmed so long as
it provides that: (i) each holder of an interest included in the rejecting
class will receive or retain on account of that interest property which has a
value, as of the effective date of the plan, equal to the greatest of the
allowed amount of any fixed liquidation preference to which such holder is
entitled, any fixed redemption price to which such holder is entitled, or the
value of such interest; or (ii) the holder of any interest that is junior to the
interest of such class will not receive or retain under the plan on account of
such junior interest any property at all.
Pursuant to the Plan and the Bankruptcy Code, Claims in Class 10 (Warrants
and other rights to acquire stock of the Debtors) are receiving or retaining no
property under the Plan. Class 10 therefore, is deemed to have rejected the Plan
pursuant to provisions of the Bankruptcy Code.
The Debtors will seek and believe they will be able to utilize the cramdown
provisions of Sec.1129(b)of the Bankruptcy Code with respect to Class 10,as none
of the Claims in such Class have any value. The Warrants are exercisable at
prices which far exceed any value the relevant equity security has or will have
during the period in which the Warrant may be exercised.
F. Confirmation of Plan
In order to confirm the Plan, the Bankruptcy Code requires that the
Bankruptcy Court make a series of determinations concerning the Plan, including:
(i) that the Plan has classified Claims and Interests in a permissible manner;
(ii) that the contents of the Plan comply with the technical requirements of the
Bankruptcy Code; (iii) that the Plan has been proposed in good faith; and (iv)
that disclosures concerning the Plan have been made which are adequate and
include information concerning all payments made or promised in connection with
the Plan and the Chapter 11 cases. The Debtors believe that all of these
conditions have been or will be met.
The Bankruptcy Code also requires (unless the "cramdown" provisions of the
Bankruptcy Code are utilized), as a condition to confirmation, that the Plan be
accepted by the requisite votes of each impaired Class of Claims and Interests,
voting as separate Classes. In addition, the Bankruptcy Court must find that
the Plan is feasible and that the Plan is in the "best interests" of all
Creditors and Equity Security Holders. Thus, even if Creditors and Equity
Security Holders of the Debtors accept the Plan by the requisite votes, the
Bankruptcy Court must make independent findings respecting the Plan's
feasibility and whether it is in the best interests of the Debtors' Creditors
and Equity Security Holders, before it can confirm the Plan.
G. Confirmation Hearing
By the Order of the Bankruptcy Court dated September 29, 1997, the
Confirmation Hearing has been scheduled for October 28, 1997 at 10:00 a.m., in
the courtroom of the Honorable Dorothy Eisenberg, United States Bankruptcy
Judge, at the United States Bankruptcy Court, 1635 Privado Road, Westbury, New
York, 11590. Any objection to confirmation must be in writing, state with
specificity the basis therefor and must be filed with the Bankruptcy Court with
a courtesy copy to the Chambers of the Honorable Dorothy Eisenberg, together
with proof of service and served in a manner so as to be received by the
following parties on or before 12:00 p.m. Eastern Standard Time on October 24,
1997:
Salvatore LaMonica, Esq. Scott Y. Stuart, Esq.
Jaspan Schlesinger Silverman & Hoffman, LLP Rivkin, Radler & Kremer
300 Garden City Plaza EAB Plaza
Garden City, New York 11530 Uniondale, New York 11553
(516) 746-8000 (516) 357-3000
Attorneys for Debtors Attorneys for Creditors' Committee
Jeffrey Wurst, Esq.
Ruskin, Moscou, Evans & Faltischek
170 Old Country Road
Mineola, New York 11501
(516) 663-6600
Attorneys for TW
XIII.
CONCLUSION
The Debtors and the Creditors' Committee believe that the Plan provides the
best possible recoveries for Creditors and Equity Security Holders which can be
achieved in any reasonable time frame and that possible alternatives are likely
to result in drastically diminished recoveries for holders of Debenture Claims
(Class 5), Administrative Convenience Claims (Class 6), Unsecured Claims (Class
7) and holders of Interests (Classes 8 and 9). Therefore, the Debtors and the
Creditors' Committee urge all Creditors and Equity Security Holders entitled to
vote to accept the Plan.
Dated: Farmingdale, New York
September 24, 1997
VTX Electronics Corp.
Debtor and Debtor-in-Possession
920 Conklin Street
Farmingdale, New York 11735
By: /s/ Ed Goodstein
Ed Goodstein, Director
Vertex Technologies, Inc.
Debtor and Debtor-in-Possession
920 Conklin Street
Farmingdale, New York 11735
By: /s/ Ed Goodstein
Ed Goodstein, Director
Dated: Garden City, New York
September 24, 1997
Jaspan Schlesinger Silverman & Hoffman LLP
Attorneys for the Debtors and
Debtors-in-Possession
By: /s/ Salvatore LaMonica
Salvatore LaMonica (SL #2148)
A Member of the Firm
300 Garden City Plaza
Garden City, New York 11530
(516) 746-8000
D 72365v2
# 28679
UNITED STATES BANKRUPTCY COURT
Eastern District of New York
1635 Privado Road
Westbury, NY 11590
IN RE: CASE NO: 897-80197-478
Vertex Technologies Inc.
SSN/TAX ID: CHAPTER: 11
11-2221621
DEBTOR(s)
NOTICE OF ENTRY OF ORDER CONFIRMING
CHAPTER 11 PLAN OF REORGANIZATION
NOTICE TO DEBTOR(S), CREDITOR(S) AND INTERESTED PARTIES
Notice is hereby given that:
In accordance with Bankruptcy Rule 2002, an order was entered on
October 30, 1997, confirming the debtor's Chapter 11 Plan of
Reorganization.
The Order Confirming the Plan of Reorganization is on file and
available for inspection in the Clerk's Office, 1635 Privado Road
Westbury, NY 11590.
Dated: November 3, 1997
For the Court, Joseph P. Hurley, Clerk of Court
CERTIFICATE OF OWNERSHIP AND MERGER
OF
VERTEX COMPUTER CABLE & PRODUCTS, INC.
INTO
VTX ELECTRONICS CORP.
VTX Electronics Corp., a corporation organized and existing
under the laws of Delaware
DOES HEREBY CERTIFY:
FIRST: That VTX Electronics Corp. (the "Company") was
incorporated on the 30th day of July, 1986, pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Company owns all of the outstanding
shares of the stock of Vertex Computer Cable & Products, Inc., a
corporation incorporated on the 28th day of October, 1970, pursuant
to the Business Corporation Law of the State of New York
("Vertex").
THIRD: That the United States Bankruptcy Court for the
Eastern District of New York, at Westbury, entered an Order on
October 30, 1997 providing that the Company and Vertex consummate
the merger of Vertex with and into the Company.
FOURTH: That the Company, by the following resolutions
of its Board of Directors, duly adopted at a meeting held on the
11th day of November, 1997, determined to and did merge Vertex into
itself:
"RESOLVED, that the Company merge, and it hereby does
merge Vertex into itself and assumes all obligations of Vertex
as set forth in the Second Amended Joint Plan of
Reorganization dated September 24, 1997 (the "Plan"); and
FURTHER RESOLVED, that the merger shall be effective upon
the date of filing the Certificate of Ownership and Merger
with the Secretary of State of Delaware; and
FURTHER RESOLVED, that the proper officers of the Company
be and they hereby are directed to make and execute a
Certificate of Ownership and Merger setting forth a copy of
the resolutions to merge Vertex into the Company and assume
the liabilities and obligations of Vertex in accordance with
the Plan, and the date of adoption thereof, and to cause the
same to be filed with the Secretary of State and to do all
acts and things whatsoever, whether within or without the
State of Delaware, which may be necessary or proper to effect
said merger; and
FURTHER RESOLVED, that the Company change its corporate
name by changing Article First of the Certificate of
Incorporation of the Company to read as follows: 'FIRST: The
name of the corporation is Vertex Computer Cable & Products,
Inc.'"
FIFTH: Anything herein or elsewhere to the contrary
notwithstanding, this merger may be amended or terminated and
abandoned by the Board of Directors of the Company at any time
prior to the date of filing the merger with the Secretary of State.
SIXTH: The Certificate of Incorporation of the Company
is hereby amended by changing Article First of the Certificate of
Incorporation of the Company to read as follows:
"FIRST: The name of the corporation is Vertex
Computer Cable & Procucts, Inc."<PAGE>
IN WITNESS WHEREOF, said VTX
Electronics Corp. has caused this Certificate to be signed by Nicholas
T. Hutzel, its Secretary, this ___ day of November, 1997.
VTX ELECTRONICS CORP.
By_____________________________
Nicholas T. Hutzel,
Secretary
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
VERTEX COMPUTER CABLE & PRODUCTS, INC.
(Under Section 242 of the General Corporation Law)
VERTEX COMPUTER CABLE & PRODUCTS, INC., a corporation
organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify that:
FIRST: The name of the corporation is Vertex Computer Cable
& Products, Inc.
SECOND: On October 30, 1997, the United States Bankruptcy
Court for the Eastern District of New York, at Westbury, entered an
Order Confirming the Second Amended Joint Plan of Reorganization
Dated September 24, 1997 for the Corporation (the "Plan"); which
Plan provides for the amendment to the Corporation's Certificate of
Incorporation as set forth herein.
THIRD: The Certificate of Incorporation of the Corporation
is hereby amended by striking out the first paragraph of Article
FOURTH in its entirety and the following new first paragraph of
Article FOURTH is substituted in lieu thereof:
"FOURTH: The total number of shares of stock that this
Corporation shall have authority to issue is (i) 40,000,000
shares of Common Stock, $.10 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01
par value per share ("Preferred Stock")."
Each of the Corporation's issued and outstanding shares of
Common Stock as of the date of this Certificate of Amendment,
shall be converted and reclassified into one-fifth of one
share of Common Stock, par value $.10 per share; no change
shall be made to the par value of the Corporation's Common
Stock; and fractional shares shall be rounded up to the
nearest whole share."
FOURTH: The Amendment to the Certificate of Incorporation
herein certified has been duly adopted in accordance with the
provisions of the Plan and Section 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this 29th day of December, 1997.
______________________________
Howard Griffith, President
ATTEST:
_____________________________
Nicholas T. Hutzel, Secretary
