<PAGE>
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) May 9, 1995
--------------
Commission File Number: 33-12173
AMERICOLD CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-0295215
(State of Incorporation) (I.R.S. Employer
Identification Number)
7007 S.W. Cardinal Lane, Suite 135
Portland, Oregon 97224
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (503) 624-8585
<PAGE>
Item 3. Bankruptcy or Receivership.
On May 9, 1995, Americold Corporation (the "Company") announced that its
restructuring plan received approval from both classes of debtholders entitled
to vote on the plan and that it filed the plan as approved as a prepackaged plan
of reorganization under Chapter 11 of the U. S. Bankruptcy Code in the United
States Bankruptcy Court for the District of Oregon on May 9, 1995. The Company
will be debtor-in-possession in the proceeding, which is captioned In re
Americold Corporation, Debtor (Case No. 395-33058-ELP11). A copy of the news
release dated May 9, 1995 is attached as Exhibit 99.1 to this Current Report on
Form 8-K.
Also attached as Exhibit 99.2 to this Current Report on Form 8-K is a copy of
the Disclosure Statement distributed to certain of the Company's debtholders of
record as of March 31, 1995 describing the Company's plan for restructuring
certain of its outstanding indebtedness.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 99.1 News Release of Americold
Corporation dated May 9, 1995
Exhibit 99.2 Disclosure Statement of Americold
Corporation dated April 14, 1995
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICOLD CORPORATION
/s/ Joel M. Smith
---------------------------
JOEL M. SMITH, Senior Vice President
and Chief Financial Officer
Date: May 10, 1995
3
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EXHIBIT INDEX
Exhibit Page No.
- ------- --------
99.1 News Release of Americold Corporation
dated May 9, 1995
99.2 Disclosure Statement of Americold
Corporation dated April 14, 1995
4
<PAGE>
EXHIBIT 99.1
For: Americold Corporation Contact: Robert Mead
(212) 484-6701
AMERICOLD MOVES TO IMPLEMENT RESTRUCTURING AGREEMENT
__________
Company Files Prepackaged Reorganization Plan With
Strong Debtholder Support
__________
Reorganization Not Expected to Affect Operations
_______________________________________________________________________________
PORTLAND, Oregon (May 9, 1995) -- Americold Corporation announced today that its
restructuring plan had received overwhelming approval from both classes of
debtholders entitled to vote on the plan and that it has filed the preapproved
agreement as a prepackaged plan of reorganization under Chapter 11 in the U.S.
Bankruptcy Court for the District of Oregon.
The Company said that the primary goal of the restructuring plan is to revise
the timing of debt service requirements related to $115 million in principal
payments due on the Company's 11% Senior Subordinated Debentures over the next
two years. The Company announced on April 14, 1995 that the plan had received
the support of the Company's largest secured lender, Metropolitan Life Insurance
Company, as well as the support of its primary bank, U.S. National Bank of
Oregon. As previously announced, the bank has provided the Company with a
commitment to extend and modify the Company's existing $27.5 million revolving
credit agreement.
"This filing is a major step towards completing our financial restructuring,"
said Ron Dykehouse, Americold's Chairman and Chief Executive Officer. "We are
pleased to have received such strong support from our debtholders and we expect
the final steps in this process to be completed quickly and smoothly. As a
result of this restructuring, Americold will have a more appropriate capital
structure and we will be in a better position to invest in business operations
and to expend our successful transportation management services segment."
The Company said that it used a prepackaged proceeding as an efficient means of
implementing a restructuring and that it would not affect its operations or the
Company's relationships with its employees, customers or suppliers.
Significant terms of the restructuring plan include:
. Each holder of the Company's 11% Senior Subordinated Debentures due 1997
will receive a corresponding amount of the
1
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new 15% Senior Subordinated Debentures due 2007, and an amount in cash
equal to the accrued but unpaid interest on the old Senior Subordinated
Debentures through but excluding the effective date of the plan of
reorganization. The new debentures will be immediately callable at par.
. The Company's 11.45% First Mortgage Bonds, Series A due 2002 and its 11.5%
First Mortgage Bonds, Series B due 2005, will remain unaffected. As part
of the restructuring plan, the Company will repurchase $10 million of the
Series A Bonds due 2002 at par, and has the option to purchase, in whole or
in part, additional Series A Bonds at par for a period of 18 months
following the effective date.
. The investment agreement between the Company and Metropolitan Life
Insurance Company has been amended, subject to confirmation, to reflect the
restructuring and will, in certain cases, contain covenants which are less
restrictive than those contained in the existing investment agreement.
. The Company's secured lenders (other than as relates to the investment
agreement), general unsecured creditors, trade creditors (suppliers) and
employees will be unaffected.
Americold previously announced preliminary results for the fiscal year ended
February 28, 1995, showing an increase in total sales of 9%. The Company also
said that it recorded a 50% sales increase in fiscal 1995 in transportation
management services as it continues its move into the third party logistics
business. EBITDA, after netting out the impact of receiving approximately $17.0
million in Kansas City fire-related insurance proceeds, increased approximately
7.5%, to $71.5 million.
The Company also stated that it is currently constructing two new facilities,
with a third facility scheduled for construction beginning in June 1995. All
three facilities will be operational by the end of fiscal 1996. The total
warehouse space to be added by these three projects is anticipated to be in
excess of ten million cubic feet, which represents growth in the Company's
existing warehouse network of approximately 4.5%.
2
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EXHIBIT 99.2
CONFIDENTIAL
NO BANKRUPTCY CASE HAS BEEN FILED
BY AMERICOLD CORPORATION
AS OF THE DATE OF THIS DISCLOSURE STATEMENT
DISCLOSURE STATEMENT
DATED APRIL 14, 1995
Pre-Petition Solicitation of Ballots and Master Ballots
With Respect to
The Financial Restructuring
of
AMERICOLD CORPORATION
Through a Prepackaged Chapter 11
Plan of Reorganization
================================================================================
This pre-petition solicitation of Ballots and Master Ballots will expire at 3:00
p.m., Portland, Oregon time, on Monday, May 8, 1995 unless extended (the "Ballot
Return Date"). Votes on, and elections with respect to, the plan of
reorganization annexed hereto may be revoked at any time prior to the Ballot
Return Date. Thereafter, revocations of votes and elections may be effected
only with the approval of the appropriate bankruptcy court (the "Bankruptcy
Court").
================================================================================
THIS DISCLOSURE STATEMENT CONTAINS CERTAIN FINANCIAL AND OTHER INFORMATION
CONCERNING AMERICOLD CORPORATION ("AMERICOLD" OR THE "COMPANY") THAT IS MATERIAL
NON-PUBLIC INFORMATION AND SHOULD BE TREATED AS CONFIDENTIAL. FEDERAL
SECURITIES LAWS PROHIBIT THE PURCHASE AND SALE OF SECURITIES ON THE BASIS OF
MATERIAL NON-PUBLIC INFORMATION, AND PERSONS WHO PURCHASE OR SELL SECURITIES ON
THE BASIS OF MATERIAL NON-PUBLIC INFORMATION, OR DISSEMINATE INFORMATION TO
OTHERS WHO DO SO, MAY BE SUBJECT TO PENALTIES.
THE SECURITY HOLDERS SOLICITED HEREBY ARE ENCOURAGED TO READ AND CONSIDER
CAREFULLY ALL THE INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT, INCLUDING
THE MATTERS DESCRIBED UNDER "RISK FACTORS," PRIOR TO SUBMITTING BALLOTS OR
MASTER BALLOTS PURSUANT TO THE SOLICITATION.
================================================================================
NO COURT HAS APPROVED THIS DISCLOSURE STATEMENT OR THE PLAN OF REORGANIZATION
DESCRIBED HEREIN. IN THE EVENT THAT THE COMPANY FILES A PETITION FOR RELIEF
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE AND SEEKS CONFIRMATION OF
SUCH PLAN OF REORGANIZATION, THIS DISCLOSURE STATEMENT WILL BE SUBMITTED TO THE
BANKRUPTCY COURT FOR APPROVAL.
================================================================================
<PAGE>
This Disclosure Statement, the Appendices, the accompanying forms of
Ballots and Master Ballots, and the related materials delivered herewith, are
being furnished by the Company pursuant to Section 1126(b) of the United States
Bankruptcy Code (the "Bankruptcy Code"), in connection with its solicitation
(the "Solicitation") of acceptances of the proposed plan of reorganization
described herein (the "Plan"). The Company is soliciting such acceptances from
all creditors that would be impaired under the Plan.
The Bankruptcy Code generally requires acceptance of the Plan by
specified percentages, voting in separate classes, of all classes of impaired
claims and interests of the debtor. For purposes of the Bankruptcy Code, each
class of impaired claims is considered to have accepted the Plan if the Plan is
accepted by creditors in such class that hold at least two-thirds in aggregate
dollar amount and more than one-half in number of the allowed claims of such
class held by those creditors that have timely voted on the Plan (the "Requisite
Acceptances"). Under the Bankruptcy Code, only the votes actually cast to
accept or reject the Plan will be counted for purposes of determining the
acceptance or rejection of the Plan by an impaired class of claims or interests.
Accordingly, the Plan could be approved by an impaired class of claims with the
affirmative vote of significantly less than two-thirds in dollar amount and one-
half in number of the claims in such class.
The Company has not commenced a case under Chapter 11 of the
Bankruptcy Code as of the date of this Disclosure Statement. In the event,
however, that the Company receives properly completed Ballots and Master Ballots
(which are not subsequently revoked) indicating acceptance of the Plan in
sufficient number and amount to meet the voting requirements prescribed by
Section 1126 of the Bankruptcy Code, the Company intends to file a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code, and to seek
as promptly thereafter as is practicable, confirmation by the Bankruptcy Court
of the Plan. The Plan is expected to become effective on a date (the "Effective
Date") shortly following the entry of an order of confirmation (the
"Confirmation Order") of the Plan by the Bankruptcy Court. If the Plan is
confirmed by the Bankruptcy Court and becomes effective, all holders of impaired
claims and interests (including those who rejected or are deemed to have
rejected the Plan and those who did not submit Ballots or Master Ballots to
accept or reject the Plan) will be bound by the terms of the Plan.
DURING THE PENDENCY OF ANY BANKRUPTCY CASE THAT WILL BE FILED IN
CONNECTION WITH THE RESTRUCTURING, THE COMPANY INTENDS TO OPERATE ITS BUSINESS
IN THE ORDINARY COURSE AND (SUBJECT TO THE APPROVAL OF THE BANKRUPTCY COURT)
MAKE PAYMENT IN FULL ON A TIMELY BASIS TO ALL OF ITS TRADE CREDITORS AND
----
EMPLOYEES. The Company's secured lenders, general unsecured creditors, trade
creditors and employees will be unimpaired, except for certain contractual
rights of the Institutional Investor (as defined herein), and the Company
intends to pay all allowed pre-petition claims of the Company's secured lenders,
general unsecured creditors, trade creditors and employees in full. See "The
Plan--Treatment of Trade Creditors and Employees."
Consummation of the restructuring pursuant to the Plan is conditioned
upon, among other things, the following (unless waived in accordance with the
Plan): (i) the Plan shall have been confirmed by the Bankruptcy Court and the
Confirmation Order shall have become final; (ii) all agreements contemplated by
or entered into pursuant to the Plan shall have been duly and validly executed
and delivered by the parties thereto and all conditions to their effectiveness
shall have been satisfied or waived; and (iii) a new revolving credit facility
(the "New Credit Agreement") shall have been executed and all conditions to its
effectiveness shall have been satisfied or waived by the Bank (as defined
herein) as required thereunder. See "Description of the New Credit Agreement."
i
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THIS
DISCLOSURE STATEMENT, THE SOLICITATION, THE PLAN AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, AND RECOMMENDS THAT ALL HOLDERS OF THE
COMPANY'S SENIOR SUBORDINATED DEBENTURES DUE 1997 AND THE INSTITUTIONAL INVESTOR
SUBMIT BALLOTS OR MASTER BALLOTS ACCEPTING THE PLAN. For information on
procedures for voting on the Plan, see "The Solicitation; Voting Procedures."
The Plan provides, among other things, that:
(i) each holder of the Company's 11% Senior Subordinated Debentures
due 1997 (the "Old Subordinated Debentures") will receive, for each $1,000
principal amount of Old Subordinated Debentures, $1,000 of the Company's 15%
Senior Subordinated Debentures due 2007 (the "New Subordinated Debentures"), and
an amount in cash equal to 100% of the accrued but unpaid interest on the Old
Subordinated Debentures up to but excluding the Effective Date;
(ii) the legal, equitable, and contractual rights of each holder of
the Company's 11 1/2% First Mortgage Bonds, Series B due 2005, under the Amended
and Restated Indenture, dated as of March 9, 1993 (the "Bond Indenture"), will
be left unaltered;
(iii) the Amended and Restated Investment Agreement, dated March 2,
1993 (the "Old Investment Agreement") between the Company and Metropolitan Life
Insurance Company (the "Institutional Investor"), will be superseded by the
Second Amended and Restated Investment Agreement (the "New Investment
Agreement"), which will contain certain financial and operating covenants that
in some cases are less restrictive than those contained in the Old Investment
Agreement, and pursuant to which (x) the Company will redeem $10 million in
principal amount of the Company's 11.45% First Mortgage Bonds, Series A, due
2002 ("Series A Bonds") held by the Institutional Investor for an amount equal
to 100% of the principal amount thereof, and (y) the Company will have the
right, under certain circumstances, to redeem prior to scheduled maturity
additional Series A Bonds without payment of any prepayment premium, see
"Description of New Investment Agreement"; and
(iv) each general unsecured claim, at the election of the Company,
will be paid in full on or before the later of (x) the Effective Date and (y)
the date on which such claim becomes allowed, unless the holder of such claim
has agreed to a different treatment of such claim.
The Company is hereby soliciting acceptances of the Plan under Section
1126(b) of the Bankruptcy Code from the beneficial owners of the Old
Subordinated Debentures and the Institutional Investor as holders of impaired
claims.
In the event that the Requisite Acceptances are not received, or if
received are subsequently revoked, in either case, prior to the termination of
the Solicitation, the Company reserves the absolute right to use any and all
Ballots and Master Ballots accepting the Plan that were received pursuant to the
Solicitation, and not subsequently revoked, to seek confirmation of the Plan (or
of any modification thereof that does not adversely affect the treatment of the
classes of claims with respect to which such Ballots or Master Ballots were
cast) pursuant to Section 1129(b) of the Bankruptcy Code.
The Institutional Investor has advised the Company that it supports
the terms of the Plan, subject to its approval of final documentation and
subject to the condition that the Petition Date be no later than June 1, 1995,
and that the Effective Date shall have occurred no later than September 30,
1995.
ii
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NO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES LAWS HAS BEEN MADE
BY THE COMPANY WITH RESPECT TO THE NEW SUBORDINATED DEBENTURES THAT MAY BE
DEEMED TO BE OFFERED BY VIRTUE OF THE SOLICITATION. THE COMPANY IS RELYING ON
SECTION 4(2) OF THE SECURITIES ACT AND GENERALLY IS RELYING ON SIMILAR STATE LAW
PROVISIONS, AND TO THE EXTENT APPLICABLE, ON REGULATION D UNDER THE SECURITIES
ACT, SIMILAR STATE LAW PROVISIONS AND/OR SECTION 1145(A) OF THE BANKRUPTCY CODE,
TO EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS THE OFFER OF ANY NEW SUBORDINATED DEBENTURES THAT MAY BE DEEMED
TO BE MADE PURSUANT TO THE SOLICITATION. MORGAN STANLEY & CO. INCORPORATED
("MORGAN STANLEY") HAS AGREED TO ACT AS PURCHASER REPRESENTATIVE, WITHOUT
CHARGE, TO ANY HOLDER OF OLD SUBORDINATED DEBENTURES THAT IS NOT AN "ACCREDITED
INVESTOR" AS DEFINED IN REGULATION D OF THE SECURITIES ACT. IN ADDITION, ANY
HOLDER OF OLD SUBORDINATED DEBENTURES SOLICITED HEREBY MAY RETAIN ITS OWN
QUALIFIED PURCHASER REPRESENTATIVE FOR THE PURPOSES OF THIS SOLICITATION.
MORGAN STANLEY MAY BE CONTACTED AT THE ADDRESS AND TELEPHONE NUMBER SET FORTH ON
THE BACK COVER OF THIS DISCLOSURE STATEMENT.
THE NEW SUBORDINATED DEBENTURES TO BE ISSUED ON THE EFFECTIVE DATE
WILL NOT HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") UNDER THE SECURITIES ACT OR UNDER ANY STATE SECURITIES OR "BLUE
SKY" LAWS. SUCH NEW SUBORDINATED DEBENTURES WILL BE ISSUED IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS PROVIDED BY SECTION 1145(a) OF THE BANKRUPTCY CODE. THE COMPANY
IN ADDITION WILL USE ITS BEST EFFORTS TO FILE WITH THE COMMISSION AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE A REGISTRATION STATEMENT WITH RESPECT TO
THE NEW SUBORDINATED DEBENTURES. IF NO SUCH REGISTRATION STATEMENT IS FILED
WITHIN 60 DAYS FOLLOWING THE EFFECTIVE DATE, THE COMPANY WILL BE REQUIRED,
PURSUANT TO THE PLAN, TO FILE A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES UPON RECEIPT OF A WRITTEN REQUEST FOR SUCH REGISTRATION BY HOLDERS OF
25% IN PRINCIPAL AMOUNT OF THE NEW SUBORDINATED DEBENTURES. SUCH WRITTEN
REQUEST MUST BE RECEIVED ON OR BEFORE THE FIRST ANNIVERSARY OF THE EFFECTIVE
DATE. SEE "SECURITIES LAW CONSIDERATIONS."
THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR
SELL, OR THE SOLICITATION OF AN OFFER TO EXCHANGE OR BUY, THE OLD SUBORDINATED
DEBENTURES AND THE NEW SUBORDINATED DEBENTURES THAT MAY BE DEEMED TO BE OFFERED
HEREBY, WITH RESPECT TO ANY HOLDER OF OLD SUBORDINATED DEBENTURES THAT IS NOT AN
"ACCREDITED INVESTOR" AS DEFINED IN REGULATION D UNDER THE SECURITIES ACT AND
DOES NOT OTHERWISE QUALIFY AS AN INVESTOR IN AN OFFERING THEREUNDER OR UNDER
SECTION 4(2) OF THE SECURITIES ACT (THROUGH USE OF A QUALIFIED PURCHASER
REPRESENTATIVE OR OTHERWISE), TO THE EXTENT THAT SECTION 1145(a) OF THE
BANKRUPTCY CODE DOES NOT EXEMPT FROM REGISTRATION ANY SUCH OFFERING TO SUCH
HOLDER. ANY BALLOT SUBMITTED WITH RESPECT TO ANY SUCH HOLDER WILL BE DEEMED A
REJECTION FOR PURPOSES OF DETERMINING WHETHER REQUISITE VOTES FOR ACCEPTANCE OF
THE PLAN HAVE BEEN RECEIVED. IN ANY STATE OR OTHER JURISDICTION (DOMESTIC OR
FOREIGN) WHERE THE NEW SUBORDINATED DEBENTURES THAT MAY BE DEEMED TO BE OFFERED
HEREBY ARE REQUIRED TO BE QUALIFIED FOR OFFERING IN SUCH JURISDICTION, NO OFFER
IS HEREBY BEING MADE TO,
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AND THE RECEIPT OF BALLOTS WILL NOT BE ACCEPTED FROM, RESIDENTS OF SUCH
JURISDICTION UNLESS AND UNTIL SUCH REQUIREMENTS, IN THE SOLE AND FINAL
DETERMINATION OF THE COMPANY, HAVE BEEN FULLY SATISFIED. UNTIL SUCH TIME, ANY
BALLOT SUBMITTED WITH RESPECT TO ANY SUCH HOLDER WILL BE DEEMED A REJECTION FOR
PURPOSES OF DETERMINING WHETHER REQUISITE VOTES FOR ACCEPTANCE OF THE PLAN HAVE
BEEN RECEIVED.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE RESTRUCTURING, INCLUDING THE
MERITS AND RISKS INVOLVED. HOLDERS OF IMPAIRED CLAIMS SHOULD NOT CONSTRUE THE
CONTENTS OF THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS,
FINANCIAL OR TAX ADVICE. EACH SUCH HOLDER SHOULD CONSULT WITH ITS OWN LEGAL,
BUSINESS, FINANCIAL AND TAX ADVISORS WITH RESPECT TO ANY SUCH MATTERS CONCERNING
THIS DISCLOSURE STATEMENT, THE SOLICITATION, THE PLAN AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY. NEITHER THE PLAN NOR THE NEW SUBORDINATED
DEBENTURES HAVE BEEN APPROVED OR DISAPPROVED BY ANY BANKRUPTCY COURT, BY THE
COMMISSION OR BY ANY STATE SECURITIES COMMISSION OR SIMILAR PUBLIC, GOVERNMENTAL
OR REGULATORY AUTHORITY, NOR HAS ANY BANKRUPTCY COURT, THE COMMISSION OR ANY
SUCH STATE SECURITIES COMMISSION OR OTHER AUTHORITY PASSED UPON THE FAIRNESS OR
MERITS OF THE PLAN OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DISCLOSURE STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS OR MAY BE A
CRIMINAL OFFENSE.
FOR FLORIDA INVESTORS
---------------------
A PURCHASER (OTHER THAN AN INSTITUTIONAL INVESTOR DESCRIBED IN SECTION
517.061(7), FLA. STAT.) WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED
FROM REGISTRATION BY SECTION 517.061(11), FLA. STAT., MAY VOID SUCH PURCHASE
WITHIN A PERIOD OF THREE (3) DAYS AFTER HE (A) FIRST TENDERS CONSIDERATION TO
THE ISSUER, ITS AGENT OR AN ESCROW AGENT OR (B) THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO THE PURCHASER, WHICHEVER LATER OCCURS, UNLESS SALES
ARE MADE TO FEWER THAN FIVE (5) NON-INSTITUTIONAL PURCHASERS IN FLORIDA. TO
ACCOMPLISH THIS, IT IS SUFFICIENT FOR THE PURCHASER TO SEND A LETTER OR TELEGRAM
TO THE COMPANY WITHIN SUCH THREE (3) DAY PERIOD, STATING THAT HE IS VOIDING AND
RESCINDING THE PURCHASE. IF THE PURCHASER SENDS A LETTER, IT IS PRUDENT TO DO
SO BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO INSURE THAT IT IS RECEIVED
AND TO EVIDENCE THE TIME OF MAILING.
FOR NEW HAMPSHIRE INVESTORS,
IN ACCORDANCE WITH NEW HAMPSHIRE
UNIFORM SECURITIES ACT SECTION 421-B:20
---------------------------------------
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER THIS CHAPTER WITH THE STATE OF NEW HAMPSHIRE NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS
iv
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AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS
PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
FOR OREGON INVESTORS
--------------------
THE SECURITIES OFFERED HAVE BEEN REGISTERED WITH THE DIRECTOR OF THE
STATE OF OREGON UNDER PROVISIONS OF OAR 441 DIVISION 65. THE INVESTOR IS
ADVISED THAT THE DIRECTOR HAS MADE ONLY A CURSORY REVIEW OF THE REGISTRATION
STATEMENT AND HAS NOT REVIEWED THIS DOCUMENT SINCE THE DOCUMENT IS NOT REQUIRED
TO BE FILED WITH THE DIRECTOR.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE
COMPANY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES.
FOR PENNSYLVANIA INVESTORS
--------------------------
A PURCHASER WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION BY SECTION 203(D) OF THE PENNSYLVANIA SECURITIES ACT DIRECTLY FROM
THE ISSUER OR AN AFFILIATE OF THE ISSUER HAS THE RIGHT TO WITHDRAW HIS
ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY)
OR ANY OTHER PERSON WITHIN TWO (2) BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE
ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A
TRANSACTION IN WHICH THERE IS NO BINDING CONTRACT OF PURCHASE, WITHIN TWO (2)
BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING
OFFERED.
TO ACCOMPLISH THIS WITHDRAWAL, A PURCHASER NEED ONLY SEND A LETTER OR
TELEGRAM TO THE ISSUER INDICATING HIS INTENTION TO WITHDRAW. SUCH LETTER OR
TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED
SECOND BUSINESS DAY. IT IS PRUDENT TO SEND SUCH LETTER BY CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO ENSURE THAT IT WAS RECEIVED. IF THE REQUEST IS
MADE ORALLY, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE
REQUESTED.
A PURCHASER OF SECURITIES IN RELIANCE ON EXEMPTION FROM REGISTRATION
UNDER SECTION 203(d) OF THE PENNSYLVANIA SECURITIES ACT MAY NOT SELL THE
SECURITIES FOR A PERIOD OF TWELVE MONTHS FROM THE DATE OF PURCHASE, EXCEPT IN
ACCORDANCE WITH RULE 204.011 OF THE PENNSYLVANIA CODE, AS AMENDED.
FOR VERMONT INVESTORS
---------------------
A NON-ACCREDITED PURCHASER WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES
EXEMPTED FROM REGISTRATION BY THE VERMONT UNIFORM LIMITED OFFERING EXEMPTION
DIRECTLY FROM THE ISSUER OR AN AFFILIATE OF THE ISSUER HAS THE RIGHT
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TO WITHDRAW SUCH ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE ISSUER OR ANY
OTHER PERSON WITHIN THREE (3) CALENDAR DAYS AFTER FIRST TENDER OF CONSIDERATION
IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW
AGENT, OR WITHIN THREE (3) CALENDAR DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
This Disclosure Statement is being furnished on a confidential basis
to each creditor of the Company known to it to hold a claim against the Company
that would be impaired under the Plan and is to be used solely by each such
holder in connection with its evaluation of the Plan. Its use for any other
purposes is not authorized. Without the prior written consent of the Company,
this Disclosure Statement may not be reproduced or provided to others (other
than to those advisors of a holder of an impaired claim who need to know such
information to assist such holder in its evaluation of the Plan and to any
person to whom such holder may transfer all or a portion of such claim).
Additional information concerning the documents referred to herein may be
obtained through the Company. See "Additional Information."
Except as set forth under "Additional Information," no person has been
authorized to give any information or make any representation not contained in
this Disclosure Statement, and if given or made, such information or
representation must not be relied upon. The statements contained in this
Disclosure Statement are made as of the date hereof, and neither delivery of
this Disclosure Statement nor any exchange or issuance of New Subordinated
Debentures pursuant to the Plan will, under any circumstances, create any
implication that the information contained herein is correct at any time
subsequent to the date hereof. With respect to other available information, see
"Additional Information."
vi
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
INTRODUCTION AND SUMMARY.............................................. 1
THE RESTRUCTURING..................................................... 10
COMPARISON OF OLD SUBORDINATED DEBENTURES AND NEW SUBORDINATED
DEBENTURES....................................................... 16
RISK FACTORS.......................................................... 19
SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION................. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................ 31
PRO FORMA FINANCIAL INFORMATION....................................... 44
BUSINESS PLAN......................................................... 47
FINANCIAL PROJECTIONS................................................. 49
BUSINESS.............................................................. 55
MANAGEMENT............................................................ 66
PRINCIPAL SHAREHOLDERS................................................ 78
THE PLAN.............................................................. 81
THE SOLICITATION; VOTING PROCEDURES................................... 105
CREDITORS' COMMITTEES................................................. 111
SECURITIES LAW CONSIDERATIONS......................................... 111
DESCRIPTION OF THE NEW CREDIT AGREEMENT............................... 115
DESCRIPTION OF NEW INVESTMENT AGREEMENT............................... 117
DESCRIPTION OF NEW SUBORDINATED DEBENTURES............................ 131
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................. 162
FINANCIAL ADVISORS.................................................... 171
ADDITIONAL INFORMATION................................................ 171
</TABLE>
vii
<PAGE>
Appendices
Appendix A -- The Plan
Appendix B -- Liquidation Analysis
Appendix C -- Commitment letter dated April 3, 1995 between Americold
Corporation and United States National Bank of Oregon
viii
<PAGE>
INTRODUCTION AND SUMMARY
This Disclosure Statement describes a proposed financial restructuring (the
"Restructuring") of Americold Corporation, an Oregon corporation ("Americold" or
the "Company"). The principal purpose of the Restructuring is to reduce the
Company's short-term cash requirements with respect to its subordinated
indebtedness and to adjust certain restrictive financial covenants and certain
other provisions contained in the Amended and Restated Investment Agreement,
dated March 2, 1993 (the "Old Investment Agreement"), between the Company and
Metropolitan Life Insurance Company (the "Institutional Investor"). The
Restructuring is designed to create a capital structure that will allow the
Company to service its debt obligations, to continue its capital expenditure
program and to enhance the competitive position of its business and operations.
The Restructuring is proposed to be accomplished pursuant to a "prepackaged"
plan of reorganization (the "Plan") in a case (the "Prepackaged Proceeding")
under Chapter 11 ("Chapter 11") of the United States Bankruptcy Code (the
"Bankruptcy Code"). The Company has not commenced a case under Chapter 11 as of
the date of this Disclosure Statement. The Plan provides, among other things,
that claims of the Company's general unsecured creditors, trade creditors,
employees and secured lenders other than the Institutional Investor will remain
unimpaired and trade creditors and employees will be paid in full in the
ordinary course of business. A copy of the Plan is attached as Appendix A
hereto. Unless otherwise noted, initially capitalized terms used but not
defined in this Disclosure Statement shall have the respective meanings ascribed
to such terms in the Plan. All pro forma financial information and projections
contained in this Disclosure Statement are based on the assumptions as set forth
under "Financial Projections."
Americold is the nation's largest supplier of refrigerated warehouse
services to the frozen food industry. The Company also provides transportation
management services to frozen food manufacturers. Services are provided through
the Company's national network of 51 refrigerated warehouses and through the
Company's refrigerated transportation management unit. The Company provides
these and other services either separately or in conjunction with warehousing
services. The Company's principal executive offices are located at 7007 S.W.
Cardinal Lane, Suite 135, Portland, Oregon 97224. Its telephone number is (503)
624-8585.
Since its founding in 1911, the Company has grown to become the largest
owner and operator of refrigerated warehouses in the United States. The Company
believes it supplies approximately 16% of the total publicly available freezer
storage space in the country. With more than twice the capacity of its nearest
competitor, the Company's network of 51 refrigerated warehouse facilities in
fifteen states provides a total storage capacity of approximately 230 million
cubic feet. Approximately 94% of the storage
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<PAGE>
space operated by the Company is freezer space (zero degrees Fahrenheit and
below), with the remaining space divided between cooler space (28 degrees
Fahrenheit and above) and unrefrigerated dry storage space. The Company
believes that its facilities are sufficiently dispersed geographically to allow
it to compete in most of the significant markets in the United States.
Americold serves a broad array of customers ranging from small local food
producers to most of the large national frozen food companies. Major customers
include ConAgra, Inc., Dean Foods Co., General Mills, Inc., H. J. Heinz Co.,
Kellogg Co., Nestle S.A., The Pillsbury Company and the United States Department
of Agriculture (the "USDA"). Major items stored include vegetables, potatoes,
fish, poultry, prepared foods and fruits.
The Company is currently controlled by Kelso & Company, an investment
banking firm, and its affiliates (collectively, "Kelso"), which together
currently hold approximately 53% of the Company's common equity. Management of
the Company beneficially owns approximately 11% of the Company's common equity.
See "Principal Shareholders."
Americold was founded in 1911, reincorporated in 1931 and, prior to 1984,
operated as The Terminal Ice and Cold Storage Company and, subsequently,
Termicold Corporation. In December 1982, Americold was acquired by Beatrice
Companies, Inc. ("Beatrice"). Beatrice was acquired by BCI Holdings
Corporation, an affiliate of Kohlberg Kravis Roberts & Co., in April 1986. In
December 1986, Kelso, certain institutional investors (the "Co-Investors") and
members of Americold's management (the "Management Group") purchased the Company
(the "Acquisition").
"Americold(R)" and "SUPERCOLD(R)" are registered service marks of Americold
Corporation.
Unless otherwise noted, all references to years refer to calendar years.
All references to fiscal years refer to the fiscal year of the Company ending
the last day of February of each year.
Reasons for the Restructuring
Although the Company is currently in compliance with all applicable
financial and operating covenants contained in its debt agreements, the
Company's current financial forecasts indicate that available cash and cash flow
from operating activities will not be sufficient to allow the Company to cover
its debt service obligations and to remain in compliance with its debt agreement
covenants in fiscal 1996. The expected shortfalls in cash are likely to limit
the Company's financial flexibility, including its ability to repay the
principal and interest due on its 11% Senior Subordinated Debentures due 1997
(the "Old Subordinated Debentures"), and to access the capital markets.
2
<PAGE>
The Company's operating results and cash flow have been and will continue
to be materially affected by the indebtedness incurred to finance the
Acquisition. For fiscal 1995, interest expense, principally related to debt
incurred to finance the Acquisition, totalled $55.3 million. In addition, the
Company's ability to meet its debt service obligations since the Acquisition has
been substantially affected by unanticipated reductions in net sales due to
adverse conditions in the agricultural sector in the United States, including
the severe drought in 1988 and the flooding in the Midwest in 1993, and in
particular due to the effects of a fire in December 1991 at the Company's Kansas
City, Kansas underground warehouse facility (the "Kansas City Fire"). While the
noted adverse agricultural conditions no longer exist, the Company anticipates
that the adverse effects of the Kansas City Fire on operating results, due to
the loss of customers, especially lease customers, will continue for at least
the next several years.
Principal Elements of the Restructuring
The principal elements of the Restructuring and the principal effects of
its consummation pursuant to the Plan are described below. For a more detailed
discussion, see "The Restructuring" and "The Plan."
Exchange of Old Subordinated Debentures for New Subordinated Debentures.
The Plan provides for the exchange on the date the Plan becomes effective
(the "Effective Date") of the Old Subordinated Debentures for the Company's 15%
Senior Subordinated Debentures, due 2007 (the "New Subordinated Debentures").
Each holder of Old Subordinated Debentures will receive for each $1,000
principal amount thereof $1,000 of New Subordinated Debentures. Interest on the
Old Subordinated Debentures will continue to accrue up to but excluding the
Effective Date. Interest on the New Subordinated Debentures will begin to
accrue on the Effective Date and will be payable semi-annually on May 1 and
November 1. The New Subordinated Debentures will be subject to redemption in
whole or in part at the option of the Company at any time, at a redemption price
equal to the unpaid principal amount thereof. For a more complete description
of the New Subordinated Debentures to be issued in exchange for the Old
Subordinated Debentures, see "Description of New Subordinated Debentures."
New Investment Agreement
The Plan provides that the Old Investment Agreement will be superseded as
of the Effective Date by the Second Amended and Restated Investment Agreement
(the "New Investment Agreement"), which will contain certain financial and
operating covenants that in certain cases are less restrictive than those
contained in the Old Investment Agreement. Pursuant to the New Investment
3
<PAGE>
Agreement, the Company will redeem on the Effective Date $10 million in
principal amount of its 11.45% First Mortgage Bonds, Series A, due 2002 ("Series
A Bonds") held by the Institutional Investor at 100% of the principal amount
thereof. In addition, the New Investment Agreement gives the Company the right,
under certain circumstances, to redeem prior to scheduled maturity additional
Series A Bonds without payment of any prepayment premium. In connection with
the modification of the Old Investment Agreement, the Company will pay to the
Institutional Investor an agreement modification fee (the "Agreement
Modification Fee") in an amount equal to 1.5% of the principal amount of Series
A Bonds held by the Institutional Investor prior to any redemption of Series A
Bonds pursuant to the Restructuring. The Company anticipates that the Agreement
Modification Fee will be $2.25 million. See "Description of New Investment
Agreement."
New Credit Agreement
United States National Bank of Oregon, the Company's primary lender (the
"Bank"), and the Company have executed a commitment letter to enter into a new
revolving credit facility (the "New Credit Agreement") upon the Effective Date
on terms and conditions acceptable to the Bank, subject to negotiation of
mutually acceptable loan documents. The New Credit Agreement will be secured by
the Company's trade receivables and mortgages on certain of the Company's
warehouse properties. The funds provided by the New Credit Agreement will be
used for general corporate purposes, including working capital, letters of
credit and capital expenditures. The New Credit Agreement will provide an
aggregate availability of $27.5 million, which may be used for any combination
of letters of credit (up to $10 million) and revolving cash borrowings, subject
to borrowing base limitations. The borrowing base will equal 85% of eligible
accounts receivable plus 70% of the value of all real property mortgaged to the
Bank, up to a maximum of $27.5 million, less the amount represented by letters
of credit outstanding. The New Credit Agreement will replace the Company's
existing bank credit agreement with the Bank (the "Old Credit Agreement") and
will mature on February 28, 1999. The commitment letter is attached to this
Disclosure Statement as Appendix C.
First Mortgage Bonds
The Plan provides that the legal, equitable, and contractual rights of each
holder of the Series A Bonds and the Company's 11 1/2% First Mortgage Bonds,
Series B, due 2005 under the Amended and Restated Indenture (the "Bond
Indenture"), will be left unaltered, and the holders thereof, other than the
Institutional Investor, will be unimpaired.
4
<PAGE>
Trade Creditors
DURING THE PENDENCY OF THE PREPACKAGED PROCEEDING, THE COMPANY INTENDS TO
CONTINUE TO OPERATE ITS BUSINESS IN THE ORDINARY COURSE AND TO PAY ALL POST-
PETITION CLAIMS OF TRADE CREDITORS IN FULL ON A TIMELY BASIS. THE COMPANY ALSO
WILL SEEK APPROVAL OF THE BANKRUPTCY COURT IMMEDIATELY UPON THE FILING OF THE
PETITION TO PAY IN FULL IN THE ORDINARY COURSE THE PRE-PETITION CLAIMS OF EACH
TRADE CREDITOR WHO AGREES TO CONTINUE TO SUPPLY PRODUCTS OR SERVICES TO THE
COMPANY ON CUSTOMARY TRADE TERMS AND FURTHER AGREES THAT IF SUCH CREDITOR LATER
UNREASONABLY REFUSES TO CONTINUE TO SUPPLY PRODUCTS OR SERVICES DURING THE
PREPACKAGED PROCEEDING ON CUSTOMARY TRADE TERMS, ANY PAYMENTS BY THE COMPANY TO
SUCH CREDITOR IN RESPECT OF ANY PRE-PETITION CLAIMS SHALL BE DEEMED ADVANCES
THAT ARE RECOVERABLE IN CASH OR IN FUTURE PRODUCTS AND SERVICES AND SUCH PRE-
PETITION CLAIMS SHALL BE REINSTATED. MANAGEMENT EXPECTS THAT UPON ENTRY OF AN
ORDER AUTHORIZING USE OF CASH COLLATERAL (THE "CASH COLLATERAL ORDER"), THE
COMPANY WILL HAVE SUFFICIENT FUNDS FROM OPERATIONS AND FROM CASH RESERVES TO
CONTINUE TO PAY ITS TRADE CREDITORS IN THE ORDINARY COURSE THROUGH THE
CONCLUSION OF THE PREPACKAGED PROCEEDING, AND TO HAVE SUFFICIENT LIQUIDITY UNDER
THE NEW CREDIT AGREEMENT AND FROM OPERATIONS TO MAKE SUCH PAYMENTS THEREAFTER.
Under the Plan, trade creditors will not be required to file proofs of claim
with the Bankruptcy Court, and it is not expected that they will be required to
take any other action to receive payment on their claims. For further
information, see "The Plan--Treatment of Trade Creditors and Employees."
The Solicitation
This Disclosure Statement, and the related materials delivered herewith
(including the forms of ballots (collectively, the "Ballots") and/or master
ballots (collectively, the "Master Ballots") for use in connection with the
Plan), are being furnished by the Company pursuant to Section 1126(b) of the
Bankruptcy Code, in connection with the solicitation (the "Solicitation") by it
of acceptances of the Plan. The Company believes that it will have the best
opportunity to accomplish the Restructuring if it receives, prior to the
commencement of any bankruptcy case, votes from the holders of impaired claims
that are sufficient in amount and number to confirm the Plan. The classes of
creditors whose claims will be impaired under the Plan consist of the holders of
the Old Subordinated Debentures and the Institutional Investor. Accordingly,
the Company is hereby soliciting acceptances of the Plan from such classes of
creditors.
<TABLE>
<CAPTION>
Voting Procedures
<S> <C>
Ballot Return Date.................. Ballots and Master Ballots with
respect to the Solicitation may be
submitted until 3:00 p.m., Portland,
Oregon time, on May 8, 1995
(the
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
"Ballot Return Date"), unless
extended by the Company, in which
case the term "Ballot Return Date"
shall mean the time and date to which
the Solicitation has been extended.
The Company will make a public
announcement of any extension, prior
to 9:00 a.m., Portland, Oregon time,
on the next business day after the
previously scheduled Ballot Return
Date. See "The Solicitation; Voting
Procedures--Procedure for Voting on
the Plan."
Holders Entitled to Vote
on the Plan........................... Only holders (i.e., beneficial
owners) of Old Subordinated
Debentures ("Holders") as of March
31, 1995 (the "Ballot Record Date")
or their authorized signatories, and
the Institutional Investor, are
eligible to vote on the Plan.
How to Vote on
the Plan.............................. Holders and the Institutional
Investor should complete and sign the
Ballot in accordance with the
instructions thereon, being sure to
check the appropriate boxes thereon.
See "The Solicitation--Voting
Procedures."
The Institutional Investor and any
Holder holding Old Subordinated
Debentures on the Ballot Record Date
in its own name may vote by
completing and signing the enclosed
Ballot and returning it directly to
the Ballot Agent (as identified on
the back cover), using the enclosed
pre-addressed envelope so that it is
received by the Ballot Return Date.
Any Holder holding Old Subordinated
Debentures on the Ballot Record Date
through a brokerage firm, commercial
bank, trust company or other nominee
(a "Nominee") can vote by either (i)
completing the Ballot and returning
it to the Nominee early enough to
permit such Nominee to transcribe the
information onto a Master Ballot
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
and return the Master Ballot to the
Ballot Agent, so that it is received
before the Ballot Return Date, or
(ii) if the Ballot has been executed
by the Nominee, completing the Ballot
and returning it directly to the
Ballot Agent, so that it is received
before the Ballot Return Date.
Requests for additional copies of
Ballots and Master Ballots should be
directed to the Ballot Agent at the
address or telephone number set forth
on the back cover of this Disclosure
Statement.
It is important that all Holders and
the Institutional Investor vote to
accept or reject the Plan. Only
Holders who vote will be counted for
purposes of determining whether the
required number of votes for
acceptance of the Plan have been
received. Failure by a Holder to
vote will be deemed to be an
abstention. Abstentions will not be
counted as votes for or against the
Plan.
Withdrawal or Change of
Vote.................................. The Institutional Investor and any
Holder who has voted on the Plan may
(i) change its vote or election by
delivering a subsequent properly
completed Ballot or Master Ballot in
accordance with the procedures
described above or (ii) withdraw its
vote or election by delivering a
written or facsimile transmission
notice of revocation to Tonkon, Torp,
Galen, Marmaduke & Booth (the "Ballot
Agent") (or, if the Old Subordinated
Debentures are held by a Nominee, to
the Nominee so that the Nominee may
deliver such notice of revocation to
the Ballot Agent), so that the Ballot
Agent receives such notice prior to
the Ballot Return Date.
</TABLE>
7
<PAGE>
Acceptances of the Plan are being solicited from each class of claims of
the Company that will be impaired under the Plan pursuant to Section 1126(b) of
the Bankruptcy Code and Bankruptcy Rule 3018(b) in advance of the date on which
any bankruptcy case will be commenced by the Company (the "Petition Date").
Each such class will be considered to have accepted the Plan if the Plan is
accepted by creditors in such class that hold at least two-thirds in aggregate
dollar amount and more than one-half in number of the allowed claims held by
those creditors in such class that have timely voted on the Plan (the "Requisite
Acceptances"). Under the Bankruptcy Code, only the votes actually cast to
accept or reject the Plan will be counted for purposes of determining the
acceptance or rejection of the Plan by any impaired class of claims or
interests. Accordingly, the Plan could be approved by any impaired class of
claims with the affirmative vote of significantly less than two-thirds in amount
and one-half in number of the claims in such class. Even if all impaired
classes of claims and interests accept the Plan, the Plan might not be confirmed
if the Bankruptcy Court finds that the Plan fails to comply with any of the
requirements of Section 1129 of the Bankruptcy Code. See "The Plan--
Confirmation of the Plan" and "Risk Factors--The Prepackaged Proceeding--Certain
Risks of Nonconfirmation."
The Company believes that the prior acceptance of the Plan by the holders
of impaired claims would minimize disputes during a reorganization under the
Bankruptcy Code, and therefore would reduce the expenses and shorten the time
required to complete such a reorganization. The Company believes that this
would minimize the disruption of the Company's business that could result from a
nonprepackaged bankruptcy case, which would likely be contested and protracted.
In such a bankruptcy, the Company believes that there is a substantial risk that
the holders of the Old Subordinated Debentures would receive significantly less
than they will receive under the Plan. If the Company were required to initiate
a liquidation proceeding under Chapter 7 of the Bankruptcy Code ("Chapter 7"),
the Company believes that there is a substantial risk that holders of unsecured
claims, including holders of the Old Subordinated Debentures, would receive no
distribution. See "Liquidation Analysis" attached as Appendix B.
If the Requisite Acceptances are not received, the Company anticipates
filing for protection under the Bankruptcy Code without a pre-approved plan of
reorganization. The Company reserves the right, however, in its sole and
absolute discretion, not to commence any bankruptcy case even if the Requisite
Acceptances are received. In addition, the Company reserves the right to use
acceptances of the Plan to seek confirmation of a plan of reorganization under
any other circumstances permitted by law, including the filing of any
involuntary bankruptcy petition against the Company or its subsidiaries. The
Company also reserves the right in its sole discretion to amend or to withdraw
this Solicitation and this Disclosure Statement at any time.
8
<PAGE>
The Company reserves the right to amend or modify the terms of the Plan or
waive any of the conditions thereto, subject to the requirements of the
Bankruptcy Code and such other consents as may be required under the Plan,
including the consent of the Institutional Investor, if and to the extent that
it determines that such amendments or modifications are necessary or desirable
in order to complete the Restructuring. The Company will give the Institutional
Investor and the holders of the Old Subordinated Debentures such notice of
amendments and modifications as may be required by the Plan or by applicable
law, including any material changes to the financial, economic or other terms
and conditions of the Plan. In addition, certain amendments or modifications of
the Plan may require the consent of certain other parties. See "The Plan--
Amendments to or Modification of the Plan."
9
<PAGE>
THE RESTRUCTURING
Background
The Acquisition and Subsequent Refinancings
The Company was acquired in December 1986 by a private group consisting of
Kelso, the Co-Investors and the Management Group. The Acquisition was funded by
cash and bridge financing which was refinanced in three stages. In April 1987,
the Company executed an $85 million bank credit agreement with the Bank. In May
1987, the Company issued $115 million of Old Subordinated Debentures, and in
June 1987 the Company issued $300 million of its 11.45% First Mortgage Bonds,
due 2002 ("Series A Bonds"). In February 1993, the Company replaced the $85
million bank credit facility with a $27.5 million facility with the Bank. In
March 1993, the Company issued $176.25 million of its 11 1/2% First Mortgage
Bonds, Series B, due 2005 ("Series B Bonds"), and used $150 million of the
proceeds to repurchase an equivalent amount of Series A Bonds, with the
remainder of the net proceeds placed in escrow to be used for the construction
or acquisition of warehouse properties within a three-year period ending in
March 1996. As of February 28, 1995, the Company had outstanding indebtedness
for money borrowed in principal amount equal to $474.2 million net of applicable
original issue discount.
As a result of the Acquisition and subsequent financings, the Company's
capitalization became highly leveraged, with substantial interest expense and
principal repayment obligations. The Company planned to service its debt
obligations principally from cash flow from operations. The Company has not,
however, achieved the cash flow levels expected at the time of the Acquisition,
as discussed below in "--Adverse Business Events," and its percentage of total
debt to total capitalization as of February 28, 1995 was approximately 117%.
Adverse Business Events
The Company's results from operations since the Acquisition have fallen
below those reasonably expected at the time of the Acquisition. Several events
beyond the control of the Company significantly contributed to the shortfall in
the Company's results.
Adverse Agricultural Conditions. Since the Acquisition, there have been two
major disruptions in the agricultural sector that have affected the Company's
operating results. In calendar 1988 a severe drought adversely affected the
vegetable harvests in the midwestern United States. Recovery from the drought
was modest in calendar 1989. As a result, the Company's storage levels of
frozen vegetables were significantly reduced for the third quarter of fiscal
1989 through the second quarter of fiscal 1990, and
10
<PAGE>
continued to be below normal through the second quarter of fiscal 1991.
In calendar 1993, major flooding in the midwestern United States caused
significant crop losses which resulted in subsequent reductions of the levels of
frozen vegetables stored in the Company's warehouses in the Midwest. In
addition, the levels of frozen vegetables in the Company's warehouses in the
western states were reduced, as vegetable processors in the West supplied the
market with increased quantities of frozen vegetables as replacement for Midwest
vegetables. The Company's reduced storage levels extended from the incidence of
flooding in calendar 1993 to the next year's harvest. The affected warehouses
experienced a recovery in the second half of calendar 1994, due to a strong
vegetable harvest in calendar 1994. As a result, the negatively affected
quarters were limited to the third and fourth quarters of fiscal 1994 and the
first and second quarters of fiscal 1995. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."
The Company's records indicate that the storage of vegetables accounts for
approximately 25% of its storage volumes in a normal year. The 1988 drought is
estimated to have reduced vegetable storage volume by approximately 25% and the
1993 flooding was estimated to have reduced the Company's volume of frozen
vegetables stored by approximately 24%. While the Company remains susceptible
to problems in vegetable and other harvests, the Company believes that the
severity of the 1988 drought and the 1993 floods were extreme.
Kansas City Fire. In December 1991 a fire began at the Company's Kansas
City, Kansas underground warehouse, the Company's largest warehouse facility.
Due to its underground location, the fire took several months to extinguish.
The fire was confined to an unrefrigerated area of the warehouse; however, a
significant amount of product in the warehouse at the time of the fire sustained
smoke damage.
As a result of the fire, the Company's warehousing activities in Kansas
City have operated at a substantially reduced level, due to reduced warehouse
volume and loss of public storage and lease customers. The fire also caused the
Company to discontinue its record center storage operations. The Company
abandoned 63% of its less productive dry storage space and 11% of its freezer
space, and the balance of the Kansas City, Kansas warehouse facility has been
restored to substantially its pre-fire condition. The Company is, however,
unable to predict its ability to return the facility to pre-fire operating
volumes and profits. While the Company has had some success in rebuilding its
public storage business, revenue from the lease of space to third parties
remains significantly below pre-fire levels. The Company anticipates that the
adverse effects of the Kansas City Fire on operating results due to the
11
<PAGE>
loss of customers, especially lease customers, will continue for at least the
next several years. For additional information with respect to the Kansas City
Fire, see "Business--Legal Proceedings and Insurance" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Comparison of Nine-Month Periods Ended November 30, 1993 and 1994."
Current Cash Flow Concerns
Under its existing capital structure, the Company's debt service
requirements in the first quarter of fiscal 1996 include payments relating to
the First Mortgage Bonds and Old Subordinated Debentures totalling approximately
$45 million. Of this amount, $28.75 million represents a sinking fund payment
due May 1, 1995 on the Old Subordinated Debentures. While the Company believes
it will have adequate cash and available borrowings under the Old Credit
Agreement to fund such requirements, the Company believes that making such
payments would create a default at the next measurement date (May 31, 1995)
under the pro forma debt service covenant contained in the Old Investment
Agreement, and a default under the Old Credit Agreement relating to an out-of-
debt requirement as of June 30, 1995. Under such circumstances, the
Institutional Investor and the Bank could declare the principal of and accrued
but unpaid interest on all the First Mortgage Bonds and borrowings under the Old
Credit Agreement to be immediately due and payable. Upon such a declaration,
such principal and interest and a premium thereon would be classified as a
current liability. The Company, therefore, is proposing the Restructuring to
alleviate the Company's anticipated liquidity constraints and to avoid
defaulting under its debt agreements.
Restructuring Discussions
In response to its short-term liquidity constraints, the Company retained
Morgan Stanley & Co. Incorporated ("Morgan Stanley") in the fall of 1994 to
develop an appropriate refinancing plan for the Old Subordinated Debentures.
Several refinancing alternatives were considered, including an exchange offer
for the Old Subordinated Debentures, a voluntary bankruptcy case other than the
Prepackaged Proceeding and the Restructuring proposed herein.
The Company believes that, given the ongoing volatility of the high yield
debt market, the Restructuring offers a greater chance for completion than an
exchange offer. Therefore, on January 20, 1995, the Company executed an
engagement letter with Morgan Stanley, pursuant to which Morgan Stanley is
acting as financial advisor to the Company in connection with the Restructuring.
On March 1, 1995, the Company met with a large holder of its Old Subordinated
Debentures, and proposed a restructuring of its capital structure pursuant to
which the maturity of the Old Subordinated Debentures would be extended from
1997 to 2007, scheduled amortization payments would be eliminated, the interest
12
<PAGE>
rate would be increased and the financial covenants would be significantly
strengthened. The Restructuring proposed herein reflects extensive discussions
regarding the proposed Restructuring among the Company and its financial and
legal advisors. The Company and the Institutional Investor also have engaged in
extensive negotiations relating to the terms of the Restructuring. The
Institutional Investor and the Company have agreed in principle to the terms of
the New Investment Agreement, and the Institutional Investor has indicated that
it supports the Plan, which will result in the elimination or modification of
certain covenants contained in the Old Investment Agreement, subject to its
approval of final documentation and subject to the condition that the Petition
Date be no later than June 1, 1995, and that the Effective Date be entered no
later than September 30, 1995.
The Company believes that the Restructuring as proposed herein is the best
available alternative for alleviating the Company's short-term liquidity
constraints and that the Plan offers the greatest potential recovery for its
creditors consistent with the establishment of a viable financial basis for
successful future operations. In addition, the New Credit Agreement will extend
the maturity and availability of the Company's credit facility to increase its
financial flexibility and to allow the refinancing of the Old Subordinated
Debentures. Management believes that as a result of the Restructuring, the
Company's short-term liquidity will improve and the Company will continue to be
able to invest in its business in order to meet customer demands and remain
competitive. No assurance can be given, however, that there will be any long-
term growth and appreciation in the value of the Company's business, even after
the Restructuring. See "Risk Factors--Substantial Leverage; Net Losses; Deficit
of Earnings to Fixed Charges; --Substantial Payment Obligations; Consequences of
Failure to Service Debt." For a description of the current capitalization of
the Company and pro forma financial information relating to the Company's post-
Restructuring capitalization, see "Pro Forma Financial Information."
The Prepackaged Proceeding
The Company intends to seek confirmation of the Plan in a voluntary
prepackaged case under Chapter 11 of the Bankruptcy Code as the means for
effecting the Restructuring. The Company is soliciting acceptances of the Plan
pursuant to Section 1126(b) of the Bankruptcy Code, which provides for a
solicitation of acceptances of a plan of reorganization in advance of a
bankruptcy filing. If the Plan is confirmed by the Bankruptcy Court, the
Company will be discharged on the Effective Date from all claims arising prior
to such confirmation, except as provided in the Plan.
The Board of Directors of the Company has not as of the date of this
Disclosure Statement formally approved any bankruptcy filing, and may in its
discretion choose to pursue other alterna-
13
<PAGE>
tives, including the implementation of another restructuring plan outside of
bankruptcy or commencing a Chapter 11 case to implement a plan of reorganization
other than the Plan. The Company has not commenced a bankruptcy case as of the
date of this Disclosure Statement.
For a further discussion of the Prepackaged Proceeding and the Plan, see
"The Plan." Before deciding whether to accept or reject the Plan, each member
of a class whose claims will be impaired under the Plan should consider
carefully all of the information contained in the Plan and this Disclosure
Statement, and in particular the discussion of certain risk factors relating to
the Company and debt of the Company, as well as certain risk factors relating
specifically to the Prepackaged Proceeding. See "Risk Factors."
First Day Orders
To minimize possible disruption to the Company's operations upon the
commencement of the Prepackaged Proceeding, the Company intends to seek approval
of a number of so-called "first day orders" from the Bankruptcy Court on the
Petition Date. These first day orders will include, among others: (i) an order
authorizing the Company to pay pre-petition claims of trade creditors who
consent to honor customary trade terms; (ii) an order authorizing payment of
pre-petition wages, salaries, commissions, employee benefits, incentive
programs, and expense reimbursements; (iii) an order authorizing the Company to
pay applicable state and federal taxes; and (iv) an order authorizing the
Company to use the cash proceeds of its pre-petition accounts receivable which
presently secure the obligations owing to the Bank (the "Cash Collateral
Order").
The first day orders will be sought pursuant to accompanying motions. The
foregoing list is subject to change based on the needs of the Company in
connection with its operations throughout the Prepackaged Proceeding.
Transferability of New Subordinated Debentures
Any holder of Old Subordinated Debentures who receives New Subordinated
Debentures pursuant to the Plan generally will be able to resell its New
Subordinated Debentures without registration under federal and state securities
laws, pursuant to the Bankruptcy Code, unless such holder is an "underwriter" as
defined in Section 1145(b) of the Bankruptcy Code, which may include affiliates
of the Company. The Company does not intend to apply to list the New
Subordinated Debentures on any securities exchange or to seek approval for
quotation of such securities through any automated quotation system. The New
Subordinated Debentures should be tradeable in the over-the-counter market, but
any such trading may
14
<PAGE>
be limited and sporadic. See "Risk Factors--Absence of Established Trading
Market; Liquidity of New Subordinated Debentures."
In addition, the Company will use its best efforts to file at its expense
with the Securities and Exchange Commission (the "Commission"), as soon as
practicable after the Effective Date, a registration statement ("Registration
Statement") with respect to the New Subordinated Debentures. If no such
Registration Statement is filed within 60 days following the Effective Date, the
Company will be required pursuant to the Plan to file a Registration Statement
with respect to such securities upon receipt of a written request for such
registration from the holders of 25% in principal amount of the New Subordinated
Debentures. Such written request must be received by the Company on or before
the first anniversary of the Effective Date.
15
<PAGE>
COMPARISON OF OLD SUBORDINATED DEBENTURES AND
NEW SUBORDINATED DEBENTURES
The following is a brief comparison of the principal features of the Old
Subordinated Debentures and the New Subordinated Debentures. The terms of the
New Subordinated Debentures differ from the terms of the Old Subordinated
Debentures in certain significant respects, including those described below.
The summary comparisons set forth below are summaries which do not purport to be
complete and are qualified in their entirety by reference to the Description of
the New Subordinated Debentures and the related definitions contained therein.
<TABLE>
<CAPTION>
Old Subordinated Debentures New Subordinated
----------------------------- ----------------
Debentures
----------
<S> <C> <C>
Principal Amount As of February 28, 1995, The aggregate principal
Outstanding approximately $115 million amount of the Old
Subordinated Debentures
at the Effective Date.
Interest Rate; Interest is paid at the rate Interest will be paid at
Original Issue of 11% per annum. The Old the rate of 15% per
Discount Subordinated Debentures were annum.
issued together with common
stock of the Company as
units. The price to the
public of $1,000 principal
amount of Old Subordinated
Debentures and 6.5 shares of
common stock was $990,
representing a deemed yield
to maturity of 12.4% per
annum, compounded on a
semi-annual basis. The
original issue discount was
dependant on relative market
prices for the Old
Subordinated Debentures and
the common stock.
Interest Payment November 1 and May 1. November 1 and May 1,
Dates commencing on November 1,
1995.
Final Maturity May 1, 1997. November 1, 2007.
Date
Optional The Old Subordinated The New Subordinated
Redemption Debentures are subject to Debentures will be
redemption in whole or in subject to redemption in
part, at the option of the whole or in part, at the
Company, at any time at 100% option of the Company, at
of principal amount, plus any time at 100% of
accrued but unpaid interest principal amount
to the redemption date. outstanding, plus accrued
but unpaid interest to
the redemption date.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Old Subordinated Debentures New Subordinated
----------------------------- ----------------
Debentures
----------
<S> <C> <C>
Mandatory Under the indenture relating The New Subordinated
Redemption to the Old Subordinated Debentures will not be
Debentures (the "Old subject to a mandatory
Indenture"), the Company is redemption requirement,
required to redeem except, at the option of
$28,750,000 principal amount the holder thereof, upon
of the Old Subordinated a Change of Control of
Debentures on each of May 1, the Company (as defined
1995, and May 1, 1996, at a herein).
redemption price equal to
100% of the principal amount
thereof plus accrued
interest thereon to the
redemption date. The
Company is entitled to a
credit against the principal
amount of the Old Subordi-
nated Debentures required to
be redeemed equal to the
principal amount (excluding
premium) of any Old Subordi-
nated Debentures that the
Company has acquired or
redeemed and delivered to
the Trustee for cancella-
tion.
Ranking The Old Subordinated The New Subordinated
Debentures are unsecured Debentures will be
senior subordinated unsecured senior subordi-
obligations of the Company nated obligations of the
and rank pari passu in right Company and will rank
of payment with the pari passu in right of
Company's existing and payment with the
future senior subordinated Company's existing and
indebtedness. The payment future senior subordi-
of the principal of and nated indebtedness. The
premium (if any) and payment of the principal
interest on the Old Subordi- of and interest on the
nated Debentures is subordi- New Subordinated
nate in right of payment to Debentures will be
the prior payment of all subordinate in right of
Senior Debt (as defined in payment to the prior
the Old Indenture). On payment of all Superior
February 28, 1995, the Debt (as defined in the
Company had $361.6 million indenture relating to the
of Senior Debt outstanding. New Subordinated
Debentures (the "New
Indenture")). See
"Description of New
Subordinated
Debentures--Ranking." On
February 28, 1995, the
Company had $361.6
million in principal
amount of Superior Debt
outstanding.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Old Subordinated Debentures New Subordinated
----------------------------- ----------------
Debentures
----------
<S> <C> <C>
Change of Control No provision. Upon a Change of Control
of the Company (as
defined in the New
Indenture), holders of
the New Subordinated
Debentures will have the
right to require the
Company to purchase the
New Subordinated
Debentures at a purchase
price of 100% of the
principal amount thereof,
plus accrued and unpaid
interest, if any, to the
date of purchase.
Certain Covenants The Old Indenture contains The New Indenture will
covenants limiting, among contain covenants
other things, (i) the issu- limiting, among other
ance of debt or preferred things, (i) the issuance
stock by the Company's of additional debt by the
subsidiaries, (ii) the Company, (ii) the
payment of dividends on and issuance of debt or
redemptions of capital stock preferred stock by the
of the Company and its Company's subsidiaries,
subsidiaries, (iii) the sale (iii) the payment of
of assets and stock of the dividends on and redemp-
Company's subsidiaries and tions of capital stock of
(iv) transactions with the Company and its
affiliates. subsidiaries, the redemp-
tion of certain subordi-
nated obligations of the
Company and investments
in affiliates of the
Company, (iv ) the sale
of assets and stock of
the Company's subsidi-
aries, (v ) transactions
with affiliates and (vi)
consolidations, mergers
and transfers of all or
substantially all of the
Company's assets. The
New Indenture will also
(x) prohibit the Company
from incurring, creating,
assuming, guaranteeing or
otherwise becoming liable
for any debt that is
subordinated or junior in
right of payment to any
Senior Debt and senior in
any respect in right of
payment to the New
Subordinated Debentures
and (y) impose restric-
tions on distributions
from subsidiaries. All
of these limitations and
prohibitions, however,
are subject to a number
of important
qualifications.
</TABLE>
18
<PAGE>
RISK FACTORS
In considering whether to vote to accept or reject the Plan, each holder of
Old Subordinated Debentures and the Institutional Investor should carefully
consider the following factors, together with all of the other information
contained in this Disclosure Statement.
Substantial Leverage; Net Losses; Deficit of
Earnings to Fixed Charges
As a result of the Acquisition, the Company is highly leveraged, with a
percentage of total debt to total capitalization at February 28, 1995 of
approximately 117%. Following the Restructuring, the Company's percentage of
total debt to total capitalization will be 115%. In addition, the Company may,
subject to certain restrictions in its debt agreements, incur further
indebtedness from time to time to finance expansion either through acquisitions
or capital leases, or for other purposes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
Significant payments are required to service the Company's debt. As a
result of the significant interest charges on the debt incurred in connection
with the Acquisition, the adverse effects on the Company's net sales resulting
from the drought and flood conditions in the agricultural sector in the United
States in certain years and the adverse effects of the Kansas City Fire, the
Company experienced losses before extraordinary items of approximately $12.4
million, $9.7 million, $5.5 million, $8.2 million and $11.0 million for fiscal
1990, 1991, 1992, 1993 and 1994, respectively. The Company's earnings were
sufficient to cover fixed charges in the nine-month period ended November 30,
1994 but were insufficient to cover fixed charges by approximately $9.9 million,
$5.9 million, $0.15 million, $5.7 million and $12.3 million in fiscal 1990,
1991, 1992, 1993 and 1994, respectively. At November 30, 1994, the Company had
a common stockholders' deficit of approximately $95.9 million. See "--
Substantial Payment Obligations; Consequences of Failure to Service Debt" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."
The extent to which the Company is leveraged could have important
consequences to holders of the New Subordinated Debentures, including: (a)
impairment of the Company's ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions or other purposes; (b)
dedication of a substantial portion of the Company's cash flow from operations
to the payment of debt service requirements (principal and interest) on its
indebtedness; (c) vulnerability of the Company to changes in general economic
conditions, including conditions in the agricultural sector; and (d) limitations
on its ability to
19
<PAGE>
capitalize on significant business opportunities and to respond to competition.
Restrictions Imposed by Debt Agreements
The Company's debt agreements contain a number of significant financial and
operating covenants that, among other things, significantly restrict the ability
of the Company and its subsidiaries to dispose of assets, incur additional
indebtedness, pay dividends, create liens on assets, enter into leases, make
investments or acquisitions, engage in mergers or consolidations, or engage in
certain transactions with subsidiaries and affiliates and otherwise restrict
corporate activities. The Old Investment Agreement contains further
restrictive covenants, including covenants requiring the Company to comply with
specific financial ratios and maintenance tests, in addition to the covenants
contained in the Company's other debt agreements.
The Company is currently in compliance with the covenants in its debt
agreements. Due to the Company's substantial debt obligations and limited
growth in cash operating earnings in recent years, however, the Company believes
that it will be unable to remain in compliance with such covenants and
restrictions in fiscal 1996 if the Restructuring is not completed. The breach
of any of these covenants or restrictions would result in a default under the
Company's debt agreements. In the event of such a default, the holders of such
indebtedness would be entitled to declare all such indebtedness immediately due
and payable, including accrued and unpaid interest, and to terminate their
commitments (if any) with respect to funding obligations under the agreements
relating to such indebtedness. In addition, such holders would be entitled to
proceed against any collateral securing their debt. The collateral securing the
Company's Senior Debt constitutes substantially all of the assets of the
Company.
If the Restructuring is approved, however, the Company anticipates that it
will remain in compliance with its debt agreements. The Plan provides that the
Old Investment Agreement will be superseded by the New Investment Agreement,
which in certain cases will contain certain financial and operating covenants
which are less restrictive than those contained in the Old Investment
Agreement. Even if the Restructuring is completed in accordance with the Plan,
however, the Company will be required to achieve financial and operating results
that are better than those achieved historically in order to remain in
compliance with its outstanding debt agreements. There can be no assurance that
such improved results will be achieved.
20
<PAGE>
Substantial Payment Obligations; Consequences
of Failure to Service Debt
Even if the Restructuring is accomplished in accordance with the Plan, the
Company will have substantial payment obligations with respect to its
indebtedness, including the First Mortgage Bonds. No assurance can be given
that the Company will be able to generate sufficient cash flow from operations
to meet its debt service obligations. To make long-term debt repayments, the
Company will attempt to increase operating cash flow through improvements in
existing operations, through expansion of its transportation management
business, and through capacity growth by pursuing viable growth opportunities,
such as the acquisition or expansion of warehouse facilities. There can be no
assurance, however, that such improved operations, expanded transportation
management business or capacity growth will be accomplished successfully. If
such increase in operating cash flow is not accomplished, the Company
anticipates it would pursue the following alternatives: (1) restrict its
projected capital expenditure program; (2) seek alternative sources of
financing; (3) seek further modifications to its financing arrangements with
existing lenders; or (4) sell certain warehouses (subject to obtaining any
necessary lender consents). See "--Payments of Principal on Other Debt" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
If for any reason the Company were unable to meet its debt service
obligations, it would be in default under the terms of its indebtedness. The
consequences of any such default could be the same as a covenant default
described above under "--Restrictions Imposed by Debt Agreements."
Subordination
The New Subordinated Debentures will be subordinated to all Superior Debt,
as defined in the New Indenture, including the First Mortgage Bonds and the debt
evidenced by the New Credit Agreement. See "Description of the New
Subordinated Debentures--Ranking." (The definition of Superior Debt contained in
the New Indenture is substantially similar to the definition of Senior Debt
contained in the Old Indenture.) Substantially all the assets of the Company
are encumbered pursuant to its Superior Debt agreements. In the event of a
subsequent liquidation, reorganization, bankruptcy or similar proceeding, the
assets of the Company would be available to pay obligations on its subordinated
indebtedness (including the New Subordinated Debentures) only after all Superior
Debt had been paid in full, and, in such event, there may be insufficient assets
to pay in full amounts due on the New Subordinated Debentures. See "Liquidation
Analysis" attached as Appendix B. On February 28, 1995, the Company had $361.6
million in principal amount of Superior Debt outstanding.
21
<PAGE>
Payments of Principal on Other Debt
The First Mortgage Bonds will mature nearly five years (Series A) and over
two years (Series B) prior to the maturity of the New Subordinated Debentures.
Failure by the Company to pay interest on or repay the principal of its
indebtedness could result in a default under the terms of its debt agreements
and may delay or preclude the payment of principal and interest on the New
Subordinated Debentures. Any such default would also have a significant adverse
effect on the market value and marketability of the New Subordinated Debentures.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--New Financing Arrangements."
Company Dependence on Significant Customers
A number of the Company's facilities depend to a large extent upon one or a
small number of customers or commodities. In fiscal 1995, the Company's ten
largest customers accounted for approximately 55% of the Company's total net
sales, with one customer accounting for approximately 21% of net sales. An
interruption or reduction in the business received by such facilities from such
customers or a reduction in demand for such commodities could result in a
decrease in the sales at such facilities and in the overall net sales of the
Company. See "Business--Customers."
Entry into New Business
As part of management's strategy to augment the Company's operating
revenues, the Company plans to expand its transportation management business.
While the Company has in the past provided transportation management services to
customers from time-to-time, the Company's current strategy involves assuming
full responsibility for the transportation management processes of certain
customers. See "Business--Company Strategy." Although the Company expects that
its transportation management business will be successful, the Company
experienced losses in this business of approximately $0.8 million during fiscal
1995, and there can be no assurance that the Company will not experience further
losses. There also can be no assurance that the Company will be successful in
its effort to reach agreements with additional customers for the provision of
comprehensive transportation management services.
Competition
Americold operates in a competitive environment in which several national
and regional, and many smaller, warehouse operators compete with the Company.
The geographic markets in which the Company competes are primarily local.
Competition varies from local market to local market, but almost all local
markets are characterized by low barriers to entry because any competitor able
22
<PAGE>
to obtain financing may build a competing facility. In addition, the Company's
customers, many of which have substantially greater resources than the Company,
may divert business from the Company by building their own private refrigerated
warehouse facilities. See "Business--Competition."
In the transportation management business, there are several national and
local enterprises that presently provide or may in the future provide logistics
services to fresh and frozen food shippers. The Company is unaware, however, of
any competitor which at this time provides significant transportation management
services in conjunction with a single integrated network of frozen food
warehouses. See "Business--Competition."
Dependence on Agricultural Markets
A substantial portion of the Company's warehousing sales are derived from
storage and handling of agricultural products and foods prepared from
agricultural products. The Company's operating results, therefore, may be
materially affected by severe weather or other conditions affecting the
agricultural sector generally. The Company previously experienced a reduction
in net sales due to a severe drought in 1988 and due to the midwestern flooding
in 1993. While these adverse conditions no longer exist, the Company's
operating results may be affected by severe weather or other conditions
affecting the agricultural sector in future years.
Voting Control
Kelso holds approximately 53%, and seven entities (including Kelso) and
management together hold approximately 83% of the outstanding shares of the
Company's common stock. These entities and management are able to elect all of
the members of the Company's Board of Directors. As a result of such stock
ownership, these shareholders can effectively control the affairs and business
policies of the Company. See "Principal Shareholders."
Absence of Established Trading Market;
Liquidity of New Subordinated Debentures
The Company does not intend to apply to list the New Subordinated
Debentures on any securities exchange or to seek approval for quotation of such
securities through any automated quotation system. It is unlikely that an
active public trading market for the New Subordinated Debentures will exist.
The New Subordinated Debentures should be tradeable in the over-the-counter
market, but any such trading may be limited and sporadic. No assurance can be
given that any trading market that does develop will continue.
23
<PAGE>
Certain Bankruptcy Considerations
If the Requisite Acceptances are received, the Company expects to file a
voluntary petition for relief with the Bankruptcy Court under Chapter 11 of the
Bankruptcy Code and use such acceptances to seek confirmation of the Plan. The
Company believes that obtaining the Requisite Acceptances before commencing a
bankruptcy case would minimize disputes concerning the reorganization and would,
therefore, substantially reduce the time and costs of such proceeding and afford
the best opportunity to accomplish the Restructuring.
If the Company fails to obtain the Requisite Acceptances, it will be forced
to evaluate the options available to it. Such options include seeking
confirmation of the Plan pursuant to the "cram-down" provisions of Section
1129(b) of the Bankruptcy Code or filing for protection under the Bankruptcy
Code without a preapproved or consensual plan of reorganization. There can be
no assurance, however, that any such bankruptcy filing would result in a
reorganization of the Company, rather than its liquidation, or that any
reorganization would be on terms as favorable to the holders of the Old
Subordinated Debentures as the terms of the Restructuring. If a liquidation or
a protracted reorganization were to occur, there is a substantial risk that the
holders of the Old Subordinated Debentures would receive no distribution. See
"Liquidation Analysis" attached as Appendix B.
There can be no assurance that, even if the Restructuring is completed, the
Company will be able to meet its ongoing debt and other obligations, or that it
will not be required to file again for bankruptcy protection in the future.
However, the Company believes that the Plan is feasible and a filing will be
unlikely after the Restructuring. See "--The Prepackaged Proceeding--Certain
Risks of Nonconfirmation."
The Prepackaged Proceeding
Use of a bankruptcy case to implement the Restructuring entails substantial
risks that should be considered carefully. See "The Plan" for further
discussion of bankruptcy-related considerations.
Disruption of Operations
It is possible that perceived difficulties from the Company's involvement
in a bankruptcy case could adversely affect the relationships of the Company
with its suppliers, customers and employees, and have other adverse effects on
the Company's businesses, particularly in the event of a bankruptcy other than
pursuant to a preapproved plan of reorganization. However, the Company believes
that using a preapproved plan of reorganization in connection with the Company's
bankruptcy case will reduce the possible adverse effects of a bankruptcy filing
on the Company's
24
<PAGE>
businesses, because such a "prepackaged" case is likely to be completed more
quickly than an ordinary bankruptcy case, disputes with and among creditor and
equity holder groups will be minimized, and the Company will have the
opportunity to take certain preparatory measures in advance of the filing. In
this regard, the Company has taken or intends to take the following steps to
minimize the disruption of operations on commencement of the Prepackaged
Proceeding.
Upon commencement of the Prepackaged Proceeding, the Company intends to
seek promptly the authorization of the Bankruptcy Court to continue to pay in
full in the ordinary course the pre-petition claims of each trade creditor of
the Company that (i) agrees to continue to supply products or services to the
Company on customary trade terms, and (ii) agrees that if such creditor later
unreasonably refuses to continue to supply products or services during the
Prepackaged Proceeding on customary trade terms, any payments by the Company to
such creditor in respect of any pre-petition claims shall be deemed advances
that are recoverable in cash or in further products and services, and such pre-
petition claims shall be reinstated. There can be no assurance, however, that
such authorization will be obtained. Regardless, the Plan provides for a 100%
cash payment to trade creditors of all their allowed pre-petition claims upon
the Effective Date (or as soon thereafter as any such claim becomes due), and
the Company expects to have sufficient cash to make such payments, as well as to
continue to pay its trade creditors in the ordinary course thereafter.
In addition, the Company intends to seek the approval of the Bankruptcy
Court to pay or adopt all accrued pre-petition salaries, wages (including, in
each case, certain taxes thereon), expense reimbursements and certain severance
arrangements, to continue to accrue benefits under incentive plans, to permit
employees to utilize vacation that they had accrued prior to the date of the
filing (so long as they remain employees of the Company), to continue paying
medical benefits under applicable plans, and otherwise to continue all employee
benefits and incentive programs on an uninterrupted basis. There can be no
assurance, however, that such approval will be obtained. Regardless, the Plan
provides that all employee claims and benefits not paid or honored, as the case
may be, prior to consummation of the Plan will be paid or honored in full upon
its effectiveness or as soon thereafter as such payment or other obligation
becomes due or performable.
Certain Risks of Nonconfirmation
Even if the Company obtains the Requisite Acceptances, there can be no
assurance that the Bankruptcy Court will confirm the Plan. Pursuant to Section
1109(b) of the Bankruptcy Code, any party in interest, including the United
States Trustee, any creditor or any equity holder, has the right to be heard by
the Bankruptcy Court on any issue in the Prepackaged Proceeding. It is
25
<PAGE>
possible that such a party in interest could challenge, among other things, the
terms of the Plan, the adequacy of disclosure in this Disclosure Statement or
the adequacy of the time period allotted under the Solicitation for considering
whether to accept or reject the Plan.
Even if the Bankruptcy Court were to determine that the Solicitation was
proper, it could still decline to confirm the Plan were it to find that any
statutory condition for confirmation had not been met. For a discussion of the
other requirements for confirmation of the Plan and the possible consequences of
nonconfirmation of the Plan, see "The Plan--Confirmation of the Plan."
The confirmation and effectiveness of the Plan are also subject to certain
conditions. See "The Plan--Conditions to the Effectiveness of the Plan." There
can be no assurance that these conditions will be satisfied, or if not
satisfied, that such conditions would be waived. Furthermore, there can be no
assurance that modifications of the Plan will not be required for its
confirmation, or that such modifications would not require resolicitation of
acceptances from one or more classes of impaired claims. In addition, certain
amendments to or modifications of the Plan may require the consent of certain
other parties. See "The Plan--Amendments to or Modification of the Plan."
Method of Solicitation and Tabulation of Ballots
Section 1126(b) of the Bankruptcy Code provides that the holder of a claim
against, or interest in, a debtor who accepts or rejects a plan of
reorganization before the commencement of a Chapter 11 case is deemed to have
accepted or rejected such plan under the Bankruptcy Code so long as either the
solicitation of such acceptance was made in accordance with applicable
nonbankruptcy laws governing the adequacy of disclosure in connection with such
solicitation, or, if no such laws apply, such acceptance was solicited after
disclosure of "adequate information" to such holder. In addition, Bankruptcy
Rule 3018(b) requires, in the case of a prepackaged plan of reorganization, that
(i) such plan be transmitted to substantially all holders in any impaired class
being solicited, (ii) with respect to securities held of record, votes are to be
solicited from the holders of record of such securities on the date specified in
the solicitation and (iii) the time prescribed for voting on such plan must not
be unreasonably short.
Even if the Requisite Acceptances are received, the Bankruptcy Court may
find that the holders of impaired claims of the Company have not validly
accepted the Plan if it determines that the Solicitation did not comply with the
requirements of Section 1126(b) of the Bankruptcy Code or Bankruptcy Rule
3018(b).
26
<PAGE>
The Company believes that the Solicitation will comply with applicable
bankruptcy and nonbankruptcy law requirements. If the Bankruptcy Court
determines that the Solicitation does not comply with such requirements, the
Company may seek to resolicit acceptances. This could delay, and possibly
jeopardize, confirmation of the Plan.
Risk of Confirmation Without Acceptance
by All Impaired Classes
The Bankruptcy Code provides that, if certain conditions are met, the Plan
may be confirmed even if the Plan is not accepted by the holders of the Old
Subordinated Debentures or the Institutional Investor. Section 1129(b) of the
Bankruptcy Code sets forth the conditions to a confirmation (or "cram-down," as
it is generally called) of a plan of reorganization without the acceptance of
all impaired classes. So long as at least one impaired class of claims or
interests has accepted the plan (without counting the votes of insiders in such
class), such plan may be confirmed if it does not "discriminate unfairly" and is
"fair and equitable" with respect to each of the nonaccepting classes. It is
generally accepted that a plan does not "discriminate unfairly" if it does not
violate the relative priorities among unsecured creditors and equity holders.
In general terms, a plan is "fair and equitable" with respect to (i) a
nonaccepting class of secured claims if provision is made under the plan for the
holders of such claims to retain the liens securing such claims to the extent of
their allowed amount and to receive deferred cash payments totalling at least
the allowed amount of such claims, having a present value at least equal to the
value of such holders' interests in the estate's interest in the collateral and
(ii) a nonaccepting class of unsecured claims if the plan provides that either
(a) such holders receive or retain property having a value, as of the effective
date of the plan, equal to the allowed amount of such holders' claims, or (b)
the holders of claims and interests that are junior to any such nonaccepting
class do not receive or retain any property under the plan. This means that it
is possible for a plan to be confirmed by a bankruptcy court notwithstanding the
nonacceptance of a class of claims or interests and the holders of such claims
or interests must accept whatever distribution, if any, is provided for them
under such plan, so long as (in the case of the unsecured claims) the holders of
junior claims and interests receive or retain no property under such plan. See
"The Plan--Confirmation of the Plan--Confirmation Without Acceptance by All
Impaired Classes."
The Company reserves the right to modify the terms of the Plan as necessary
for the confirmation of the Plan without acceptance by all impaired classes,
subject to the consent of the Institutional Investor and such consents as may be
required under the Plan. Such modifications could result in a less favorable
treatment of any nonaccepting class or classes of claims, as well as any classes
junior to such nonaccepting classes, than the treatment currently
27
<PAGE>
provided in the Plan. Such less favorable treatment could include receiving
property of a lesser value than that currently provided in the Plan or receiving
or retaining no property whatsoever under the Plan. See "The Plan--Amendments
to or Modifications of the Plan."
The Company may elect not to seek confirmation of the Plan in the event a
class of claims or interests does not accept the Plan, and may choose instead to
seek an alternative means to restructure the Company, including the filing of a
Chapter 11 case without the benefits of a preapproved plan of reorganization.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The following table presents selected consolidated historical financial and
other information of the Company. The information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" as furnished below. The consolidated financial information for the
Company for each of the five fiscal years set forth in the table has been
derived from the historical consolidated financial statements of the Company
which have been audited by KPMG Peat Marwick LLP, independent certified public
accountants for the Company. Selected consolidated financial information for
the nine months ended November 30, 1993 and November 30, 1994 has been derived
from unaudited consolidated financial statements and, in the opinion of the
Company, includes all adjustments that are considered necessary for a fair
presentation of such financial information. Historical data and interim results
are not necessarily indicative of future results and interim data are not
necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Years Ended Last Day of February November 30,
--------------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1993 1994
---------- --------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars are in thousands except per share data)
Income Statement Data:
Net sales................................. $173,631 $196,927 $200,680 $196,130 $198,887 $ 152,540 $162,214
Operating expenses:
Cost of sales........................... 100,537 115,030 115,452 118,846 126,273 94,960 104,188
Amortization of cost in excess of
net assets acquired.................... 2,500 2,527 2,528 2,533 2,531 1,899 1,902
Selling and administrative expense...... 25,836 30,517 30,094 27,192 27,090 20,573 19,500
Employee stock ownership plan expense... 900 750 750 750 -- -- --
-------- -------- -------- -------- -------- --------- --------
Total operating expense................ 129,773 148,824 148,824 149,321 155,894 117,432 125,590
-------- -------- -------- -------- -------- --------- --------
Gross operating margin................... 43,858 48,103 51,856 46,809 42,993 35,108 36,624
Other income (expense):
Interest income......................... 9 22 16 323 757 557 1,134
Interest expense........................ (53,784) (53,112) (51,601) (51,943) (55,403) (41,535) (41,318)
Amortization of debt issuance cost...... (1,144) (1,120) (1,129) (1,173) (1,249) (937) (944)
Other, net(d)........................... 1,222 165 773 289 680 331 17,483
-------- -------- -------- -------- -------- --------- --------
Total other expenses.................... (53,697) (54,045) (51,941) (52,504) (55,215) (41,584) (23,645)
-------- -------- -------- -------- -------- --------- --------
Income (loss) before income taxes and
extraordinary items..................... (9,839) (5,942) (85) (5,695) (12,222) (6,476) 12,979
Income tax expense (benefit).............. 2,528 3,774 5,408 2,455 (1,183) (107) 5,754
Extraordinary gain (loss)................. (408) 654 -- -- (1,848) (1,848) --
Cumulative effect of accounting changes.. -- -- -- -- (64,234) (65,934) --
-------- -------- -------- -------- -------- --------- --------
Net income (loss)......................... $(12,775) $ (9,062) $ (5,493) $ (8,150) $(77,121) $ (74,151) $ 7,225
======== ======== ======== ======== ======== ========= ========
Net income (loss) per common share........ $ (2.62) $ (1.93) $ (1.24) $ (1.80) $ (16.00) $ (15.37) $ 1.38
Other Data:
Earnings before interest, taxes,
depreciation and amortization
("EBITDA")(a)(d)........................ $ 68,310 $ 70,839 $ 74,620 $ 67,729 $ 66,550 $ 52,145 $ 71,407
Depreciation and amortization............. 24,374 23,690 23,119 21,804 24,126 17,643 18,244
Capital expenditures...................... 11,011 8,509 9,212 7,661 8,925 7,559 13,160
EBITDA as a percent of net sales(a)....... 39.3% 36.0% 37.2% 34.5% 33.5% 34.2% 44.0%
Ratio of earnings to fixed charges(b)..... -- -- -- -- -- -- 1.31
Deficiency in earnings to cover
fixed charges(c)........................ $ 9,899 $ 5,942 $ 148 $ 5,699 $ 12,283 $ 6,537 --
Net cash provided by operating
activities.............................. 14,239 16,950 24,860 17,700 18,476 20,310 4,415
Weighted average capacity--cubic feet
(in millions)........................... 213.2 223.4 225.9 228.8 231.4 231.0 227.5
Net warehousing sales per cubic foot...... $ 0.73 $ 0.84 $ 0.85 $ 0.79 $ 0.78 $ 0.60 $ 0.64
Total pounds handled--receipts and
releases (in millions).................. 15,427 17,380 17,154 16,609 17,906 13,621 14,066
Total pounds stored--average at month end
(in millions)........................... 1,328 1,560 1,635 1,534 1,493 1,519 1,563
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Last Day of February November 30,
-------------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1993 1994
--------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.................. $502,765 $493,651 $483,841 $490,151 $ 528,703 $536,402 $537,205
Long-term debt................ 461,344 449,299 435,133 443,003 467,337 469,127 438,251
Preferred stock............... 2,072 3,208 4,204 4,773 5,348 5,399 5,850
Common stockholders' deficit.. (330) (10,578) (16,882) (25,175) (102,577) (99,633) (95,853)
</TABLE>
________________________
(a) EBITDA is presented because it is a widely accepted financial indicator of
a company's ability to service debt. The Company believes that EBITDA and
the ratio of EBITDA to net sales, while providing useful information,
should not be considered in isolation or as a substitute for the
consolidated income statement data prepared in accordance with generally
accepted accounting principles. For example, EBITDA should not be
considered an alternative to net income as an indicator of operating
performance or an alternative to the use of cash flow as a measure of
liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
(b) For purposes of computing the ratio of earnings to fixed charges,
"earnings" are defined as earnings before income taxes, extraordinary items
and fixed charges, and "fixed charges" consist of interest expense,
amortization of debt issuance cost and that portion of rental expense
considered to be representative of the interest factor in leases.
(c) These deficiencies reflect non-cash charges as follows:
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Years Ended Last Day of February November 30,
------------------------------------------- -------------
1990 1991 1992 1993 1994 1993 1994
------- ------- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars are in thousands)
Non-cash charges:
Depreciation............................. $20,554 $19,822 $19,171 $17,725 $19,938 $14,538 --
Goodwill amortization.................... 2,500 2,527 2,528 2,533 2,531 1,898 --
Amortization of debt issuance costs...... 1,144 1,120 1,129 1,173 1,249 937 --
Amortization of original issue discount.. 679 725 938 1,069 1,205 882 --
Other amortization....................... 176 221 291 373 408 270 --
Employee stock ownership plan expense.... 835 600 485 450 320 320 --
------- ------- ------- ------- ------- ------- ----
Total.............................. $25,888 $25,015 $24,542 $23,323 $25,651 $18,845 --
======= ======= ======= ======= ======= ======= ====
</TABLE>
(d) Includes a pretax gain of approximately $17.0 million in fiscal 1995 from
insurance proceeds related to the Company's settlement of claims arising
out of the Kansas City Fire.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
Americold's principal services are the storage and handling of frozen foods
and the provision of transportation management services to frozen food
manufacturers. The Company uses temperature-controlled warehouse space to
provide frozen food storage and handling and uses information processing systems
and contractual arrangements with carriers to provide transportation management
services. The Company also provides a wide range of services related to the
refrigerated storage business, including leasing of warehouse space and freezing
of fresh products, as well as electronic data interchange ("EDI") to receive and
transmit product flow and status information to the Company's customers.
In December 1982, Americold was acquired by Beatrice, which combined its own
public refrigerated warehouse facilities, operating under various names, with
Americold. In December 1986, a private group consisting of Kelso, the Co-
Investors and the Management Group purchased all of the outstanding capital
stock of the Company in the Acquisition.
The Company's operating results have been and will continue to be materially
affected by the transactions related to the Acquisition. For fiscal 1993 and
1994, interest expense, principally related to debt incurred to finance the
Acquisition, totaled $51.9 million and $55.4 million respectively, and the
amortization of debt issuance costs totaled $1.2 million in each year. The
Company's operating results have also been substantially affected in certain
years due to adverse conditions in the agricultural sector in the United States,
including the severe drought in 1988 and the flooding in the Midwest in 1993
and, in particular, due to the effects of the Kansas City Fire. While the noted
adverse agricultural conditions no longer exist, the Company anticipates that
the adverse effects of the Kansas City Fire on operating results, due to the
loss of customers, especially lease customers, will continue for at least the
next several years.
The Company's operations have not been, nor are they expected to be,
materially affected by inflation or changing prices.
Historical Income Statement Information
The following table sets forth, for the fiscal years ended the last day of
February 1992, 1993 and 1994, respectively, certain consolidated financial data
for the Company, expressed as a
31
<PAGE>
percentage of net sales, and the percentage changes in the dollar amounts as
compared to the prior period.
<TABLE>
<CAPTION>
Percentage of Net Sales Period-to-Period
Last Day of February Change
----------------------- ----------------
1992 to 1993 to
1992 1993 1994 1993 1994
------- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Net sales.................. 100.0% 100.0% 100.0% (2.3)% 1.4%
Cost of sales.............. 57.5% 60.6% 63.5% 2.9% 6.2%
Amortization of cost in
excess of net 1.3% 1.3% 1.3% 0.2% (0.1)%
assets acquired..........
Selling and administrative
expense.................. 15.0% 13.9% 13.6% (9.6)% (0.4)%
Gross operating margin..... 25.8% 23.9% 21.6% (9.7)% (8.2)%
Interest expense........... 25.7% 26.5% 27.9% 0.7% 0.7%
</TABLE>
The following table sets forth, for the nine-month periods ended November
30, 1993 and November 30, 1994, respectively, certain consolidated financial
data of the Company, expressed as a percentage of net sales, and the percentage
changes in the dollar amounts as compared to the prior period:
<TABLE>
<CAPTION>
Percentage of Net Sales
Nine Months Ended Percentage
November 30 Change
------------------------- -----------
1993 to
1993 1994 1994
------------ ----------- -----------
<S> <C> <C> <C>
Net sales.............................. 100.0% 100.0% 6.3%
Cost of sales.......................... 62.3% 64.2% 9.7%
Amortization of cost in excess of net 1.2% 1.2% 0.2%
assets acquired.......................
Selling and administrative expense..... 13.5% 12.0% (5.2)%
Gross operating margin................. 23.0% 22.6% 4.3%
Interest expense....................... 27.2% 25.5% (0.5)%
</TABLE>
32
<PAGE>
Results of Operations
Comparison of Nine-Month Periods Ended November 30, 1993 and 1994
Net Sales - The Company's net sales increased 6.4% from $152.5 million
for the first three quarters of fiscal 1994 to $162.2 million for the same
period in fiscal 1995.
<TABLE>
<CAPTION>
NET SALES (Dollars in Millions)
Nine Months Nine Months Percentage
Ended Ended Change
November 1993 November 1994 1993 to 1994
---------------- ---------------- -------------
Amount % Amount %
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Storage.................... $ 75.0 49.2% $ 77.4 47.7% 3.2%
Handling................... 49.5 32.4% 53.1 32.7% 7.3%
Freezing................... 5.5 3.6% 6.6 4.1% .2%
Leasing.................... 5.6 3.7% 5.3 3.3% (5.4%)
Other...................... 2.6 1.7% 2.8 1.7% 7.7%
------ ----- ------ ----- ----
Net warehousing sales...... $138.2 90.6% $145.2 89.5% 5.1%
Quarry sales............... 4.5 3.0% 4.1 2.5% (8.9%)
Transportation management
services................. 9.8 6.4% 12.9 8.0% 31.6%
------ ----- ------ ----- ----
Total net sales............ $152.5 100.0% $162.2 100.0% 6.4%
====== ===== ====== ===== ====
</TABLE>
Warehousing sales increased 5.1% from $138.2 million for the first three
quarters of fiscal 1994 to $145.2 million for the same period in fiscal 1995,
primarily due to a 3.2% increase in storage revenue and a 7.3% increase in
handling revenue. The increase in storage revenue resulted from an increase in
storage volume of 2.9%, assisted slightly by price increases and other factors.
The increase in storage volume is due primarily to the increased storage of
vegetables, primarily attributable to a strong vegetable harvest in the Midwest
in 1994.
The increase in handling revenue resulted primarily from an 11.0% increase
in volume of product handled. For the first nine months of fiscal 1994, 13.6
billion pounds of product were handled by the Company compared with 15.1 billion
pounds during the same period in fiscal 1995. While handling volume increased
11.0%, handling revenue increased 7.3% due to decreased processing revenue
(classified by the Company as handling revenue), changes in product mix and
other factors in the New England and surrounding area warehouses.
Nonwarehousing sales increased 18.9% from $14.3 million for the first nine
months of fiscal 1994 to $17.0 million in the comparable period in fiscal 1995,
due primarily to increased sales from Americold Transportation Systems ("ATS"),
the Company's transportation division.
33
<PAGE>
The Company's net sales are seasonal. The third fiscal quarter ending
November 30 is typically the strongest sales quarter.
Cost of Sales - Cost of sales increased $9.2 million or 9.7% from $95.0
million for the first three quarters of fiscal 1994 to $104.2 million for the
first three quarters of fiscal 1995. Approximately $3.9 million of the increase
was due to increased volume at ATS, which requires corresponding increases in
transportation capacity purchased from carriers. Another $3.8 million of the
increase was primarily attributable to increased warehouse payroll expense,
resulting from the increase in handling volume at the Company's facilities.
Approximately $0.7 million of the increase was due to increased depreciation.
Cost of sales as a percentage of net sales increased from 62.3% in the
first three quarters of fiscal 1994 to 64.2% in the first three quarters of
fiscal 1995, as handling and ATS sales, which have high variable cost
requirements, increased from 38.9% of total sales in the prior period to 40.7%
in the more recent period.
Although management has observed over the past several years a gradual
shift in its warehousing business mix to reflect an increasing percentage of
lower-margin handling revenue, management does not believe the rate of increase
in such revenue in the first three quarters of fiscal 1995 reflects an
acceleration of such trend, but rather reflects transient factors such as a
temporary increase in handling activity resulting from the improved vegetable
harvest in the Midwest in 1994. While management expects the underlying trend
toward lower margins to continue due to the planned growth of the refrigerated
transportation management business, the increased emphasis by customers on
inventory turns and other factors, the Company believes that such activity is
likely to also include related increases in higher-margin storage business and a
long-term increase in earnings due to higher volumes in all lines of business.
Selling and Administrative Expenses - Selling and administrative expenses
for the first three quarters of fiscal 1994 were $20.6 million, as compared to
$19.5 million for the first three quarters of fiscal 1995, a decrease of 5.2%.
The reduction primarily reflects a decrease of approximately $0.7 million in
salaries and related fringe benefits and in professional fees. The Company was
able to reduce selling and administrative expenses in an environment of
increasing sales due to an intensive program to reduce and restructure
administrative activities.
Interest Expense - Interest expense decreased from $41.5 million for the
first three quarters of fiscal 1994 to $41.3 million for the first three
quarters of fiscal 1995 as a result of slightly lower overall borrowings.
34
<PAGE>
Gain on Insurance Settlement - This category reflects the gain on insurance
settlement of approximately $17.0 million related to the Company's settlement of
its first party claims with its insurance carriers for business interruption
losses, property damage and out-of-pocket expenses incurred with respect to the
Kansas City Fire.
Income - The Company's loss before income taxes, extraordinary item and
cumulative effect of accounting changes for the first nine months of fiscal 1994
was $6.5 million, compared to income of $13.0 million in the first nine months
of fiscal 1995. The increase in income reported in the more recent period is
primarily the result of the insurance settlement referred to above.
Recent Events - In December 1994, the Company signed a contract with a
major customer to provide transportation management services fully integrated
with warehousing services for that customer. The contract is expected to be
fully implemented by August 1995. In February 1995, the Company signed a letter
of intent with a second customer to provide transportation management services.
The Company therefore expects that revenue related to its third party logistics
("TPL") activity may increase substantially in fiscal 1996. The amount of such
revenue depends upon the transition process and other factors. In the initial
year, the Company does not expect the contract to have a material effect on
income.
Comparison of Fiscal Years 1993 and 1994
Net Sales - The Company's net sales increased 1.4% from $196.1 million for
fiscal 1993 to $198.9 million for fiscal 1994.
<TABLE>
<CAPTION>
NET SALES (Dollars in Millions)
Percentage Change
Fiscal 1993 Fiscal 1994 1993 to 1994
-------------- -------------- -------------------
Amount % Amount %
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Storage.................... $101.0 51.5% $ 98.5 49.5% (2.5%)
Handling................... 60.3 30.8% 65.3 32.8% 8.3%
Freezing................... 6.2 3.2% 6.5 3.3% 4.8%
Leasing.................... 9.5 4.8% 7.4 3.7% (22.1%)
Other...................... 3.8 1.9% 3.4 1.7% (10.5%)
------ ----- ------ ----- ------
Net warehousing sales...... $180.8 92.2% $181.1 91.0% 0.2%
Quarry sales............... 2.8 1.4% 5.2 2.6% 85.7%
Vital Record Center sales.. 0.4 0.2% - - (100.0%)
Transportation management
services................. 12.1 6.2% 12.6 6.4% 4.1%
------ ----- ------ ----- ------
Total net sales............ $196.1 100.0% $198.9 100.0% 1.4%
====== ===== ====== ===== ======
</TABLE>
Warehousing sales increased 0.2% from $180.8 million for fiscal 1993 to
$181.1 million for fiscal 1994, primarily due to an 8.3% increase in handling
revenues. This increase was partially offset by a 2.5% decline in storage
revenue and a 22.1% decline in
35
<PAGE>
leasing revenue. The decline in storage revenue resulted from a 2.7% decrease
in storage volume, offset slightly by price changes and other factors. The
Company believes the decreased storage volume was due to a reduction in certain
frozen vegetable stocks, attributable primarily to the flooding in the
midwestern United States in 1993. Approximately $1.9 million of the $2.1
million decline in leasing activity is attributable to the effects of the Kansas
City Fire. The increase in handling revenue resulted primarily from a 7.8%
increase in volume of product handled. For fiscal 1993, 16.6 billion pounds
were handled compared with 17.9 billion pounds during fiscal 1994.
Nonwarehousing sales increased 16.3% from $15.3 million for fiscal 1993 to
$17.8 million for fiscal 1994. The Company experienced a decrease of
approximately $0.4 million in nonwarehousing sales in fiscal 1994 due to the
permanent closure in the first quarter of fiscal 1994 of the Company's vital
records center which was damaged in the Kansas City Fire. This decrease was
offset by an increase in sales for fiscal 1994 over fiscal 1993 of approximately
$0.5 million from ATS, and an increase in quarry sales of approximately $2.4
million. The Company believes that the increase in quarry sales was due in part
to the increased demand for quarry products resulting from the flooding in the
Midwest in 1993.
Cost of Sales - Cost of sales increased by 6.2% from $118.8 million for
fiscal 1993 to $126.3 million for fiscal 1994. Payroll costs and energy costs
increased approximately $3.9 million and $1.5 million, respectively, as a result
of increased handling volume at the Company's facilities, including the quarry,
and as a result of the new Burley, Idaho warehouse facility added in January
1993. Approximately $0.6 million of the increase in cost of sales was due to
increased activity at ATS. Cost of sales as a percentage of net sales increased
from 60.6% for fiscal 1993 to 63.5% for fiscal 1994, primarily due to the
addition of the new warehouse facility, increased handling activity and the
increased non-warehousing sales which carry lower operating margins.
Selling and Administrative Expenses - Selling and administrative expenses
for fiscal 1993 were $27.2 million compared to $27.1 million for fiscal 1994.
This decrease of 0.4% primarily reflects a decrease of approximately $1.2
million in salaries and related fringe benefits. Certain other costs declined,
as well, including office supplies, communications and equipment rentals.
Professional fees increased, however, due primarily to one-time expenses for
consulting services related to administrative cost reduction efforts, as did
meeting and travel expenses.
Interest Expense - Interest expense increased from $51.9 million for fiscal
1993 to $55.4 million for fiscal 1994, resulting from both the $26.25 million
net increase in the principal amount of mortgage bonds outstanding due to the
issuance of $176.25
36
<PAGE>
million of First Mortgage Bonds in March 1993, and from the new mortgage payable
on the Burley, Idaho warehouse facility.
Loss - The Company's loss before extraordinary items and cumulative effects
of accounting changes for fiscal 1993 was $8.1 million compared to a loss of
$11.0 million for fiscal 1994. The principal reasons for the increased loss
includes the increased interest expense and increased cost of sales, discussed
above.
Extraordinary Loss - During the first quarter of fiscal 1994, the Company
completed a debt refinancing transaction related to the First Mortgage Bonds
which resulted in an extraordinary loss to the Company, net of taxes, of
approximately $1.8 million due to the write-off of unamortized issuance costs.
New Accounting Standards - Effective March 1, 1993, the Company implemented
Financial Accounting Standards Board Statement of Financial Accounting Standard
("SFAS") No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions," and Statement No. 109, "Accounting for Income Taxes." As a result of
the implementation of these accounting standards, the Company's fiscal 1994
earnings were reduced by approximately $64.2 million.
Comparison of Fiscal Years 1992 and 1993
Net Sales - The Company's net sales decreased 2.3% from $200.7 million in
fiscal 1992 to $196.1 million in fiscal 1993.
<TABLE>
<CAPTION>
NET SALES (Dollars in Millions)
Percentage Change
Fiscal 1992 Fiscal 1993 1992 to 1993
-------------- -------------- -------------------
Amount % Amount %
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Storage.................... $106.8 53.2% $101.0 51.5% (5.4%)
Handling................... 62.3 31.0% 60.3 30.8% (3.2%)
Freezing.................. 6.4 3.2% 6.2 3.2% (3.1%)
Leasing.................... 10.0 5.0% 9.5 4.8% (5.0%)
Other...................... 5.8 2.9% 3.8 1.9% (34.4%)
------ ----- ------ ----- ------
Net Warehousing sales...... $191.3 95.3% $180.8 92.2% (5.5%)
Quarry sales............... 3.1 1.6% 2.8 1.4% (9.7%)
Vital Record Center sales.. 0.7 0.3% 0.4 0.2% (42.9%)
Transportation management
services................. 5.6 2.8% 12.1 6.2% 116.1%
------ ----- ------ ----- ------
Total net sales............ $200.7 100.0% $196.1 100.0% (2.3%)
====== ===== ====== ===== ======
</TABLE>
Warehousing sales decreased 5.5% from $191.3 million in fiscal 1992 to
$180.8 million for fiscal 1993, primarily due to a 5.4% decline in storage
revenue and a 3.2% decline in handling revenue. The decline in storage revenue
resulted from a 6.1% decrease in volume. Approximately $2.8 million of the $5.8
million decline in storage revenue was attributable to reduced activity at the
Company's Kansas City, Kansas warehouse facility for reasons related to the
Kansas City Fire. The decline in handling revenue
37
<PAGE>
resulted from a 2.6% decrease in the volume of product handled, also due
primarily to reduced activity at the Kansas City facility.
The decline in handling revenue resulted from a 2.6% decrease in volume of
product handled. For fiscal 1994, 17.1 billion pounds of product were handled
by the Company compared with 16.6 billion pounds during fiscal 1993.
Nonwarehousing sales increased 62.7% from $9.4 million in fiscal 1992 to
$15.3 million in fiscal 1993, primarily as a result of including the sales from
ATS in nonwarehousing sales in 1993. Americold entered into a joint venture
agreement in April 1990 forming ATS to provide transportation support services
for the Company's customers. In the first eight months of fiscal 1992, joint
venture sales of ATS were not consolidated with Americold sales. The joint
venture was terminated during the third quarter of fiscal 1992, and the Company
absorbed the operations of ATS.
Costs of Sales - Costs of sales were $115.5 million for fiscal 1992
compared to $118.8 million for fiscal 1993, an increase of 2.9%. The principal
reasons for the increase in cost of sales were the inclusion of ATS in fiscal
1993 as noted above. Costs of sales as a percentage of net sales increased from
57.5% in fiscal 1992 to 60.6% in fiscal 1993.
Selling and Administrative Expenses - Selling and administrative expenses
decreased 9.6% from $30.1 million for fiscal 1992 to $27.2 million in fiscal
1993. The decrease primarily reflects a decrease in professional fees and
administrative payroll.
Interest Expense - Interest expense increased slightly from $51.6 million
in fiscal 1992 to $51.9 million for fiscal 1993, as a result of a new financing
lease of the Ontario, Oregon facility, and the purchase of the Burley, Idaho
facility, which was offset by slightly lower overall borrowings under the prior
revolving credit agreement and the bank credit agreement, along with moderately
lower average interest rates.
Loss - The Company's loss before extraordinary item for fiscal 1992 was
$5.5 million compared to a loss of $8.1 million for fiscal 1993. The decline in
gross operating margin for fiscal 1993 over fiscal 1992 is primarily due to the
effects of the fire at the Kansas City, Kansas warehouse facility.
Liquidity and Capital Resources
Liquidity
Operating Cash Flow - The Company relies primarily upon cash generated by
operations to service debt and fund capital expenditures. Net cash flow from
operating activities as reported in the Company's consolidated financial
statements decreased from $20.3
38
<PAGE>
million for the first three quarters of fiscal 1994 to $4.4 million for the
first three quarters of fiscal 1995. The decrease is due primarily to an
increase in trade receivables, resulting from increased sales and changes in the
timing of certain cash collections, and from changes in the timing of the
payment of interest and certain other items. Cash and cash equivalents
increased from $3.9 million at the end of the last fiscal year to $21.1 million
at end of the third fiscal quarter of 1995 due primarily to the receipt of the
insurance proceeds relating to the Kansas City Fire.
The Company's working capital position as of the last day of the nine-month
period ended November 30, 1994 was a negative $20.3 million. This position
compares to a negative $7.5 million at fiscal 1994 year end. The decrease in
working capital was due primarily to an increase in current maturities of long-
term debt of $28.7 million, which is approximately equal to the amount of the
mandatory sinking fund payment of $28.75 million due on May 1, 1995 with respect
to the Old Subordinated Debentures offset in part by the increase in cash and
cash equivalents of $17.2 million, due primarily to the receipt of the insurance
proceeds.
Short-Term Capital Resources - The commitment level at November 30, 1994
under the Old Credit Agreement was $27.5 million, with a maximum of $20.0
million available for cash borrowing. The maximum amount of letters of credit
permitted to be outstanding under the Old Credit Agreement is $10.0 million.
Any amount by which letters of credit outstanding exceed $7.5 million under the
Old Credit Agreement reduces the available cash borrowings by a like amount. In
addition, the amount available for cash borrowings is subject to further
limitation by the amount of eligible accounts receivable outstanding. Based
upon letters of credit outstanding and eligible accounts receivable as of
November 30, 1994, the Company had an available cash borrowing capacity of $20.0
million, of which no amount was borrowed. The Company had approximately $6.3
million of outstanding letters of credit, principally related to leasing and
workers' compensation requirements.
Debt Service Requirements - Payments due on long-term debt in the first
half of fiscal 1996 included an interest payment of $10.1 million paid on March
1, 1995 with respect to the First Mortgage Bonds, and a sinking fund payment of
$28.75 million and an interest payment of $6.3 million due on May 1, 1995 with
respect to the Old Subordinated Debentures. As a result, the Company's
estimated cash requirements for debt service in the first quarter of fiscal 1996
are approximately $45 million. The Company had available cash to make the March
1, 1995 interest payment on the First Mortgage Bonds and, subject to the timing
of cash collections and payments, believes it will have, in cash and available
borrowings under the Old Credit Agreement, approximately the $35.0 million
required as of May 1, 1995 to make the principal and interest payments with
respect to the Old Subordinated Debentures.
39
<PAGE>
However, if the Company were able to and elected to make the required May
1, 1995 principal and interest payments on the Old Subordinated Debentures from
available cash and borrowings under the Old Credit Agreement, the Company
believes that such payments would create a default at the next measurement date
(May 31, 1995) under the pro forma debt service covenant (as defined) contained
in the Old Investment Agreement, and a default under the Old Credit Agreement
relating to an out-of-debt requirement as of June 30, 1995. Under such
circumstances, the Institutional Investor and the Bank could declare the
principal of and accrued but unpaid interest on all the First Mortgage Bonds and
borrowings under the Old Credit Agreement to be immediately due and payable.
Upon such a declaration, such principal and interest and a premium thereon would
be classified as a current liability. The Company, therefore, is proposing the
Restructuring to alleviate the Company's anticipated liquidity shortfall and to
avoid defaulting under its debt agreements.
New Financing Arrangements
The New Credit Agreement will provide an aggregate availability of $27.5
million, which may be used for any combination of letters of credit (up to $10
million) and revolving cash borrowings, subject to borrowing base limitations.
The borrowing base will equal 85% of eligible accounts receivable, plus 70% of
the value of all real property mortgaged to the Bank, up to a maximum of $27.5
million, less the amount represented by letters of credit outstanding. The New
Credit Agreement will be secured by the Company's trade receivables and
mortgages on certain of the Company's warehouse properties. Borrowings under
the New Credit Agreement will mature on February 28, 1999. The New Credit
Agreement eliminates the 30-day resting period (during which there may be no
outstanding borrowings) for fiscal 1996 and requires only one such period for
fiscal 1997. Two such periods will be required during fiscal 1998 and fiscal
1999. The New Credit Agreement also is expected to contain amendments of
certain financial covenants contained in the Old Credit Agreement in light of
the Restructuring. See "Description of New Credit Agreement."
The New Subordinated Debentures will be issued in an aggregate principal
amount of $115 million, will bear interest at the rate of 15% until maturity and
will not be subject to any sinking fund requirement.
Pursuant to the New Investment Agreement, the Company will redeem on the
Effective Date $10 million in principal amount of Series A Bonds held by the
Institutional Investor for an amount equal to 100% of the principal amount
thereof. In addition, under the New Investment Agreement, the Company will have
the option of prepaying principal on the Series A Bonds, without payment of any
prepayment penalty, (i) in whole or in part for a period ending 18 months
following the Effective Date, and (ii) on one or more
40
<PAGE>
occasions up to a total of $25 million (less the amount of Series A Bonds
redeemed or prepaid within the 18-month period described in clause (i) above),
whenever such redemption shall occur.
The following table shows the principal amortization schedule for the
existing $115 million of Old Subordinated Debentures (before giving effect to
the Restructuring, the purchase of $10 million of Series A Bonds and the
issuance of the New Subordinated Debentures) compared to the new principal
amortization schedule for the $115 million of New Subordinated Debentures, the
new principal amortization schedule for the Series A Bonds after giving effect
to the New Investment Agreement, and required repayment or amortization of the
other outstanding debt of the Company as of December 31, 1994:
<TABLE>
<CAPTION>
Scheduled Redemption of:
------------------------
Repayments
Pursuant to
Other Old New Series A
Fiscal Mortgages and First Mortgage Bonds Subordinated Subordinated Bonds, Post-
Year Capital Leases Series A Series B Debentures Debentures Restructuring
- -------- -------------- ----------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
1996 $ 4.04 $ -- $ -- $ 28.75 $ -- $ 10.00
1997 2.41 -- -- 28.75 -- --
1998 3.32 -- -- 57.50 -- --
1999 2.26 -- -- -- -- --
2000 2.50 30.00 -- -- -- 30.00
2001 2.76 36.00 -- -- -- 36.00
2002 2.49 36.00 -- -- -- 36.00
2003 2.52 48.00 -- -- -- 38.00
2004 2.39 -- -- -- -- --
2005 0.64 -- 88.13 -- -- --
2006 0.84 -- 88.12 -- -- --
2007 0.96 -- -- -- -- --
2008 1.10 -- -- -- 115.00 --
------ ------- ---------- ------- ------------ -------
Total $28.23 $150.00 $176.25 $115.00 $115.00 $150.00
====== ======= ========== ======= ============ =======
</TABLE>
The Restructuring will mitigate the Company's near-term financial
vulnerability and increase the likelihood that the Company will realize the
benefits of additional capital expenditures and possible expansion of its
refrigerated transportation management business. After the Restructuring,
however, the Company will remain highly leveraged and will continue to be
subject to substantial principal and interest payments with respect to its
indebtedness.
Capital Expenditures
Cash provided by operating activities, insurance proceeds received related
to the Kansas City Fire and escrowed funds available under the Bond Indenture
were sufficient to provide for $13.2 million in expenditures for property, plant
and equipment
41
<PAGE>
during the nine-month period ended November 30, 1994. The Company's capital
expenditures are substantially discretionary. Capital expenditures for the last
three months of fiscal 1995 totalled approximately $6.2 million, including
approximately $2.2 million for property additions, and approximately $4.0
million for revenue enhancement or cost reduction expenditures and routine
replacements or betterments. A portion of the $4.0 million, related primarily
to material handling equipment, will be leased on an operating or capital lease
basis. The funding for the approximately $2.2 million of property expansions
will come from the funds held in escrow pursuant to the Bond Indenture or from
outside borrowings. As of February 28, 1995, the Company had approximately
$20.7 million in escrowed funds reserved for capital expenditures. The Company
continues to examine opportunities for expansion of its locations and services.
Any escrowed funds not expended by March 1996 must be used to redeem First
Mortgage Bonds.
The Company has made a proposal to the trustee under the Bond Indenture to
substitute approximately $4.8 million in cash as collateral for the property
lost in the Kansas City Fire, although no agreement has been reached for such
substitution. The Company has not reclassified any cash balance for the
possible payment. The $4.8 million has been excluded from the Company's
calculation of cash reserves for debt service.
Expenditures, including capital leases, for property, plant and equipment
for fiscal years 1992, 1993 and 1994 totaled $9.2 million, $17.7 million and
$11.0 million, respectively. Fiscal 1992 capital expenditures included
approximately $3.3 million for the expansion of the Ontario, Oregon facility and
approximately $0.8 million for the purchase of the Tampa, Florida (Shoreline
Drive) facility. The balance of the fiscal 1992 capital expenditures included
approximately $2.6 million in revenue enhancement or cost reduction
expenditures, and approximately $2.5 million for routine replacements,
betterments and other improvements. The Company also acquired $1.9 million of
assets under capital leases and $0.8 million under operating leases in fiscal
1992.
Fiscal 1993 capital expenditures included approximately $14.4 million for
the acquisition of the Burley, Idaho facility and the expansion of the
Fogelsville, Pennsylvania facility. The balance of the fiscal 1993 capital
expenditures included approximately $1.9 million in revenue enhancement or cost
reduction expenditures, and approximately $1.4 million for routine replacements
or betterments. The Company also acquired $1.2 million of assets under capital
leases and $0.6 million under operating leases.
Fiscal 1994 capital expenditures included approximately $4.8 million to
complete the expansion of the Fogelsville, Pennsylvania facility. The balance
of the fiscal 1994 capital
42
<PAGE>
expenditures included approximately $1.8 million in revenue enhancement or cost
reduction expenditures, and approximately $2.2 million for routine replacements
or betterments. The Company also acquired $1.0 million of assets under capital
leases and $1.2 million under operating leases.
The Company, as part of its Kansas City, Kansas location, operates a
limestone quarry. Subject to the completion of certain remaining due diligence
items, the Company expects to dispose of this business during the first half of
fiscal 1996. Net proceeds of the sale must, in accordance with the Company's
existing debt agreements, be reinvested in warehouse properties or used to
satisfy, in part, the mortgage obligation on the property.
43
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the
Restructuring as if it had occurred on March 1, 1994. The unaudited pro forma
financial statements are based on the estimated and unaudited financial
statements of the Company for the fiscal year ended February 28, 1995. The pro
forma data are not necessarily indicative of the financial position or results
of operations that would have been reported had the Restructuring occurred on
March 1, 1994 or that will be experienced and reported in the future.
The pro forma data should be read together with the other information
contained herein under the headings "The Restructuring," "Selected Consolidated
Financial and Other Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business Plan," and "Financial
Projections" and the financial statements of the Company and the notes thereto
made available as set forth in "Additional Information."
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Year ended last day of February 1995
(In Thousands)
<TABLE>
<CAPTION>
Estimated & Pro Forma Pro Forma
Unaudited Adjustments Reorganized
----------- ----------- -----------
Income Statement Data:
<S> <C> <C> <C>
Net sales $215,981 $ $215,981
Operating expenses:
Cost of sales 138,926 138,926
Amortization of cost in excess of
net assets acquired 2,535 2,535
Selling and administrative expenses 25,955 25,955
Employee stock ownership plan
expense 750 750
-------- --------
Total operating expense 168,166 168,166
-------- --------
Gross operating margin 47,815 47,815
Other (income) expense:
Interest expense, net (53,480) (1,369) (a) (55,566)
(13,795) (d)
17,250 (f)
Amortization of debt issuance costs (1,259) (466) (b) (793)
Other, net 17,718 17,718
Reorganization items 0 3,500 (g) (5,750)
2,250 (h)
-------- --------
Total other expenses (37,021) (44,391)
-------- --------
Income (loss) before income taxes and
extraordinary loss 10,794 3,424
Income tax expense 5,228 (2,948) (i) 2,280
Extraordinary loss 3,146 (c) (3,254)
108 (h)
-------- --------
Net income (loss) $ 5,566 $ (2,110)
======== ========
</TABLE>
See accompanying notes.
44
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
Last day of February 1995
(In Thousands)
<TABLE>
<CAPTION>
Estimated & Pro Forma Pro Forma
Unaudited Adjustments Reorganized
----------- ----------- -----------
ASSETS
Current assets:
<S> <C> <C> <C>
Cash, escrow and short-term
investments $ 51,632 $ 13,795 (d) $ 37,193
(4,217) (e)
(11,500) (f)
(3,500) (g)
(12,441) (h)
3,424 (j)
Trade receivables, net 20,494 20,494
Other current assets 6,452 6,452
-------- ---------
Total current assets 78,578 64,139
Net property, plant and equipment 367,248 367,248
Cost in excess of net assets
acquired, net 80,028 80,028
Debt issuance costs, net 8,909 466 (b) 7,740
(1,455) (c)
(180) (h)
Other noncurrent assets 5,782 5,782
-------- ------------ ---------
Total assets $540,545 $(15,608) $ 524,937
======== ============ =========
<CAPTION>
LIABILITIES, PREFERRED STOCK & COMMON STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accounts payable $ 5,006 $ $ 5,006
Accrued interest 17,385 (4,217) (e) 18,727
5,750 (f)
(191) (h)
Current maturities of long-term debt 2,570 2,570
Other current liabilities 19,421 19,421
-------- ---------
Total current liabilities 44,382 45,724
Long-term debt, less current
maturities 471,657 (1,369) (a) 464,076
3,788 (c)
(10,000) (h)
Deferred income taxes 105,942 (2,097) (c) 104,249
(72) (h)
(2,948) (i)
3,424 (j)
Other noncurrent liabilities 10,532 10,532
-------- ---------
Total liabilities 632,513 624,581
Preferred stock 5,792 5,792
Common stockholders' deficit (97,760) 1,369 (a) (105,436)
466 (b)
(3,146) (c)
13,795 (d)
(17,250) (f)
(3,500) (g)
(2,358) (h)
2,948 (i)
-------- ------------ ---------
Total liabilities, preferred stock
and common stockholders' deficit $540,545 $(15,608) $ 524,937
======== ============ =========
</TABLE>
See accompanying notes.
45
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AND STATEMENT OF OPERATIONS
The following notes set forth an explanation of the assumptions used in
preparing the unaudited pro forma financial statements. The pro forma
adjustments are based on management's best estimates using information currently
available.
(a) Reverse accretion on the Old Subordinated Debentures recorded for fiscal
1995.
(b) Reverse amortization of debt issuance costs recorded for fiscal 1995 on the
Old Subordinated Debentures and the portion of the Series A Bonds being
redeemed.
(c) Reflect exchange at March 1, 1994 of the Old Subordinated Debentures for
the New Subordinated Debentures. Recognize extraordinary loss (net of tax)
on the transaction, including the write-off of the unamortized portion of
the debt issuance costs and original issue discount for the Old
Subordinated Debentures.
(d) Reverse interest expensed and paid during fiscal 1995 on the Old
Subordinated Debentures and the portion of the Series A Bonds being
redeemed.
(e) Record payment of four months of interest accrued on the Old Subordinated
Debentures through March 1, 1994.
(f) Record interest expense on the New Subordinated Debentures, representing
two months of interest paid on May 1, 1994, six months of interest paid on
November 1, 1994, and four months of interest accrued for payment due May
1, 1995.
(g) Record estimated costs and professional fees associated with the
Restructuring.
(h) Record payment for redemption of $10 million of Series A Bonds, including
Agreement Modification Fee, accrued interest and the extraordinary loss
(net of tax) on the transaction for the write-off of the unamortized
portion of the debt issuance costs.
(i) Record income tax expense for all transactions except for the extraordinary
items, which were recorded net of tax.
(j) Record adjustment of deferred taxes and of income tax payment for fiscal
1995.
46
<PAGE>
BUSINESS PLAN
Americold's financial projections reflect the Company's business plan,
which is to continue to manage existing warehouse properties for the highest
attainable sales and earnings, grow the base of warehouse properties through
construction or acquisition and expand the Company's activities in
transportation management services.
Generally, the Company expects that the existing warehouse properties will
remain relatively stable. The Company has in place a "continuous improvement
process," through which the Company is seeking to enhance efficiency and contain
costs, to help offset inflationary cost increases and contribute to the
Company's margins from warehouse operations. Continuing sales efforts will be
directed at increasing customers' use of the Company's facilities as opposed to
competitors' facilities. The Company expects that its transportation management
services and its involvement in TPL will play important roles in bringing
additional business to existing warehouses. See "Business--Company Strategy."
Additional warehouse properties will be added to the Company's portfolio of
managed properties through construction or acquisition as well as through
operating or capital leases. The Company expects that such new properties will
generally yield margins above the average margin of the properties in the
current portfolio. Also, opportunities to sell or close warehouses will be
pursued if such sales or closures can be expected to improve the Company's
overall performance. The Company expects to invest all of the currently
escrowed funds available for construction or acquisition before the end of
fiscal 1996. In addition, the Company expects that any additional funds placed
in escrow will also be invested by the date required for investment under the
Bond Indenture. Projects currently underway account for approximately 62% of
the funds which are available or expected to become available in fiscal 1996,
excluding the possibility of the sale of any properties in the current year. In
the years following investment of the escrowed funds in new properties, the
Company expects continued but slower growth of warehouse assets funded out of
available cash flow and individual project financing.
The Company is pursuing opportunities to add larger customers in the
transportation management services business, and expects to see significant
growth in this area. Investments in systems and computer hardware were made in
fiscal 1995 to expand the Company's service offerings in this segment. A major
expansion of this business volume is anticipated for the first half of fiscal
1996 and a subsequent expansion within a few months thereafter. Management
expects that proposals currently under development will confirm the Company's
expectation that continued growth of transportation management services is
attainable for future years. Although the Company does not expect this business
to be profitable
47
<PAGE>
in fiscal 1996, margin growth is expected to produce profitable operations in
fiscal 1997 and later years.
The Company's service offerings in transportation management and in other
third party logistics areas, such as the emerging opportunities available
through the Company's affiliation with Non-Stop Logistics Corporation ("Non-
Stop") and the development of an available pool of cryogenically cooled railcars
and containers through the Company's affiliation with Logistics Resource
Management, Inc., are expected to further enhance the Company's reputation as a
full service supplier of frozen food handling, storage and transportation
services to frozen food manufacturers, distributors and retailers. In addition,
management believes that the logistics activities will be profitable activities
and will assist the Company in marketing its warehouse services for existing and
future warehouse properties.
48
<PAGE>
FINANCIAL PROJECTIONS
The following projections have been prepared by the Company to present the
effects of the Restructuring and to assess the Company's ability to meet its
restructured financial obligations, but are not facts and should not be relied
upon as being representative of future results. The estimates and assumptions
underlying the projections are inherently uncertain, being based upon events
that have not taken place, are subject to economic, competitive and other
uncertainties and contingencies beyond the Company's control, and involve
judgments based upon past performance and industry trends which may not
necessarily be indicative of future performance or trends. Consequently, there
can be no assurance that the projected results can be realized, or that actual
results will not be higher or lower than those projected. Management believes
that the basis for such projections is reasonable, taking into account the
purpose for which they were prepared. However, the projections were not
prepared with a view towards public disclosure or compliance with the published
guidelines of the Commission or the American Institute of Certified Public
Accountants regarding projections or forecasts. Neither KPMG Peat Marwick LLP,
the Company's independent auditors, nor any other independent accounting firm,
has examined, reviewed or compiled the following projections or expressed an
opinion or any other form of assurance or other association with respect
thereto. Management believes, however, that the projections are presented on a
basis consistent with generally accepted accounting principles as applied to the
Company's historical financial statements. There can be no assurance that the
assumptions underlying the projections will prove correct or that the Company's
actual ability to cover its future principal and cash interest payment
obligations will not differ from the information reflected below. See
"-- General Assumptions; -- Key Operating Assumptions." IMPAIRED CREDITORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FOLLOWING PROJECTIONS IN
DETERMINING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN.
The estimates and assumptions underlying the projections are based on
matters as they exist on the date hereof, and not as of any future date. In
addition, the Company is unable to predict all of the effects of a filing under
the Bankruptcy Code in connection with the Restructuring. These factors may
adversely affect the Company's business, its growth opportunities and
relationships with its customers, suppliers and employees. The Company does not
intend to update or otherwise revise the following projections to reflect
circumstances existing after the date hereof or to reflect the occurrence of
unanticipated events, even in the event that any or all of the underlying
assumptions are shown to be in error, except as required by applicable law. In
any event, the Company does not intend to update or revise these projections to
reflect changes in general, economic or industry conditions. Information
contained in any of the Company's financial statements made
49
<PAGE>
available as set forth in "Additional Information" shall be deemed to supersede
the projections.
The projections should be read together with the other information
contained herein under the headings "The Restructuring," "Selected Consolidated
Financial and Other Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business Plan" and "Business --
Company Strategy" and the financial statements of the Company and the notes
thereto made available as set forth in "Additional Information."
General Assumptions
The accompanying projected financial statements assume that the
Restructuring will be consummated on August 1, 1995. The projections do not
reflect any potential adverse operating effects of the Restructuring (including
the potential operating effects of a prepackaged bankruptcy filing or any
alternative restructuring) on the Company's business. It is possible that the
Company's sales, profits and cash flows could be negatively impacted by the
Restructuring.
The projections do not reflect any impact from the effects of inflation on
the Company's sales or operating expenses.
Key Operating Assumptions
For projection purposes, the Company's operations have been segregated into five
strategic business components, with the following assumptions regarding their
performance.
Americold - Existing Base
- -------------------------
Projections for the existing base encompass all operations, excluding
transportation management services, existing as of March 1, 1995. These
operations generated approximately 100% of fiscal 1995 EBITDA. For fiscal 1996
and thereafter, the existing warehouse business is assumed to provide constant
EBITDA generally consistent with that achieved in fiscal 1995, adjusted for the
planned disposal of the quarry in Kansas City in mid-fiscal 1996 and scheduled
operating lease expirations for warehouse facilities beginning in 1997. The
impact of any potential lease rejections by the Company has not been reflected
in the projections.
ATS - Existing
- --------------
Represents the existing consolidated shipping business performed by ATS.
It does not include the new business development related to the third party
logistics component. ATS business is assumed to remain constant at fiscal 1995
levels.
50
<PAGE>
Americold - Expansion
---------------------
Represents growth in the warehousing business resulting from (1) increased
capacity related to the use of approximately $29 million in escrow funds by
March 1996; (2) the expansion of a warehouse facility (completed February 1995);
and (3) following the use of all escrow funds, the addition of one warehouse
per fiscal year beginning in fiscal 1997. A significant portion of the escrow
funds is committed to projects currently under construction. Several other
projects are currently being considered, and the Company believes the remaining
funds will be used by March 1996. Any subsequent expansions are assumed to be
75% financed. The projections also assume the Company will add $5 million
annually in incremental warehousing sales, building up over a period of six
years beginning in fiscal 1997, as a result of increased utilization of the
existing capacity related to the development of the third-party logistics
business. Overall warehousing margins are expected to improve as a result of
the warehouse expansions and increased utilization of existing warehouses, as
margins from these activities are expected to exceed those of the average
existing warehouse business.
Third-Party Logistics
- ---------------------
Represents the development of the new TPL service business. The Company
has an agreement with its first major TPL customer and assumes a significant
portion of this customers' service requirements will be transferred by August
1995. The Company has also reached a tentative agreement with a second customer
and assumes this business will be transferred by May 1995. Beginning in mid-
fiscal 1997, the Company anticipates adding one additional customer every
twelve months. While TPL accounts for the majority of the Company's assumed
sales increases, margins for the transportation services are anticipated to be
significantly below those of warehousing due to the outsourcing of trucking and
other transportation services and the nature of the business.
Non-Stop Logistics
- ------------------
The Company has business development activities underway related to its
investment and preferred provider status with Non-Stop Logistics. Due to the
start-up nature of these activities, no sales or earnings related to Non-Stop
have been included in the projections. The Company believes, however, that this
is a viable, strategic business that will ultimately provide a positive EBITDA
impact.
51
<PAGE>
Following are descriptions of various other income statement and balance
sheet assumptions:
Interest Expense
- ----------------
Interest expense is calculated assuming the Company's existing debt
structure adjusted to reflect the Restructuring. Bank debt is assumed to carry
an annual interest rate of 11%, and any incremental warehouse expansion funding
is assumed at an annual rate of 12%. Excess cash is assumed to be invested at
6% per annum. All debt is assumed to be held to maturity.
Reorganization Costs
- --------------------
All expenses incurred by the Company for the Restructuring are assumed to
be expensed during fiscal 1996. The current estimate of $3.5 million is based
on the assumption that the Company will emerge from Chapter 11 by August 1,
1995. If confirmation does not occur as planned, reorganization costs could be
significantly higher than projected. In addition, the Company will pay the
$2.25 million Agreement Modification Fee in connection with the modification of
the Old Investment Agreement.
Extraordinary Loss
- ------------------
Represents the loss (net of tax) on the restructuring transaction, which
includes the write-off of the unamortized debt issuance costs for the Old
Subordinated Debentures and the portion of the Series A Bonds being redeemed and
original issue discount for the Old Subordinated Debentures.
Income Taxes
- ------------
Income tax expense is based on applicable federal and state tax rates. Due
to the significant difference in the Company's asset base for financial
accounting and income tax purposes, the Company will pay significant income
taxes during the projection period as compared to book tax expense.
Working Capital
- ---------------
The change in working capital is primarily due to the change in cash,
escrow and short-term investments. Accounts receivable are projected on a basis
consistent with historical collection patterns for the Company. Accounts
payable are projected to allow for an initial investment in working capital due
to TPL start-up. No material working capital impact is projected after fiscal
1997, with the exception of scheduled paydowns of long-term debt reflected in
fiscal 1999 and 2000.
52
<PAGE>
Capital Expenditures
- --------------------
Represents capital expenditures projected at a level required to fund all
expansion activities and to maintain all assets in good operating condition.
53
<PAGE>
PROJECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Fiscal Years Ended Last Day of February
-----------------------------------------------------------------------
1995(a) 1996 1997 1998 1999 2000
-------- --------- --------- --------- --------- ---------
(Dollars are in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $215,981 $ 263,967 $ 324,417 $ 349,650 $ 372,798 $ 398,998
Operating expenses:
Costs of sales 138,926 178,135 227,156 246,594 264,175 285,644
Amortization of cost in
excess of net assets
acquired 2,535 2,535 2,535 2,535 2,535 2,535
Selling and administrative
expense 25,955 31,293 35,934 38,507 40,779 43,476
Employee stock ownership
plan expense 750 750 750 750 750 750
-------- --------- --------- --------- --------- ---------
Total operating expense 168,166 212,713 266,375 288,386 308,239 332,405
-------- --------- --------- --------- --------- ---------
Gross operating margin 47,815 51,254 58,042 61,264 64,559 66,593
Other income (expense):
Interest expense, net (53,480) (55,579) (56,541) (56,488) (56,182) (55,137)
Amortization of debt
issuance costs (1,259) (802) (778) (778) (778) (778)
Other, net (b) 17,718 150 135 134 137 135
Reorganization items 0 (5,750) 0 0 0 0
-------- --------- --------- --------- --------- ---------
Total other expenses (37,021) (61,981) (57,184) (57,132) (56,823) (55,780)
-------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary
loss 10,794 (10,727) 858 4,132 7,736 10,813
Income tax expense (benefit) 5,228 (1,033) 1,143 2,427 3,841 5,048
Extraordinary loss -- (2,163) -- -- -- --
-------- --------- --------- --------- --------- ---------
Net income (loss) $ 5,566 $ (11,857) $ (285) $ 1,705 $ 3,895 $ 5,765
======== ========= ========= ========= ========= =========
Balance Sheet Data:
Cash, escrow and short-term
investments $ 51,632 $ 19,318 $ 23,888 $ 29,661 $ 39,552 $ 20,644
Working capital 34,196 628 4,496 12,714 (7,754) (32,632)
Property and equipment, net 367,248 380,799 373,921 366,681 359,835 352,680
Total assets 540,545 519,242 519,032 516,502 518,487 491,427
Long-term debt 471,657 461,597 459,747 460,342 430,456 394,029
Preferred stock 5,792 6,573 7,461 8,468 9,611 10,909
Common stockholders' deficit (97,760) (110,098) (110,971) (109,973) (106,921) (102,153)
Other Data:
Earnings before interest, taxes,
depreciation, and
amortization
("EBITDA") (b)(c)(e) $ 88,512 $ 68,193 $ 81,365 $ 84,145 $ 87,135 $ 89,563
EBITDA as a percent of
sales (b)(c)(e) 41% 26% 25% 24% 23% 22%
EBITDA as a percent of sales,
excluding transportation
activities (b)(c)(e) 45% 35% 39% 39% 40% 40%
Ratio of EBITDA to interest
expense (b)(c)(e) 1.7 1.2 1.5 1.5 1.6 1.6
Depreciation and amortization 24,238 23,341 23,967 23,526 23,218 23,613
Capital expenditures 13,203 37,247 13,340 12,472 12,559 12,646
Warehouses open on the last
day of the year (d) 51 54 54 54 53 54
Weighted average capacity --
cubic feet (in millions) (d) 229.2 234.2 244.5 245.1 242.0 242.9
</TABLE>
(a) Estimated and unaudited; see "Selected Consolidated Financial and Other
Information."
(b) Includes pre-tax gain on insurance settlement of approximately $17.0
million in fiscal 1995 for claims related to the Kansas City Fire.
(c) EBITDA is presented because it is a widely accepted financial indicator of
a company's ability to service debt. The Company believes that EBITDA and
the ratios of EBITDA to net sales and interest expense, while providing
useful information, should not be considered in isolation or as a
substitute for the projected consolidated income statement data. For
example, EBITDA should not be considered an alternative to net income as an
indicator of operating performance or an alternative to the use of cash
flow as a measure of liquidity.
(d) Reflects facility construction and expansion and any assumed lease
expirations.
(e) Includes reorganization items incurred in fiscal 1996.
See accompanying notes.
54
<PAGE>
BUSINESS
Americold is the nation's largest supplier of refrigerated warehouse
services for the frozen food industry. The Company also provides transportation
management services for frozen food shippers. Services are provided through the
Company's national network of 51 refrigerated warehouses and through the
Company's refrigerated transportation management unit. The Company provides
these and other services either separately or in conjunction with warehousing
services.
Americold was founded in 1911, reincorporated in 1931 and, prior to 1984,
operated as The Terminal Ice and Cold Storage Company and, subsequently,
Termicold Corporation. In December 1982, Americold was acquired by Beatrice.
Beatrice was acquired by BCI Holdings Corporation, an affiliate of Kohlberg
Kravis Roberts & Co., in April 1986. In December 1986, Kelso, the Co-Investors
and the Management Group purchased the Company in the Acquisition.
Refrigerated Warehouses
Since its founding in 1911, the Company has grown to become the largest
owner and operator of refrigerated warehouses in the United States. The Company
believes it supplies 16% of the total publicly available freezer storage space
in the country, based on the most recent data (October 1993) published by the
USDA and the data most recently prepared by the International Association of
Refrigerated Warehousemen (the "IARW"). With more than twice the capacity of
its nearest competitor, the Company's network of 51 refrigerated warehouse
facilities in fifteen states provides a total storage capacity of approximately
230 million cubic feet. Approximately 94% of the storage space operated by the
Company is freezer space (zero degrees Fahrenheit and below), with the remaining
space divided between cooler space (28 degrees Fahrenheit and above) and
unrefrigerated dry storage space. The Company believes that its facilities are
sufficiently dispersed geographically to allow it to compete in most of the
significant markets in the United States.
The USDA statistics show that approximately 77% of all commercial freezer
space is available through public suppliers, such as the Company, and the
remainder is owned or operated by food processors and distributors for their
private use. The USDA statistics since 1979 show that there has been an
increasing trend toward the use of public as opposed to private freezer space.
Americold serves a broad array of customers in the frozen food industry
ranging from small local food producers to most of the large national food
companies as well as retail distributors and food service operators. Major
customers include ConAgra, Inc., Dean Foods Co., General Mills, Inc., H. J.
Heinz Co., Kellogg Co., Nestle S.A., The Pillsbury Company and the USDA. Major
items
55
<PAGE>
stored include vegetables, potatoes, fish, poultry, prepared foods and fruits.
Most of the Company's warehouses may be classified as combination production
and distribution facilities, although some provide solely production or
distribution services. Production facilities differ from distribution
facilities in that they typically serve one or a small number of customers
located nearby. These customers store large quantities of unprocessed or
partially processed products in the facility until they are further processed or
shipped to the next stage of production or distribution. Distribution
facilities primarily serve customers who store smaller quantities of a larger
variety of finished products before they are shipped to end-users, such as food
retailers and food service companies.
During the past four years the Company has implemented new management
systems and performance standards in its warehouses. The IBM AS400 warehouse
management system was completed in December 1992 to tie together into a single
network with common services all of the Company's locations. The Company
believes that the standardization of systems and procedures has improved the
quality and consistency of customer services, reduced costs and led to the
overall enhancement of performance. To further integrate the Company's
services, the Company, using new computer hardware and a combination of
purchased and internally developed software, completed in March 1995 a
transportation management system which is fully integrated with the Company's
warehouse management system.
The Company has developed several services ancillary to its warehouse
freezer operations and intends to continue developing and promoting such
services as well as adding incremental freezer, cooler or dry space. Ancillary
services include the use of EDI to receive and transmit product flow and status
information to the Company's customers, and SUPERCOLD freezer storage provided
at 11 of Americold's facilities for the preservation of products, such as ice
cream, which require storage at temperatures as low as 20 degrees below zero
(Fahrenheit).
Refrigerated Transportation Management
The Company provides frozen food manufacturers with refrigerated
transportation management services either separately or in conjunction with
warehousing services. Integrated services allow frozen food manufacturers to
contract with a single entity, the Company, for warehousing and transportation
services to the manufacturer's ultimate customer. Transportation management
services, which are provided under the Company's own ICC authority as a carrier
or under ICC broker authority, include carrier and mode selection, routing,
dispatch, carrier rate negotiations, carrier performance monitoring, claims
management, freight payment and load consolidation. The actual freight
transportation is
56
<PAGE>
performed by carriers who have negotiated rates with the Company. The Company
does not own and does not intend to own significant transportation equipment.
In 1990, the Company united its freight consolidation activities conducted
at various warehouses into a single unit, ATS. Subsequently, in order to expand
the business of ATS, the Company formed alliances with transportation providers
and added staff resources and expertise in logistics. The Company now has the
ability to utilize its network of IBM AS400 computers, its transportation
management and communications software and its multiple warehouse locations to
provide integrated warehousing and logistics services to its customers.
In addition to these integrated transportation management and warehousing
services, the Company is working to develop services that include demand
forecasting, "flow-through logistics" and "channel cost economic modeling" for
its customers. Through its investment in Non-Stop, a start-up venture, the
Company is working to provide Non-Stop's advanced forecasting technology to
Americold's customers. Non-Stop's forecasting technology is designed to be
sufficiently accurate to allow customers to predict demand in advance and to
send products to market area warehouses for rapid turn through the warehouses
("flow-through logistics"). Also through Non-Stop, the Company is working to
provide channel cost economic modeling, which is a methodology used to identify
and track accurately per-case costs of delivering products to individual
markets. If Non-Stop is ultimately successful, the Company, through an
agreement with Non-Stop, expects to be the principal provider of frozen storage,
handling and transportation services in Non-Stop's flow-through environment.
While there can be no assurance of Non-Stop's success, the Company believes that
its association with Non-Stop will benefit the Company by providing it access to
the latest cost-savings technology relating to food and packaged goods
logistics.
In December 1994, the Company entered into a significant contract with one
of its largest customers to provide transportation management services fully
integrated with warehousing services. The customer has begun transferring
responsibility for transportation management to the Company, and responsibility
is expected to be fully transferred by August 1995. In addition, the Company is
working with that customer and Non-Stop to develop a channel cost economic
model, to provide forecasting services, and to develop an integrated logistics
model. In February 1995 the Company signed a letter of intent with another
customer to similarly provide transportation management services.
57
<PAGE>
Company Strategy
Americold's strategy is to use its position as the largest supplier of
public cold storage space to access increased volumes of frozen food storage and
additional transportation management business. By combining logistical data
from the Company's many customers, transportation efficiencies can be realized
which would be unavailable to any one customer alone. Americold's systems allow
it to manage the entire process of warehousing and transportation management for
production and distribution of frozen food.
The Company's customers, by outsourcing to Americold, may benefit from the
transportation efficiencies Americold achieves while being able to reduce
redundant staff, avoid individual investments in computer hardware and software
for transportation management and focus instead on manufacturing and marketing
requirements. Industry studies suggest that frozen food processors generally
spend approximately twice as much on transportation as on warehousing of frozen
food products. The Company believes that the potential cost savings brought to
customers in product distribution will attract additional customers and volumes
to its existing warehouse facilities and may provide opportunities to expand
geographically to meet customer needs.
The Company believes that its strong industry position, its geographically
dispersed network of warehouse facilities and its transportation management
systems provide it with a competitive advantage in developing relationships with
large frozen food manufacturers that have freezer storage needs in numerous
locations throughout the United States. In this regard, the Company has entered
into agreements with two of the largest of these frozen food manufacturers
pursuant to which the Company has become a preferred provider of freezer
services. Under such agreements, the Company has the opportunity to increase
its warehousing business with such customers while making a commitment to
provide certain continuing services. The Company believes that these agreements
have the potential to reduce these customers' overall distribution costs and
provide the Company with increased volume. The Company plans to continue to
develop agreements with other customers with respect to becoming a preferred
provider of freezer services to such companies, and believes that this strategy
has the potential to increase utilization of its existing warehouses, provide
opportunities to build or acquire additional warehouses and develop new
refrigerated transportation management customers. The Company is also
approaching smaller frozen food manufacturers and distributors to offer the
Company's network of warehousing and logistics services which such smaller
customers may find more attractive than developing their own logistics
resources. See "Business Plan."
58
<PAGE>
Customers
Americold's customers consist primarily of national, regional and local
frozen food processing firms, traders, wholesalers, retailers and food service
organizations. Although the Company provides services to approximately 3,200
customers, in fiscal 1994 the 10 largest customers accounted for approximately
55% of total net sales. For fiscal 1994, the ten largest customers of the
Company and certain of the customers' subsidiaries, in alphabetical order, were
ConAgra, Inc., General Mills, Inc. (Gorton Group), H. J. Heinz Co. (Ore-Ida
Foods, Inc.), J.R. Simplot Co., Kellogg Co. (Mrs. Smith's Frozen Pies), Nestle
S.A. (Carnation Co.), Norpac Foods Inc., Philip Morris Companies Inc. (All
American Gourmet Co.), The Pillsbury Company and the USDA. H. J. Heinz Co. and
its subsidiaries accounted for approximately 18% of the Company's net sales in
fiscal 1994. See "Risk Factors--Company Dependence on Significant Customers."
At several locations, the Company's production warehouses are located
adjacent to customers' processing facilities. Several of the Company's
customers guarantee a minimum quantity of product to be stored in return for
guaranteed space pursuant to long-term contracts. At several locations, the
Company leases space to manufacturers or distributors on a long-term, fixed-rate
basis. At a number of facilities, particularly those located adjacent to
customers' processing facilities, a majority of, and in some cases virtually
all, business is attributable to a single user of the facility. Management has
observed in the past, however, that to the extent products produced at locations
adjoining the Company's facilities are commodities grown in the surrounding
area, demand for the products has been more significant to the long-term sales
and profitability of the facility than has been the viability of a single
producer.
Seasonality
Warehousing sales are seasonal, depending upon the timing and availability
of crops grown for frozen food production and the seasonal build-up of certain
products for holiday consumption. The third quarter, ending each November 30,
normally represents the strongest sales quarter. Capacity utilization at
facilities varies from season to season, with average annual capacity
utilization of approximately 70%. The Company generally keeps sufficient space
available at individual warehouses to meet peak season demand.
Competition
Americold operates in an environment in which location, customer mix,
warehouse size, service level and price are the principal competitive factors.
Since frozen food manufacturers and distributors incur transportation costs
which typically are significantly greater than warehousing costs, location is a
major
59
<PAGE>
competitive factor. In addition, in certain locations, customers depend upon
pooling shipments, which involves combining their products with the products of
others destined for the same markets. In these cases, the mix of customers in a
warehouse can significantly influence the cost of delivering products to
markets. The size of a warehouse is important because large customers prefer to
have all of the products needed to serve a given market in a single location and
to have the flexibility to increase storage at that single location during
seasonal peaks. The Company believes that customers generally will select a
warehouse facility based upon service levels and price, if there are several
warehouse locations which satisfy its transportation, customer mix and size
requirements. In addition, the Company's customers, many of which have
substantially greater resources than the Company, may divert business from the
public warehousing sector by building their own refrigerated warehouse
facilities.
Competition is national, regional and local in nature. There are no
significant barriers to entry, permitting a relatively large number of smaller
competitors to enter the Company's markets. On the national level, Americold
competes with United Refrigerated Services, Inc. ("URS"), United States Cold
Storage, Inc., Millard Refrigerated Services and Christian Salvesen, Inc.,
which, according to statistics compiled by the IARW, accounted for approximately
6.3%, 4.2%, 2.7% and 2.2% of public freezer space, respectively, in 1993. On
the regional and local level, there are many smaller warehouse operators that
compete with the Company and, according to data prepared by the IARW, warehouse
operators who own or control less than 35 million cubic feet each of
refrigerated space or freezer space accounted for approximately 71% of all
public refrigerated storage space in 1993. The Company believes that
competition from these local and regional competitors is significant because
national competitors often do not compete in the same markets as the Company.
The Company also believes, however, that if its strategy of integrating
warehousing and transportation management services is successful, the economies
of scale attendant to the movement of large quantities of diverse products
through its national network of warehouses will create a marketing advantage not
available to smaller competitors. Certain companies, such as GATX Corporation
and Exel Logistics, Inc., provide transportation management services to local
shippers, but not in conjunction with frozen food warehouse systems.
Kelso holds approximately 57% of the common equity of URS and, therefore,
owns a controlling interest in both the Company and URS. Kelso has implemented
procedures intended to address possible conflicts of interest that might arise
from its investment in both URS and the Company. Kelso has considered on a
preliminary basis the possibility of a business combination between the Company
and URS. Kelso has terminated its consideration of such a business combination.
Because no definitive plan was reached on the structure and business terms of
such a combination, it is not
60
<PAGE>
possible to predict what effect, if any, such a combination would have on the
New Subordinated Debentures. It is possible, however, that upon completion of
the Restructuring, Kelso may re-visit the possibility of a business combination
between the Company and URS.
The Company continues to look for opportunities to add warehouse locations
and to expand its existing locations. While the Company added approximately 24
million cubic feet of freezer space over the last seven years, the public
refrigerated warehouse industry has grown at a faster pace, adding approximately
340 million cubic feet of freezer space between 1987 and 1993 based on data
prepared in October 1993 by the USDA. As a consequence, the Company's national
market share of freezer space during such period decreased from approximately
18% to approximately 16%. Although some of the freezer space added by
competitors has adversely affected the level of business at certain of the
Company's warehouses, the majority has been in areas where the Company does not
directly compete. The Company's ability to capitalize on significant business
opportunities in the future, however, may be limited by its substantial leverage
and restrictions in its debt agreements. See "Risk Factors--Competition; --
Substantial Leverage; Net Losses; Deficit of Earnings to Fixed Charges."
Organization
The Company's operations are headquartered in Portland, Oregon, and the
Company maintains an office in Gloucester, Massachusetts. The Company's
warehouse facilities are organized into four districts. Each district is
managed by a District Manager to whom the respective General Managers report.
General Managers are responsible for one to five warehouses and are supported at
the district and corporate levels by certain logistics, accounting, marketing,
engineering, data processing and operational functions.
Sales and Marketing
Sales responsibility at the Company resides primarily with district and
local management who are supported at the national level by the Company's
executive and sales and marketing staff. Marketing is principally a corporate
management function.
It is the responsibility of each warehouse's or group's management to
understand and be responsive to the needs of its individual marketplace and to
adapt sales efforts accordingly. Each General Manager actively engages in the
sales effort. Although the Company operates nationally, prices charged by the
Company tend to reflect local market conditions.
Local sales efforts are supplemented by the national corporate sales and
marketing and logistics departments, which supplies sales support, logistics
analysis, account pricing guidance and
61
<PAGE>
advertising, and monitors relationships with large district and national
accounts. The Company employs two sales managers and a sales representative,
all reporting to a director of sales in Portland, Oregon. These sales managers
are located in California and Colorado, while the sales representative is
located in Massachusetts. In addition, a primary sales development and pricing
contact is assigned to each of the Company's top 100 accounts. Certain
customers storing product in multiple facilities, but who are not among the
Company's top 100 accounts, are also offered a similar contact.
The majority of the Company's customers are billed on a monthly basis.
Handling and first period storage is billed upon receipt of the product.
Recognition of one-half of the handling revenue is deferred until the product is
released.
Employees
The Company had approximately 1,889 employees as of February 28, 1995. A
breakdown of employees by function is set forth below:
Employee Breakdown by Function
<TABLE>
<CAPTION>
Function Number of Percentage
-------- Employees of Total
--------- -----------
<S> <C> <C>
Operations.......................... 1,485 78.6%
Transportation Management Services.. 19 1.0%
Sales and Marketing................. 4 0.2%
Administration...................... 381 20.2%
----- ------
Total............................ 1,889 100.0%
===== ======
</TABLE>
Approximately 673 of the Company's employees are covered by union contracts.
Currently, 26 facilities employ unionized labor, while 25 facilities are non-
unionized. Union contracts for individual locations are with the local chapters
of national unions, principally the International Brotherhood of Teamsters, and
generally have staggered expiration dates. During the past three years, there
have been no strikes at the Company's facilities, and the Company believes its
relationships with its employees are satisfactory.
Patents, Licenses and Trademarks
The Company's operations are not dependent upon any single or related group
of patents, licenses, franchises or concessions. The Company's operations are
also not dependent upon a single trademark or service mark, although the Company
has registered the Americold
62
<PAGE>
and SUPERCOLD service marks with the United States Patent and Trademark Office.
Research and Product Development
The Company does not operate in an industry in which research and
development plays an important role. The Company, therefore, has not made any
material expenditure with regard to Company-sponsored research and development
in the past three fiscal years, nor has it been involved in any material
customer-sponsored research and development activities during that period. The
Company, however, has made significant expenditures in developing and installing
its new computer data processing support system and continues to pursue methods
of reducing energy costs at its facilities.
Properties
As of February 28, 1995, the Company owned or leased 51 facilities in 15
states. Although most of the facilities are owned by the Company, 13 facilities
comprising approximately 10.2% of the Company's total cubic feet of storage
space are leased or subleased by the Company under operating-type lease
arrangements. Four facilities with approximately 5.3% of the total cubic feet
of storage space are leased, in whole or in part, under sale-and-leaseback or
capitalized-type lease arrangements. Five facilities, or portions thereof, with
approximately 7.2% of the total cubic feet of storage space, are situated on
leased land. Capacity utilization at facilities varies from season to season,
with average annual capacity utilization of approximately 70%. All but five of
the Company's owned warehouses are currently encumbered to secure the Senior
Debt of the Company.
The Company's facilities are typically single-story concrete buildings
constructed at dock height elevation, with very heavy insulation and vapor
barrier protection. Refrigeration is typically supplied by screw-type
compressors in ammonia-based cooling systems. Facilities are served by truck as
well as by rail. In many instances buildings generally have sufficient land
space surrounding them to afford ample area for truck parking and storage of
unused pallets and equipment. Many facilities also have room for expansion.
63
<PAGE>
The following table lists the 51 refrigerated warehouse properties owned or
leased by the Company as of February 28, 1995:
REFRIGERATED WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
Total
Storage Space Type of Owned or
(Cubic Ft./Mil) Facility(*) Leased
--------------- ----------- ------
<S> <C> <C> <C>
Burbank (W. Magnolia Blvd.), California 0.8 P/D Owned
Fullerton (S. Raymond Ave.), California 4.0 P/D Leased(1)
Los Angeles (Corona St.), California 0.7 D Leased(1)
Los Angeles (Jesse St.), California 2.7 P/D Owned(4)
Oakland (E. 11th St.), California 1.9 D Leased(1)
Pajaro (Salinas Rd.), California 0.8 P/D Leased(1)
San Francisco (Donner Ave.), California 2.5 D Leased(1)
Turlock (5th St.), California 2.5 P/D Owned(4)
Turlock (S. Kilroy Rd.), California 3.0 P/D Owned(4)
Watsonville (W. Riverside Dr.), California 5.2 P/D Owned(2)(4)
Watsonville (Second St.), California 1.5 P/D Leased(1)
Watsonville (Hwy One), California 3.6 P/D Leased(1)
Denver (E. 50th St.), Colorado 2.8 P/D Owned(2)/Leased(3)(4)
Denver (N. Washington St.), Colorado 0.5 P/D Leased(1)
Bartow (U. S. Highway 17), Florida 1.2 P/D Owned(2)(4)
Plant City (S. Alexander St.), Florida 0.9 P/D Owned
Tampa (N. 50th St.), Florida 4.1 P/D Owned/Leased(3)
Tampa (S. Lois Ave.), Florida 0.4 D Owned
Tampa (Shoreline Dr.), Florida 0.8 D Owned(2)
Burley (U.S. Highway 30), Idaho 7.8 P/D Owned(2)(6)
Nampa (4th St. N.), Idaho 8.0 P Owned(4)
Chicago (S. State St.), Illinois 2.9 P/D Leased(1)
Chicago (S. Blue Island Ave.), Illinois 2.9 P/D Leased(1)
Bettendorf (State St.), Iowa 8.9 P/D Owned(4)
Fort Dodge (Maple Dr.), Iowa 3.7 D Owned(4)
Kansas City (Inland Dr.), Kansas 35.2 P/D Owned(4)
Portland (Read St.), Maine 1.8 P/D Owned
Boston (Widett Ci.), Massachusetts 3.1 P/D Owned(4)
Gloucester (E. Main St.), Massachusetts 1.9 P/D Owned(4)
Gloucester (Railroad Ave.), Massachusetts 0.3 P/D Owned(4)
Gloucester (Rogers St.), Massachusetts 2.8 P/D Owned(4)
Gloucester (Rowe Sq.), Massachusetts 2.4 P/D Owned(4)
Watertown (Pleasant St.), Massachusetts 4.7 P/D Owned(4)
Brooks (Brooklake Rd.), Oregon 4.8 P Owned(4)
Hermiston (Westland Rd.), Oregon 4.0 P Owned(4)
Hillsboro (W. Washington St.), Oregon 1.1 P/D Leased(1)
Milwaukie (S. E. McLoughlin Blvd.), Oregon 4.7 D Owned(4)
Ontario (N. E. First St.), Oregon 8.1 P Leased(5)
Salem (Portland Rd. N.E.), Oregon 12.5 P/D Owned(4)
Woodburn (Silverton Rd.), Oregon 6.3 P/D Owned(4)
Fogelsville (Mill Rd.), Pennsylvania 14.0 D Owned/Leased(3)(4)
Murfreesboro (Stephenson Dr.), Tennessee 2.9 P/D Owned(4)
Clearfield (South St.), Utah 8.6 P/D Owned(4)
Burlington (S. Walnut), Washington 4.7 P/D Owned(4)
Connell (W. Juniper St.), Washington 5.7 P Owned(4)
Kent (S. 190th St.), Washington 1.0 D Leased(1)
Moses Lake (Wheeler Rd.), Washington 7.3 P/D Owned(4)
Walla Walla (4-14th Ave. S.), Washington 3.1 P Owned(4)
Wallula (Dodd Rd.), Washington 1.2 P/D Owned(4)
Plover (110th St.), Wisconsin 9.4 P/D Owned(4)
Tomah (Route 2), Wisconsin 4.6 P Owned(4)
----
230.3
=====
</TABLE>
____________________________
(*) "P" designates a production facility.
"D" designates a distribution facility.
"P/D" designates a facility that is used for both production and
distribution.
(1) Operating lease.
(2) Building owned by the Company; land is leased.
(3) Capitalized lease.
(4) Security for Company's First Mortgage Bonds.
(5) Financing lease.
(6) Security for mortgage payable.
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<PAGE>
Legal Proceedings and Insurance
From time to time, the Company has been involved in litigation relating to
claims arising out of its operations in the regular course of business. The
Company has settled all of the material lawsuits and claims filed in connection
with the Kansas City Fire. The aggregate amount of all settlement payments for
the litigation and claims related to the Kansas City Fire did not exceed the
amount of the Company's applicable insurance coverage and therefore no cash
payment by the Company was required. After resolution of the lawsuits and
claims, the Company applied the proceeds paid to the Company by the Company's
insurance carriers in the third quarter of fiscal 1995. See "The Restructuring
- --Background--Adverse Business Events" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Comparison of Nine-Month
Periods Ended November 30, 1993 and 1994."
As of the date of this Disclosure Statement, the Company is not a party to
any legal proceedings, the adverse outcome of which would, in management's
opinion, have a material adverse effect on the Company's results of operations
or financial position. The Company maintains property, liability and
warehouseman's legal liability insurance in amounts which it believes are
consistent with industry practice and adequate for its operations.
65
<PAGE>
MANAGEMENT
The directors and executive officers of Americold as of February 28, 1995
are as follows:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Ronald H. Dykehouse.. 53 Chairman of the Board, President, Chief Executive
Officer and Director
Joel M. Smith........ 51 Senior Vice President, Chief Financial Officer and
Director
John P. LeNeveu...... 48 Senior Vice President, Operation and Sales
F. Stanley Sena...... 46 Senior Vice President, Administration and
Technical Services
J. Roy Coxe.......... 54 Senior Vice President, Logistics
Ronald A. Nickerson.. 58 Vice President, Operations
Lon V. Leneve........ 38 Vice President, Treasurer and Secretary
Frank Edelstein...... 69 Director
George E. Matelich... 38 Director
James C. Pigott...... 58 Director
William A. Marquard.. 74 Director
</TABLE>
Ronald H. Dykehouse was named President of Americold Corporation in May
1990 and Chairman of the Board and Chief Executive Officer in June 1990. From
1989 to 1990, Mr. Dykehouse was a private investor and consultant. From 1986 to
1989, he was Executive Vice President and Chairman of the Food and Distribution
Groups of Amfac Inc., a diversified holding company. Mr. Dykehouse is a past
director of the National Frozen Foods Association and past Chairman of the
American Frozen Food Institute.
Joel M. Smith has been Senior Vice President and a director of the Company
since December 1986. Mr. Smith has been the Chief Financial Officer of
Americold since 1978 and a Vice President since 1984.
John P. LeNeveu was named Senior Vice President, Operations and Sales of
Americold in July 1991. From 1988 to 1991, he was a management consultant with
the Institute of Management Resources, an international management consulting
company. Mr. LeNeveu was a division manager for Fluorocarbon Company, PRP and
FoMac divisions, producers of engineered rubber and plastic products, from 1986
to 1988.
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<PAGE>
F. Stanley Sena has been Senior Vice President, Administration and
Technical Services of the Company since August 1991. From 1986 to 1990, Mr.
Sena was Vice President, Operations, Western Region, and from 1990 to 1991, Mr.
Sena was Vice President, Operations of the Company.
J. Roy Coxe was named Senior Vice President, Logistics, of Americold in
December 1993. From 1991 to 1993, he was a management consultant with A. T.
Kearney, Inc., an international management consulting company. Mr. Coxe was a
vice president for Drake Sheahan Stewart Dougall and successors, a logistics and
transportation consulting firm, from 1983 to 1991.
Ronald A. Nickerson has been Vice President, Operations since 1990. From
1987 to 1990, Mr. Nickerson was Vice President, Operations, Eastern Region, of
the Company.
Lon V. Leneve was named Vice President in September 1992, has been
Treasurer of Americold since July 1988 and was appointed Secretary of the
Company in February 1995. Mr. Leneve joined Americold in 1982 and was
Controller from 1984 to 1988.
Frank Edelstein was elected a director of the Company in 1986. He is
currently a consultant to Kelso, and Vice President of Gordon+Morris Group,
Inc., an investment banking firm. Mr. Edelstein joined Kelso in 1987 and held
the position of Vice President of Kelso until 1992. Mr. Edelstein is also a
director of Ceradyne, Inc., IHOP Corporation and Arkansas Best Corporation.
George E. Matelich has been a director of the Company since December 1986.
Mr. Matelich joined Kelso, an investment banking firm, in 1985 as an Associate,
served as a Vice President of Kelso from 1986 to 1990 and is currently a
Managing Director of Kelso.
James C. Pigott was elected a director of Americold in June 1987. He is
President of Pigott Enterprises, Inc., a private investment company. Mr. Pigott
has been Chairman of the Board and Chief Executive Officer of Management Reports
and Services, Inc., an accounting consulting firm since 1987. Mr. Pigott's
other business activities include membership on the Board of Directors of
PACCAR, Inc.
William A. Marquard was elected a director of Americold in June 1987. He
is currently Chairman Emeritus of the Board of Directors of American Standard,
Inc., and Chairman of the Board of Directors of Arkansas Best Corporation. Mr.
Marquard is a director of Treadco, Inc., Mosler, Inc., Earle M. Jorgenson
Company and Earthshell Container Corporation. He is also Vice Chairman of the
Board of Directors of Kelso.
All directors hold office until the next annual meeting of shareholders of
the Company or until their successors have been
67
<PAGE>
elected and qualified. The executive officers of the Company are chosen by the
Board and serve at its discretion.
For their services on the Board of Directors of the Company, Messrs.
Pigott, Marquard and Edelstein are paid $16,000 per year. Mr. Pigott receives
$1,000 per year as Chairman of the Company's Audit Committee, and Mr. Marquard
receives $1,000 per year as Chairman of the Company's Compensation Committee.
Messrs. Pigott, Marquard and Edelstein also receive $600 per meeting attended.
Directors who are also officers of the Company and Mr. Matelich do not receive
additional compensation as directors of the Company. Directors are reimbursed
for out-of-pocket expenses incurred in connection with attendance at meetings.
The Compensation Committee for fiscal 1994 consisted of Mr. Marquard, Mr.
Matelich and Mr. Pigott. The Audit Committee for fiscal 1994 consisted of Mr.
Pigott, Mr. Edelstein and Mr. Matelich.
Stockholders' Agreement
The Company's Bylaws provide for one to twelve directors. The Board of
Directors of the Company currently consists of six directors. Certain of the
Company's shareholders have agreed, pursuant to the stockholders' agreement
dated as of December 24, 1986, as amended (the "Stockholders' Agreement"), that
two directors shall be designated by Kelso. The Stockholders' Agreement also
provides for two directors who are not affiliates of Kelso, the Management Group
or the Co-Investors, as defined in the Stockholders' Agreement. In addition,
one director may be designated by Northwestern Mutual Life Insurance Company.
Mr. Edelstein and Mr. Matelich have been designated by Kelso. Pursuant to the
Stockholders' Agreement, Mr. Pigott and Mr. Marquard are deemed not to be
affiliates of Kelso, the Management Group or the Co-Investors. Northwestern
Mutual Life Insurance Company has not designated a director since May 1991. The
Stockholders' Agreement also provides that prior to the occurrence of an initial
public offering of at least 25% of the outstanding shares of common stock of the
Company pursuant to an effective registration statement under the Securities
Act, sales of shares of common stock by a member of the Management Group are
subject to a right of first refusal granted to the Company and, in certain
events, the non-management shareholders who are parties to the Stockholders'
Agreement.
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<PAGE>
Executive Compensation
Summary Compensation Table
- --------------------------
The following table sets forth information as to the compensation of the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company as of the last day of February 1994 for
services in all capacities to the Company for the years ended the last day of
February 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
----------------------------------------- -----------------------------
Other Restricted Option/
Name and Annual Stock SARs
Principal Position Year Salary Bonus Compensation(1) Awards(2) No.
- ------------------ ---- ------ ----- --------------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Dykehouse 1994 $300,000 $68,608 $10,500 $ - -
Chairman & CEO 1993 300,000 65,276 8,971 - -
1992 300,000 - 30,938 169,359 -
Joel M. Smith 1994 159,120 29,920 5,029 - -
Sr. Vice President 1993 159,120 27,946 44,009 - -
and CFO 1992 159,120 - 74,650 72,833 -
John P. LeNeveu(3) 1994 159,120 29,920 2,309 - 30,000
Sr. Vice President, 1993 159,120 27,946 27,208 - -
Operations & Sales 1992 97,920 - 177 45,769 -
F. Stanley Sena 1994 140,712 26,459 1,611 - -
Sr. Vice President, 1993 140,712 24,713 43,774 - -
Administration & 1992 140,712 - 71,045 64,407 -
Technical Services
J. Roy Coxe(4) 1994 30,192 23,250 - - 30,000
Sr. Vice President,
Logistics
</TABLE>
_______________
(1) Consists of the cost of relocation, the value of automobiles, payments made
on behalf of the individuals to a bank which made loans to facilitate
acquisition of the Company's stock by each individual, and other
miscellaneous fringe benefits. The value of such benefits is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- --------
<S> <C> <C> <C>
Mr. Dykehouse
Relocation $ - $ - $22,238
Other 10,500 8,971 8,700
Mr. Smith
Bank Loan - 40,291 69,055
Other 5,029 3,718 5,595
Mr. LeNeveu
Relocation - 25,999 -
Other 2,309 1,209 177
Mr. Sena
Bank Loan - 41,910 69,052
Other 1,611 1,864 1,993
Mr. Coxe
Other - - -
</TABLE>
(2) Awards under the Stock Incentive Plan.
(3) Mr. LeNeveu's employment commenced July 15, 1991.
(4) Mr. Coxe's employment commenced December 20, 1993. His annual base salary
is $150,000.
69
<PAGE>
Options Grant Table
The following table sets forth information as to the options granted to the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company during the fiscal year ended the last day of
February 1994.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------
Percent of
total Potential realizable
Number of options/ value at assumed
Securities SARs annual rates of stock
Underlying granted to price appreciation
Options/ employees Exercise or for option term(*)
SARs in fiscal base price Expiration --------------------
Name Granted year ($/Share) Date 5% ($) $10% ($)
- ---- ------- --------- --------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Dykehouse - - - - - -
Joel M. Smith - - - - - -
John P. LeNeveu 30,000 50% $21.88 May 2003 0 0
F. Stanley Sena - - - - - -
J. Roy Coxe 30,000 50% $20.40 December 2003 0 0
</TABLE>
(*) The market price used was based on the last known transaction in the
voting stock of the Company of $6.50 per share.
Aggregated Option Table
The following table sets forth information as to the options held by
the Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company through the end of fiscal 1994.
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised
Acquired on Options at Fiscal Year End Options at Fiscal
Name Exercise Value Exercisable/Unexercisable Year-End
---- ----------- ----- ------------------------- --------
<S> <C> <C> <C> <C>
Ronald H. Dykehouse 0 $0 60,000/40,000 $0
Joel M. Smith 0 0 8,278/0 0
John P. LeNeveu 0 0 0/30,000 0
F. Stanley Sena 0 0 8,279/0 0
J. Roy Coxe 0 0 0/30,000 0
</TABLE>
70
<PAGE>
Incentive Compensation Plans
- ----------------------------
Management Incentive Plan
The Company has a Management Incentive Plan (the "MIP Plan") to
provide additional compensation to participants, including executive officers,
upon the achievement of certain financial objectives of the Company and
individual personal objectives of the Participants. The MIP Plan was replaced
by the Stock Incentive Plan beginning with fiscal 1992, as described below, and
reinstated by the Board of Directors on June 16, 1994, effective as of March 1,
1994. The MIP Plan is administered by the Compensation Committee of the Board
of Directors (the "Compensation Committee") and is applicable to management
employees of Americold and, at the option of the President of the Company, other
employees of Americold. The financial objective award is 50% of the total award
and is based on attainment of actual operating results as compared to financial
targets. The financial objectives were established and approved by the Company
based upon the annual business plan. The personal objective award is 50% of the
total award and is based on attainment of both quantifiable and nonquantifiable
goals established at the beginning of the MIP Plan year. Incentive compensation
earned under the MIP Plan is computed as soon as possible after the close of the
Company's fiscal year and payment made within 60 days after the end of the
fiscal year unless a deferred payment election has been filed with the Company
in accordance with the terms of the Plan.
The Board of Directors authorized a separate $500,000 cash bonus award
for fiscal 1994 payable under a format similar to the MIP Plan structure, which
was paid in July 1994. Incentive compensation earned by the Company's executive
officers for the fiscal year ended the last day of February 1994 is included in
the above Cash Compensation Table.
Stock Incentive Plan
On June 16, 1994, effective as of February 28, 1994, the Board of
Directors authorized the suspension of the Company's Stock Incentive Plan (the
"SIP Plan"), which was a long-term incentive plan intended to provide additional
financial incentives to key employees, including executive officers of the
Company. Any awards issued under the SIP Plan prior to its suspension will be
paid pursuant to the Plan provisions. The SIP Plan, which was authorized by the
Board or Directors on September 19, 1991, was intended to replace the MIP Plan
for the four-year period commencing March 1, 1991 and ending on February 28,
1995. However, due to the significant effects of the fire at the Company`s
Kansas City, Kansas facility on the results of operations beginning with the
second year of this four-year period, the Board reinstated the former MIP Plan,
as described above, effective March 1, 1994.
71
<PAGE>
Distribution or awards earned under the SIP Plan are deferred until
the end of the four-year period, although annual awards were achievable during
each of the three fiscal years during which the SIP Plan applied.
The total amount of shares awarded under the SIP Plan prior to its
suspension on February 28, 1994 was 106,123 shares. All of such award was based
upon the fiscal 1992 financial performance. Shares allocable to the individuals
named in the Summary Compensation Table are as follows: Mr. Dykehouse, 16,659;
Mr. Smith, 7,164; Mr. LeNeveu, 4,502; Mr. Sena, 6,335; and Mr. Coxe, 0. No
stock was awarded under the Plan for fiscal 1993 and fiscal 1994.
All awards are intended to be made in common stock of the Company.
Participants may elect, however, for a limited period after the end of the Plan,
to receive cash in lieu of the stock awarded, if they have not elected to defer
receipt of their award. Participants electing to receive cash will receive the
cash bonus that they would have been awarded during the same award period
(fiscal 1992) under the MIP Plan, plus interest on such amounts. Participants
who receive stock will also receive an amount of cash equal to the amount of any
dividends declared and paid with respect to such shares had they been issued on
the date the participant first received the award. As a condition to, and
contemporaneously with the issuance of certificates for shares awarded under the
SIP Plan, the participant will be required to enter into a stock transfer
restriction agreement which will limit the participant's ability to sell,
assign, transfer, hypothecate, pledge or in any manner alienate the shares
except as expressly provided for in the Stockholders' Agreement.
The total amount of stock awarded under the SIP Plan was determined by
the difference between the actual financial results in each year and the
targeted financial results for such year. Each participant's share of the total
stock awarded under the SIP Plan is based upon the individual's proportionate
interest in the total cash bonus that would have been awarded to all
participants under the MIP Plan. A maximum of 500,000 shares of common stock
was available for issue under the Plan.
The Plan generally requires that a participant must be employed at the
end of the four-year period (March 1, 1995) in order for the participant's
awards to vest. However, participants awarded stock shall be fully vested if
their employment by the Company terminates prior to March 1, 1995 because of
death, disability, retirement at age 65 or older or an involuntary termination
by the Company without cause. Awards will be distributed within 60 days of
vesting unless a participant has elected to defer such distribution.
72
<PAGE>
Participants' stock awards are also fully vested if the Participant's
employment with the Company has not previously terminated and the shareholders
of the Company approve any of the following transactions: (1) any
consolidation, merger, plan of exchange, or other transaction involving the
Company, in which the Company is not the continuing or surviving corporation or
pursuant to which the common stock of the Company would be converted into cash,
securities or other property, other than a merger involving the Company in which
the holders of the common stock of the Company immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation after the merger; or (2) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially
all of the assets of the Company or the adoption of any plan or proposal for the
liquidation or dissolution of the Company; or (3) any transaction whereby a
person acquires, directly or indirectly, the beneficial ownership (as defined in
Rule 13d-3 promulgated under the Exchange Act) or 50% or more of the Company's
voting stock.
Retirement Plan - Americold has a noncontributory defined benefit
retirement plan for salaried employees, including executive officers (the
"Retirement Plan"). The Retirement Plan provides retirement benefits based on
credited years of service and average monthly compensation for the highest five
calendar years of the final 15 calendar years of employment or, if higher, the
highest 60 consecutive months in the last 120 months of employment. A
participant's retirement benefits vest after the participant has completed at
least ten years of Vesting Service, as defined, or after the participant has
both attained age 55 and completed at least five years of Vesting Service.
The following table shows the approximate annual retirement benefits
payable to employees for life from normal retirement date pursuant to the
Retirement Plan before reduction for Social Security payments. The actual
retirement benefit to employees is offset by Social Security benefits. Service
credited under a former Beatrice retirement plan will be recognized by the
Retirement Plan for purposes of determining the pension benefits payable under
the Retirement Plan.
Estimated years of credited service as of February 28, 1995 under the
Retirement Plan for the individuals named in the Summary Compensation Table are
as follows: Mr. Dykehouse, 4 years; Mr. Smith, 16 years; Mr. LeNeveu, 3 years;
Mr. Sena, 25 years; and Mr. Coxe, 1 year. Estimated years of credited service
at normal retirement date (age 65) under the Retirement Plan for the individuals
named in the Summary Compensation Table are as follows: Mr. Dykehouse, 16
years; Mr. Smith, 26 years; Mr. LeNeveu, 20 years; Mr. Sena, 45 years; and Mr.
Coxe, 12 years.
73
<PAGE>
<TABLE>
<CAPTION>
Years of Service
-------------------------------------
Average Annualized
Compensation 20 30 40 50
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
$100,000 $30,000 $ 45,000 $ 60,000 $ 75,000
125,000 37,500 56,250 75,000 93,744
150,000 45,000 67,500 90,000 112,500
175,000 52,500 78,750 105,000 118,800
200,000 60,000 90,000 118,800 118,800
300,000 90,000 118,800 118,800 118,800
</TABLE>
In addition to the above, certain individuals named in the Summary
Compensation Table are entitled to a benefit calculated by using additional
years of service credited under supplements to the Retirement Plan. Years of
credited service under the supplements for the individuals named in the Summary
Compensation Table as of the last day of February 1994 are as follows: Mr.
Dykehouse, 0 years; Mr. Smith, 5 years; Mr. LeNeveu, 0 years; Mr. Sena, 0 years;
and Mr. Coxe, 0 years. The annual amount to be received at normal retirement
date pursuant to the supplements is estimated to be as follows: Mr. Dykehouse,
$0 per annum; Mr. Smith, $5,906 per annum; Mr. LeNeveu, $0 per annum; Mr. Sena,
$0 per annum; and Mr. Coxe, $0 per annum.
A participant's retirement benefits (excluding any incremental benefit
earned under any supplement) under the Retirement Plan plus 50% of Social
Security benefits may not exceed 60% of his compensation at retirement after 40
years of service, subject to maximum dollar limitations.
Employee Stock Ownership Plan - Americold established, effective March
1, 1987, an Employee Stock Ownership Plan, as amended January 1, 1994 (the
"ESOP"), in which all qualifying employees of the Company not covered by
collective bargaining arrangements are able to participate. It is contemplated
that contributions on an annual basis will not exceed 15% of the aggregate total
compensation of any participating employee. The Company may contribute cash as
well as or in lieu of its stock. The consent of the Company's Board of
Directors is required to authorize any contribution by Americold to the ESOP.
Contributions are allocated among participants based on the ratio of each
participant's compensation to the total compensation of all such participants,
subject to certain limitations. The ESOP is intended to provide retirement
funds to participants in addition to present pension benefits.
Benefits under the ESOP vest based upon years of service as follows:
20% after three years of service, increased by 20% for each of the next four
years with a maximum of 100% after seven
74
<PAGE>
years of service. A participant is 100% vested if employed by the Company on or
after his 65th birthday, or if the participant incurs a total and permanent
disability or dies while employed by the Company. The ESOP has the right to
repurchase previously distributed shares from employees terminating their ESOP
participation, using funds obtained through cash contributions by the Company.
Participant forfeitures are allocated pro rata to remaining participants.
Participants are eligible for distribution of their capital
accumulation in the ESOP at the normal retirement age of 65. The distribution
will be made in whole shares of the Company's stock, cash or a combination of
both, as determined by the Compensation Committee, provided the participant has
not elected to be paid in stock.
Upon termination of the ESOP, the ESOP's trust will be maintained
until the capital accumulations of all participants have been distributed.
In November 1993, the Company funded the fiscal 1993 ESOP contribution
of $750,000. The contribution was in the form of 13,333 shares of the Company's
common stock and $430,008 in cash. Shares allocable to the individuals named in
the Summary Compensation Table as a result of the contribution are as follows:
Mr. Dykehouse, 112 shares; Mr. LeNeveu, 80 shares; Mr. Smith, 94 shares; Mr.
Sena, 83 shares; and Mr. Coxe, 0 shares. No ESOP contribution was declared for
fiscal 1994.
Key Employee Stock Option Plan - In 1987, Americold established a Key
Employee Stock Option Plan (the "Option Plan"). The Option Plan permits the
issuance of nonstatutory options to purchase up to 300,000 shares of common
stock of the Company to directors, officers and other key employees of the
Company. Of these, options to purchase up to 150,000 shares were reserved for
issuance to the Management Group and options to purchase the remaining 150,000
shares are reserved for issuance to all eligible employees (including the
Management Group) of the Company.
An individual exercising options under the Option Plan must become a
party to the Stockholders' Agreement. The Option Plan is administered by the
Compensation Committee. The Compensation Committee determines the recipients of
options granted, the exercise price and the number of shares of common stock
subject to each option. The Board of Directors may amend the Option Plan from
time to time. The maximum term of each stock option is ten years. Options
become exercisable at such time or times as the Compensation Committee may
determine at the time of grant.
If the outstanding shares of common stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company, by reason of any merger,
75
<PAGE>
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Compensation Committee shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which the unexercised portion of the option shall be exercisable, to the extent
that after such event the optionee's right to a proportionate interest in the
Company shall be maintained as if the option had already been exercised and the
option shares were subject to such change or exchange. Such adjustment shall be
made without change in the total price applicable to the unexercised portion of
the option and with a corresponding adjustment in the exercise price per option
share. Any such adjustment made by the Compensation Committee shall be final
and binding upon the Company, the optionee and all other interested persons.
In the event of (i) dissolution or liquidation of the Company, (ii) a
merger in which the Company is not the surviving corporation or (iii) a share
exchange pursuant to which the outstanding shares of common stock of the Company
are acquired by another corporation, then either (a) the Compensation Committee,
upon authorization of the Board, shall make an appropriate and equitable
adjustment in the number and kinds of securities covered by outstanding options,
and such options shall be expressly assumed by the successor corporation, if
any; or (b) in lieu of such adjustment, the Board shall provide a 30-day period
immediately prior to such an event during which each optionee shall have the
right to exercise the optionee's outstanding options, in whole or in part,
without regard to the time the options have been outstanding or the vesting
schedule provided for in any option agreement entered into pursuant to the
Option Plan and all options not exercised shall expire at the end of the 30-day
period.
Information with regard to the grant of options as of the last
day of February 1995 under the Plan follows:
<TABLE>
<CAPTION>
Number of Option Number Expiration
Options Price Exercisable Date
- --------- ------ ----------- ----------
<S> <C> <C> <C>
93,795 $10.00 93,795 May 1998
100,000 $18.95 80,000 June 2000
30,000 $21.88 6,000 May 2003
30,000 $20.40 6,000 December 2003
</TABLE>
During fiscal 1994, the Company granted options totaling 60,000 shares
of the Company's common stock to two of its officers. No options were exercised
during the most recent fiscal year.
Other Arrangements - The Company entered into a two-year employment agreement
with Mr. Dykehouse on May 14, 1990. Pursuant to the terms of the agreement, Mr.
Dykehouse agreed to serve as the Chief Executive Officer of the Company.
Further, Mr. Dykehouse
76
<PAGE>
agreed not to compete with the Company for a 12-month period following
termination of his employment unless such termination is "without cause," as
defined in the employment agreement. Although the agreement has not been
extended, certain provisions survive the expiration of the initial term of the
agreement. If before June 26, 1995, Mr. Dykehouse's employment is terminated
"without cause," the Company has the right to purchase any shares of common
stock acquired pursuant to the exercise of any options granted on June 26, 1990
at the fair market value of the shares, as determined in accordance with the
Stockholders' Agreement. If before June 26, 1995, Mr. Dykehouse's employment is
terminated voluntarily or "for cause," the Company has the right to purchase any
such shares at the price paid by Mr. Dykehouse, plus interest. The agreement
also provided that Mr. Dykehouse would participate in the Americold Management
Incentive Plan, subsequently replaced by the Stock Incentive Plan. Pursuant to
an Agreement of Assumption dated June 26, 1990, Mr. Dykehouse has agreed to be
bound by the Stockholders' Agreement.
The Company entered into a three-year employment agreement with Mr. Coxe on
December 6, 1993. Mr. Coxe agreed to serve as the Senior Vice President,
Logistics, of the Company. Further, Mr. Coxe has agreed not to compete with the
Company for a 12-month period following termination of his employment unless
such termination is "without cause," as defined in the employment agreement.
The agreement provides, among other conditions, that if during the term of the
employment agreement Mr. Coxe's employment is terminated "without cause," the
Company will pay him a lump sum amount equal to one year's base compensation, or
the balance of the salary, plus bonus, provided for through the then remaining
term of the agreement, whichever is greater, plus any employee benefits accrued
to the date of termination. The Company is not required to make any such
payment if the termination is "for cause," as defined. The employment agreement
provides that Mr. Coxe will participate in any incentive plan otherwise offered
to members of senior management with a bonus of $23,250 awarded March 1, 1994,
and a minimum bonus of $55,000 awarded March 1, 1995.
77
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership
of common stock of the Company as of February 28, 1995 by (i) each person known
by the Company to own more than five percent of its common stock, (ii) each
director of the Company, (iii) all directors and officers as a group and (iv)
the Management Group:
<TABLE>
<CAPTION>
Number of Percent of
Name and Address Shares Outstanding
---------------- --------- Shares
-----------
<S> <C> <C>
KIA III-Americold, Inc. L.P./(1)/.......... 2,000,000 41.1%
("KIA III")
c/o Kelso & Company
350 Park Avenue, 21st Floor
New York, NY 10017
Kelso Investment Associates II, L.P./(1)/.. 500,000 10.3%
("KIA II")
c/o Kelso & Company
350 Park Company, 21st Floor
New York, NY 10017
Kelso Equity Partners, L.P./ (1)/.......... 70,000 1.4%
("Kelso Equity")
c/o Kelso & Company
350 Park Avenue, 21st Floor
New York, NY 10017
Joseph S. Schuchert/(2)/................... 2,593,600 53.3%
350 Park Avenue, 21st Floor
New York, NY 10017
Frank T. Nickell/(2)/...................... 2,593,600 53.3%
350 Park Avenue, 21st Floor
New York, NY 10017
George E. Matelich/(2)/.................... 2,593,600 53.3%
350 Park Avenue, 21st Floor
New York, NY 10017
Thomas R. Wall, IV/(2)/.................... 2,593,600 53.3%
350 Park Avenue, 21st Floor
New York, NY 10017
The Northwestern Mutual Life Insurance
Company/(1)/............................. 500,000 10.3%
720 East Wisconsin Avenue
Milwaukee, WI 53202
New York Life Insurance Company/(1)/....... 330,000 6.8%
51 Madison Avenue
New York, NY 10010
</TABLE>
78
<PAGE>
<TABLE>
<S> <C> <C>
New York Life Insurance and Annuity
Corporation/(1)/......................... 250,000 5.1%
51 Madison Avenue
New York, NY 10010
Ronald H. Dykehouse/(1)(3)/................ 97,900 2.0%
7007 S.W. Cardinal Lane, Suite 135
Portland, OR 97224
Joel M. Smith/(1)(3)/...................... 38,278 0.8%
7007 S.W. Cardinal Lane, Suite 135
Portland, OR 97224
Frank Edelstein............................ --- ---
The Gordon + Morris Group, Suite 1400
620 Newport Center Drive
Newport Beach, CA 92660
James C. Pigott............................ --- ---
1405-42nd Avenue East
Seattle, WA 98112
William A. Marquard........................ --- ---
350 Park Avenue, 21st Floor
New York, NY 10017
All directors and officers as a group
(11 persons)/(3)/........................ 239,495 4.9%
Management Group (31 persons)/(1)(3)/...... 555,695 11.4%
</TABLE>
_________________
(1) These persons are party to the Stockholders' Agreement which controls the
voting by these shareholders for directors of the Company. See
"Management--Stockholders' Agreement."
(2) Messrs. Schuchert, Nickell, Matelich and Wall may be deemed to share
beneficial ownership of shares owned of record by KIA III, KIA II, Kelso
Equity and Kelso & Company (Kelso & Company owns 23,600 shares) by virtue
of their status as the general partners of Kelso Partners III, L.P. (the
general partner of KIA III), Kelso Partners II, L.P. (the general partner
of KIA II) and Kelso Equity and the controlling stockholders and officers
of Kelso & Company. Messrs. Schuchert, Nickell, Matelich and Wall share
investment and voting powers with respect to securities owned by the
foregoing entities. Messrs. Schuchert, Nickell, Matelich, and Wall
disclaim beneficial ownership of such securities (other than the 23,600
shares owned by Kelso & Company).
(3) Includes the following numbers of shares of common stock that may be
acquired within 60 days after February 28, 1995 through the exercise of
stock options granted pursuant to the Company's Option Plan: 80,000 shares
for Mr. Dykehouse; 8,278 shares for Mr. Smith; 119,595 shares for all
directors and officers as a group; and 185,795 shares for the Management
Group.
The shareholders of the Company listed above hold approximately 83% of the
voting power of the Company's common stock and are able to elect all of the
members of the Board and control the Company. See "Risk Factors--Voting
Control."
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On December 23, 1992, Kelso and its chief executive officer, without
admitting or denying the findings contained therein, consented to an
administrative order in respect of a Commission inquiry relating to the 1990
acquisition of a portfolio company by a Kelso affiliate. The order found that
Kelso's tender offer filing in connection with the acquisition did not comply
fully with the Commission's tender offer reporting requirements, and required
Kelso and the chief executive officer to comply with these requirements in the
future.
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THE PLAN
The Plan sets forth in detail the terms of the Restructuring and provides
for its implementation. The following discussion of the Plan is qualified in
its entirety by reference to the provisions of the Plan, a copy of which is
attached as Appendix A hereto.
Brief Explanation of Chapter 11
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself, its creditors and equity holders. In
addition to permitting rehabilitation of the debtor, another goal of Chapter 11
is to promote equality of treatment of creditors and equity holders of equal
rank with respect to the distribution of a debtor's assets. In furtherance of
these two goals, upon the filing of a petition for reorganization under Chapter
11, Section 362 of the Bankruptcy Code generally provides for an automatic stay
of substantially all acts and proceedings against the debtor and its property,
including all attempts to collect debts or enforce liens that arose prior to the
commencement of the debtor's case under Chapter 11.
The consummation of a plan of reorganization is the principal objective of
a Chapter 11 reorganization case. A plan of reorganization sets forth the means
for satisfying claims against, and interests in, a debtor. Confirmation of a
plan of reorganization by a bankruptcy court makes the plan binding upon the
debtor, any issuer of securities under the plan, any person acquiring property
under the plan and any creditor and any equity holder of the debtor. Subject to
certain limited exceptions provided by the Bankruptcy Code, and except as
specifically provided in the plan of reorganization, the confirmation order
discharges the debtor from any debt that arose prior to the date of such
confirmation order and substitutes therefor the obligations specified in the
Plan.
Solicitation of Acceptances of the Plan
The Company is hereby soliciting acceptances of the Plan under Section
1126(b) of the Bankruptcy Code from the beneficial owners of the Old
Subordinated Debentures as of the Ballot Record Date and the Institutional
Investor as the holders of impaired claims. Under Section 1126(b) of the
Bankruptcy Code, a holder of a claim or interest that accepts or rejects a plan
of reorganization before the Chapter 11 case commences will be deemed to have
accepted or rejected such plan for purposes of confirmation of such plan under
Chapter 11, if the solicitation complied with any applicable nonbankruptcy law,
rule or regulation governing adequacy of disclosure in connection with the
solicitation, or if no such law, rule or regulation applies, such solicitation
was made after disclosure of adequate information as defined in Section 1125(a)
of
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the Bankruptcy Code. In addition, Bankruptcy Rule 3018(b) requires, in the case
of a prepackaged plan of reorganization, that (i) such plan be disseminated to
substantially all holders in any impaired class that is solicited, (ii) with
respect to securities held of record, votes be solicited from the holders of
record of such securities on the date specified in the solicitation and (iii)
the time prescribed for voting on such plan must not be unreasonably short. The
Company believes that this Disclosure Statement and the Solicitation comply with
the requisite requirements of the Bankruptcy Code and the Bankruptcy Rules, as
well as with the requirements of any applicable nonbankruptcy laws.
If by the end of the Solicitation period the Requisite Acceptances have
been received, the Company may elect, and currently intends, to commence a
reorganization case by filing a petition under Chapter 11 and to use the Ballots
and Master Ballots received pursuant to this Solicitation to seek confirmation
of the Plan as promptly as practicable. If the Company commences a Chapter 11
case and files the Plan with the Bankruptcy Court, it will seek to obtain an
order of the Bankruptcy Court finding that the Solicitation was in compliance
either with securities laws, rules and regulations or, if otherwise applicable,
the provisions of the Bankruptcy Code and that, therefore, the holders of claims
and interests that have accepted or rejected the Plan pursuant to the
Solicitation should be deemed to have accepted or rejected the Plan for purposes
of confirmation of the Plan under Chapter 11.
The Company believes that it will have the best opportunity to have the
Plan confirmed and to accomplish the Restructuring if it receives, prior to the
commencement of any bankruptcy case, acceptances of the Plan that are sufficient
in amount and number to confirm the Plan. See "--Voting on the Plan" for a
discussion of the Requisite Acceptances. In addition, the Company believes that
the prior acceptance of the Plan by the holders of impaired claims would
minimize disputes during its bankruptcy case and would, therefore, expedite
completion of the Reorganization, reduce the expenses of the court proceedings
and minimize the disruption of the Company's businesses that could result from a
protracted and contested bankruptcy case. If, on the other hand, the Company
were forced to file for bankruptcy protection without the prior acceptance of
the Plan, the Company believes that there is a substantially increased risk that
the Plan would not be consummated and that such case would be protracted, costly
and disruptive to the operation of the Company's businesses. In a
nonprepackaged bankruptcy, the Company believes that there is a substantial risk
that the holders of the Old Subordinated Debentures would receive significantly
less in respect of their claims than under the Plan.
Voting on the Plan
Upon the commencement of the Prepackaged Proceeding, the Company will
request a determination from the Bankruptcy Court that
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each vote received on a timely basis and not subsequently revoked be deemed to
constitute a valid vote under the Bankruptcy Code with respect to the Plan.
However, any Ballot submitted by a holder of Old Subordinated Debentures that is
not an "accredited investor," as defined in Regulation D, and does not otherwise
qualify as an investor in an offering thereunder or under Section 4(2) of the
Securities Act, will be deemed a rejection for purposes of determining whether
the Requisite Acceptances have been received. Such a holder may qualify to vote
on the Plan by having Morgan Stanley or another qualified person act as such
holder's purchaser representative. Because any Ballot will be deemed a
rejection if submitted by a holder of Old Subordinated Debentures that is not an
"accredited investor" as defined in Regulation D and does not otherwise qualify
as an investor in an offering thereunder or under Section 4(2) of the Securities
Act, the Bankruptcy Court may determine that the Solicitation does not comply
with the requirements of the bankruptcy laws. If the Bankruptcy Court were to
make such a determination, the Company might seek to resolicit acceptances.
This could delay, and possibly jeopardize, confirmation of the Plan. See "Risk
Factors--The Prepackaged Proceeding--Method of Solicitation and Tabulation of
Ballots."
A claim or interest that will not be repaid in full or as to which legal,
equitable or contractual rights are altered, is impaired. A holder of an
impaired claim or interest is entitled to vote to accept or reject the Plan to
the extent such claim or interest has been allowed under Section 502 of the
Bankruptcy Code.
This Disclosure Statement is furnished to the holders of impaired claims
against and interests in the Company to satisfy the requirements of the
Bankruptcy Code. The claims of the holders of the Company's First Mortgage
Bonds (except the Institutional Investor), the claims of the Bank, the trade
creditors, certain other secured creditors pursuant to capitalized leases and
mortgages and employees of the Company will be unimpaired under the Plan. The
holders of Old Subordinated Debentures, Class 8, and the Institutional Investor,
Class 6, are impaired under the Plan and are entitled to vote for its acceptance
or rejection.
Chapter 11 does not require that each holder of a claim against or an
interest in a debtor vote in favor of a plan of reorganization in order for the
Bankruptcy Court to confirm such plan. The Bankruptcy Code defines acceptance
of a plan of reorganization by a class of claims as acceptance by the creditors
holding a majority in number and at least two-thirds in amount of the allowed
claims of that class that have actually been voted on the plan. Accordingly,
claims or interests that are not voted will not be counted to determine whether
the Requisite Acceptances have been obtained with respect to the Plan.
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT, EACH HOLDER OF A CLAIM OR
INTEREST IN A CLASS WILL RECEIVE, ON ACCOUNT OF SUCH
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CLAIM OR INTEREST, THE SAME CONSIDERATION AS THE OTHER MEMBERS OF SUCH CLASS,
WHETHER OR NOT SUCH HOLDER VOTED TO ACCEPT THE PLAN. MOREOVER, UPON
CONFIRMATION, THE PLAN WILL BE BINDING ON ALL CREDITORS AND EQUITY HOLDERS
REGARDLESS OF WHETHER OR NOT SUCH CREDITORS OR EQUITY HOLDERS VOTED TO ACCEPT
THE PLAN.
Treatment of Trade Creditors and Employees
Provisions for Trade Creditors
The Company believes that the continued availability of trade credit in
amounts and on terms consistent with those currently in place is necessary to
the Company's ability to maintain adequate liquidity for operations.
Notwithstanding provisions of the Bankruptcy Code that would otherwise require
deferral of payment of pre-petition trade claims until consummation of the Plan,
the Company intends to seek the authorization of the Bankruptcy Court, promptly
following commencement of its Chapter 11 case, to pay in the ordinary course of
business the general unsecured pre-petition claims (collectively, the "Trade
Claims") of each trade creditor who, following commencement of the Company's
Chapter 11 case, (i) agrees to continue to provide products and services to the
Company on customary trade terms and (ii) agrees that if such holder of a Trade
Claim thereafter unreasonably refuses to continue to provide products and
services to the Company on customary trade terms during the Chapter 11 case, any
payments by the Company in respect of such holder's Trade Claim shall be deemed
advances recoverable in cash or in further products and services and such
holder's Trade Claim shall be reinstated. There can be no assurance, however,
that the Bankruptcy Court will permit any early payment to holders of Trade
Claims prior to consummation of the Plan. If such authorization is denied, all
allowed Trade Claims will be paid in full, in cash, on the Effective Date or as
soon thereafter as such Trade Claim becomes due.
Under the Plan, holders of Trade Claims will not be required to file proofs
of claim with the Bankruptcy Court, and, unless an objection to their claims is
filed, it is not expected that they will be required to take any other action to
receive payment on their Trade Claims. If the Company disputes a Trade Claim,
such dispute will be determined, resolved or adjudicated as if the Prepackaged
Proceeding had not been commenced.
Provisions for Employees
Pursuant to the terms of the Plan, the Company intends that salaries, wages
and sales commissions, expense reimbursements, accrued vacation pay, health-
related benefits, incentive programs, severance and similar employee benefits
of its employees (pre-petition claims based on any of the foregoing,
collectively, the "Employee Claims") be unaffected by the Restructuring. To
ensure the continuity of its work force and to further accommodate
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the unimpaired treatment of Employee Claims, the Company intends to seek the
authorization of the Bankruptcy Court, promptly upon the commencement of its
Chapter 11 case, to pay or adopt all accrued pre-petition salaries, wages and
sales commissions (including, in each case, certain taxes thereon), expense
reimbursements and severance, to continue to accrue benefits under incentive
programs, to permit employees to utilize paid vacation time that accrued prior
to the Petition Date (so long as they remain employees of the Company) and
otherwise to continue its employee benefits and incentive programs on an
uninterrupted basis. If such approval is granted, all allowed Employee Claims
will be paid in full in the ordinary course of business. There can be no
assurance that the Bankruptcy Court will permit such early payment or honoring
of the Employee Claims. Employee Claims not paid or honored prior to the
consummation of the Plan will be paid or honored in full on the Effective Date
or as soon thereafter as such payment or other obligation becomes due or
performable.
Under the Plan, employees of the Company will not be required to file
proofs of claim with the Bankruptcy Court, and, unless an objection to their
claims is filed, it is not expected that they will be required to take any other
action to receive payment on their Employee Claims. If the Company disputes an
Employee Claim, such dispute will be determined, resolved or adjudicated as if
the Prepackaged Proceeding had not been commenced.
Classification and Treatment of Claims and Interests
General
The Plan provides for the classification and treatment of the claims of the
creditors and the interests of the equity holders of the Company allowed under
Section 502 of the Bankruptcy Code (each, as the case may be, an "Allowed
Claim").
An Allowed Claim is a claim (a) that either (i) is listed by the Company in
its respective schedules filed with the Bankruptcy Court and not designated as
"contingent," "unliquidated" or "disputed" or (ii) as to which a proof of claim
or interest has been filed, and (b) in all cases, as to which no objection to
the allowance thereof, or motion for estimation thereof, has been made by the
Company or any other party in interest. If an objection is made, the validity
and amount of the claim will be resolved as described under "--Summary of Other
Provisions of the Plan--Disputed Claims and Interests." A creditor, other than
a holder of a Trade Claim or an Employee Claim or as described below, must file
a proof of claim with the Bankruptcy Court to assert any claim or interest not
scheduled by the Company, to assert a claim or interest in an amount different
from the amount scheduled by the Company or to assert a status different from
that shown in the schedules filed by the Company. However, after the Effective
Date, if the Bankruptcy Court so orders, the Company and any holder of a
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claim against the Company can agree that such claim or interest shall be an
"Allowed Claim" and thereafter treat such claim as an Allowed Claim without the
need to file a proof of such claim or seek further approval of the Bankruptcy
Court. No claims bar date shall be fixed as a deadline for filing proofs of
claim in the Bankruptcy Court except as to claims relating to or arising out of
unexpired leases or executory contracts rejected pursuant to the Plan.
Rejection claims must be filed within 20 days after the entry of an order
authorizing the rejection.
The Company is required under Section 1122 of the Bankruptcy Code to
classify the claims and interests of its creditors and equity holders into
classes that contain claims and interests that are substantially similar to the
other claims or interests in such class. The Plan designates 8 classes of
claims and 2 classes of interests. This classification takes into account the
differing nature and priority under the Bankruptcy Code and other applicable
laws of the various claims and interests.
While the Company believes that it has classified all claims and interests
in compliance with the provisions of Section 1122 of the Bankruptcy Code, it is
possible that, once the Prepackaged Proceeding has been commenced, a party in
interest may challenge such classification of claims or interests and the
Bankruptcy Court may find that a different classification is required for the
Plan to be confirmed. In such event, it is the present intention of the Company
to modify the Plan to provide for whatever reasonable classification might be
required by the Bankruptcy Court for confirmation of the Plan and to use the
acceptances received by the Company from any Person pursuant to the
Solicitation, to the extent permitted by the Bankruptcy Court, for the purpose
of obtaining the approval of the class or classes of which such person is
ultimately deemed to be a member.
All holders of unimpaired claims are conclusively deemed to have accepted
the Plan and such holders may not vote to reject the Plan. The unimpaired
classes under the Plan consist of, respectively, (1) the secured claims of the
holders of First Mortgage Bonds, other than the Institutional Investor, (2) the
secured claims of the Bank, (3) the allowed miscellaneous secured claims, (4)
the general unsecured claims of all creditors of the Company (including Employee
Claims and Trade Claims) other than the claims of the holders of the Old
Subordinated Debentures, (5) the allowed equity interests of the holders of
preferred stock of the Company, and (6) the allowed equity interests of the
holders of the common stock of the Company. The unimpaired classes of claims
include the claims of all employees and trade creditors of the Company and of
all holders of currently contingent, disputed or unliquidated claims. See
"--Summary of Distributions Under the Plan--Class 7--General Unsecured Claims."
Although the Company reserves the right to reject executory contracts and
unexpired leases in the Prepackaged Proceeding, the Company has no intention
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of altering its contractual relationships with its employees. See "--Summary of
Other Provisions of the Plan--Executory Contracts and Unexpired Leases."
Summary of Distributions Under the Plan
The following summary of distributions under the Plan does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
the Plan.
Administrative Expense Claims and Priority Tax Claims. An "Administrative
Expense Claim" is a claim against the Company constituting a cost or expense of
administration of the Prepackaged Proceeding allowed under Section 503(b) of the
Bankruptcy Code, including, without limitation, the actual and necessary costs
and expenses of preserving the estate and operating the business of the Company
during the Prepackaged Proceeding, any indebtedness or obligations incurred by
the Company during the pendency of the Prepackaged Proceeding in connection with
the conduct of the business of, the acquisition or lease of property by, or the
rendition of services to, the Company and compensation for legal and other
professional services and reimbursement of expenses and statutory fees payable
to the United States Trustee.
A "Priority Tax Claim" is a claim of a governmental unit of the kind
entitled to priority under Section 507(a)(8) of the Bankruptcy Code.
Pursuant to the Plan, Administrative Expense Claims and Priority Tax Claims
will be paid in full on the later of the Effective Date or the date on which any
such Administrative Expense Claim becomes an Allowed Claim; provided, however,
that the Administrative Expense Claims representing liabilities incurred in the
ordinary course of business by the Company (including amounts owed to vendors
and suppliers that have sold products or furnished services to the Company after
the Petition Date) will be paid in accordance with the terms and conditions of
the particular transactions and any agreements relating thereto.
Class 1 -- Allowed Other Priority Claims. An "Other Priority Claim" is a
claim against the Company entitled to priority under Section 507(a) of the
Bankruptcy Code (other than Administrative Expense Claims and Priority Tax
Claims) including (i) unsecured claims for accrued employee compensation earned
within 90 days prior to the Petition Date, to the extent of $4,000 per employee,
and (ii) contributions to employee benefit plans arising from services rendered
within 180 days prior to the Petition Date, but only to the extent of (a) the
number of employees covered by such plans multiplied by $4,000, less (b) the
aggregate amount paid to such employees from the estate for wages, salaries or
commissions.
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Pursuant to the Plan, unless otherwise agreed by any holder of an allowed
Other Priority Claim, each such holder shall be paid in full on the latest to
occur of (a) the Effective Date, (b) the date such claim becomes an Allowed
Claim and (c) the date such claim becomes due and owing.
Class 1 is unimpaired and the holders of Class 1 claims are conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
Class 2 -- The Bank's Secured Claim. Class 2 consists of the Bank's
Secured Claim. The "Bank's Secured Claim" is the secured claim of the Bank
against the Company, which is deemed to be Allowed Claims in an amount equal to
the excess of (a) the sum of (i) all of the Obligations (as such term is defined
in the Old Credit Agreement) as of the Petition Date and as described in the
Cash Collateral Order, (ii) an amount equal to 100% of the interest that accrued
pursuant to the Old Credit Agreement at the contract rate from and including the
Petition Date through and including the Effective Date, (iii) all payments
required under all Letters of Credit outstanding (as such term is defined in the
Old Credit Agreement) from and including the Petition Date through and including
the Effective Date, and (iv) to the extent provided by the Credit Documents (as
such term is defined in the Old Credit Agreement), an amount equal to 100% of
any and all costs and expenses, including without limitation attorney fees which
remain unpaid as of the Effective Date over (b) the sum of all payments made in
cash by the Company to the Bank pursuant to Sections 361, 363 and/or 364 of the
Bankruptcy Code prior to the Effective Date on account of the obligations
described in subparagraph (a) herein. The Class 2 Claim does not include the
Bank's claim secured by the Burley, Idaho warehouse which is treated as a Class
3 Claim.
Class 2 is unimpaired and the holder of Class 2 claims is conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
Class 3 -- Allowed Miscellaneous Secured Claims. Class 3 consists of each
Allowed Claim secured by a security interest in or lien upon property of the
Company other than any Class 2, Class 4, Class 5 or Class 6 Claim, including,
but not limited to, claims secured by mechanic's, materialman's or artisan's
liens on miscellaneous personal property and claims arising from leases that are
intended to grant a security interest in the leased property to the lessor under
such lease. Included in this class are the
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secured claims of the creditors secured by the facilities or equipment described
in the following list:
Lenders Facility/Description
- ------- --------------------
-United States National
Bank of Oregon Burley (1)
Burley (2)
Capital Lessors - Real Property
- -------------------------------
Country Life Denver - Ash Street
Bankers Trust Tampa - 50th
Continental Bank Chicago - State Street
Indianapolis Life Insurance Co. Fogelsville
NDB Bank Corp., Inc.
United Farm Bureau Life Insurance
Numerous Individuals
Oregon Warehouse Partners Ontario
Capital Lessors - Personal Property
- -----------------------------------
IBM Computer equipment
XL Data Company Computer equipment
AT&T Material & handling equipment
Comdisco Computer equipment
Sanwa Gel Material & handling equipment
PCL Leasing Computer equipment
Citicorp Material & handling equipment
Others Phone systems
Each Class 3 claim shall be treated for all purposes of the Plan and the
Bankruptcy Code as a separate subclass.
Pursuant to the Plan, unless otherwise agreed by any holder of a Class 3
claim, each such claim, at the election of the Company, will be (a) unaltered as
to its legal, equitable and contractual
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rights, or (b) given the treatment described in Section 1124(2) of the
Bankruptcy Code (regarding the curing of an acceleration of a claim or
interest). The Plan shall not alter the rights of any holder of a Class 3 claim
in any collateral securing such claim as of the Petition Date, and the liens
thereunder shall be ratified and affirmed.
Class 3 and each subclass thereof is unimpaired and the holders of Class 3
claims are conclusively presumed pursuant to Section 1126(f) of the Bankruptcy
Code to have accepted the Plan.
Class 4 -- Allowed Claims of Holders of the First Mortgage Bonds, Series
B. Class 4 consists of the Allowed Claims of the holders of the Company's 11
1/2% Series B First Mortgage Bonds due 2005 ("Series B Bonds"). The aggregate
outstanding principal amount of Series B Bonds is $176,250,000. Pursuant to the
Plan, each such claim, at the election of the Company, will be (a) unaltered as
to its legal, equitable and contractual rights, or (b) given the treatment
described in 1124(2) of the Bankruptcy Code (regarding the curing of an
acceleration of a claim or interest). The Plan shall not alter the rights of
any Class 4 holder in the collateral securing such claim as of the Petition
Date, and the liens thereunder shall be ratified and affirmed.
Class 4 is unimpaired and holders of Class 4 claims are conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
Class 5 -- Allowed Claims of Holders of the First Mortgage Bonds, Series A
other than the Institutional Investor. Class 5 consists of the Allowed Claims
of the holders of the Company's 11.45% Series A First Mortgage Bonds due 2002
("Series A Bonds"). The aggregate amount of Series A Bonds is $150 million.
Pursuant to the Plan, each such claim, at the election of the Company, will be
(a) unaltered as to its legal, equitable and contractual rights, or (b) given
the treatment described in 1124(2) of the Bankruptcy Code (regarding the curing
of an acceleration of a claim or interest). The Plan shall not alter the rights
of any Class 5 holder in the collateral securing such claim as of the Petition
Date, and the liens thereunder shall be ratified and affirmed.
Class 5 is unimpaired and holders of Class 5 claims are conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
Class 6 - The Allowed Secured Claim of the Institutional Investor. The
Institutional Investor is a holder of Series A Bonds and is a party to the Old
Investment Agreement. The Claim of the Institutional Investor as a holder of
Series A Bonds shall receive the treatment set forth in the Plan relating to the
Claims of holders of Series A Bonds. As of the Effective Date, the Old
Investment Agreement shall be cancelled and have no further force
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or effect. The Reorganized Debtor shall execute and deliver to the
Institutional Investor the New Investment Agreement and the New Investment
Agreement shall be deemed effective and binding as of the Effective Date. The
New Investment Agreement provides (i) that the Company will pay the
Institutional Investor a 1.5% Agreement Modification Fee, (ii) the Company will
redeem from the Institutional Investor on the Effective Date $10 million in
principal amount of Series A Bonds for a price equal to 100% of the principal
amount thereof, (iii) the Company will have the right, under certain
circumstances, to redeem prior to scheduled maturity additional Series A Bonds
without payment of any prepayment premium, and (iv) that certain of the
covenants contained in the Old Investment Agreement will be modified and
amended.
Class 6 is impaired and the Institutional Investor is entitled to vote on
the Plan.
Class 7 -- Allowed Claims of the Holders of General Unsecured Claims.
Class 7 consists of the claims of all creditors that are not in another class
and are not holders of Administrative Expense Claims or Priority Tax Claims.
Class 7 claims generally consist of the claims of trade creditors for products
and services provided to the Company prior to the filing of the Prepackaged
Proceeding, unsecured claims of employees in excess of their Class 1 claims and
other unsecured contract claims and damage claims, including claims, if any, for
damages arising from rejection of executory contracts and unexpired leases
subsequent to the filing of the Prepackaged Proceeding.
Under the Plan, holders of Trade Claims and Employee Claims will not be
required to file proofs of claim with the Bankruptcy Court, and, unless an
objection to the claims is filed, it is not expected that they will be required
to take any action to receive payment on their respective Trade Claims and
Employee Claims.
Pursuant to the Plan, unless otherwise agreed by the holder of a Class 7
claim, each such claim, at the election of the Company will be (a) to the extent
due and owing, paid in full on or before the later to occur of (i) the Effective
Date or (ii) the date such claim becomes an Allowed Claim; (b) unaltered as to
its legal, equitable and contractual rights; or (c) given the treatment
described in Section 1124(2) of the Bankruptcy Court (regarding the curing of
an accelerated claim or interest.)
Class 7 is unimpaired and holders of Class 7 claims are conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
Class 8 -- Allowed Claims of the Holders of Old Subordinated Debentures.
Class 8 consists of the Allowed Claims of the holders of the Old Subordinated
Debentures against the Company, arising
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from, under, or in connection with the issuance or ownership of the Old
Subordinated Debentures.
The Allowed Claims of holders of the Old Subordinated Debentures are in an
amount equal to the sum of (a) the $115 million face amount of Old Subordinated
Debentures and (b) an amount equal to 100% of the interest that accrued on such
Old Subordinated Debentures from and including November 1, 1994, through but not
including the Effective Date.
Pursuant to the Plan, each holder of a Class 8 claim will receive, in
exchange for such claim, $1,000 of principal amount of New Subordinated
Debentures for each $1,000 of principal amount of Old Subordinated Debentures,
plus cash in an amount equal to accrued but unpaid interest on such holder's Old
Subordinated Debentures up to but not including the Effective Date. See
"Description of New Subordinated Debentures." The Company intends, that for
federal income tax purposes the entire cash payment will be allocated to accrued
but unpaid interest. See "Certain Federal Income Tax Considerations."
Class 8 is impaired and holders of Class 8 claims are entitled to vote on
the Plan.
Class 9 -- Allowed Interests of Holders of Preferred Stock of the Company.
Class 9 consists of the Interests of the holders of the Company's preferred
stock.
Pursuant to the Plan, the legal, equitable and contractual rights of the
holders of Class 9 interests will not be altered.
Class 9 is unimpaired and holders of Class 9 interests are conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
Class 10 -- Allowed Interests of Holders of Common Stock of the Company.
Class 10 consists of the Interests of the holders of the Company's common stock
and options to acquire common stock.
Pursuant to the Plan, the legal, equitable and contractual rights of the
holders of Class 10 interests will not be altered.
Class 10 is unimpaired and holders of Class 10 claims are conclusively
presumed pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the
Plan.
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Summary of Other Provisions of the Plan
Executory Contracts and Unexpired Leases
The Bankruptcy Code gives the Company the right, after the commencement of
its Chapter 11 case, subject to the approval of the Bankruptcy Court, to assume
or reject executory contracts and unexpired leases. Generally, an "executory
contract" is a contract under which material performance (other than the payment
of money) is still due by each party. The Plan provides for the assumption by
the Company of all executory contracts and unexpired leases that are not
expressly rejected or subject to a motion for rejection filed on or before the
Confirmation Date. The Company is currently reviewing its executory contracts
and unexpired leases to determine whether it will reject any leases and
contracts. The Company has not made a final determination of which, if any,
contracts or leases it will reject, although the Company anticipates that it
will reject several leases and contracts. Prior to rejecting such leases and
contracts the Company may attempt to renegotiate the terms of such contracts and
leases. The Company reserves the right to reject additional claims of parties
to the Company's executory contracts and unexpired leases.
If an executory contract or unexpired lease is rejected, the other party to
the agreement may file a proof of claim for damages resulting from such
rejection. The Plan provides that a proof of claim with respect to any such
claim must be filed within 20 days of the approval of the Bankruptcy Court of
the rejection of the relevant executory contract or unexpired lease. Any such
claim shall constitute a Class 3 claim if secured, or a Class 7 claim if
unsecured, to the extent such claim is finally treated as an Allowed Claim as
described under "--Classification and Treatment of Claims and Interests--
General." To the extent that the Company rejects an unexpired lease of non-
residential real property, the claim for damages resulting from such rejection
will be limited to the amount allowed under Section 502(b)(6) of the Bankruptcy
Code.
Indemnification Obligations
The obligation of the Company to indemnify its directors and officers as of
the Petition Date pursuant to its Articles of Incorporation or bylaws,
applicable state law or by contract (or any combination of the foregoing), shall
survive the confirmation of the Plan, remain unaffected thereby, and not be
discharged, irrespective of whether such indemnification is owed in connection
with an event occurring before, on or after the Petition Date.
Distribution of New Subordinated Debentures
On the Effective Date or as soon as practicable thereafter, the Company
will distribute the New Subordinated Debentures to the holders of the Old
Subordinated Debentures in accordance with the
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Plan in exchange for their Class 6 claims. See "--Means for Execution of Plan--
Surrender and Cancellation of Instruments."
Setoffs
The Company may, but will not be required to, set off against any claim and
the payment to be made pursuant to the Plan in respect of such claim, any claims
of any nature whatsoever which the Company may have against the holder of such
claim. Under the Plan, neither the failure to exercise any setoff right nor the
allowance of any claim will constitute a waiver or release of any claim that the
Company may have against the holder of a claim.
Timing of Distributions
Any distribution to be made under the Plan on the Effective Date will be
made as soon as practicable after (but in any event within 15 days of) the later
of (i) the Effective Date and (ii) the date such claim becomes an Allowed Claim
and any other conditions to distribution are satisfied. Any distribution to be
made subsequent to the Effective Date will be made on the later of (i) the date
specified and (ii) as soon as practicable after (but in any event within 15 days
of) the date the pertinent claim becomes an Allowed Claim and any other
conditions to distribution are satisfied.
Unclaimed Distributions
Any distribution of property under the Plan which is unclaimed after two
years following the Effective Date will irrevocably revert to the Company.
Disputed Claims and Interests
Any party in interest may object to the allowance of any claim or interest
filed with the Bankruptcy Court. Objections will be litigated to a Final Order.
However, the Company may compromise and settle, withdraw or resolve by any other
method approved by the Bankruptcy Court, any objection to a disputed claim or
interest, and may seek the Bankruptcy Court's estimation of any disputed claim
pursuant to section 502(c) of the Bankruptcy Code.
Successors and Assigns
The rights, benefits and obligations of any Person named or referred to in
the Plan will be binding upon, and will inure to the benefit of, the heir,
executor, administrator, successor or assignee of such Person.
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Waivers of Subordination
The distributions under the Plan take into account the relative priority of
the claims in each class in connection with any contractual, legal and equitable
subordination rights relating thereto. Accordingly, on the Effective Date, all
holders of claims will be deemed to have waived any and all contractual
subordination, intercreditor or contribution rights that they may have with
respect to such distributions, and the Confirmation Order will enjoin
permanently, effective as of the Effective Date, all holders of claims from
enforcing or attempting to enforce any such rights with respect to the
distributions under the Plan.
Means for Execution of the Plan
Effectiveness of Agreements; Issuance of New Securities
On the Effective Date, all agreements entered into pursuant to the Plan and
all amendments to agreements made in connection with the Prepackaged Proceeding
will become effective. The Company will be deemed to have authorized and issued
on the Effective Date the New Subordinated Debentures. See "Description of New
Subordinated Debentures."
Surrender and Cancellation of Instruments
As a condition to receiving any distribution pursuant to the Plan, each
holder of Old Subordinated Debentures must surrender such Old Subordinated
Debentures to the Company (or establish the unavailability thereof to the
Company's satisfaction and provide the Company with adequate security therefor),
in all cases, in proper form for transfer. In accordance with the provisions of
Section 1143 of the Bankruptcy Code, any holder of such claim that fails to
surrender such Old Subordinated Debenture within two years from the Effective
Date will be deemed to have forfeited all rights, claims and interests and will
not participate in any distribution under the Plan. The Company may waive the
foregoing requirements.
On the Effective Date, (a) all such Old Subordinated Debentures will be
cancelled and (b) except as provided in the Plan, the Company's obligations
under the agreements, indentures or other instruments, as the case may be,
governing such Old Subordinated Debentures will be discharged. Also on the
Effective Date, the Old Credit Agreement and the Old Investment Agreement will
be cancelled.
Ballot Record Date; Distribution Record Date
The Company will distribute, or cause to be distributed, all distributions
of property to be made pursuant to the Plan to the record holders of Old
Subordinated Debentures as of the Ballot
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Record Date, unless, prior to the date on which the Confirmation Order is signed
(the "Distribution Record Date"), the holder of any such claim furnishes (or
causes its transferee to furnish) the Company or its agent with sufficient
evidence (in the Company's or its agent's sole and absolute discretion) of the
transfer of such claim, in which event the Company will distribute, or cause to
be distributed, all distributions of property to the holder of such claim as of
the Distribution Record Date. As of the close of business on the Distribution
Record Date, the transfer ledgers with respect to the Old Subordinated
Debentures will be closed and the Company and the indenture trustee with respect
to the Old Indenture will have no obligation to recognize any transfer of the
Old Subordinated Debentures occurring thereafter.
Confirmation of the Plan
Hearing
To confirm the Plan, the Bankruptcy Court will be required to hold, after
notice, a confirmation hearing. The Plan will only be confirmed if the
Bankruptcy Court determines that all the requirements of the Bankruptcy Code
have been met. The requirements for confirmation are set forth in Section 1129
of the Bankruptcy Code. These requirements include, among others, that the Plan
is (1) accepted by all impaired classes of claims and interests or, if rejected
by an impaired class, that the Plan does not "discriminate unfairly" and is
"fair and equitable" as to such class, (2) feasible and (3) in the "best
interests" of creditors and equity holders impaired under the Plan.
Acceptance
The claims of the holders of the Old Subordinated Debentures and the
Institutional Investor are impaired under the Plan. Therefore, such holders and
the Institutional Investor must accept the Plan in order for it to be confirmed
without application of the "fair and equitable" test. The requirements for
acceptance by these classes are described under "--Voting on the Plan." The
"fair and equitable" test is described under " --Confirmation Without Acceptance
by All Impaired Classes."
Feasibility
The Bankruptcy Code requires that confirmation of a plan not be likely to
be followed by liquidation or need for further financial reorganization of the
debtor. For purposes of determining whether the Plan meets this requirement,
the Company has analyzed the Company's ability to meet its obligations under the
Plan. As part of this analysis, the Company has prepared projections of the
Company's financial performance for the period from fiscal 1996 through fiscal
2000. See "Financial Projections." Although these projections do not reflect
all possible effects of
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the Restructuring, the Company believes that the Plan provides a feasible means
of reorganization and operation, through which it can be reasonably expected
that, subject to the risks disclosed herein, the Company, as reorganized under
the Plan, will be able to satisfy its obligations on and after the Effective
Date. For a description of the assumptions underlying the projections, as well
as the related qualifications, see "Financial Projections."
Best Interests Test
Under the Bankruptcy Code, confirmation of the Plan requires that each
creditor or equity holder in an impaired class either (a) accept the Plan or (b)
receive or retain under the Plan property of a value, as of the Effective Date,
that is not less than the value such creditor or equity holder would receive or
retain if the Company were liquidated under Chapter 7.
To determine what the holders of claims and interests in each impaired
class would receive if the Company were liquidated, the Bankruptcy Court must
determine the dollar amount that would be generated from a liquidation of the
assets and properties of the Company in the context of a hypothetical
liquidation case under Chapter 7. Such determination must take into account the
fact that secured claims, the costs and expenses of the liquidation case, and
any costs and expenses resulting from the original reorganization case would
have to have been paid in full from the liquidation proceeds before the balance
of those proceeds were made available to pay any pre-petition unsecured claims
and interests. See "Liquidation Analysis," attached as Appendix B.
To determine if the Plan is in the best interests of each impaired class,
the present value of the distributions from the proceeds of the hypothetical
liquidation of the assets and properties of the Company (after subtracting the
amounts attributable to secured claims and costs and expenses of the bankruptcy
case) must be compared with the present value of the consideration offered to
such classes under the Plan.
After consideration of the effect that a Chapter 7 liquidation would have
on the ultimate proceeds available for distribution to creditors and equity
holders of the Company, including (1) increased costs and expenses of
liquidation under Chapter 7 arising from fees payable to a bankruptcy trustee
and attorneys and other professional advisors to such trustee, (2) additional
expenses and claims, some of which would be entitled to priority, which would be
generated during the liquidation and from the rejection of unexpired leases and
executory contracts in connection with the cessation of the operations of the
Company, (3) the erosion of the value of the Company's assets in the context of
an expedited liquidation required by Chapter 7 and the "fire sale" atmosphere
that would prevail, (4) the adverse effects on the marketability of business
segments that could result from the possible departure of key employees and the
loss of major customers, (5) the cost attributable to the time value of money
resulting from what is
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likely to be a more protracted proceeding and (6) the application of the rule of
absolute priority to distributions in a Chapter 7 liquidation, the Company has
determined that confirmation of the Plan will provide each holder of a claim or
interest in an impaired class with a greater recovery than such holder would
receive pursuant to a Chapter 7 liquidation of the Company.
The Liquidation Analysis for the Company is attached as Appendix B hereto.
The analysis of the estimated recoveries in a liquidation of the Company's
operating businesses was prepared by the Company. A description of procedures
followed and the assumptions and qualifications made by the Company in
connection with such analysis is set forth in the Notes to the Liquidation
Analysis, contained in Appendix B. The Liquidation Analysis was completed using
estimated and unaudited January 31, 1995 data and, as of the date of this
Disclosure Statement, the Company is not aware of any events subsequent to such
date that would materially affect the Liquidation Analysis.
Confirmation Without Acceptance by All Impaired Classes
Even if one or more impaired class rejects or is deemed to have rejected
the Plan, the Bankruptcy Code provides that, as long as at least one impaired
class has accepted the Plan (without counting the votes of any insiders in such
class), the Company could nevertheless seek confirmation of the Plan. To obtain
confirmation under these so-called "cram-down" provisions, it must be
demonstrated to the Bankruptcy Court that the Plan does not "discriminate
unfairly" and is "fair and equitable" with respect to any dissenting class.
The "unfair discrimination" test requires, among other things, that the
Plan recognize the relative priorities among unsecured creditors and equity
holders.
Fair and Equitable Standard
The Bankruptcy Code establishes different "fair and equitable" tests for
secured creditors, unsecured creditors and equity holders. The respective tests
in relevant part as follows:
(a) Secured Creditors. Either (i) each impaired secured creditor of the
rejecting class (A) retains its liens in the collateral securing such creditor's
claim or in the proceeds thereof to the extent of the allowed amount of its
secured claim and (B) receives deferred cash payments in at least the allowed
amount of its secured claim with the present value on the Effective Date at
least equal to such creditor's interest in its collateral or in the proceeds
thereof or (ii) the Plan provides each impaired secured creditor with the
"indubitable equivalent" of its claim.
(b) Unsecured Creditors. Either (i) each impaired unsecured creditor of
the rejecting class receives or retains under the Plan property of a value equal
to the amount of its allowed claim or
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(ii) the holders of claims and interests that are junior to the claims of the
dissenting class do not receive or retain any property under the Plan.
(c) Equity Holders. Either (i) each equity holder of the rejecting class
receives or retains under the Plan property of a value equal to the value of
such holder's equity interest or (ii) the holders of interests that are junior
to the interests of such rejecting class do not receive or retain any property
under the Plan.
If all of the applicable requirements for confirmation of the Plan are met
as set forth in Section 1129(a) of the Bankruptcy Code, except that any impaired
class rejects the Plan, the Company may choose to amend the Plan as necessary to
request the Bankruptcy Court to confirm the Plan pursuant to the "cram-down"
provisions of Section 1129(b) of the Bankruptcy Code, on the basis that the
Plan, as so amended, is fair and equitable and does not discriminate unfairly
with respect to such rejecting class.
Alternatives to Confirmation and Consummation of the Plan
If the Company commences the Prepackaged Proceeding and the Plan is not
confirmed or consummated, the alternatives include, in addition to dismissal of
its Chapter 11 filing, (a) liquidation of the Company under Chapter 7 or (b) an
alternative plan of reorganization.
Liquidation under Chapter 7
If no plan can be confirmed, the Prepackaged Proceeding may be converted to
a case under Chapter 7, in which case a trustee would be appointed to liquidate
the assets of the Company for distribution to its creditors in accordance with
priorities established by the Bankruptcy Code. See "--Confirmation of the Plan--
Best Interests Test."
The amount of liquidation value available to holders of unsecured claims
would be reduced first by all secured claims. Such secured claims include those
of holders of the First Mortgage Bonds, lessors under certain capital lease
arrangements, the Bank under the Old Credit Agreement and certain other term
debt. Each secured lender is entitled to its collateral or the proceeds
therefrom to satisfy its claim. The Court may permit charges against the
---
proceeds of the collateral where there is a finding that the charges are
reasonable and necessary to preserve the collateral. Unless a secured claim is
non-recourse, a secured lender whose collateral is insufficient to pay its claim
in full would be entitled to assert an unsecured claim for the deficiency.
In the event that there are any remaining funds after settling the secured
claims, the amount of liquidation value available to holders of unsecured claims
would be reduced further by administrative claims. These claims include the
costs of a Chapter 7 case,
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such as the compensation of a trustee, attorneys, accountants and other
professionals retained by such trustee, as well as the costs to wind down
operations and pay all state and federal taxes due from the liquidation of the
Company's assets. After payment of administrative claims, other claims entitled
to priority under the Bankruptcy Code pursuant to 11 U.S.C. (S)507(a) would be
paid in full before any distribution to unsecured creditors. Priority claims
would include, with certain limitations, (i) allowed unsecured claims for wages,
salaries or commissions, including vacation, severance and sick leave pay; (ii)
allowed unsecured claims for contributions to an employee benefit plan; and
(iii) allowed unsecured claims for taxes of governmental units.
Funds, if any, remaining after payment of secured, administrative and
priority claims would be distributed pro rata in satisfaction of unsecured
claims. Unsecured claims would include deficiency claims of secured creditors,
claims by holders of the Old Subordinated Debentures, lease and contract
rejection claims, and general unsecured claims of trade creditors and other
parties. However, the holders of the Old Subordinated Debentures would receive
no distribution prior to payment in full of all deficiency claims of secured
creditors and arguably damage claims arising out of the rejection of any
executory contracts and unexpired leases.
In addition, the Company believes that liquidation under Chapter 7 would
result in substantially smaller distributions to claimants than those provided
for in the Plan because of (a) increased costs and expenses arising from fees
payable to a bankruptcy trustee and attorneys and other professional advisors to
such trustee, (b) realization of substantial income tax liabilities from the
sale of properties in liquidation due to an income tax basis which is
significantly lower than estimated liquidation values, (c) additional expenses
and claims, some of which would be entitled to priority, which would be
generated during the liquidation and from the rejection of unexpired leases and
executory contracts in connection with the cessation of the operations of the
Company, (d) the erosion of the value of the Company's assets in the context of
an expedited liquidation required by Chapter 7 and the "fire sale" atmosphere
that would prevail, (e) the adverse effect on the marketability of business
segments that could result from the possible departure of key employees and the
loss of major customers, and (f) the cost attributable to the time value of
money resulting from what is likely to be a more protracted proceeding. The
Company believes that in a liquidation under Chapter 7, the Company's unsecured
creditors, including the holders of Old Subordinated Debentures, would not
receive any distribution of property as, in a liquidation, the Company's assets
would not be sufficient to fully compensate holders of secured claims and
priority administrative expense and tax claims which have rights of payment
prior to any distribution to the Company's unsecured creditors. For more
details, see "Liquidation Analysis" attached as Appendix B.
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Alternative Plan of Reorganization
If the Plan is not confirmed, the Company or any other party in interest
could attempt to formulate a different reorganization plan. Such a plan might
involve either reorganization and continuation of the Company's businesses or an
orderly liquidation of its assets. With respect to an alternative plan, the
Company and Morgan Stanley have explored various other alternatives in
connection with the formulation and development of the Plan and believe that the
Plan enables the creditors to realize greater value under the circumstances than
other available alternatives. In a liquidation under Chapter 11, the Company's
assets would be sold in a more orderly fashion and over a more extended period
of time than in a liquidation under Chapter 7, probably resulting in somewhat
greater recoveries. Although preferable to a Chapter 7 liquidation, the Company
believes that a liquidation under Chapter 11 would still not realize the full
going-concern value of its business and, as it is likely to be more protracted
than the Prepackaged Proceeding, would involve greater administrative expenses
than the Prepackaged Proceeding. Consequently, the Company believes that a
liquidation under Chapter 11 is a much less attractive alternative to holders of
impaired claims than the Plan because the Plan provides for a greater return to
such holders than what would likely be realized in a Chapter 11 liquidation.
Amendments to or Modification of the Plan
Subject to certain restrictions contained in the Plan, Section 1127 of the
Bankruptcy Code and Bankruptcy Rule 3019 allow the Company to amend the Plan at
any time prior to its confirmation. If the Company files a modification of the
Plan with the Bankruptcy Court, the Plan as modified shall become the Plan. If
circumstances so warrant, the Company may modify the Plan after the confirmation
but prior to substantial consummation of the Plan. However, the Company would
then have to submit the Plan as modified to the Bankruptcy Court for
confirmation, after notice and a hearing. The Company reserves the right,
subject to the consent of the Institutional Investor, to amend or modify the
terms of the Plan in accordance with the provisions of Section 1127 of the
Bankruptcy Code and Bankruptcy Rule 3019, if and to the extent the Company
determines that such amendments or modifications are necessary or desirable in
order to complete the Restructuring. Under the Bankruptcy Rules, any amendments
or modifications of the Plan may be approved by the Bankruptcy Court at
confirmation without resolicitation of the votes of the members of any class
whose treatment is not adversely affected by such amendment or modification.
After the Confirmation Date, the Company and any other party in interest
may institute proceedings in the Bankruptcy Court to remedy any defects or
omissions or reconcile any inconsistencies in the Plan or the Confirmation Order
in such manner as may be
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necessary to carry out the purposes and intent of the Plan so long as the
holders of claims and interests are not adversely affected and prior notice of
such proceeding is served in accordance with Bankruptcy Rules 2002 and 9014.
Conditions to the Effectiveness of the Plan
Conditions to Consummation of the Plan
The following are conditions precedent to the consummation of the Plan:
(1) the Confirmation Order shall have become a Final Order, (2) all agreements
contemplated by or entered into pursuant to the Plan shall have been duly and
validly executed and delivered by the parties thereto and all conditions to
their effectiveness shall have been satisfied or waived, (3) the New Credit
Agreement shall have been executed and all conditions to its effectiveness shall
have been satisfied or waived by the Bank as required thereunder, and (4) all
other actions required by Article 7 of the Plan on or before the Effective Date
shall have occurred.
Waiver of Conditions
The Company may, after obtaining any consents required by the Plan, waive
at any time, without leave or order of the Bankruptcy Court, and without any
formal action other than proceeding to consummate the Plan, any condition
precedent to confirmation or consummation of the Plan.
Effects of Plan Confirmation
Vesting of Assets
Except as otherwise provided in the Plan, on the Effective Date, all assets
of the Company will revest in the Company free and clear of all liens, claims,
encumbrances and interests arising on or before the Effective Date. The Plan
expressly preserves the rights in the collateral of Class 2, 3, 4 and 5 claims
existing on the Petition Date.
Discharge of the Company
Except as otherwise provided in the Plan and, provided that the Effective
Date shall have occurred, the confirmation of the Plan will discharge all Claims
to the fullest extent authorized or provided for by Sections 524 and 1141
thereof. In addition, except as provided in the Plan, the New Indenture and the
distribution of the New Subordinated Debentures and payment of accrued but
unpaid interest on the Old Subordinated Debentures up to but excluding the
Effective Date shall be in exchange for and in complete satisfaction, discharge
and release of all claims against the Company and any of its assets or
properties by holders of Old Subordinated Debentures. On and after the
Effective Date, except
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as provided in the Plan and the New Indenture, all holders of claims and
interests arising prior to the Confirmation Date will be permanently barred and
enjoined from asserting against the Company, as reorganized, or its assets any
claims based on any act or omission, transaction or other activity of any kind
or nature that occurred prior to the Effective Date.
Retention of Jurisdiction
Notwithstanding entry of the Confirmation Order or the Effective Date
having occurred, the Plan provides for the retention of jurisdiction by the
Bankruptcy Court over the Company's Chapter 11 case for the purposes of (i)
hearing and determining any pending applications for the rejection of executory
contracts or unexpired leases, and the allowance of Claims resulting therefrom;
(ii) determining any adversary proceedings, applications, contested matters and
other litigated matters pending on the Effective Date; (iii) ensuring that
distributions to holders of Allowed Claims are accomplished as provided in the
Plan; (iv) hearing and determining objections to the classification of any
Claim, and to allow, disallow and/or estimate any Claim, in whole or in part;
(v) entering and implementing such orders as may be appropriate in the event the
Confirmation Order is for any reason stayed, revoked, modified or vacated; (vi)
issuing any appropriate orders in aid of execution of the Plan or to enforce the
Confirmation Order and/or the discharge, or the effect of such discharge,
provided to the Company; (vii)hearing and determining any applications to modify
the Plan, to cure any defect or omission or to reconcile any inconsistency in
the Plan or in any order of the Bankruptcy Court, including, without limitation,
the Confirmation Order; (viii) hearing and determining all applications for
compensation, and reimbursement of expenses of professionals or members of the
Creditors' Committee (and, if applicable, the Debenture Holders Committee),
under Sections 330, 331, 503(b) and/or 1103 of the Bankruptcy Code; (ix) hearing
and determining disputes arising in connection with the interpretation,
implementation or enforcement of the Plan; (x) hearing and determining other
issues presented or arising under the Plan; (xi) hearing and determining any
other matters related to the Plan and not inconsistent with Chapter 11 of the
Bankruptcy Code; (xii) entering a final decree closing the Chapter 11 Case;
(xiii) recovering all assets of the Company, wherever located; (xiv) hearing and
determining any motions or contested matters involving taxes, tax refunds, tax
attributes and tax benefits and similar or related matters with respect to the
Company arising prior to the Effective Date or relating to the period of
administration of the Chapter 11 Case, including, without limitation, matters
concerning state, local and federal taxes in accordance with Sections 346, 505
and 1146 of the Bankruptcy Code; and (xv) hearing any other matter not
inconsistent with the Bankruptcy Code.
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Withdrawal of the Plan
The Company reserves the right not to file the Plan, or, if it files the
Plan, to revoke and withdraw such Plan at any time prior to confirmation, in
which case the Plan and the Ballots and Master Ballots will be deemed to be null
and void. In such event, nothing contained in the Plan will be deemed to
constitute a waiver or release of any Claims by or against the Company or any
other person or to prejudice in any matter the rights of the Company or any
other person.
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THE SOLICITATION; VOTING PROCEDURES
General
Upon the terms and subject to the conditions set forth herein, the Company
is soliciting acceptances of the Plan from the Institutional Investor and each
holder of the Old Subordinated Debentures as of the close of business on the
Ballot Record Date (March 31, 1995). Separate forms of Ballots and, where
appropriate, Master Ballots, to be used for voting to accept or reject the Plan,
together with a pre-addressed postage-paid envelope, have been provided with
this Disclosure Statement to the record holders of the Old Subordinated
Debentures and the Institutional Investor.
Persons Entitled to Vote
All beneficial owners of Old Subordinated Debentures as of 5:00 p.m.,
Portland, Oregon time, on the Ballot Record Date and the Institutional Investor
are entitled to vote to accept or reject the Plan.
Ballot Return Date; Extensions; Amendments
The Solicitation will expire at 3:00 p.m., Portland, Oregon time, on
Monday, May 8, 1995, unless and until the Company, in its sole discretion,
extends the Solicitation. During any extension of the Solicitation, all Ballots
and Master Ballots previously cast will remain subject to all the terms and
conditions of the Solicitation, including the revocation rights specified
herein. Except to the extent the Company so determines or as permitted by the
Bankruptcy Court, Ballots or Master Ballots that are received after the Ballot
Return Date will not be accepted or used by the Company to seek confirmation of
the Plan (or any permitted modification thereof).
The Company reserves the absolute right, at any time or from time to time,
to extend the Solicitation for such period or periods as it may determine in its
sole discretion by giving notice mailed to the holders of the Old Subordinated
Debentures on the next business day following the previously scheduled Ballot
Return Date.
The Company reserves the right to amend, at any time and from time to time,
the terms of the Solicitation or the Plan (subject to specific conditions
provided in the Plan and to compliance with the requirements of Section 1127 of
the Bankruptcy Code). If the Company makes a material change to the terms of
the Solicitation or the Plan or if it waives a material condition, including as
a result of any material changes to the financial, economic or other terms and
conditions of the Restructuring, it will disseminate additional solicitation
materials and will extend the Solicitation, in each case to the extent required
by law.
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The Company further expressly reserves the right to terminate the
Solicitation and not accept any Ballot or Master Ballot. See "The Plan--
Conditions to the Effectiveness of the Plan."
Information Agent
Morgan Stanley will act as the Information Agent in connection with the
Solicitation. All deliveries, correspondence and questions sent to Morgan
Stanley relating to the Solicitation and the Ballots or Master Ballots should be
directed to the address or telephone number set forth on the back cover page of
this Disclosure Statement. Morgan Stanley will provide holders with information
regarding the Solicitation, assist holders in obtaining copies of this
Disclosure Statement, Ballots, Master Ballots and Questionnaires to Determine
Investor Status and respond to questions with respect to any of the foregoing.
Requests for information or additional copies of this Disclosure Statement,
Ballots or Master Ballots should be directed to Morgan Stanley at the address
and telephone number set forth on the back cover page of this Disclosure
Statement.
Procedure for Voting on the Plan
General
Under the Bankruptcy Code, for purposes of determining whether the
Requisite Acceptances have been received, only those holders who vote to accept
or reject the Plan will be counted. It is therefore important that all holders
of impaired claims and interests vote to accept or reject the Plan. Failure by
any holder to send a duly executed Ballot will be deemed to constitute an
abstention by such holder with respect to a vote regarding the Plan. Any such
abstention will not be counted as a vote for or against the Plan. To accept the
Plan, a holder should check the box entitled "Accept the Plan" on the
appropriate Ballot. To reject the Plan, a holder should check the box entitled
"Reject the Plan" on the appropriate Ballot. In addition, each holder should
check the box indicating whether or not such holder is an accredited investor.
Any holder who is an accredited investor and who returns an otherwise properly
completed Ballot but fails to check either box will be deemed to have voted to
accept the Plan.
The determination of whether the Requisite Acceptances have been received
from holders of Old Subordinated Debentures will be based on the votes of the
beneficial owners of the Old Subordinated Debentures as of the Ballot Record
Date. The term "beneficial owner" includes any person who has or shares
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, the power to vote or direct the voting of a security,
and/or to dispose or direct the disposition of a
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security, whether or not such person is also the record holder of such security.
The Company is providing copies of this Disclosure Statement, Ballots and,
where appropriate, Master Ballots, to all record holders of Old Subordinated
Debentures as of the Ballot Record Date and to the Institutional Investor. Any
entity that holds Old Subordinated Debentures as a nominee for a customer or
other beneficial owner should provide copies of this Disclosure Statement and
appropriate Ballots to such beneficial owners. Any beneficial owner who has not
received a Ballot from his or its nominee should contact his or its brokerage
firm, nominee, or the Information Agent to obtain copies of the appropriate
Ballots. A beneficial owner must comply with the instructions given under "--
Beneficial Owners" below to have his or its Ballot counted for purposes of
accepting or rejecting the Plan.
Beneficial Owners
(A) The Institutional Investor and any beneficial owner holding Old
Subordinated Debentures as record holder in its own name should vote on the Plan
by completing and signing the enclosed Ballot and returning it directly to the
Ballot Agent on or before the Ballot Return Date using the enclosed pre-
addressed envelope.
(B) Any beneficial owner holding Old Subordinated Debentures in "street
name" through a brokerage firm, bank, trust company or other nominee should vote
on the Plan through such nominee by following these instructions:
1. Complete and sign the Ballot.
2. Return the Ballot to your nominee as promptly as possible. If no
pre-addressed envelope was enclosed for this purpose, contact the Ballot Agent
for instructions.
Any Ballot returned to a nominee by a beneficial owner will not be counted
for purposes of seeking confirmation of the Plan until such nominee properly
completes and delivers to the Ballot Agent a Master Ballot that reflects the
vote of such beneficial owner.
If any beneficial owner holds Old Subordinated Debentures through more than
one broker or bank, such beneficial owner may receive multiple mailings
containing the Ballots. Each beneficial owner should execute a separate Ballot
for each block of Old Subordinated Debentures that it holds through a different
nominee for the aggregate amount of securities that such owner beneficially
owned as of the Record Date through such nominee and return each Ballot to the
respective nominee in the return envelope provided therewith.
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Beneficial owners who execute multiple Ballots with respect to Old
Subordinated Debentures held through more than one nominee must indicate on each
Ballot the names of ALL such other nominees and the additional amounts of such
Old Subordinated Debentures so held and voted.
If the beneficial owner holds a portion of the Old Subordinated Debentures
through a nominee and another portion as a record holder, such owner should
follow the procedures described in (A) above to vote the portion held of record
and the procedures described in (B) above to vote the portion held through a
nominee or nominees.
Brokerage Firms, Banks, and Other Nominees
An entity (other than a beneficial owner) that is the registered holder of
Old Subordinated Debentures or that has the requisite authority to act on behalf
of such registered holder pursuant to a proxy, should vote on behalf of the
beneficial owners of such Old Subordinated Debentures by (i) immediately
distributing a copy of this Disclosure Statement, all appropriate Ballots and
pre-addressed return envelopes to all beneficial owners for whom it holds such
Old Subordinated Debentures, (ii) collecting all such Ballots, and (iii)
completing a Master Ballot compiling the votes and other information from the
Ballots collected, and transmitting such Master Ballot to the Ballot Agent on or
before the Ballot Return Date. A proxy intermediary acting on behalf of a
brokerage firm or bank may follow the procedures outlined in the preceding
sentence to vote on behalf of such party.
Securities Clearing Agencies
To the extent that there are any securities clearing agencies among the
registered holders of the Old Subordinated Debentures, the Company expects that
each of such clearing agencies will arrange for its respective participants to
vote by executing an omnibus proxy in favor of such participants. As a result
of the omnibus proxy, such participants will be authorized to vote in the name
of such securities clearing agencies and should follow the relevant procedures
outlined in the preceding paragraphs.
Other
If a Ballot is signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should indicate such capacity when signing
and must submit proper evidence satisfactory to the Company of authority to so
act. Authorized signatories should submit separate Ballots for each beneficial
owner for whom they are voting.
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Except as provided below, unless the Ballot being furnished is timely
submitted to the Ballot Agent on or prior to the Ballot Return Date together
with any other documents required by such Ballot, the Company may, in its sole
discretion, reject such Ballot as invalid and, therefore, decline to utilize it
in connection with seeking confirmation of the Plan by the Bankruptcy Court. In
no case should a Ballot be delivered to the Company or the Information Agent.
The Company is not at this time requesting the delivery of, and will not
accept, certificates representing Old Subordinated Debentures. Promptly after
the Effective Date, the Company (or its agent) will furnish all holders of Old
Subordinated Debentures with an appropriate letter of transmittal to be used to
remit Old Subordinated Debentures in exchange for the distributions provided
under the Plan. Information regarding such remittance procedure (together with
all appropriate materials) will be distributed by the Company (or its agent)
after the commencement of its Chapter 11 case.
Agreements Upon Furnishing Ballots
The delivery of a Ballot by a holder in accordance with the procedures set
forth below, indicating a vote to accept the Plan, will constitute an agreement
between such holder and the Company to accept all the terms of, and conditions
to, the Solicitation and the Plan.
Waivers of Defects, Irregularities, Etc.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance, and
revocation of Ballots or Master Ballots will be determined by the Company in its
sole discretion, which determination will be final and binding. The Company
reserves the absolute right to contest the validity or any revocation. The
Company also reserves the right to reject any and all Ballots or Master Ballots
not in proper form, the acceptance of which would, in the opinion of the Company
or its counsel, be unlawful. The Company further reserves the right to waive
any defects or irregularities or conditions of delivery as to any particular
Ballot or Master Ballot. The interpretation (including of the Ballot or Master
Ballot and the respective instructions thereto) by the Company, unless otherwise
directed by the Bankruptcy Court, will be final and binding on all parties.
Unless waived, any defects or irregularities in connection with deliveries of
Ballots or Master Ballots must be cured within such time as the Company (or the
Bankruptcy Court) determines. Neither the Company nor any other person will be
under any duty to provide notification of defects or irregularities with respect
to deliveries or notices of revocation of Ballots or Master Ballots, nor will
any of them incur any liabilities for failure to provide such notification.
Unless
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otherwise directed by the Bankruptcy Court, delivery of such Ballots or Master
Ballots will not be deemed to have been made until such irregularities have been
cured or waived. Ballots or Master Ballots previously furnished (and as to
which any irregularities have not theretofore been cured or waived) will be
invalidated.
Revocation Rights
Votes with respect to Ballots or Master Ballots may be revoked at any time
prior to the Ballot Return Date. After commencement of the Company's Chapter 11
case, revocation may be effected only with the approval of the Bankruptcy Court.
To be effective, a written or facsimile transmission notice of revocation
must (i) be timely received by the Ballot Agent, (ii) specify the name of the
holder of the claim or interest whose vote on the Plan is being revoked;
additionally, in the case of a nominee using a Master Ballot, contain the
name(s) and/or customer account number(s) of the beneficial owner whose vote is
being revoked, (iii) contain the number and name (as provided in the Plan) of
the class of the claim or interest as to which a vote on the Plan is being
revoked, and (iv) be signed by the holder of such claim or interest in the same
manner as the original Ballot or Master Ballot. If received prior to the Ballot
Return Date, a signed notice of revocation of a Ballot is effective upon receipt
by the Ballot Agent of written or facsimile transmission notice of revocation.
Termination Upon Certain Events
Notwithstanding any provisions of the Solicitation to the contrary, the
Company may, at its option, terminate or amend the Solicitation at any time on
or after the date of the commencement of the Solicitation. The Company may
terminate the Solicitation and refuse to accept Ballots and Master Ballots or
extend the Solicitation and retain all Ballots and Master Ballots until the
Ballot Return Date, subject, however, to the rights of holders to revoke such
Ballots or Master Ballots.
Fees and Expenses
The cost of the Solicitation will be borne by the Company. Votes to
accept the Plan may be solicited by mail, telephone, telegram, cablegram or
other form of electronic transmission, in person and otherwise, by Morgan
Stanley and the directors, officers and employees of the Company, who will
receive no additional compensation for such solicitation. Arrangements may also
be made with brokerage houses and other custodians, nominees and fiduciaries to
forward the material regarding the Solicitation to the beneficial owners of the
Old Subordinated Debentures.
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CREDITORS' COMMITTEES
Upon commencement of the Prepackaged Proceeding, a committee of
unsecured creditors may be appointed by the Bankruptcy Court. The Bankruptcy
Court may also, at its discretion, appoint a committee of holders of Old
Subordinated Debentures and additional official committees of creditors and
equity holders. During the Prepackaged Proceeding, any official committee
appointed by the Bankruptcy Court will consult with the Company concerning the
administration of the Prepackaged Proceeding, investigate any matters relevant
to the Prepackaged Proceeding and perform any other services that are in the
interest of the creditors or equity holders represented by such committee.
Committee members will serve in a fiduciary capacity with respect to the class
members they represent. The duties and powers of any creditors' committee and
its agents will automatically terminate on the Effective Date.
SECURITIES LAW CONSIDERATIONS
Offering of New Securities
The Company has not filed a registration statement under the
Securities Act or any other federal or state securities laws with respect to the
New Subordinated Debentures that it may be deemed to be offering by virtue of
the Solicitation. The Company is relying on Section 4(2) and is generally
relying on similar state law provisions, and to the extent applicable, on
Regulation D, similar state law provisions and Section 1145(a) of the Bankruptcy
Code ("Section 1145(a)"), to exempt from registration under the Securities Act
and any applicable state securities laws the offer of any New Subordinated
Debentures that may be deemed to be made pursuant to the Solicitation. Section
4(2) exempts from the registration provisions of the Securities Act any
transaction by an issuer not involving any public offering. Regulation D
similarly exempts from the registration provisions under the Securities Act
limited offerings of securities to "accredited investors," as such term is
defined under Regulation D, and a limited number of other investors. Section
1145(a) of the Bankruptcy Code exempts from the registration provisions under
the Securities Act, and any state or local law requiring registration for offer
or sale of a security, certain offers or sales of securities of a debtor made
under a plan of reorganization, or of securities of any of its affiliates
participating in a joint plan of reorganization. The Company believes that the
offer of the New Subordinated Debentures pursuant to the Solicitation qualifies
for the exemptions from registration under the Securities Act provided by
Section 4(2) and for the exemptions from state law registration requirements
provided by similar state law provisions, and may also qualify for the
exemptions from such registration provided by Regulation D, similar state law
provisions and, to the extent applicable, Section 1145(a).
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Morgan Stanley has agreed to act as "purchaser representative," as
defined in Regulation D, without charge, to any holder of Old Subordinated
Debentures that is not an accredited investor, as defined in Regulation D, to
assist such holder in evaluating the risks and merits of the Plan. In addition,
any creditor solicited hereby may retain, at its own expense, a qualified
purchaser representative for purposes of this Solicitation. The Company is not
soliciting votes to accept or reject the Plan from any holder of the Old
Subordinated Debentures that is not an accredited investor and does not
otherwise qualify as an investor in an offering under Section 4(2) or Regulation
D by having a qualified purchaser representative act on behalf of such holder or
otherwise.
Any Ballot submitted by a person who is not an accredited investor and
who has not utilized the services of Morgan Stanley or another qualified
purchaser representative and who does not otherwise qualify as an investor in an
offering under Regulation D or Section 4(2), will be deemed a rejection for the
purpose of determining whether the Requisite Acceptances have been received.
The Company also is not making an offer to residents of any state or other
jurisdiction where the New Subordinated Debentures that may be deemed to be
offered under the Plan are required to be qualified for offering in such
jurisdiction and, prior to such qualification, will not accept Ballots or Master
Ballots from residents of any such jurisdiction unless and until applicable
qualification requirements have been fully satisfied for such jurisdiction in
the sole and final determination of the Company. Until such time, any Ballot
submitted with respect to any such holder will be deemed a rejection for
purposes of determining whether requisite votes for acceptance of the Plan have
been received.
Issuance of New Subordinated Debentures
With respect to the issuance of the New Subordinated Debentures to
holders of Old Subordinated Debentures, the Company intends to rely on the
exemption from registration requirements of Section 5 of the Securities Act (and
of equivalent state securities or "blue sky" laws) provided by Section 1145(a).
Generally, Section 1145(a)(1) exempts the offer and sale of securities pursuant
to a plan of reorganization from such registration requirements if the following
conditions are satisfied: (i) the securities are issued by a debtor (or its
affiliate or successor) under a plan of reorganization; (ii) the recipients of
the securities hold a claim against, an interest in, or a claim for an
administrative expense against, the debtor, and (iii) the securities are issued
entirely in exchange for the recipient's claim against or interest in the
debtor, or are issued "principally" in such exchange and "partly" for cash or
property. The Company believes that the New Subordinated Debentures issued
pursuant to the Plan will satisfy the requirements of Section 1145(a)(1).
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The New Subordinated Debentures may be resold by the holders thereof
without restriction, except for any such holder that is deemed to be an
"underwriter" with respect to the New Subordinated Debentures as defined in
Section 1145(b)(1) of the Bankruptcy Code. Generally, Section 1145(b)(1)defines
an "underwriter" as any person who (i) purchases a claim against, or an interest
in, a debtor with a view towards distribution of any security to be received in
exchange for such claim or interest, (ii) offers to sell securities issued
pursuant to a bankruptcy plan for the holders of such securities, (iii) offers
to buy securities issued pursuant to a bankruptcy plan from persons receiving
such securities, if the offer to buy is made with a view towards distribution of
such securities, or (iv) is an issuer within the meaning of Section 2(11) of the
Securities Act. Section 2(11) of the Securities Act provides that the term
"issuer" includes all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with, an
issuer of securities. Under Rule 405 of Regulation C under the Securities Act,
the term "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the policies of a person, whether through the
ownership of voting securities, by contract or otherwise. Accordingly, an
officer or director of a reorganized debtor (or its affiliate or successor)
under a plan of reorganization may be deemed to "control" such debtor (and
therefore be an underwriter for purposes of Section 1145), particularly if such
management position is coupled with the ownership of a significant percentage of
a debtor's (or its affiliate's or successor's) voting securities. Any entity
that is an "underwriter" but not an "issuer" with respect to an issue of
securities is, however, entitled to engage in exempt "ordinary trading
transactions" within the meaning of Section 1145(b).
Rule 144A, promulgated under the Securities Act, provides a non-
exclusive safe harbor exemption from the registration requirements of the
Securities Act for resales to certain "qualified institutional buyers" of
securities which are "restricted securities" within the meaning of the
Securities Act, irrespective of whether the seller of such securities purchased
his or its securities with a view towards reselling such securities under the
provisions of Rule 144A. Under Rule 144A, a "qualified institutional buyer" is
defined to include, among other Persons (e.g., "dealers" registered as such
pursuant to Section 15 of the Exchange Act and "banks" as defined in Section
3(a)(2) of the Securities Act), any entity which purchases securities for its
own account or for the account of another qualified institutional buyer and
which (in the aggregate) owns and invests on a discretionary basis at least $100
million in the securities of unaffiliated issuers. Subject to certain
qualifications, Rule 144A does not exempt the offer or sale of securities which,
at the time of their issuance, were securities of the same class of securities
then listed on a national securities exchange (registered as such under Section
6 of the Exchange Act), or quoted in a U.S. automated interdealer
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quotation system (e.g., Nasdaq). Given that none of the New Subordinated
Debentures to be issued on the Effective Date will be securities of a class then
listed or quoted as described above, holders of such securities who are deemed
to be "underwriters" within the meaning of Section 1145(b)(1) of the Bankruptcy
Code or who may otherwise be deemed to be "affiliates" of, or to exercise
"control" over, the Company within the meaning of Rule 405 of Regulation C under
the Securities Act should, assuming that all other conditions of Rule 144A are
met, be entitled to avail themselves of the safe harbor resale provisions
thereof.
To the extent that Rule 144A is unavailable, holders may, under
certain circumstances, be able to sell their securities pursuant to the more
limited safe harbor resale provisions of Rule 144 under the Securities Act.
Generally, Rule 144 provides that if certain conditions are met (e.g., two-year
holding period with respect to "restricted securities," volume limitations,
manner of sale, availability of current information about the issuer, etc.), (a)
any person who resells "restricted securities" and (b) any "affiliate" of the
issuer of the securities sought to be resold, will not be deemed to be an
"underwriter" as defined in Section 2(11) of the Securities Act. Under
paragraph (k) of Rule 144, the aforementioned conditions to resale will no
longer apply to restricted securities sold for the account of a holder who is
not an affiliate of the Company at the time of such resale and who has not been
such during the three-month period next preceding such resale, so long as a
period of at least three years has elapsed since the later of (i) the Effective
Date and (ii) the date on which such holder acquired its securities from an
affiliate of the Company.
In addition, the Company will use its best efforts to file, at its
expense, as soon as practicable after the Effective Date, a Registration
Statement with respect to the New Subordinated Debentures. If no such
Registration Statement is filed within 60 days following the Effective Date, the
Company will be required, pursuant to the Plan, to file a Registration Statement
with respect to such securities upon receipt of a written request for such
registration by holders of 25% in principal amount of the New Subordinated
Debentures. Such written request must be received on or before the first
anniversary of the Effective Date.
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DESCRIPTION OF THE NEW CREDIT AGREEMENT
The Company and the Bank have executed a commitment letter to enter
into the New Credit Agreement upon the Effective Date on terms and conditions
acceptable to the Bank, subject to negotiation of mutually acceptable loan
documents. The commitment expires on August 15, 1995. The New Credit Agreement
will be secured primarily by the Company's trade receivables and mortgages on
certain of the Company's warehouse properties. The funds provided by the New
Credit Agreement will be used primarily for working capital, letters of credit
and capital expenditures. The New Credit Agreement will provide an aggregate
availability of $27.5 million, which may be used for any combination of letters
of credit (up to $10 million) and revolving cash borrowings, subject to
borrowing base limitations. The borrowing base will equal 85% of eligible
accounts receivable plus 70% of the value of all real property mortgaged to the
Bank up to a maximum of $27.5 million, less the amount represented by letters of
credit outstanding. Interest rates will be the prime lending rate, as announced
by the Bank from time to time, plus 1 percent, or the Eurodollar Market rate
plus 2 percent, at the option of the Company. These rates will be subject to
change, up to a maximum increase of 0.25% and a maximum reduction of 1.00%,
based on the Company's performance relative to a predefined fixed charge
coverage test. The New Credit Agreement provides for a commitment fee, an
unused line fee, and a letter of credit fee based on the face amount of each
letter of credit used. The New Credit Agreement will mature on February 28,
1999. Borrowings under the New Credit Agreement will constitute Senior Debt, as
defined in the New Indenture.
The New Credit Agreement will contain certain restrictive covenants
related to, among other things, creation of liens, payment of dividends and
other distributions, sales of assets, transactions with affiliates, and mergers
and consolidation. In addition, the Company will be required to comply with
certain specified financial ratios and tests. It is anticipated that the tests
will include a pro forma debt service test, the requirements of which will be
established prior to the Confirmation Date.
The Company anticipates granting mortgages to the Bank as security for
its obligations under the New Credit Agreement. It is currently anticipated
that the Company will offer mortgages on its Portland, Maine and Tampa (50th
Street), Florida properties, or other properties acceptable to the Bank which
are not included in the collateral pool for the First Mortgage Bonds.
The New Credit Agreement will also require that there be certain 30-
day periods ("resting periods") during which there may be no outstanding
borrowings, including borrowings to reimburse the Bank with respect to letters
of credit. One such resting period will be required during the year ending
February 28, 1997, and two such periods will be required during each of the
fiscal years
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ending February 28, 1998 and February 28, 1999. There will be no resting period
requirement for the fiscal year ending February 29, 1996. The resting periods
are not expected to affect the Company's ability to service its seasonal working
capital or short-term debt requirements or maintain outstanding letters of
credit. The commitment letter is attached to this Disclosure Statement as
Appendix C.
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DESCRIPTION OF NEW INVESTMENT AGREEMENT
The Company and the Institutional Investor entered into an investment
agreement dated as of July 2, 1987 in connection with the issuance of the Series
A Bonds. The investment agreement was amended and restated as of March 2, 1993
in connection with the issuance of the Series B Bonds. On the Effective Date,
the Old Investment Agreement will be cancelled and the New Investment Agreement
will be effective, subject to the satisfaction or waiver by the Institutional
Investor of certain conditions to effectiveness as set forth in the New
Investment Agreement.
The following summary of certain provisions of the New Investment
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the New Investment Agreement, which is attached to
the Plan as Exhibit 2, including the definitions therein of terms not defined in
this Disclosure Statement. Certain important definitions are included in this
summary under "Definitions" below.
The New Investment Agreement will terminate in the event the
Institutional Investor should at any time either (1) hold less than 25% of the
outstanding principal amount of Series A Bonds or (2) hold less than $25 million
in principal amount of the Series A Bonds. Upon termination of the New
Investment Agreement, all Series A Bonds, together with the Series B Bonds, will
be governed solely by the provisions of the Bond Indenture.
Certain Covenants
So long as the New Credit Agreement is in effect, the negative
covenants in such agreement, other than those dealing with transactions with
affiliates and modifications of indebtedness and other agreements, will be
incorporated by reference into the New Investment Agreement. In addition, if
the New Credit Agreement is replaced by any other bank financing, any
corresponding covenants in such replacement financing agreement will be
incorporated into the New Investment Agreement so long as any such replacement
financing agreement is in effect.
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The Company will not permit Adjusted Consolidated Net Worth at any
time to be less than the amount set forth below opposite the period in which the
measurement is made:
Fiscal Years Ended February Amount
--------------------------- ------
1996 ($37,000,000)
1997 ($36,000,000)
1998 ($34,000,000)
1999 ($32,000,000)
2000 ($28,000,000)
2001 ($25,000,000)
2002 ($19,000,000)
2003 ($10,000,000)
The Company will not permit the ratio of Senior Debt to Adjusted Total
Capitalization at any time to be greater than the following amounts:
Maximum
Permitted
Fiscal Years Ended February Ratio
--------------------------- ---------
1996 86.0%
1997 86.0%
1998 85.0%
1999 85.0%
2000 84.0%
2001 81.0%
2002 79.0%
2003 77.0%
The Company will not permit the ratio of (1) the sum of Available Cash
Flow for the four most recently ended quarters, plus Net Cash, to (2) Pro Forma
Debt Service for the four succeeding quarters (or if such determination is made
on a day which is not the last day of a fiscal quarter, the quarter in which a
determination is being made and the following three quarters) at any time to be
less than:
Fiscal Years Ended February Ratio
--------------------------- ------------
1996 1.00 to 1.00
1997 1.10 to 1.00
1998 1.20 to 1.00
1999 .95 to 1.00
2000 .70 to 1.00
2001 .65 to 1.00
2002 .66 to 1.00
2003 1.00 to 1.00
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The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to (i) declare or pay any dividend or make any
distribution on or in respect of its Capital Stock (including any distribution
in connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of its Capital Stock (except dividends or
distributions payable solely in its Non-Convertible Capital Stock or in options,
warrants or other rights to purchase its Non-Convertible Capital Stock and
except dividends or distributions payable to the Company or a Restricted
Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or of any direct or indirect Parent of the Company,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment any Subordinated
Debt (other than the purchase, repurchase or other acquisition of Subordinated
Debt purchased in anticipation of and used for satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iii) make any Investment in any Affiliate
of the Company, other than a Restricted Subsidiary or a Person which will become
a Restricted Subsidiary as a result of any such Investment (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being hereinafter referred to as a "Restricted
Payment") if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (A) a Default shall have occurred and be continuing (or
would result therefrom); (B) the Company is not able to issue $1.00 of
additional Debt in accordance with the provisions of Section 4.09(a) of the Bond
Indenture; or (C) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the date on which the Series B Bonds were originally
issued, would exceed the sum of: (1) 50% of the Adjusted Consolidated Net
Income of the Company and its Restricted Subsidiaries accrued during the period
(treated as one accounting period) from December 1, 1992 to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of said
Restricted Payment (or, in case such Adjusted Consolidated Net Income of the
Company and its Restricted Subsidiaries shall be a deficit, minus 100% of such
deficit) and minus 100% of the amount of any write-downs, write-offs, other
negative revaluations and other negative extraordinary charges not otherwise
reflected in Adjusted Consolidated Net Income of the Company and its Restricted
Subsidiaries during such period; (2) the aggregate Net Cash Proceeds received by
the Company from the issuance and sale of its Capital Stock (other than
Redeemable Stock or Exchangeable Stock) subsequent to the date on which the
Series B Bonds were originally issued (other than an issuance or sale to a
Subsidiary or an employee stock ownership plan); (3) the aggregate Net Cash
Proceeds received by the Company from the issuance or sale of its Capital Stock
(other than Redeemable Stock or Exchangeable Stock) to an employee stock
ownership plan subsequent to May 31, 1992, but (if such employee stock ownership
plan incurs any Debt) only to the
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extent that any such proceeds are equal to any increase in the Consolidated Net
Worth of the Company and its Restricted Subsidiaries resulting from principal
repayments made by such employee stock ownership plan with respect to Debt
incurred by it to finance the purchase of such Capital Stock; and (4) the amount
by which Debt of the Company and its Restricted Subsidiaries is reduced on the
consolidated balance sheet of the Company and its Restricted Subsidiaries upon
the conversion or exchange (other than by a Restricted Subsidiary) subsequent to
the date on which the Series B Bonds were originally issued of any Debt of the
Company or any Restricted Subsidiary convertible or exchangeable for Capital
Stock (other than Redeemable Stock or Exchangeable Stock) of the Company or any
Restricted Subsidiary (less the amount of any Cash, or other property,
distributed by the Company or any Restricted Subsidiary upon such conversion or
exchange).
The restrictions described in the preceding paragraph shall not
prohibit: (A) any purchase or redemption of Capital Stock or Subordinated Debt
of the Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or
Exchangeable Stock and other than Capital Stock issued or sold to a Subsidiary
or an employee stock ownership plan); provided, however, that (1) such purchase
------------------
or redemption shall be excluded in the calculation of the amount of Restricted
Payments made since the date the Series B Bonds were originally issued and (2)
the Net Cash Proceeds from such sale shall be excluded from clauses (C)(2) and
(C)(3) of the preceding paragraph; (B) any purchase or redemption of
Subordinated Debt of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Subordinated Debt of the Company;
provided, however, that such purchase or redemption shall be excluded in the
- ------------------
calculation of the amount of Restricted Payments made since the date the Series
B Bonds were originally issued; (C) dividends paid within 60 days after the date
of declaration thereof if at such date of declaration such dividend would have
complied with the preceding paragraph; provided, however, that at the time of
------------------
payment of such dividend, no other Default shall have occurred and be continuing
(or result therefrom); provided further, however, that such dividend shall be
--------------------------
included in the calculation of the amount of Restricted Payments made since the
date the Series B Bonds were originally issued; (D) any repurchase of Capital
Stock of the Company after January 1, 1993 pursuant to the terms of the
Stockholders' Agreement from officers and employees (or their estates) of the
Company or its Restricted Subsidiaries upon death, disability or termination of
employment of such officers and employees; provided, however, that (1) the
------------------
aggregate amount of all such repurchases (excluding repurchases made with
proceeds of life insurance policies maintained by the Company on such employees
or officers) in any fiscal year shall not exceed $500,000; (2) to the extent
that the aggregate amount of such repurchases (excluding repurchases made with
proceeds of life insurance policies maintained by the Company on such employees
or officers) in any
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fiscal year is less than $500,000, the difference between $500,000 and such
amount may be carried forward and applied to repurchases in subsequent fiscal
years; and (3) all such repurchases shall be included in the calculation of the
amount of Restricted Payments made since the date the Series B Bonds were
originally issued; (E) Cash dividends paid after January 1, 1993 with respect to
the ESOP Preferred Stock; provided, however, that (1) the aggregate amount of
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all such dividends paid in any fiscal year shall not exceed $500,000; (2) to the
extent that the aggregate amount of such dividends paid in any fiscal year is
less than $500,000, the difference between $500,000 and such amount may be
carried forward and applied to the payment of such dividends in subsequent
fiscal years; and (3) all such dividends shall be included in the calculation of
the amount of Restricted Payments made since the date the Series B Bonds were
originally issued; (F) Investments in Unrestricted Subsidiaries, not to exceed,
in the aggregate, during the term of this Agreement, the lesser of (1)
$5,000,000 and (2) $7,000,000 minus the amount of Restricted Payments made
pursuant to clause (G) below; provided, however, that all such Investments shall
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be excluded in the calculation of the amount of Restricted Payments made since
the date the Series B Bonds were originally issued; (G) Restricted Payments not
to exceed, in the aggregate, during the term of the New Investment Agreement,
the lesser of (l) $5,000,000 and (2) $7,000,000 minus the amount of Investments
in Unrestricted Subsidiaries made during the term of Indenture; provided,
---------
however, that Restricted Payments made pursuant to this clause (G) shall be
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included in the calculation of the amount of Restricted Payments made since the
date the Series B Bonds were originally issued.
In addition, the Company has agreed to permit the Institutional
Investor to inspect the properties of the Company and its Subsidiaries, to
examine the books and records of the Company and its Subsidiaries and to provide
the Institutional Investor with certain other information, so long as the New
Investment Agreement remains in effect.
Required Redemptions
In addition to any redemption required by the Bond Indenture, the
Company will be required to redeem Series A Bonds (but only Series A Bonds held
by the Institutional Investor in the case of clause (iii) below) in the
following circumstances and in the principal amounts indicated:
(i) At any time the Company makes an optional redemption of any Series
B Bonds pursuant to the terms of the Bond Indenture, the Company shall,
concurrently with such redemption of Series B Bonds, redeem the entire principal
amount of the Series A Bonds;
(ii) On March 9, 1996, the Company shall redeem a principal amount of
Series A Bonds equal to the difference, if any,
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between (x) $21,525,588 and (y) the value of Mortgaged Properties acceptable to
the Institutional Investor that have become subject to the lien of a Mortgage
after April 12, 1995 and prior to March 9, 1996 (other than Mortgaged Properties
acquired with cash or U.S. government obligations held by the Trustee pursuant
to the release and substitution provisions of the Bond Indenture), except that
no such prepayment shall be required if the difference between the amounts
described above in clauses (x) and (y) is less than $50,000;
(iii) If the Company or any Affiliate of the Company or other Person
(as defined in the Bond Indenture) acting on behalf of the Company acquires
Series B Bonds, in open market purchases or otherwise (excluding, however, any
redemption of Series B Bonds in accordance with the terms of the Bond Indenture
and the New Investment Agreement that occurs concurrently with a pro rata
redemption of Series A Bonds), the Company shall give written notice thereof to
the Institutional Investor. Such notice shall contain an offer by the Company
to redeem all of the Series A Bonds held by the Institutional Investor on a date
specified in such notice (which date shall be no less than 30 and no more than
60 days from the date of such notice). If the Institutional Investor shall
notify the Company in writing within 20 days after receipt of such notice that
the Institutional Investor will accept such offer, the Company will redeem, on
the date specified in such notice, all of the Series A Bonds held by the
Institutional Investor;
(iv) Upon an Asset Disposition, the Company shall apply to the
redemption of an aggregate principal amount of Senior Debt of the Company an
amount equal to the amount of Net Available Cash not applied within 360 days of
such Asset Disposition to the acquisition of Tangible Property acceptable to the
Institutional Investor. If any First Mortgage Bonds are to be redeemed pursuant
to this clause, the respective principal amounts of Series A Bonds and Series B
Bonds to be redeemed shall be determined pro rata based on the respective
principal amounts of Series A Bonds and Series B Bonds outstanding (and not
theretofore called for redemption) on the date the redemption is to be made;
(v) At any time the Company exercises its legal defeasance option or
covenant defeasance option pursuant to Article 6 of the Bond Indenture, the
Company shall, concurrently with the exercise of such option, redeem the entire
principal amount of Series A Bonds;
(vi) On the Effective Date, the Company shall redeem $10 million in
principal amount of the Series A Bonds held by the Institutional Investor, at a
price equal to 100% of the principal amount thereof.
Any such redemption of Series A Bonds and any other redemptions of
Series A Bonds permitted or required under the Bond
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Indenture (other than a redemption upon a Change of Control (as defined in the
Bond Indenture), a redemption in connection with casualty, condemnation,
taxation and certain other events, a redemption in connection with a sale of the
Watsonville, California Property or a redemption or prepayment subject to the
waiver described below) shall be made at a price equal to the greater of the
applicable optional price for Series A Bonds specified in the Bond Indenture and
the redemption price specified below for the date on which such redemption is to
be made (together with accrued interest to the date of redemption:
Twelve Months
Beginning March 1 Redemption Price
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1995 111.500%
1996 109.583%
1997 107.666%
1998 105.750%
1999 103.833%
2000 101.917%
2001 and thereafter 100.000%
The Institutional Investor has agreed to waive any premium on the
redemption of $10 million of Series A Bonds as provided in paragraph (vi) above;
any redemption or prepayment of Series A Bonds within the 18 month period
immediately following the Effective Date; and on the redemption of an additional
$25 million of Series A Bonds (less any amount redeemed or prepaid during the 18
month period) whenever such redemption shall occur. The Company's right to
redeem Series A Bonds without payment of premium, in accordance with this
paragraph, shall lapse, and the provisions in the Indenture and in the New
Investment Agreement for payment of premium with respect to Series A Bonds shall
again become effective (without, however, requiring payment of any premium with
respect to any redemption or prepayment which has then been completed) in the
event of a subsequent bankruptcy or reorganization proceeding initiated by or
against the Company.
Events of Default
The Institutional Investor will be able to declare an Event of Default
under the New Investment Agreement if (i) any interest on the Series A Bonds is
not paid within five days of the applicable payment date, (ii) there is any
default which continues for 30 days in the performance of any other covenant or
agreement included or incorporated by reference in the New Investment Agreement,
(iii) there is a material breach of a material representation, warranty or other
statement made by or on behalf of the Company included or incorporated by
reference in the New Investment Agreement or (iv) any event shall occur or any
condition shall exist with respect to any Indebtedness of the Company (other
than the Series A Bonds and the Series B Bonds) or a Subsidiary of the Company
in a principal
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(or capitalized) amount of at least $2.5 million, or under any agreement
securing or relating to such Indebtedness, the effect of which is to cause or
permit any holder thereof or a trustee to accelerate the maturity of such
Indebtedness, or any such Indebtedness shall not have been paid at the final
maturity date thereof (as renewed or extended if such Indebtedness shall have
been renewed or extended) and any applicable grace period shall have expired;
and in any such case the Institutional Investor has notified the Company and the
First Mortgage Bonds trustee (the "Bond Trustee") that an Event of Default has
occurred under the New Investment Agreement. Such an Event of Default
constitutes an Event of Default under the Bond Indenture. The New Investment
Agreement requires the Company promptly to notify the Institutional Investor of
the occurrence of any Event of Default under the New Investment Agreement or
Bond Indenture, certain pending litigation and any other event which is likely
to affect the financial condition, operations or prospects of the Company or any
Restricted Subsidiary materially and adversely.
Release of Collateral
If the Company plans to release a Property or Properties from the lien
of a Mortgage on such Property pursuant to the terms of the Bond Indenture,
subject to certain exceptions specified in the New Investment Agreement, it
shall, at least 45 days prior to the proposed date of release, provide the
Institutional Investor with a list of Properties including at least two more
Properties than the number proposed to be released, and shall promptly
thereafter furnish the Institutional Investor with such information relating to
such Properties which is maintained in the ordinary course of the Company's
business as the Institutional Investor shall reasonably request. Within 30 days
of receipt of such information, the Institutional Investor shall designate such
Properties, if any, which it believes should not be released, it being
understood that (1) the Institutional Investor shall not object to a number of
Properties at least equal to the number proposed to be released and (2) the
Institutional Investor will not object to the release of the Brooks, Oregon
Property (assuming the release of such Property otherwise complies with the
provisions in the Bond Indenture regarding the release of Properties generally).
The approval and consent of the Institutional Investor is required prior to any
release of property under Section 3.01(e)(ii) of the Indenture (which requires,
inter alia, the replacement of such property with other property or cash within
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one year of release.) The Company shall exercise such release rights only with
respect to the Properties so accepted for release by the Institutional Investor.
The Company will also not substitute property for (x) cash held by the
Bond Trustee, in the case of property which is to become subject to a first lien
in accordance with the provisions of the Bond Indenture or (y) Mortgaged
Properties released from the lien of their respective Mortgages pursuant to
certain provisions
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of the Bond Indenture, without the prior written approval of the Institutional
Investor.
Termination
Unless sooner terminated by the Company and the Institutional
Investor, the New Investment Agreement will terminate when the Institutional
Investor holds less than (1) 25% of the outstanding principal amount of Series A
Bonds or (2) $25 million in aggregate principal amount of Series A Bonds.
Agreement Modification Fee
The effectiveness of the New Investment Agreement is conditioned upon
the Company paying the Institutional Investor the Agreement Modification Fee.
Certain Definitions. Certain definitions contained in the New
Investment Agreement are listed below.
Adjusted Consolidated Interest Expense: The term "Adjusted
Consolidated Interest Expense" means, for any period, the total interest expense
of the Company and its Restricted Subsidiaries, including (i) interest expense
attributable to capital leases, (ii) amortization of debt discount and debt
issuance cost, (iii) capitalized interest, (iv) non-cash interest payments, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) net costs under interest rate
protection agreements (including amortization of fees), (vii) preferred stock
dividends (other than dividends payable solely in kind) in respect of all
preferred stock held by persons other than the Company or a Restricted
Subsidiary, (viii) interest incurred in connection with investments in
discontinued operations and (ix) interest actually paid by the Company or any of
its Restricted Subsidiaries under any guarantee of Indebtedness or any other
obligation of any other person.
Adjusted Consolidated Net Income: The term "Adjusted Consolidated Net
Income" means, for any period, the net income (or net loss) of the Company and
its Restricted Subsidiaries determined on a consolidated basis in accordance
with generally accepted accounting principles; provided, however, that there
shall not be included in such Adjusted Consolidated Net Income:
(i) any net income of any person if such person is not a Restricted
Subsidiary, except that (A) the Company's or any Restricted Subsidiary's equity
in the net income of any such person for such period shall be included in such
Adjusted Consolidated Net Income up to the aggregate amount of cash actually
distributed by such person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted
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Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's or any Restricted Subsidiary's equity in a net loss of any such person
for such period shall be included in determining such Adjusted Consolidated Net
Income;
(ii) any net income of any person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company, except that (A) the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Adjusted Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Adjusted Consolidated Net Income;
(iv) any gain or loss realized upon the sale or other disposition of
any property, plant or equipment of the Company or its Restricted Subsidiaries
(including pursuant to any sale-and-leaseback arrangement), provided, however,
that the exclusion from Adjusted Consolidated Net Income of gains described in
this clause (iv) shall not apply to deferred gains resulting from sale and
leaseback arrangements to the extent that there is an offsetting increase in
depreciation expense resulting from the recapitalization of the related
property, plant or equipment) which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any person;
(v) the cumulative effect of a change in accounting principles,
including the cumulative effect of the implementation of SFAS 106 by the Company
with respect to services rendered by employees in periods prior to its
implementation, but excluding any effects of such implementation with respect to
services rendered in periods following such implementation, and excluding any
one-time or cumulative charges associated with the implementation of SFAS 109.
(vi) the cash effect of the rejection of any leases or executory
contracts pursuant to the Plan; and
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(vii) the cash effect of the Company's incurring costs (including but
not limited to professional fees) in connection with the Plan in excess of
5,750,000.
Adjusted Consolidated Net Worth: The term "Adjusted Consolidated Net
Worth" of the Company and its Restricted Subsidiaries means an amount equal to
the total amounts shown on the balance sheet of the Company and its Restricted
Subsidiaries, as of the date for which the determination is being made, as (i)
the par or stated value of all outstanding Capital Stock of the Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit,
(B) any amounts attributable to Redeemable Stock, (C) any amounts attributable
to Exchangeable Stock, (D) any amounts attributable to treasury stock and (E)
adjustments relating to pension liabilities, in all cases determined on a
consolidated basis in accordance with generally accepted accounting principles;
provided, however, that to the extent such balance sheet reflects any effects
attributable to any one-time or cumulative charges associated with the
implementation of SFAS 106 and 109, or any changes in accounting principles
implemented thereafter, such effect shall be disregarded; provided further, that
to the extent such balance sheet reflects any gain or loss realized upon the
sale or other disposition of any property, plant or equipment of the Company or
its restricted subsidiaries after February 28, 1995 upon the sale or other
disposition of any Capital Stock of any person, such gain or loss shall also be
disregarded and provided, further, that the cash effects of the rejection of any
leases or executory contracts pursuant to the Plan and the cash effects of the
Company's incurring costs (including but not limited to professional fees) in
connection with the Plan in excess of $5,750,000 shall also be disregarded.
Adjusted EBITDA: The term "Adjusted EBITDA" means, for any period,
Adjusted Consolidated Net Income plus (to the extent deducted in calculating
Adjusted Consolidated Net Income) Adjusted Consolidated Interest Expense, income
taxes, depreciation expense, amortization expense, non-cash write-offs of
deferred financing costs and non-cash deductions for contributions to the ESOP
(but without giving effect to any extraordinary gain or loss) for such period.
Adjusted Total Capitalization: The term "Adjusted Total
Capitalization" means, without duplication, Adjusted Consolidated Net Worth plus
Indebtedness of the Company and its Restricted Subsidiaries, consolidated in
accordance with generally accepted accounting principles.
Asset Disposition: The term "Asset Disposition" means any sale,
lease, transfer or other disposition (or series of related sales, leases,
transfers or dispositions) of shares of capital stock of a Subsidiary (other
than directors' qualifying
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shares), property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Subsidiaries, other
than (i) a disposition by a Subsidiary to the Company or by the Company or a
Subsidiary to a wholly owned Subsidiary that is a Restricted Subsidiary, (ii) a
disposition of property or assets at fair market value in the ordinary course of
business, (iii) a disposition of obsolete or worn out assets in the ordinary
course of business, (iv) a disposition subject to and made in accordance with
the provisions of the Bond Indenture relating to optional redemptions and
redemptions in connection with casualty, condemnation, taxation and certain
other events, (v) a disposition subject to the provision of the Bond Indenture
relating to Limitations on Restricted Payments or (vi) a sale-and-leaseback
under Section 4.08(i) of the Bond Indenture.
Available Cash Flow: The term "Available Cash Flow" means, for the
most recent two-quarter period ended prior to the date on which a determination
is being made, Adjusted EBITDA minus (i) cash income taxes paid or payable
during such period and (ii) the amount of Capital Expenditures (other than any
non-cash Capital Expenditures) of the Company and its Restricted Subsidiaries
during such period.
Indebtedness: The term "Indebtedness" of any person means, without
duplication, (a) all indebtedness of such person for borrowed money or for the
deferred purchase price of property or services; (b) except to the extent
supporting Indebtedness of such person (but no other indebtedness) of the type
described in clause (a) above, the face amount of all letters of credit issued
for the account of such person and, without duplication, all drafts drawn
thereunder; (c) all liabilities secured by any lien on any property owned by
such person, whether or not such indebtedness has been assumed; (d) all Capital
Lease Obligations (as defined in the New Investment Agreement); and (e) all
Contingent Obligations (as defined in the New Investment Agreement) of such
person.
Lien: The term "Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement and any financing lease having substantially the same effect
as any of the foregoing).
Net Available Cash: The term "Net Available Cash" from an Asset
Disposition means cash payments received (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form) therefrom, in each
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case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability under generally accepted
accounting principles, as a consequence of such Asset Disposition, and in each
case net of all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
or other security agreement of any kind with respect to such assets, or which
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law be repaid out of the proceeds from such Asset
Disposition, and net of all distributions and other payments required to be made
and actually made to minority interest holders in Subsidiaries or joint ventures
as a result of such Asset Disposition.
Net Cash: The term "Net Cash" of the Company and its Restricted
Subsidiaries on a consolidated basis means, as of any date, the amount shown on
the consolidated balance sheet of the Company and its Restricted Subsidiaries as
cash as of such date (but not including cash held in accounts or deposits that
are subject to any lien, encumbrances or restrictions or which is required to be
held in connection with any agreements or obligations), computed in accordance
with generally accepted accounting principles, plus the total amount of cash
payments which the Company has made as of the date of computation for redemption
or prepayment of Series A Bonds pursuant to redemptions without payment of
premium described above (other than the redemption of $10 million of Series A
Bonds pursuant to the Restructuring) minus the amount of Indebtedness
outstanding on such date under the New Credit Agreement (or any Indebtedness
issued in any refinancing, refunding, replacement, extension or restructuring
thereof), other than any Indebtedness representing undrawn amounts under letters
of credit under the New Credit Agreement (or any Indebtedness issued in any
refinancing, refunding, replacement, extension or restructuring thereof) not in
excess of $10.0 million in the aggregate; provided, however, that Net Cash shall
not be less than zero.
Pro Forma Debt Service: The term "Pro Forma Debt Service" for any
period, means the sum of (i) Adjusted Consolidated Interest Expense (excluding
any non-cash items included in Adjusted Consolidated Interest Expense to the
extent no current liability exists with respect thereto) that would be payable
during such period by the Company and its Restricted Subsidiaries assuming (x)
that all Indebtedness outstanding on the last day of the quarter prior to the
period for which the determination is being made were outstanding throughout
such period (other than scheduled payments of principal to the extent included
in clause (ii) below), and (y) that, with respect to any floating rate or other
Indebtedness, the interest rate in effect on the date of such determination were
in effect throughout such period, but giving effect to any scheduled increase or
decrease in interest rate that is ascertainable on the
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date of determination, and (ii) the amount of principal payments payable during
such period (and any interest payable during such period on such principal
amounts to the extent not included in clause (i) above) on all Indebtedness of
the Company and its Restricted Subsidiaries, in each case consolidated in
accordance with generally accepted accounting principles.
Restricted Subsidiary: The term "Restricted Subsidiary" means all
Subsidiaries of the Company other than Unrestricted Subsidiaries.
Senior Debt: The term "Senior Debt" means all Indebtedness of the
Company and its Restricted Subsidiaries, consolidated in accordance with
generally accepted accounting principles, other than Subordinated Debt.
Subordinated Debt: The term "Subordinated Debt" means the Old
Subordinated Debentures, the New Subordinated Debentures, and any other
unsecured Indebtedness for money borrowed of the Company which (i) on the date
on which the status of such Indebtedness is determined for any purpose hereof
(1) has a final maturity not earlier than September 1, 2005, and (2) is not
subject to payment, redemption or other retirement by means of any installment,
sinking fund, serial maturity or other required payments prior to September 1,
2005 and (ii) is issued or assumed pursuant to, or evidenced by, an indenture or
other instrument that contains provisions for the subordination of such
Indebtedness (to which appropriate reference shall be made in the instruments
evidencing such Indebtedness if not contained therein) to the Series A Bonds and
the Series B Bonds (and, at the option of the Company, if so provided, to other
Indebtedness of the Company, either generally or as specifically designated) as
specified in the New Investment Agreement.
Subsidiary: The term "Subsidiary" of any person means and includes
(a) any corporation more than 50% of whose stock of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the directors
of such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation will have or might have voting power by
reason of the happening of any contingency) is at the time owned by such person
directly or indirectly or through Subsidiaries and (b) any partnership,
association, joint venture or other entity in which such person, directly or
through Subsidiaries, has a more than 50% equity interest at the time.
Unrestricted Subsidiary: The term "Unrestricted Subsidiary" means any
Subsidiary of the Company which is created or acquired by the Company or any
Subsidiary of the Company after the date of the New Investment Agreement and is
designated an Unrestricted Subsidiary by the Company's Board of Directors at the
time of such creation or acquisition.
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DESCRIPTION OF NEW SUBORDINATED DEBENTURES
The New Subordinated Debentures are to be issued under the New
Indenture, to be dated as of the Effective Date, between the Company and United
States Trust Company of New York, as trustee (the "Trustee"), which will govern
the terms of the New Subordinated Debentures. The terms of the New Indenture
are also governed by certain provisions of the Trust Indenture Act of 1939, as
amended. The following summary, which describes certain provisions of the New
Indenture, does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the New Indenture, including the definitions
therein of terms not defined in this Disclosure Statement. Certain important
definitions used in the New Indenture are included below under "Certain
Definitions."
The New Subordinated Debentures will be transferable and exchangeable
at the office of the Trustee and will be issued in fully registered form,
without coupons, in a minimum denomination of $1,000 and such greater
denominations as are whole multiples of $1,000.
The Company has no sinking fund obligations with respect to the New
Subordinated Debentures.
Interest on the New Subordinated Debentures will be computed on the
basis of a 360-day year of twelve 30-day months. Principal and interest will be
payable at the office of the Trustee, but, at the option of the Company,
interest may be paid by check mailed to the registered holders at their
registered addresses. Interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest will accrue at a rate
equal to the lesser of (i) the greater of (a) 18% per annum and (b) 4% per annum
- - -
over the prime rate or equivalent rate of interest from time to time in effect
as announced by the Trustee and (ii) the maximum rate of interest on the New
--
Subordinated Debentures then permitted by applicable law.
Terms of the New Subordinated Debentures
The New Subordinated Debentures will be unsecured, subordinated
obligations of the Company, will be limited in aggregate principal amount to the
aggregate principal amount of the New Subordinated Debentures issued pursuant to
the Restructuring, which amount will not exceed $115 million, and will mature on
November 1, 2007. Interest will accrue on the New Subordinated Debentures from
the Effective Date, or from the most recent Interest Payment Date to which
interest has been paid or provided for, and will be payable in cash semiannually
on May 1 and November 1 of each year, commencing November 1, 1995 at the rate of
15% per annum of the principal amount at maturity of the New Subordinated
Debentures to Holders of record at the close of business on the
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April 1 or October 1 immediately preceding the Interest Payment Date.
Optional Redemption
The New Subordinated Debentures may be redeemed at the option of the
Company, at any time as a whole, or from time to time in part, at a redemption
price equal to 100 percent of the outstanding principal amount thereof, plus
accrued interest to the redemption date.
Selection for Redemption
In the case of any partial redemption, selection of the New
Subordinated Debentures for redemption will be made by the Trustee on a pro rata
basis, by lot or by such other method that complies with applicable legal and
securities exchange requirements, if any, and that the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no New
Subordinated Debentures of $1,000 in principal amount at maturity or less shall
be redeemed in part. If any New Subordinated Debentures are to be redeemed in
part only, the notice of redemption relating to such New Subordinated Debentures
shall state the portion of the principal amount thereof to be redeemed. A New
Subordinated Debenture in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original New Subordinated Debentures.
Ranking
The Debt evidenced by the New Subordinated Debentures constitutes
Senior Subordinated Debt of the Company, and will rank pari passu with all
existing or future Senior Subordinated Debt of the Company. The payment of the
principal of and premium (if any) and interest on the New Subordinated
Debentures will be subordinated in right of payment, as set forth in the New
Indenture, to the prior payment of all Superior Debt of the Company including,
without limitation, the Company's obligations under the New Credit Agreement and
the First Mortgage Bonds. Superior Debt is defined, in a manner which is
substantially similar to the definition of Senior Debt contained in the Old
Indenture, as (a) the principal of, and premium (if any) and accrued and unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for postfiling interest is allowed in such proceeding) on (i) indebtedness of
the Company for money borrowed, whether outstanding on the date of execution of
the New Indenture or thereafter created, incurred or assumed, together with all
amounts for fees and expenses due to the agent banks under the New Credit
Agreement and other representatives of Superior Debt, and all reimbursement and
other contingent obligations with respect to letters of credit issued in
accordance with the New Credit
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Agreement, (ii) guarantees by the Company of indebtedness for money borrowed by
any other person, whether outstanding on the date of execution of the New
Indenture or thereafter created, incurred or assumed, (iii) obligations which
are classified in accordance with generally accepted accounting principles as
capital leases in the financial statements of the Company and (iv) indebtedness
evidenced by notes, debentures, bonds or other instruments of indebtedness for
the payment of which the Company is responsible or liable, by guarantee or
otherwise, whether outstanding on the date of execution of the New Indenture or
thereafter created, incurred or assumed and (b) modifications, renewals,
extensions and refundings on any such indebtedness, obligations or guarantees,
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such indebtedness, obligations or
guarantees, or such modifications, renewals, extensions or refundings thereof,
are not superior in right of payment to the New Subordinated Debentures;
provided, however, that Superior Debt will not be deemed to include (1) any
- -------- -------
obligation of the Company to any Subsidiary (2) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities),
(3) any indebtedness, guarantee or obligation of the Company of the type
described in clause (a) or (b) above which is subordinate or junior in any
respect to any other indebtedness, guarantee or obligation of the Company and
(4) the portion of any Debt issued in violation of the covenant concerning
"Limitation on Debt" or "Limitation on Senior Subordinated Debt."
Superior Debt is defined separately from the definition of Senior
Debt, in order to make the ranking of the New Subordinated Debentures identical
in all material respects to the ranking of the Old Subordinated Debentures. As
of February 28, 1995, the Company had approximately $361.6 in principal amount
of Superior Debt outstanding. The Company's obligations under the New Credit
Agreement and the First Mortgage Bonds are secured by first priority liens on
substantially all of the Company's assets. The New Indenture does not limit the
Company's right to incur additional Superior Debt, if such incurrence is
otherwise permitted by the covenant governing the incurrence of Debt generally.
Only Debt of the Company which is Superior Debt including, without
limitation, the Company's obligations under the New Credit Agreement and the
First Mortgage Bonds will rank senior to the New Subordinated Debentures in
accordance with the provisions of the New Indenture. The New Subordinated
Debentures will rank senior to all existing and future Subordinated Debt (other
than Senior subordinated Debt) of the Company. Any Debt of the Company which is
subordinate or junior in ranking in any respect to any other such Debt will be
subordinate to Senior Subordinated Debt unless the instrument creating or
evidencing the same or pursuant to which the same is outstanding specifically
provides that such Debt (i) is to rank pari passu with other Senior Subordinated
-
Debt and (ii) is
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not subordinated to any Debt of the Company which is not Superior Debt.
No payment on account of principal or interest on the New Subordinated
Debentures may be made and the Company may not deposit funds with the Trustee
for the purpose of discharging its obligations under the New Indenture and may
not repurchase, redeem or otherwise retire any New Subordinated Debentures if at
the time there exists a payment default with respect to any Superior Debt which
has not been cured or waived or if any Superior Debt has been accelerated and
such acceleration has not been rescinded. In addition, if an event of default
exists with respect to any Superior Debt (i.e., if all notices have been given
- -
and grace periods have elapsed, so that the holders of Superior Debt are in a
position to accelerate immediately such Superior Debt), a majority of the
holders thereof or their representatives may notify the Trustee that payments
with respect to the New Subordinated Debentures are to be suspended. If such
notice is provided, no payments of principal or interest may be made on the New
Subordinated Debentures until the earlier of 180 days after the date of such
notice and 120 days after a notice to the holders of Superior Debt of any
acceleration of the New Subordinated Debentures. A failure to make any payments
with respect to the New Subordinated Debentures as a result of the rights of the
holders of Superior Debt described in this paragraph will not have any effect on
the right of the holders of the New Subordinated Debentures to accelerate the
maturity thereof as a result of such payment default.
Upon any distribution to creditors of the assets of the Company in a
liquidation or total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, the holders of Superior Debt will be entitled to
receive payment in full before the holders of the New Subordinated Debentures
are entitled to receive any payment (other than shares of stock or subordinated
Debt provided by a plan of reorganization or adjustment which does not alter the
rights of holders of Superior Debt).
Upon any acceleration of the maturity of the New Subordinated
Debentures by reason of default, the Company or the Trustee must give notice of
the acceleration to holders of the Superior Debt and may not pay Holders of the
New Subordinated Debentures until 120 days after the acceleration occurs and
then only if such payment is otherwise permitted at that time.
By reason of such subordination, in the event of insolvency, creditors
of the Company who are holders of Superior Debt may recover more, ratably, than
Holders of the New Subordinated Debentures.
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Change of Control
Upon the occurrence of any of the following events each Holder of New
Subordinated Debentures will have the right to require the Company to repurchase
all or any part of such Holder's New Subordinated Debentures at a repurchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date): (i) prior to the earlier to occur of (A) the
- -
first public offering (which shall mean the sale of shares of common stock of
the relevant entity pursuant to an effective registration statement under the
Securities Act, that covers (together with any such prior effective
registrations) not less than 25% of the outstanding shares of common stock of
such entity on a fully diluted basis after giving effect to all such
registrations) of common stock of Parent or (B) the first public offering of
-
common stock of the Company, the Permitted Holders cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have beneficial ownership of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of a
majority in the aggregate of the total voting power of the Voting Stock of the
Company, whether as a result of issuance of securities of the Company, any
merger, consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities by Parent or otherwise (for purposes of this
clause (i) and clause (ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified corporation")
held by any other corporation (the "parent corporation") so long as the
Permitted Holders beneficially own (as so defined), directly or indirectly, in
the aggregate a majority of the voting power of the Voting Stock of the parent
corporation); (ii) any "Person" (as such term is used in Sections 13(d) and
--
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i) above), directly or
indirectly, of more than 30% of the total voting power of the Voting Stock of
the Company; provided, however, that the Permitted Holders beneficially own (as
so defined), directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Company than such other Person and
do not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of the Company
(for the purposes of this clause (ii), such other Person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a parent
corporation, if such other Person "beneficially owns" (as so defined), directly
or indirectly, more than 30% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders "beneficially own" (as so defined),
directly or indirectly, in the aggregate a lesser percentage of the voting power
of the
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Voting Stock of such parent corporation and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of such parent corporation); (iii) during any
---
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by a vote of 66 2/3% of
the directors of the Company then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company
--
consolidates with or merges with or into any other Person or conveys, transfers
or leases all or substantially all of its assets to any Person or any Person
consolidates with or merges into the Company, in either event pursuant to a
transaction in which either (A) the outstanding Voting Stock of the Company is
-
changed into or exchanged for cash, securities or other property (excluding,
however, any such transaction where the outstanding Voting Stock of the Company
is changed into or exchanged for Voting Stock of the surviving or transferee
corporation which is neither Redeemable Stock nor Exchangeable Stock) or (B) the
-
holders of the Voting Stock of the Company immediately prior to such
transaction, together with Kelso and Affiliates of Kelso which are either
controlled by or under common control with Kelso, own, directly or indirectly,
in the aggregate, less than 50.01% of the Voting Stock of the surviving Person
immediately after such transaction.
Clause (iv) of the definition of Change of Control set forth above
includes a conveyance, transfer or lease of all or "substantially all" of the
Company's assets. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. Accordingly, the ability of a Holder of New
Subordinated Debentures to require the Company to repurchase such New
Subordinated Debentures as a result of a transfer or lease of the Company's
assets to another Person may be uncertain. In addition, if the Company merges
or consolidates with or into another entity controlled by Kelso, the Holders of
New Subordinated Debentures may not be able to require the Company to repurchase
such New Subordinated Debentures.
Within 30 days following any Change of Control, the Company will mail
a notice to each Holder of New Subordinated Debentures with a copy to the
Trustee stating (i) that a Change of Control has occurred and that such holder
-
has the right to require the Company to repurchase all or any part of such
Holder's New Subordinated Debentures at a repurchase price in cash equal to 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the
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<PAGE>
relevant interest payment date); (ii) the circumstances and relevant facts
--
regarding such Change of Control (including, but not limited to, information
with respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control); (iii) the repurchase date (which will
---
be no earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (iv) the instructions determined by the Company, consistent with
--
the New Indenture, that a Holder must follow in order to have its New
Subordinated Debentures repurchased.
The Change of Control provisions of the New Subordinated Debentures
may in certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the New
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit ratings.
The occurrence of certain of the events which would constitute a
Change of Control also would constitute a default under certain of the Company's
other existing or future indebtedness. In addition, the exercise by the Holders
of their right to require the Company to repurchase the New Subordinated
Debentures could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. The Company's ability to pay cash to the Holders of New Subordinated
Debentures upon a repurchase may also be limited by the Company's then existing
financial resources. Finally, the fact that a transaction would constitute a
Change of Control as defined does not mean that the transaction would be
permitted under the New Indenture unless the transaction would be otherwise
permissible under the New Indenture.
The Company will comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with any
offer required to be made by the Company to repurchase the New Subordinated
Debentures as a result of a Change of Control.
The provisions relative to the Company's obligation to make an offer
to repurchase the New Subordinated Debentures as a result of a Change of Control
may be waived or modified with the written consent of the Holders of a majority
in principal amount of the New Subordinated Debentures.
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<PAGE>
Certain Covenants
Set forth below are certain covenants contained in the New
Indenture relating to the New Subordinated Debentures:
Limitation on Senior Subordinated Debt
The Company shall not issue, directly or indirectly, any Debt that is
expressly subordinate in right of payment to any Senior Debt unless such Debt is
expressly made pari passu with, or subordinate in right of payment to the New
Subordinated Debentures.
Limitation on Debt
The Company shall not issue, directly or indirectly, any Debt unless
the Consolidated EBITDA Coverage Ratio (as shown by a consolidated pro forma
income statement of the Company and its consolidated Subsidiaries for the
Reference Period after giving effect to (i) the issuance of such Debt and (if
-
applicable) the application of the net proceeds thereof to refinance other Debt
as if such Debt was issued and the application of such proceeds occurred at the
beginning of the Reference Period, (ii) the issuance and retirement of any other
--
Debt since the last day of the most recent fiscal quarter covered by such income
statement as if such Debt was issued or retired at the beginning of the
Reference Period and (iii) the acquisition or disposition of any company or
---
business acquired or disposed of by the Company since the first day of the
Reference Period, including any acquisition or disposition which will be
consummated substantially contemporaneously with the issuance of such Debt, as
if such acquisition or disposition occurred at the beginning of the Reference
Period) exceeds 1.75:1 for the Reference Period.
Notwithstanding the foregoing, the Company may issue the following
Debt: (1) Debt issued as working capital and letter of credit financing in an
-
aggregate principal amount outstanding at any time not to exceed the greater of
(i) the sum of (A) 85% of the book value of the net trade receivables of the
- -
Company and its Subsidiaries and (B) $7.5 million or (ii) up to $27.5 million of
- --
Debt incurred pursuant to the terms of the New Credit Agreement and Debt issued
in exchange for, or the proceeds of which are used to refund or refinance, the
Debt permitted by this clause (ii); (2) Debt owed to and held by a Wholly Owned
-
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any transfer of such Debt (other than to a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of
such Debt by the Company; (3) the New Subordinated Debentures and Debt issued in
-
exchange for, or the proceeds of which are used to refund or refinance, any Debt
permitted by this clause (3); provided, however, that (i) the principal amount
-
of the Debt so issued shall not exceed the
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<PAGE>
principal amount of the Debt so exchanged, refunded or refinanced and (ii) the
--
Debt so issued (A) shall not mature prior to the Stated Maturity of the Debt so
-
exchanged, refunded or refinanced and (B) shall have an Average Life equal to or
-
greater than the remaining Average Life of the Debt so exchanged, refunded or
refinanced; (4) Debt (other than Debt described in clause (1), (2) or (3) of
-
this paragraph) outstanding on the date on which the New Subordinated Debentures
are originally issued and Debt issued in exchange for, or the proceeds of which
are used to refund or refinance, any Debt permitted by this clause (4);
provided, however, that (i) the principal amount of the Debt so issued shall not
-
exceed the principal amount of the Debt so exchanged, refunded or refinanced and
(ii) the Debt so issued (A) shall not mature prior to the Stated Maturity of the
-- -
Debt so exchanged, refunded or refinanced, (B) shall have an Average Life equal
-
to or greater than the remaining Average Life of the Debt so exchanged, refunded
or refinanced and (C) shall be subordinate in right of payment to the New
-
Subordinated Debentures if the Debt so exchanged, refunded or refinanced is so
subordinated; and (5) Debt in an aggregate principal amount which, together with
-
all other Debt of the Company then outstanding (other than Debt permitted by
clauses (1) through (4) of this paragraph) does not exceed the greater of: (i)
-
$40 million and (ii) 10% of Consolidated Net Tangible Assets as of the end of
--
the most recent fiscal quarter of the Company ending not less than 45 days from
the date of determination.
Limitation on Subsidiary Debt and Preferred Stock
The Company shall not permit any Subsidiary to issue, directly or
indirectly any Debt or Preferred Stock, except: (1) Debt or Preferred Stock
-
issued to and held by the Company or a Wholly Owned Subsidiary; provided,
however, that (i) any subsequent issuance or transfer of any Capital Stock which
-
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or (ii) any subsequent transfer of such Debt or Preferred Stock
--
(other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in
each case, to constitute the issuance of such Debt or Preferred Stock by the
issuer thereof; (2) Debt or Preferred Stock of a Subsidiary issued and
-
outstanding on or prior to the date on which such Subsidiary was acquired by the
Company (other than Debt or Preferred Stock issued as consideration in, or to
provide all or any portion of the funds utilized to consummate, the transaction
or series of related transactions pursuant to which such Subsidiary became a
Subsidiary or was acquired by the Company); (3) Debt or Preferred Stock issued
-
and outstanding on or prior to the date on which the New Subordinated Debentures
are originally issued, other than Debt or Preferred Stock described in clause
(1) or (2) of this paragraph; (4) Non-Recourse Debt of a Non-Recourse Subsidiary
-
issued after the date of the New Indenture to finance the acquisition of assets
after such date; and (5) Debt or Preferred Stock issued in exchange for, or the
-
proceeds of which are used to refund or refinance, Debt or Preferred Stock
referred to in clause (2) or
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<PAGE>
(3) of this paragraph; provided, however, that (i) the principal amount of such
-
Debt or the liquidation value of such Preferred Stock so issued shall not exceed
the principal amount or liquidation value of the Debt or Preferred Stock so
exchanged, refunded or refinanced; (ii) the Debt or Preferred Stock so issued
--
(A) shall have a Stated Maturity later than the Stated Maturity of the Debt or
-
final redemption date (if any) of the Preferred Stock being exchanged, refunded
or refinanced and (B) shall have an Average Life equal to or greater than the
-
remaining Average Life of the Debt or Preferred Stock being exchanged, refunded
or refinanced; (iii) the Debt so issued shall be subordinate in right of payment
---
to the New Subordinated Debentures if the Debt so exchanged, refunded or
refinanced is so subordinated; and (iv) Debt may not be issued in exchange for,
--
and the proceeds of such Debt may not be used to refund or refinance, Preferred
Stock.
Limitation on Restricted Payments
The Company shall not, and shall not permit any Subsidiary, directly
or indirectly, to (i) declare or pay any dividend or make any distribution on or
-
in respect of its Capital Stock (including any distribution in connection with
any merger or consolidation involving the Company) or to the direct or indirect
holders of its Capital Stock (except dividends or distributions payable solely
in its Non-Convertible Capital Stock or in options, warrants or other rights to
purchase its Non-Convertible Capital Stock and except dividends or distributions
payable to the Company or a Subsidiary), (ii) purchase, redeem or otherwise
--
acquire or retire for value any Capital Stock of the Company or of any direct or
indirect Parent of the Company, (iii) purchase, repurchase, redeem, defease or
---
otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment any Subordinated Obligations (other
than the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of and used for satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition) or (iv) make any Investment in an Affiliate of the Company,
--
other than a Subsidiary that is not a Non-Recourse Subsidiary or a person which
will become a Subsidiary that is not a Non-Recourse Subsidiary as a result of
any such Investment (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement or Investment being
hereinafter referred to as a "Restricted Payment") if at the time the Company or
such Subsidiary makes such Restricted Payment: (1) a Default shall have
-
occurred and be continuing (or would result therefrom); (2) the Company is not
-
able to issue $1.00 of additional Debt in accordance with the provisions of the
first paragraph under "Limitation on Debt" above; or (3) the aggregate amount of
-
such Restricted Payment and all other Restricted Payments since the date on
which the New Subordinated Debentures are issued would exceed the sum of: (a)
-
50% of the Consolidated Net Income accrued during the period (treated as one
accounting period) from
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<PAGE>
the date of issuance of the New Subordinated Debentures, to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit) and minus 100% of the amount of any write-downs,
write-offs, other negative revaluations and other negative extraordinary charges
not otherwise reflected in Consolidated Net Income during such period; (b) the
-
aggregate Net Cash Proceeds received by the Company from the issuance or sale of
its Capital Stock (other than Redeemable Stock or Exchangeable Stock) subsequent
to the date on which the New Subordinated Debentures are originally issued
(other than an issuance or sale to a Subsidiary or an employee stock ownership
plan); (c) the aggregate Net Cash Proceeds received by the Company from the
-
issue or sale of its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) to an employee stock ownership plan subsequent to the date of issuance of
the New Subordinated Debentures, but (if such employee stock ownership plan
incurs any Debt) only to the extent that any such proceeds are equal to any
increase in the Consolidated Net Worth of the Company resulting from principal
repayments made by such employee stock ownership plan with respect to Debt
incurred by it to finance the purchase of such Capital Stock; and (d) the amount
-
by which Debt of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to the date on
which the New Subordinated Debentures are issued of any Debt of the Company
convertible or exchangeable for Capital Stock (other than Redeemable Stock or
Exchangeable Stock) of the Company (less the amount of any cash, or other
property, distributed by the Company upon such conversion or exchange).
The restrictions described in the preceding paragraph will not
prohibit (i) any purchase or redemption of Capital Stock or Subordinated
-
Obligations of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock and other than Capital Stock issued or
sold to a Subsidiary or an employee stock ownership plan); and (A) such purchase
-
or redemption shall be excluded in the calculation of the amount of Restricted
Payments made since the date on which the New Subordinated Debentures are issued
and (B) the Net Cash Proceeds from such sale shall be excluded from clauses 3(b)
-
and 3(c) of the previous paragraph; (ii) any purchase or redemption of
--
Subordinated Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, other Subordinated Obligations
of the Company; and such purchase or redemption, shall be excluded in the
calculation of the amount of Restricted Payments made since the date on which
the New Subordinated Debentures are issued; (iii) any purchase or redemption of
---
Subordinated Obligations from Net Available Cash to the extent permitted under
"Limitation on Sales of Assets and Subsidiary Stock" below; and such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments
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<PAGE>
made since the date on which the New Subordinated Debentures are issued; (iv)
--
dividends paid within 60 days after the date of declaration thereof if at such
date of declaration such dividends would have complied with this covenant;
provided, however, that (A) at the time of payment of such dividends, no other
-
Default shall have occurred and be continuing (or result therefrom); and (B)
-
such dividends shall be included in the calculation of the amount of Restricted
Payments made since the date on which the New Subordinated Debentures are
originally issued; (v) any repurchase of capital stock of the Company after the
-
date of issuance of the New Subordinated Debentures pursuant to the terms of the
Stockholders' Agreement from officers and employees (or their estates) of the
Company or its Subsidiaries upon death, disability or termination of employment
of such officers and employees; provided, however, that (A) the aggregate amount
-
of all such repurchases (excluding repurchases made with proceeds of life
insurance policies maintained by the Company on such employees or officers) in
any fiscal year shall not exceed $500,000; (B) to the extent that the aggregate
-
amount of such repurchases (excluding repurchases made with proceeds of life
insurance policies maintained by the Company on such employees or officers) in
any fiscal year is less than $500,000, the difference between $500,000 and such
amount may be carried forward and applied to repurchases in subsequent fiscal
years; and (C) all such repurchases shall be included in the calculation of the
-
amount of Restricted Payments made since the date on which the New Subordinated
Debentures are originally issued; (vi) cash dividends paid after the date of
--
issuance of the New Subordinated Debentures with respect to the ESOP Preferred
Stock; provided, however, that (A) the aggregate amount of all such dividends
-
paid in any fiscal year shall not exceed $500,000; (B) to the extent that the
-
aggregate amount of such dividends paid in any fiscal year is less than
$500,000, the difference between $500,000 and such amount may be carried forward
and applied to the payment of such dividends in subsequent fiscal years; and (C)
-
all such dividends shall be included in the calculation of the amount of
Restricted Payments made since the date on which the New Subordinated Debentures
are issued; (vii) Investments in Non-Recourse Subsidiaries not to exceed $5.0
---
million in the aggregate during the term of the New Indenture; and all such
Investments shall be excluded in the calculation of the amount of Restricted
Payments made since the date on which the New Subordinated Debentures are
originally issued; or (viii) Restricted Payments not to exceed $5.0 million in
----
the aggregate during the term of the New Indenture; and such Restricted Payments
shall be included in the calculation of the amount of Restricted Payments made
since the date on which the New Subordinated Debentures are issued.
Limitation on Restrictions on Distributions from Subsidiaries
The Company shall not, and shall not permit any Subsidiary to, create
or otherwise cause or permit to exist or become effective
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any consensual encumbrance or restriction on the ability of any Subsidiary to
(i) pay dividends or make any other distributions on its Capital Stock or pay
-
any Debt or other obligation owed to the Company or any Subsidiary, (ii) make
--
any loans or advances to the Company or any Subsidiary or (iii) transfer any of
---
its property or assets to the Company or any Subsidiary, in each case except:
(1) any encumbrance or restriction pursuant to an agreement in effect on the
-
date of the New Indenture; (2) any encumbrance or restriction with respect to a
-
Subsidiary pursuant to an agreement relating to any Debt issued by such
Subsidiary on or prior to the date on which such Subsidiary became a Subsidiary
or was acquired by the Company (other than Debt issued as consideration in, or
to provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such Subsidiary
became a Subsidiary or was acquired by the Company) and outstanding on such
date; (3) any encumbrance or restriction pursuant to an agreement effecting a
-
refinancing of Debt issued pursuant to an agreement referred to in clause (1) or
(2) of this paragraph; provided, however, that the encumbrances and restrictions
contained in any such refinancing agreement are no less favorable to the Holders
of the New Subordinated Debentures than the encumbrances and restrictions
contained in the agreements being refinanced; (4) any such encumbrance or
-
restriction consisting of customary nonassignment provisions in leases governing
leasehold interests to the extent such provisions restrict the transfer of the
lease; (5) restrictions contained in security agreements securing Debt of a
-
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements and (6) any such encumbrance or restriction
-
relating to a Non-Recourse Subsidiary.
Limitation on Sales of Assets and Subsidiary Stock
The Company shall not, and shall not permit any Subsidiary to, make
any Asset Disposition unless (i) the Company or such Subsidiary receives
-
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Board of Directors (including a
determination as to the value of all non-cash consideration), of the shares and
assets subject to such Asset Disposition, and at least 90% of the consideration
therefor received by the Company or such Subsidiary is in the form of cash or
cash equivalents and (ii) an amount equal to 100% of the Net Available Cash from
--
such Asset Disposition is applied by the Company (or such Subsidiary, as the
case may be) either (A) to the extent the Company elects (or is required by the
-
terms of any Senior Debt), to redeem, prepay, repay or purchase Senior Debt or
Debt of a Wholly Owned Subsidiary to the extent the asset disposed of was
previously held by such Wholly Owned Subsidiary (in each case other than Debt
owed to the Company or an Affiliate of the Company) within 60 days from the
later of the date of such Asset Disposition or the receipt of such Net Available
Cash; or (B) to the extent of Net Available Cash not so applied in
-
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accordance with clause (A), to the acquisition by the Company or any Wholly
Owned Subsidiary of Tangible Property of a nature or type or that is used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the Tangible
Property of, or the business of, the Company and its Subsidiaries existing on
the date of such acquisition (as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution); and (C)
-
to the extent there is Net Available Cash after application in accordance with
clauses (A) and (B), to make an Offer (as defined below) to purchase New
Subordinated Debentures pursuant to and subject to the conditions of the
following paragraph and to effect any Offer accepted, in each case within one
year from the later of the receipt of such Net Available Cash and the date the
Offer described in the following paragraph is consummated; provided, however,
that in connection with any redemption, prepayment, repayment or purchase of
Debt pursuant to clause (A) above, the Company shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so redeemed, prepaid, repaid or purchased. Notwithstanding
the foregoing provisions of this paragraph, the Company and its Subsidiaries
shall only be required to apply any Net Available Cash in accordance with this
paragraph to the extent that the aggregate Net Available Cash from all Asset
Dispositions exceeds $25 million. Pending application of Net Available Cash
pursuant to this paragraph, such Net Available Cash shall be invested in
Permitted Investments.
To the extent that there is Net Available Cash remaining after (i) any
-
elected or required payment of Senior Debt or Debt of a Wholly Owned Subsidiary
as described in clause (ii)(A) of the previous paragraph and (ii) any
--
acquisition of Tangible Property as described in clause (ii)(B) of the previous
paragraph, the Company will be required to purchase New Subordinated Debentures
tendered pursuant to an offer by the Company for the New Subordinated Debentures
(the "Offer") at a purchase price, equal to not less than 100% of their
principal amount, plus accrued interest. The Company shall not be required to
make an Offer for New Subordinated Debentures pursuant to this paragraph if the
Net Available Cash available therefor (after application of the proceeds as
provided in clauses (ii)(A) and (B) of the previous paragraph) is less than $5.0
million for any particular Asset Disposition (which lesser amounts shall not be
carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of New Subordinated Debentures
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with this covenant, the Company shall comply with
the
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<PAGE>
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the New Indenture by virtue thereof.
Limitation on Transactions with Affiliates
The Company shall not, and shall not permit any Subsidiary to, conduct
any business or enter into any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company or any legal or
beneficial owner of five percent or more of any class of Capital Stock of the
Company or with any Affiliate of such owner (other than a Wholly Owned
Subsidiary of the Company or an employee stock ownership plan for the benefit of
the Company's or a Subsidiary's employees) unless (i) the terms of such
-
business, transaction or series of transactions are (a) set forth in writing and
-
(b) as favorable to the Company or such Subsidiary as terms that would be
-
obtainable at the time for a comparable transaction or series of related
transactions in arm's-length dealings with an unrelated third Person and (ii)
--
the Board of Directors has, by resolution, determined in good faith that such
business or transaction or series of related transactions meets the criteria set
forth in (i) above. This paragraph, however, will not prohibit any dividend or
distribution permitted under the covenant described under "Limitation on
Restricted Payments" above.
Securities and Exchange Commission Reports
The Company shall file with the Trustee and provide the Holders of the
New Subordinated Debentures, within 15 days after it files them with the
Commission, copies of its annual report and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall continue to file with the Commission so long as any New Subordinated
Debentures remain outstanding and provide the Trustee and Holders of the New
Subordinated Debentures with such annual reports and such information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which are specified in
Sections 13 and 15(d) of the Exchange Act.
The holders of the Senior Debt are entitled to the benefit of
covenants and other provisions similar to those contained in the New Indenture,
including, without limitation, those relating to Change of Control, defeasance
and optional redemptions, that in many cases are substantially similar to or
more restrictive than the covenants and other provisions described herein. The
holders
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of the Senior Debt are also entitled to the benefits of the subordination
provisions of the New Indenture.
Consolidation, Merger and Sale of Assets
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") is a
Person organized and existing under the laws of the United States of America,
any state thereof or the District of Columbia and the Successor Company (if not
the Company) expressly assumes by an indenture supplemental to the New
Indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the New Subordinated
Debentures and the New Indenture; (ii) immediately after giving effect to such
transaction (and treating any Debt which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been
incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default has occurred and is continuing; (iii) immediately after
giving effect to such transaction, the Consolidated EBITDA Coverage Ratio of the
Successor Company is at least 1:1; provided, however, that, if the Consolidated
EBITDA Coverage Ratio of the Company before giving effect to such transaction is
within the range set forth in column (A) below, then the Consolidated EBITDA
Coverage Ratio of the Successor Company, as the case may be, shall be at least
equal to the lesser of (1) the ratio determined by multiplying the percentage
set forth in column (B) below by the Consolidated EBITDA Coverage Ratio prior to
such transaction and (2) the ratio set forth in column C below:
<TABLE>
<CAPTION>
(A) (B) (C)
--- --- ---
<S> <C> <C>
1.11:1 to 1.99:1...................... 90% 1.50:1
2.00:1 to 2.99:1...................... 80% 2.10:1
3.00:1 to 3.99:1...................... 70% 2.40:1
4.00:1 or more........................ 60% 2.50:1
</TABLE>
(iv) immediately after giving effect to such transaction, the Successor Company
has Consolidated Net Worth in an amount which is not less than the Consolidated
Net Worth of the Company prior to such transaction; and (v) the Company delivers
to the Trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the New Indenture.
The Successor Company will be the successor to the Company and will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the New Indenture, but the predecessor Company in the case of
a conveyance, transfer or lease will not be released from the obligation to pay
the principal of and interest on the New Subordinated Debentures.
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<PAGE>
Defaults
An Event of Default is defined in the New Indenture as (i) a default
-
in the payment of interest on any New Subordinated Debentures when due and
payable, continued for 30 days, (ii) a default in the payment of the principal
--
of any New Subordinated Debentures when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration or otherwise, (iii) the
---
failure by the Company to comply with its obligations under "Consolidation,
Merger and Sale of Assets" above, (iv) the failure by the Company to comply for
--
30 days after notice with any of its covenants or agreements in the New
Subordinated Debentures or the New Indenture (other than those described in
clause (i), (ii) or (iii) of this paragraph), (v) Debt of the Company or any
-
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Debt unpaid or accelerated exceeds $5.0 million or its foreign
currency equivalent and such failure continues for 10 days after notice (the
"cross acceleration provision"), (vi) certain events of bankruptcy, insolvency
--
or reorganization of the Company or a Subsidiary (the "bankruptcy provisions"),
or (vii) any judgment or decree for the payment of money in excess of $5.0
---
million is rendered against the Company and is not discharged and either (A) an
-
enforcement proceeding has been commenced by any creditor upon such judgment or
decree or (B) there is a period of 60 days following such judgment or decree
-
during which such judgment or decree is not discharged, waived or the execution
thereof stayed and, in the case of (B), such default continues for 10 days after
notice (the "judgment default provision"). However, a default under clause
(iv), (v) or (vii)(B) above will not constitute an Event of Default until the
Trustee or the Holders of 25% in principal amount of the outstanding New
Subordinated Debentures notify the Company of the default and the Company does
not cure such default within the time specified after receipt of such notice.
Subject to the subordination provisions in the New Indenture, if an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the outstanding New Subordinated Debentures may
declare the principal of and accrued but unpaid interest on all the New
Subordinated Debentures to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of and interest on all
the New Subordinated Debentures will automatically become due and payable,
without presentment, demand or other requirements of any kind. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
New Subordinated Debentures may rescind any such acceleration with respect to
the New Subordinated Debentures and its consequences.
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<PAGE>
No Holder of New Subordinated Debentures may pursue any remedy with
respect to the New Indenture or the New Subordinated Debentures unless (i) such
-
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in principal amount of the outstanding
--
New Subordinated Debentures have requested the Trustee to pursue the remedy,
(iii) such Holders have offered the Trustee reasonable security or indemnity
- ----
against any loss, liability or expense, (iv) the Trustee has not complied with
--
such request within 60 days after the receipt thereof and the offer of security
or indemnity and (v) the Holders of a majority in principal amount of the
-
outstanding New Subordinated Debentures have not given the Trustee a direction
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount of the outstanding
New Subordinated Debentures are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the New Indenture
or that the Trustee determines is unduly prejudicial to the rights of any other
Holder of New Subordinated Debentures or that would involve the Trustee in
personal liability.
The New Indenture provides that if a Default or Event of Default
occurs and is continuing and is known to the Trustee, the Trustee must mail to
each Holder of the New Subordinated Debentures notice of the Default or Event of
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of, premium (if any) or interest on any New Subordinated
Debentures, the Trustee may withhold notice if and so long as a committee of its
trust officers determines that withholding notice is in the interest of the
Holders of the New Subordinated Debentures. In addition, the Company is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, an officers' certificate indicating whether the signers thereof know of
any Default or Event of Default that occurred during the previous year. The
Company also is required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an officers' certificate of
any event which would constitute certain Defaults, their status and what action
the Company is taking or proposes to take in respect thereof.
Amendment, Supplement, Waiver
Subject to certain exceptions, the New Indenture may be amended or
supplemented with the consent of the Holders of a majority in principal amount
of the New Subordinated Debentures then outstanding, and any past default or
compliance with any provisions may be waived with the consent of the Holders of
a majority in principal amount of the New Subordinated Debentures then
outstanding. However, without the consent of each Holder of outstanding New
Subordinated Debentures, no amendment may, among
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other things, (i) reduce the amount of New Subordinated Debentures whose Holders
-
must consent to an amendment, supplement or waiver, (ii) reduce the rate of or
--
extend the time for payment of interest on any New Subordinated Debentures,
(iii) reduce the principal of or extend the fixed maturity of any New
---
Subordinated Debentures, (iv) change the time at which or circumstances under
--
which any New Subordinated Debentures may or shall be redeemed or repurchased,
(v) make any New Subordinated Debentures payable in money other than that stated
-
in the New Subordinated Debentures, (vi) impair the right of any Holder of the
--
New Subordinated Debentures to receive payment of principal of and interest on
such Holder's New Subordinated Debentures on or after the due dates therefor or
to institute suit for the enforcement of any payment on or with respect to such
Holder's New Subordinated Debentures, (vii) make any change in the amendment
---
provisions which require each Holder's consent or in the waiver provisions, or
(viii) waive any Default in the payment of principal of or interest on any New
- -----
Subordinated Debentures.
Without the consent of any Holder of New Subordinated Debentures, the
Company and the Trustee may amend or supplement the New Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of the Company under the New Indenture,
to provide for uncertificated New Subordinated Debentures in addition to or in
place of certificated New Subordinated Debentures or to make any change that
does not adversely affect the rights of any Holder of the New Subordinated
Debentures.
The consent of the Holders of the New Subordinated Debentures is not
necessary under the New Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
After an amendment under the New Indenture becomes effective, the
Company is required to mail to Holders of the New Subordinated Debentures a
notice briefly describing such amendment. However, the failure to give such
notice to all Holders of the New Subordinated Debentures, or any defect therein,
will not impair or affect the validity of the amendment.
Transfer
The New Subordinated Debentures will be issued in registered form, and
will be transferable only upon the surrender of the New Subordinated Debentures
being transferred for registration of transfer. The Company may require payment
of a sum sufficient to cover any tax, assessment or other governmental charge
payable in connection with certain transfers and exchanges.
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Defeasance
Subject to certain covenants in documents governing certain of the
Company's Senior Debt which prohibit certain restricted payments, including
defeasance of the New Subordinated Debentures, the Company may terminate all its
obligations under the New Subordinated Debentures and the New Indenture ("legal
defeasance") except for certain obligations, including those respecting the
defeasance trust and obligation to register the transfer or exchange of the New
Subordinated Debentures, to replace mutilated, destroyed, lost or stolen New
Subordinated Debentures and to maintain a registrar and paying agent in respect
of the New Subordinated Debentures. The Company at any time may terminate (a)
-
its obligations under the covenants described under "Certain Covenants," "Change
of Control" and "Use of Proceeds," and the covenants relating to payment of
taxes and other claims, the corporate existence of the Company's Subsidiaries,
and certain obligations regarding books of record and account, notices and
providing information to the Trustee, in each case, as described in the New
Indenture; (b) the operation of the following default provisions described above
-
under "Defaults": the provision contained in clause (iv) concerning failure to
comply with covenants (with respect to those covenants being defeased), the
cross-acceleration provision contained in clause (v), certain of the bankruptcy
provisions contained in clause (vi) (with respect to any Subsidiary) and the
judgment default provision contained in clause (viii); and (c) the limitations
-
contained in clauses (iii) and (iv) described above under "Consolidation, Merger
and Sale of Assets" ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the New Subordinated Debentures may not
be accelerated because of an Event of Default. If the Company exercises its
covenant defeasance option, payment of the New Subordinated Debentures may not
be accelerated because of an Event of Default which is being defeased, as
described in the preceding paragraph, or because of the failure of the Company
to comply with clause (iii) or (iv) under "Consolidation, Merger and Sale of
Assets" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money or
U.S. Government Obligations for the payment of principal, and interest on the
New Subordinated Debentures to the date of redemption or maturity, as the case
may be, and must comply with certain other conditions, including delivering to
the Trustee an opinion of counsel to the effect that holders of the New
Subordinated Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance and will be
subject to federal income tax on the same
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<PAGE>
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such opinion of counsel must be based on a ruling of the
Internal Revenue Service or a change in applicable federal income tax law).
Concerning the Trustee
United States Trust Company of New York is to be the Trustee under the
New Indenture and will be appointed by the Company as Registrar and Paying Agent
with regard to the New Subordinated Debentures.
Governing Law
The New Indenture provides that it and the New Subordinated Debentures
will be governed by, and construed in accordance with, the laws of the State of
New York without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
Certain Definitions
Certain definitions contained in the New Indenture are listed below.
Affiliate: The term "Affiliate" means with respect to any Person (i)
-
any other Person (or group of Persons acting in concert in respect of such
specified Person) which, directly or indirectly, is in control of, is controlled
by or is under common control with such specified Person or (ii) any other
--
Person who is a director, executive officer or general partner (A) of such
-
specified Person, (B) of any Subsidiary of such specified Person or (C) of any
- -
Person described in clause (i) above. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided, however, that a Person shall not be
deemed to be an Affiliate of another Person solely as a result of a warehouse
management contract entered into between such Persons in the ordinary course of
business.
Asset Disposition: The term "Asset Disposition" means any sale,
lease, transfer or other disposition (or series of related sales, leases,
transfers or dispositions) of shares of Capital Stock of a Subsidiary (other
than directors' qualifying shares), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Subsidiaries, other than (i) a disposition by a Subsidiary to the Company or
-
by the Company or a Subsidiary to a Wholly Owned
151
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Subsidiary, (ii) a disposition of property or assets at fair market value in the
--
ordinary course of business, (iii) a disposition of obsolete or worn out assets
---
in the ordinary course of business, (iv) a disposition subject to and made in
--
accordance with the redemption provisions described above, (v) a disposition
-
subject to the covenant described under "Certain Covenants--Limitation on
Restricted Payments" above or (vi) a sale-and-leaseback transaction pursuant to
--
which either (x) the lease in such sale-and-leaseback transaction is for a
-
period, including renewal rights, of not in excess of three years or (y) the
Company could incur Attributable Debt under "Certain Covenants--Limitation on
Debt" above.
Attributable Debt: The term "Attributable Debt" in respect of a sale-
and-leaseback transaction means, as at the time of determination, the present
value (discounted at the interest rate borne by the Series B Bonds compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement (including any period
for which such lease has been extended).
Average Life: The term "Average Life" means, as of the date of
determination, with respect to any Debt or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the numbers of years from
-
the date of determination to the dates of each successive scheduled principal
payment of such Debt or redemption payment on such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
--
Capital Lease Obligation: The term "Capital Lease Obligation" of a
Person means any obligation which is required to be classified and accounted for
as a capital lease on the face of a balance sheet of such Person prepared in
accordance with generally accepted accounting principles; the amount of such
obligation shall be the capitalized amount thereof, determined in accordance
with generally accepted accounting principles; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
Capital Stock: The term "Capital Stock" means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock, including
any Preferred Stock.
Consolidated EBITDA Coverage Ratio: The term "Consolidated EBITDA
Coverage Ratio" as determined on any date means the ratio of (i) the aggregate
-
amount of Consolidated Net Income plus (to the extent deducted in calculating
Consolidated Net Income) Consolidated Interest Expense, income taxes,
depreciation expense, amortization expense, non-cash write-offs of deferred
financing costs and non-cash deductions for contributions to the ESOP (but
without giving any effect to any extraordinary gain or loss) for
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the Reference Period to (ii) the aggregate amount of Consolidated Interest
--
Expense for the Reference Period.
Consolidated Interest Expense: The term "Consolidated Interest
Expense" means, for any period, the total interest expense of the Company and
its consolidated Subsidiaries, including (i) interest expense attributable to
-
capital leases, (ii) amortization of debt discount and debt issuance cost, (iii)
---
capitalized interest, (iv) non-cash interest payments, (v) commissions,
-- -
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs under Interest Rate Protection
--
Agreements (including amortization of fees), (vii) Preferred Stock dividends in
---
respect of all Preferred Stock held by Persons other than the Company or a
Wholly Owned Subsidiary, (viii) interest incurred in connection with investments
----
in discontinued operations and (ix) interest actually paid by the Company or any
--
of its consolidated Subsidiaries under any guarantee of Debt or any other
obligation of any other Person.
Consolidated Net Income: The term "Consolidated Net Income" means,
for any period, the net income of the Company and its consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income of any Person if such Person is not a Subsidiary,
except that (A) the Company's equity in the net income of any such Person
-
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
-
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Subsidiary, directly or indirectly, to the
Company, except that (A) the Company's equity in the net income of any such
-
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Subsidiary during such period to the Company or another Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
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<PAGE>
distribution to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary
-
for such period shall be included in determining such Consolidated Net
Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its
consolidated Subsidiaries (including pursuant to any sale and leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale or
other disposition of any Capital Stock of any Person; or
(v) the cumulative non-cash effect of a change in accounting
principles, including (A) the cumulative or one-time non-cash charges
-
associated with the implementation of SFAS 106 by the Company with respect
to services rendered by employees in periods prior to its implementation,
but excluding any effects of such implementation with respect to services
rendered in periods following such implementation, and (B) any cumulative
-
or one-time non-cash charges associated with the implementation of SFAS
109.
Consolidated Net Tangible Assets: The term "Consolidated Net Tangible
Assets" means the total assets shown on the balance sheet of the Company and its
consolidated Subsidiaries, determined on a consolidated basis using generally
accepted accounting principles, as of any date selected by the Company not more
than 90 days prior to the taking of any action for the purpose of which the
determination is being made, less (i) all current liabilities and minority
-
interests and (ii) goodwill and other intangibles.
--
Consolidated Net Worth: The term "Consolidated Net Worth" of any Person
means the total amounts shown on the balance sheet of such Person and its
consolidated Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles, as of the end of the most recent
fiscal quarter of such Person ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
-
or stated value of all outstanding Capital Stock of such Person plus (ii) paid-
--
in capital or capital surplus relating to such Capital Stock plus (iii) any
---
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
- -
amounts attributable to Redeemable Stock and (C) any amounts attributable to
-
Exchangeable Stock, and excluding amounts attributable to cumulative or onetime
non-cash charges associated with the implementation of SFAS 106 and 109.
Debt: The term "Debt" of any Person means, without duplication,
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(i) the principal of and premium (if any) in respect of (A)
-
indebtedness of such Person for money borrowed and (B) indebtedness
-
evidenced by the New Subordinated Debentures, or the First Mortgage Bonds,
notes, debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
business day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock or
Exchangeable Stock;
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; provided, however, that to the extent such Person
is responsible or liable only for the obligation of another Person to pay
interest on Debt, then a designated percentage of such interest or the
amount of the underlying Debt, as the case may be, shall be deemed Debt of
the referent Person and the amount of such deemed Debt of the referent
Person shall be equal to the lesser of (A) the aggregate principal amount
-
of the underlying Debt or (B) the aggregate amount of interest due or
-
payable over the term of such Debt (or the term of the New Subordinated
Debentures, if shorter) determined based upon the rate of interest in
effect as of the date of such determination, together with the maximum
prepayment premium or penalty which could become due or payable with
respect to such Debt if such Debt was prepaid prior to the maturity of the
New Subordinated Debentures;
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(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) all obligations of such Person consisting of modifications,
renewals, extensions, replacements and refundings of any obligations
described in any of clauses (i) through (vii).
Default: The term "Default" means any condition or event which constitutes
or which, after notice or lapse of time or both, would constitute an Event of
Default under the New Indenture.
ESOP: The term "ESOP" means the Company's Employee Stock Ownership Plan.
ESOP Preferred Stock: The term "ESOP Preferred Stock" means shares of
preferred stock of the Company held by the ESOP.
Exchangeable Stock: The term "Exchangeable Stock" means any Capital Stock
which is exchangeable or convertible into another security (other than Capital
Stock of the Company which is neither Exchangeable Stock nor Redeemable Stock).
Holder: The term "Holder" means the Person in whose name New Subordinated
Debentures is registered on the Registrar's books.
Interest Rate Protection Agreement: The term "Interest Rate Protection
Agreement" means any interest rate swap agreement, interest rate cap agreement
or other financial agreement or arrangement designed to protect the Company or
any Subsidiary against fluctuations in interest rates.
Investment: The term "Investment" in any Person means any loan or advance
to, any acquisition of Capital Stock, equity interest, obligation or other
security of, or capital contribution or other investment in, such Person.
issue: The term "issue" means issue, assume, guarantee, incur or otherwise
become liable for; provided, however, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
Lien: The term "Lien" means any mortgage, pledge, security interest,
conditional sale or other title retention agreement, constructive trust or other
similar lien.
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Net Available Cash: The term "Net Available Cash" from an Asset
Disposition means cash payments received (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of Debt
or other obligations relating to such properties or assets or received in any
other non-cash form) therefrom, in each case net of all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all federal, state, provincial, foreign and local taxes required to be accrued
as a liability under generally accepted accounting principles, as a consequence
of such Asset Disposition, and in each case net of all payments made on any Debt
which is secured by any assets subject to such Asset Disposition, in accordance
with the terms of any Lien upon or other security agreement of any kind with
respect to such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law be repaid out
of the proceeds from such Asset Disposition, and net of all distributions and
other payments required to be made and actually made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition.
Net Cash Proceeds: The term "Net Cash Proceeds," with respect to any
issuance or sale of Capital Stock, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
Non-Convertible Capital Stock: The term "Non-Convertible Capital Stock"
means, with respect to any corporation, any non-convertible Capital Stock of
such corporation and any Capital Stock of such corporation convertible solely
into non-convertible common stock of such corporation; provided, however, that
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.
Non-Recourse Debt: The term "Non-Recourse Debt" means Debt or that portion
of Debt of a Subsidiary as to which (i) neither the Company nor any Subsidiary
-
(other than a Non-Recourse Subsidiary) (A) provides credit support or (B) is
- -
directly or indirectly liable and (ii) no default with respect to such Debt
--
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company or any other Subsidiary to
declare a default on such other Debt or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity.
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Non-Recourse Subsidiary: The term "Non-Recourse Subsidiary" means a
Subsidiary organized or acquired after the date of the New Indenture which has
no Debt other than Non-Recourse Debt and which has been designated as a Non-
Recourse Subsidiary by the Board of Directors of the Company, as provided below.
The Board of Directors of the Company may designate any Subsidiary organized or
acquired after the date of the New Indenture as a Non-Recourse Subsidiary;
provided, however, that, notwithstanding the foregoing, no Subsidiary as of the
date of the New Indenture shall be reclassified as a Non-Recourse Subsidiary or
become a Subsidiary of a Non-Recourse Subsidiary. The Trustee shall be given
prompt notice by the Company of each resolution adopted by the Board of
Directors under this provision, together with a certified copy of each such
resolution adopted and an officers' certificate certifying that such designation
complies with the foregoing conditions.
Parent: The term "Parent" means any Person of which the Company is a
Subsidiary at the relevant time.
Permitted Holders: The term "Permitted Holders" means Kelso and its
Affiliates, the Co-Investors and the Management Shareholders. The terms Kelso,
Co-Investors and Management Shareholders have the respective meanings specified
in the Stockholders' Agreement, as in effect on the date of the New Indenture.
Permitted Investments: The term "Permitted Investments" shall mean (i)
-
U.S. Government Obligations maturing within 90 days of the date of acquisition
thereof, (ii) investments in certificates of deposit maturing within 90 days of
--
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States or any state thereof having
capital, surplus and undivided profits aggregating in excess of $500,000,000 or
issued in an amount not to exceed $1.0 million at any time by United States
National Bank of Oregon (or, if United States National Bank of Oregon ceases to
be the bank with which the Company has its principal banking relationship, the
bank with which the Company then has its principal banking relationship), (iii)
---
investments in commercial paper given the highest rating (i.e., A-1/P-1 or
- -
better) by two established national credit rating agencies and maturing not more
than 90 days from the date of acquisition thereof and (iv) solely with respect
--
to investments by the Trustee, in the absence of any direction by the Company or
during the continuance of a Default or an Event of Default, shares in any money
market fund registered under the Investment Company Act of 1940, as amended, the
portfolio of which is limited to U.S. Government Obligations and U.S. agency
obligations.
Person: The term "Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company,
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trust, unincorporated organization or government or any agency or political
subdivision thereof.
Preferred Stock: The term "Preferred Stock," as applied to the Capital
Stock of any corporation, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.
Redeemable Stock: The term "Redeemable Stock" means any Capital Stock that
by its terms or otherwise is required to be redeemed on or prior to the first
anniversary of the Stated Maturity of the New Subordinated Debentures or is
redeemable at the option of the holder thereof at any time on or prior to the
first anniversary of the Stated Maturity of the New Subordinated Debentures.
Reference Period: The term "Reference Period," with respect to any
computation of the Consolidated EBITDA Coverage Ratio, means the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
determination of the Consolidated EBITDA Coverage Ratio.
Senior Debt: The term "Senior Debt" means Debt unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is provided that such obligations are pari passu or junior or subordinate in
right of payment to the New Subordinated Debentures; provided, however, that
Senior Debt shall not be deemed to include (1) any obligation of the Company to
-
any Subsidiary, (2) any liability for federal, state, local or other taxes owed
-
or owing by the Company, (3) any accounts payable or other liability to trade
-
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (4) any indebtedness,
-
guarantee or obligation of the Company which is subordinate or junior in any
respect to any other indebtedness, guarantee or obligation of the Company
(including, without limitation, the New Subordinated Debentures), (5) the
-
portion of any Debt issued in violation of the covenant concerning "Limitation
on Debt" or "Limitation on Senior Subordinated Debt" or (6) any obligations of
-
the Company or any Subsidiary with respect to the redemption, repayment or other
repurchase of any Redeemable Stock or Exchangeable Stock.
Senior Subordinated Debt: The term "Senior Subordinated Debt" means the
New Subordinated Debentures and any other Debt of the Company of the type
described in the definition of Superior Debt, which by its terms or the terms
of the instrument creating or evidencing the same or pursuant to which the same
is outstanding contains for the benefit of the holders of Superior Debt
provisions no less favorable to such holders than the subordination provisions
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of the New Indenture and ranks pari passu with the New Subordinated Debentures.
Stated Maturity: The term "Stated Maturity" means, with respect to any
security, the date specified in such security as the fixed date on which the
final payment of principal of such security is due and payable, including
pursuant to any mandatory redemption or prepayment provision.
Stockholders' Agreement: The term "Stockholders' Agreement" means the
Stockholders' Agreement, dated as of December 24, 1986, as amended or restated,
among the Company and the parties listed on the signature pages thereof.
Subordinated Obligation: The term "Subordinated Obligation" means any Debt
of the Company (whether outstanding on the date hereof or hereafter incurred)
which is subordinate or junior in right of payment to the New Subordinated
Debentures.
Subsidiary: The term "Subsidiary" means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) the Company, (ii) the
- --
Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
---
Tangible Property: The term "Tangible Property" means all land, buildings,
machinery and equipment and leasehold interests and improvements which would be
reflected on a consolidated balance sheet of the Company and its consolidated
Subsidiaries, prepared in accordance with generally accepted accounting
principles, excluding (i) all such tangible property located outside the United
-
States of America, (ii) all rights, contracts and other intangible assets of any
--
nature whatsoever and (iii) all inventories and other current assets.
---
U.S. Government Obligations: The term "U.S. Government Obligations" means
direct obligations (or certificates representing an ownership interest in such
obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America is pledged and which are not callable at the
issuer's option.
Voting Stock: The term "Voting Stock" of a corporation means all classes
of Capital Stock of such corporation then outstanding and normally entitled to
vote in the election of directors.
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Wholly Owned Subsidiary: The term "Wholly Owned Subsidiary" means a
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly Owned Subsidiary.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following discussion summarizes certain anticipated federal income tax
consequences of the Restructuring to the holders of the Old Subordinated
Debentures and to the Company. The Company believes that the Restructuring will
result in no direct tax consequences to anyone other than the holders of Old
Subordinated Debentures and the Company. This is a general discussion and does
not address all aspects of federal income taxation that may be relevant to a
holder in light of the holder's particular circumstances, or to certain types of
holders subject to special treatment under federal income tax laws (such as
insurance companies, tax-exempt organizations, financial institutions, brokers,
dealers, and taxpayers that are neither citizens nor residents of the United
States, or that are foreign corporations, foreign partnerships or foreign
estates or trusts as to the United States).
In addition, the discussion does not consider the effect of any foreign,
state, local, or other tax laws, or any United States tax consequences (e.g.,
estate or gift tax) other than income tax consequences, that may be applicable
to particular holders. Further, this summary assumes that holders hold the Old
Subordinated Debentures and will hold the New Subordinated Debentures as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based on the Code and applicable regulations issued thereunder
(the "Treasury Regulations"), rulings, administrative pronouncements and
decisions as of the date hereof, all of which are subject to change or differing
interpretations at any time with possible retroactive effect.
The following discussion of certain federal income tax considerations is
for general information only and does not constitute tax advice. No ruling has
been requested from the Internal Revenue Service (the "IRS") on any aspect of
the Restructuring, and the IRS may disagree with some conclusions set forth
below. Accordingly, each holder is urged to consult the holder's tax advisor
with respect to the tax consequences to such holder, including the tax
consequences of the exchange and the ownership and disposition of New
Subordinated Debentures under state, foreign and other tax laws.
Tax Consequences to Exchanging Holders
Accrued Interest
The Company intends to pay in cash all interest on the Old Subordinated
Debentures that accrues through the day preceding the
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Effective Date. This payment should not constitute "Boot" (defined under "--The
Exchange," below). The IRS may contend, however, that the cash payment and the
New Subordinated Debentures must be pro rated between the accrued interest and
the Old Subordinated Debentures. In such case, Boot would result to the extent
cash is given in exchange for Old Subordinated Debentures.
Regardless of whether the accrued interest is paid with cash or a
combination of cash and New Subordinated Debentures, such payment will be
taxable as ordinary income to the extent not previously included in income.
Similarly, any portion of the cash payment or New Subordinated Debentures given
in consideration for a holder's accrued, but unreported, OID (defined under "--
Original Issue Discount," below) will be taxable as ordinary income.
It is unlikely that a portion of the cash payment will be reallocated
to the Old Subordinated Debentures. Accordingly, the following discussion
assumes that the allocation of the cash payment to the accrued interest will be
respected.
The Exchange
Classification of the Debentures. The tax consequences to a holder
exchanging Old Subordinated Debentures for New Subordinated Debentures will
depend in large part on whether the Debentures are classified as "securities"
for federal income tax purposes. Whether a debt instrument constitutes a
security for federal income tax purposes depends on the terms, conditions and
the facts and circumstances relating to such instrument. Prominent factors that
the courts have relied upon in making this determination include: (i) the term
to maturity of the debt; (ii) the collateral securing the debt; (iii) the degree
of subordination of the debt; (iv) the ratio of debt to equity of the issuer;
(v) the riskiness of the issuer's business; and (vi) the negotiability of the
instrument.
Generally, debt with terms to maturity of ten years or more, constitutes
securities. Nevertheless, the IRS contends that while the term to maturity is
an important factor, the determination of whether a debt instrument is a
security is based upon an evaluation of the overall nature of the debt,
including the degree of participation and continuing interest in the business of
the debtor represented by the debt.
The Old Subordinated Debentures and the New Subordinated Debentures both
have terms to maturity of ten years or more. Based on this factor and others,
the Old Subordinated Debentures and the New Subordinated Debentures most likely
will be considered to be securities for federal income tax purposes.
Nevertheless, due to the inherently factual nature of this determination, the
IRS or a court could determine that the Old Subordinated Debentures or the New
Subordinated Debentures do not constitute securities. In such
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case, a holder would recognize gain or loss equal to the difference between the
"Issue Price" (defined under "--Original Issue Discount--Computation," below) of
the New Subordinated Debenture and the holder's tax basis in the Old
Subordinated Debentures surrendered in the Exchange.
The following discussion assumes that both the Old Subordinated Debentures
and the New Subordinated Debentures will be treated as "securities" for federal
income tax purposes.
No Loss Recognition. A holder will recognize no loss on the Exchange.
Possible Gain Recognition. A holder will realize gain on the Exchange to
the extent that the aggregate fair market value of the New Subordinated
Debentures exceeds the holder's tax basis in the Old Subordinated Debentures. A
holder must recognize such gain only to the extent of the value of any property
other than stock or securities ("Boot") received in the Exchange.
As securities, the New Subordinated Debentures would constitute Boot only
to the extent of the fair market value of the excess of the "principal amount"
of the New Subordinated Debentures over the "principal amount" of the Old
Subordinated Debentures for which they are exchanged (the "Excess Principal
Amount"). Although there is no explicit authority in the Code, "principal
amount" should be interpreted to mean Issue Price or "adjusted issue price" (as
defined in "--Original Issue Discount--Computation," below) to conform to the
concepts discussed below under "--Original Issue Discount," and provided in the
Treasury Regulations. Accordingly, the following discussion is based on such
interpretation.
A holder must recognize gain realized on the Exchange to the extent of the
Boot received. Boot exists to the extent that the Issue Price of the New
Subordinated Debentures exceeds the "adjusted issue price" of the Old
Subordinated Debentures. Gain recognized on the distribution of Boot will be
treated as ordinary income to the extent of "accrued market discount" on the Old
Subordinated Debentures (see "--Market Discount," below) and the remainder will
be treated as capital gain (see "--Tax Basis and Holding Period," below).
Tax Basis and Holding Period. An exchanging holder will have an
aggregate tax basis in the New Subordinated Debentures received and not treated
as Boot equal to the basis in the Old Subordinated Debentures exchanged,
increased by the amount of any gain recognized on the Exchange, and reduced by
the fair market value of the Excess Principal Amount received that is treated as
Boot. However, the tax basis in the New Subordinated Debentures treated as Boot
will be equal to their fair market value. Generally, the holding period in the
New Subordinated Debentures
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that are not treated as Boot will include the holding period of the Old
Subordinated Debentures (assuming they were held as capital assets). However,
the holding period for the portion, if any, of the New Subordinated Debentures
that are treated as Boot will start on the day immediately following the
Exchange Date. Holders of Old Subordinated Debentures with differing bases or
holding periods should consult a tax advisor before selling any of the New
Subordinated Debentures received in the Exchange.
Original Issue Discount. The New Subordinated Debentures may be issued
with original issue discount ("OID") within the meaning of Section 1273(a) of
the Code. A holder must accrue OID into income over the life of the New
Subordinated Debentures. See "--OID Accrual," below.
Computation. The amount of OID with respect to the New Subordinated
Debentures will equal the excess of their "Redemption Price" over their "Issue
Price." The Redemption Price will equal the sum of the face amount and interest
payments other than payments of "qualified stated interest." "Qualified stated
interest" includes interest that is payable at least annually at a single fixed
rate. All of the interest payments on the New Subordinated Debentures should
constitute "qualified stated interest." Accordingly, the Redemption Price
should equal the face amount of the New Subordinated Debentures.
The Issue Price of the New Subordinated Debentures depends largely on
whether either the Old Subordinated Debentures were or the New Subordinated
Debentures will be "traded on an established securities market." Property is
"traded on an established securities market" if, among other things, at any time
during the 60-day period ending 30 days after the "issue date" (as defined in
the Treasury Regulations) of the New Subordinated Debentures, it appears on a
"Quotation Medium" or "price quotations are readily available from dealers,
brokers or traders."
A "Quotation Medium" is a system of general circulation (including a
computer listing disseminated to subscribing brokers, dealers, or traders) that
provides a reasonable basis to determine fair market value by disseminating
either recent price quotations of one or more brokers, dealers, or traders of
actual prices of recent sales transactions. A directory or listing of brokers,
dealers, or traders for specific securities, such as yellow sheets, that
provides neither price quotations nor actual prices of recent sales transactions
is not a Quotation Medium.
The Company believes that the Old Subordinated Debentures currently appear
and the New Subordinated Debentures probably will appear on a Quotation Medium.
The Company also believes that "price quotations are readily available from
dealers, brokers, or traders" with respect to the
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Old Subordinated Debentures and will be with respect to the New Subordinated
Debentures. Under the "safe harbor" provisions of Section 1.1273-2(f)(5) of the
Treasury Regulations, price quotations are not considered readily available if,
among other things, no other outstanding debt instrument of the issuer (or of
any person who guarantees the debt instrument) is "exchange listed," "traded on
a board of trade," or appears on a Quotation Medium (as defined in Sections
1.1273-2(f)(2), (3) and (4), respectively, of the Treasury Regulations). The
Company believes that the First Mortgage Bonds and the Old Subordinated
Debentures probably appear on a Quotation Medium currently. Accordingly, the
New Subordinated Debentures probably will not qualify for this safe harbor.
If neither the Old Subordinated Debentures nor the New Subordinated
Debentures are "traded on an established securities market," the Issue Price of
the New Subordinated Debentures should equal the stated principal amount, which
generally is the face amount, because the New Subordinated Debentures provide
for "adequate stated interest" within the meaning of section 1.1272-2 of the
Treasury Regulations. In such case, there would be no OID since the Redemption
Price would equal the Issue Price.
If, as the Company believes, the New Subordinated Debentures are "traded on
an established securities market," the Issue Price will be based on the fair
market value of the New Subordinated Debentures on the issue date (as defined in
the Treasury Regulations). If the New Subordinated Debentures are not "traded
on an established securities market," but the Old Subordinated Debentures are so
traded, the Issue Price of the New Subordinated Debentures will be based on the
fair market value of the Old Subordinated Debentures on the issue date. If the
relevant fair market value is less than the face amount of New Subordinated
Debentures, the Issue Price of the New Subordinated Debentures will equal such
fair market value and OID will result to the extent that the Redemption Price
exceeds such Issue Price.
The Company believes that the New Subordinated Debentures will be "traded
on an established securities market." Accordingly, the following discussion
assumes that the Issue Price of the New Subordinated Debentures will equal their
fair market value on the "issue date."
OID Accrual. All holders will be required to report the OID as ordinary
income on a constant yield to maturity basis over the life of the New
Subordinated Debentures, without regard to the timing or amounts of payments
received. OID will accrue daily on the New Subordinated Debentures on a
constant yield basis over their term. Each holder generally must include in
income for each taxable year the daily portion of OID that accrues during such
year while the holder holds the New Subordinated Debentures (including the
issuance date and excluding the disposition date). The daily
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portion is determined by allocating to each day of an accrual period (generally,
each six month period or, in the case of the initial period, the shorter period
from the issue date) a pro rated portion of the amount determined by multiplying
(i) the "adjusted issue price" of the New Subordinated Debentures at the
beginning of the accrual period by (ii) 50% of their yield to maturity
(determined on the basis of semi-annual compounding). The "adjusted issue
price" of the New Subordinated Debentures at the beginning of an accrual period
will equal their Issue Price, increased by the aggregate amount of OID that has
accrued on the New Subordinated Debentures in all prior accrual periods, and
decreased by all payments (other than payments of "qualified stated interest")
made during all prior accrual periods.
Effect on Tax Basis. A holder's tax basis in the New Subordinated
Debentures will be increased by the OID includible in taxable income under the
foregoing rules and will be reduced by any amounts (other than payments of
"qualified stated interest") paid to the holder with respect to the New
Subordinated Debentures.
Reporting. The Company will report to each holder and to the IRS for
each calendar year the amount of OID attributable to the New Subordinated
Debentures while held by such holder at any time during such year. A holder
whose tax basis in the New Subordinated Debentures exceeds their Issue Price
should reduce such reported amount in the manner described above under "--OID
Reduction."
Receipt of Stated Interest. A holder must include amounts payable as
"qualified stated interest" under the New Subordinated Debentures in gross
income in accordance with the holder's method of accounting. All of the stated
interest under the New Subordinated Debentures should constitute "qualified
stated interest."
Market Discount
Generally, a holder currently has market discount in the Old Subordinated
Debentures if (i) the Old Subordinated Debentures were acquired by the holder
after original issue, (ii) the face amount or the "revised issue price" of the
Old Subordinated Debentures exceeded the holder's basis in such Debentures
immediately after the acquisition, and (iii) such excess did not qualify for a
de minimis exception. For purposes of the following discussion, there is no
material distinction between the "revised issue price" and the "adjusted issue
price."
The portion of the market discount that accrued while the holder owned the
Old Subordinated Debentures (determined on a straight-line basis or, at the
holder's election, on a constant yield to maturity basis) and has not otherwise
been included in income (the "accrued market discount") will be taxable as
ordinary
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income to the holder at the time of the Exchange but only to the extent of gain
(if any) recognized on the Exchange.
Generally, market discount on the Old Subordinated Debentures will be
converted into OID on the New Subordinated Debentures if the Issue Price of the
New Subordinated Debentures is less than the "revised issue price" of the Old
Subordinated Debentures. As OID, the holder must accrue such amount into
income currently (See -Original Issue Discount-OID Accrual, above). Market
discount that is neither recognized as ordinary income nor converted to OID
continues as market discount with respect to the New Subordinated Debentures.
The market discount rules may also affect the resale of the New
Subordinated Debentures. If a person purchases a New Subordinated Debenture at
a market discount and thereafter recognizes gain upon its disposition, such gain
will be taxable as ordinary interest income to the extent of the market discount
that accrued during the period the purchaser held such Debenture. Market
discount income is recognized on a gift of a New Subordinated Debenture as well
as upon a sale.
Amortizable Bond Premium. Generally, "Bond Premium" would result to the
extent that the holder's tax basis in the New Subordinated Debentures exceeds
the Redemption Price of the New Subordinated Debentures. Generally, the
holder's tax basis would exceed the Redemption Price of the New Subordinated
Debentures if (i) the Issue Price of the New Subordinated Debentures exceeds the
Redemption Price or (ii) the holder acquired the Old Subordinated Debentures for
an amount that (after adjustment for the accrual of any OID, Bond Premium and
acquisition premium (as defined in "--Amortizable Acquisition Premium" below))
exceeds the Redemption Price of the New Subordinated Debentures.
Bond Premium arising in these circumstances may be deductible by holders as
"amortizable bond premium" on a constant yield to maturity basis over the period
from the holder's acquisition date to the maturity date of the New Subordinated
Debentures. The deduction will be treated as a reduction of interest income.
The deduction is available only if holder makes a timely election under section
171 of the Code. The election, if made, would apply to all debt instruments
held or subsequently acquired by the electing holder and could not be revoked
without permission from the IRS.
Amortizable Acquisition Premium. Generally, "Acquisition Premium" will
result if the holder's tax basis in the New Subordinated Debentures is less than
the Redemption Price, but more than the Issue Price of the New Subordinated
Debentures. The Acquisition Premium is the amount by which the holder's tax
basis exceeds the Issue Price of the New Subordinated Debentures. Generally,
the holder's tax basis would exceed the Issue Price if (i) the holder acquired
the Old Subordinated Debentures at original
168
<PAGE>
issue and the "adjusted issue price" of the Old Subordinated Debentures exceeds
the Issue Price of the New Subordinated Debentures or (ii) the holder acquired
the Old Subordinated Debentures after original issue for an amount that (after
adjustment for the accrual of OID, Bond Premium and Acquisition Premium, if any)
exceeds the Issue Price of the New Subordinated Debentures.
Acquisition Premium arising in these circumstances is applied to reduce the
amount of OID otherwise includible in the income of the holder. The holder may
reduce the amount of OID under a fixed fractional formula or may elect under the
Treasury Regulations to compute the net OID accrual under a constant yield
method.
Backup Withholding
Under the backup withholding rules, interest otherwise payable to a holder
of New Subordinated Debentures and the proceeds from any disposition of such
property may be subject to backup withholding at the rate of 31% unless the
holder (i) is a corporation or comes within certain other exempt categories and,
demonstrates that fact when required, or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules.
Tax Consequences To The Company
The Company will be treated as if it satisfied Old Subordinated Debentures
with New Subordinated Debentures. The Company will realize cancellation of debt
("COD") income to the extent that the Issue Price of the New Subordinated
Debentures is less than the "adjusted issue price" of the Old Subordinated
Debentures.
Generally, COD income is excluded from gross income if it occurs in a
Chapter 11 reorganization. To the extent of such COD income, however, the
taxpayer must first reduce certain tax attributes such as net operating losses
and certain tax credits and then reduce the tax bases of its assets. The
reduction in tax bases, however, is limited to the amount by which the aggregate
tax bases of the taxpayer's assets exceeds the taxpayer's aggregate liabilities
immediately after the issuance of the New Subordinated Debentures. These
adjustments are designed to cause to the taxpayer to recapture the excluded COD
income when such assets are sold or income is realized in the future. To the
extent that the COD income exceeds the taxpayer's asset bases and tax attributes
available for reduction, such excess COD income will be permanently excluded
from gross income.
COD income realized from the issuance of the New Subordinated Debentures
under the Plan should be excluded from the Company's
169
<PAGE>
income. The Company expects that immediately after the issuance it will have
certain tax credits available for reduction. Its aggregate liabilities,
however, are expected to exceed the aggregate tax bases of its assets.
Accordingly, any COD income realized on the issuance of the New Subordinated
Debentures will reduce such tax credits. There should be no reduction, however,
in the basis of the Company's assets. Any COD income remaining after the
reduction of tax credits should be permanently excluded from income.
If the Issue Price of the New Subordinated Debentures equals the "adjusted
issue price" of the Old Subordinated Debentures, no COD income should result.
If the Issue Price of the New Subordinated Debentures exceeds the "adjusted
issue price" of the Old Subordinated Debentures, the Company should receive an
immediate deduction for such amount as "bond retirement premium." See "--
Original Issue Discount--Computation."
Under the New Investment Agreement, the Company will pay the holder of
the Series A Bonds the Agreement Modification Fee. The Company must capitalize
this fee. However, it may deduct the fee ratably over the remaining term of the
Series A Bonds under the amortization provisions of the Code.
170
<PAGE>
FINANCIAL ADVISORS
In the fall of 1994, the Company retained Morgan Stanley as the financial
advisor (the "Financial Advisor") for advice and assistance with respect to the
evaluation of available alternatives related to refinancing or other
restructuring of the Company's high levels of debt and debt repayment
obligations, and implementation of its long term business strategies, and
otherwise to advise and assist the Company with respect to the Restructuring.
See "The Restructuring--Background and Restructuring Discussions" above.
The Company has entered into an agreement with the Financial Advisor
pursuant to which it will compensate the Financial Advisor for services in
connection with the Restructuring, and will reimburse the Financial Advisor for
its out-of-pocket expenses (including fees and expenses of its legal counsel).
The fee for such services provided by the Financial Advisor, not including
expense reimbursements, will be $2.1 million.
The Financial Advisor has provided and may provide, from time to time,
certain financial advisory services to Kelso.
The Company has also retained Price Waterhouse LLP ("Price Waterhouse") to
provide consulting services relating to the Restructuring. The Company has
agreed to pay Price Waterhouse a consulting fee for its services based on hourly
billing rates negotiated between the Company and Price Waterhouse, and to
reimburse Price Waterhouse for its out-of-pocket expenses.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). Reports and other information filed
by the Company may be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such materials may be obtained by mail, upon payment of the
Commission's prescribed rates, by writing to the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Company
delivers a copy of its Annual Report on Form 10-K to certain of its equity
security holders and provides and will continue to provide to the holders of its
outstanding debt securities annual reports and other information, documents and
reports specified in Sections 13 and 15 of the Exchange Act and filed with the
Commission pursuant to the terms of the relevant indenture.
Statements made in this Disclosure Statement as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract,
171
<PAGE>
agreement or other document that has been attached hereto as an Appendix,
reference is made to the appropriate Appendix for a more complete description,
and each such statement shall be deemed qualified in its entirety by such
reference. Any contract, agreement or other document that has been referred to
or described herein but not otherwise attached as an Appendix may be reviewed at
the principal offices of the Company at 7007 S.W. Cardinal Lane, Suite 135,
Portland, Oregon 97224.
172
<PAGE>
APPENDIX A
AMERICOLD CORPORATION HAS NOT COMMENCED A BANKRUPTCY CASE
AS OF THE DATE OF THE DISCLOSURE STATEMENT TO WHICH
THIS PLAN OF REORGANIZATION IS ANNEXED
UNITED STATES BANKRUPTCY COURT
DISTRICT OF OREGON
- --------------------------
In re ) Chapter 11
) Case No. 395-__________-11
AMERICOLD CORPORATION, )
)
Debtor. )
- --------------------------
PLAN OF REORGANIZATION
OF
AMERICOLD CORPORATION
________________, 1995
Tonkon, Torp, Galen, Marmaduke & Booth
Counsel to Debtor
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, Oregon 97204-2099
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. DEFINITIONS............................................ 1
ARTICLE 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.. 10
ARTICLE 3. CLASSIFICATION......................................... 11
ARTICLE 4. TREATMENT OF UNIMPAIRED CLASSES........................ 12
ARTICLE 5. TREATMENT OF IMPAIRED CLASSES.......................... 16
ARTICLE 6. NO BAR DATE; DISPUTED CLAIMS; OBJECTIONS TO CLAIMS..... 17
ARTICLE 7. IMPLEMENTATION OF THE PLAN............................. 18
ARTICLE 8. EXECUTORY CONTRACTS AND UNEXPIRED LEASES............... 25
ARTICLE 9. CONDITIONS PRECEDENT................................... 26
ARTICLE 10. MODIFICATION, REVOCATION OR WITHDRAWAL OF THE PLAN..... 28
ARTICLE 11. RETENTION OF JURISDICTION.............................. 29
ARTICLE 12. MISCELLANEOUS PROVISIONS............................... 32
EXHIBITS
--------
1. FORM OF NEW SUBORDINATED DEBENTURE INDENTURE
2. FORM OF NEW INVESTMENT AGREEMENT
3. COMMITMENT LETTER DATED APRIL 3, 1995 FROM UNITED
STATES NATIONAL BANK OF OREGON
THE EXHIBITS TO THE PLAN ARE NOT ATTACHED TO THIS APPENDIX TO THE
DISCLOSURE STATEMENT. EXHIBITS 1 AND 2 ARE AVAILABLE UPON WRITTEN REQUEST
TO TONKON, TORP, GALEN, MARMADUKE & BOOTH, 1600 PIONEER TOWER, 888 S.W.
FIFTH AVENUE, PORTLAND, OREGON 97204-2099,
ATTENTION: ALBERT N. KENNEDY. EXHIBIT 3 IS ATTACHED TO THE
DISCLOSURE STATEMENT AS APPENDIX C.
i
<PAGE>
Americold Corporation, as debtor and debtor-in-possession, proposes this Plan of
Reorganization pursuant to Section 1121(a) of Title 11 of the United States
Code:
ARTICLE 1.
DEFINITIONS
Rules of Interpretation. As used herein, the following terms have the
-----------------------
respective meanings specified below, and such meanings shall be equally
applicable to both the singular and plural, and masculine and feminine, forms of
the terms defined. The words "herein," "hereof," "hereto," "hereunder" and
others of similar import, refer to the Plan as a whole and not to any particular
section, subsection or clause contained in the Plan. Captions and headings to
articles, sections and exhibits are inserted for convenience of reference only
and are not intended to be part of or to affect the interpretation of the Plan.
The rules of construction set forth in section 102 of the Bankruptcy Code shall
apply. In computing any period of time prescribed or allowed by the Plan, the
provisions of Bankruptcy Rule 9006(a) shall apply. Any capitalized term used
herein that is not defined herein but is defined in the Bankruptcy Code shall
have the meaning ascribed to such term in the Bankruptcy Code. In addition to
such other terms as are defined in other sections of the Plan, the following
terms (which appear in the Plan as capitalized terms) have the following
meanings as used in the Plan.
1.1 "Administrative Expense Claim" means any Claim entitled to the
priority afforded by sections 503(b) and 507(a)(1) of the Bankruptcy Code.
<PAGE>
1.2 "Allowed" means, with respect to any Claim, proof of which has been
properly Filed or, if no proof of claim was so Filed, which was or hereafter is
listed on the Schedules as liquidated in amount and not disputed or contingent,
and, in either case, a Claim as to which no objection to the allowance thereof,
or motion to estimate for purposes of allowance, shall have been Filed on or
before any applicable period of limitation that may be fixed by the Bankruptcy
Code, the Bankruptcy Rules and/or the Bankruptcy Court, or as to which any
objection, or any motion to estimate for purposes of allowance, shall have been
so Filed, to the extent allowed by a Final Order; provided that all Class 7
Claims (excluding any Rejection Claims arising pursuant to Article 8 of the
Plan) shall be treated for all purposes as if the Chapter 11 Case was not filed,
and the determination of whether any such Claim shall be allowed and/or the
amount thereof shall be determined, resolved or adjudicated, as the case may be,
in the manner in which such Claim would have been determined, resolved or
adjudicated if the Chapter 11 Case had not been commenced.
1.3 "Ballot Agent" means Tonkon, Torp, Galen, Marmaduke & Booth.
1.4 "Ballot Record Date" means March 31, 1995.
1.5 "Ballot Return Date" means 3:00 p.m., Portland, Oregon time, on May 8,
1995, unless and to the extent such date is extended by the Debtor in accordance
with the provisions of the Disclosure Statement.
2
<PAGE>
1.6 "Ballots" means the ballots and/or master ballots distributed to the
holders of Old Subordinated Debentures and the Institutional Investor for the
purposes of voting on the Plan.
1.7 "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, set forth in sections 101 et seq. of title 11 of the United
States Code.
1.8 "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Oregon, or such other court that exercises jurisdiction over the
Chapter 11 Case or any proceeding therein, including the United States District
Court for the District of Oregon to the extent that the reference of the Chapter
11 Case or any proceeding therein is withdrawn.
1.9 "Bankruptcy Rules" means, collectively, the Federal Rules of
Bankruptcy Procedure, as amended and promulgated under section 2075, title 28 of
the United States Code, and the local rules and standing orders of the
Bankruptcy Court.
1.10 "Bank" means United States National Bank of Oregon.
1.11 "Bank's Secured Claim" means the Secured Claim of the Bank which, for
purposes of the Plan, shall be deemed to be Allowed in an amount equal to the
excess of (a) the sum of (i) all of the Obligations (as such term is defined in
the Credit Agreement) as of the Petition Date and as described in the Cash
Collateral Order, (ii) an amount equal to 100% of the interest that accrued
pursuant to the Credit Agreement at the contract rate from and including the
Petition Date through and including the Effective Date, (iii) all payments
required under all Letters of Credit outstanding (as such term is defined in the
Credit
3
<PAGE>
Agreement) from and including the Petition Date through and including the
Effective Date and (iv) to the extent provided by the Credit Documents (as such
term is defined in the Credit Agreement), an amount equal to 100% of any and all
costs and expenses, including, without limitation, attorneys' fees which remain
unpaid as of the Effective Date over (b) the sum of all payments made in cash by
the Debtor to the Bank pursuant to Sections 361, 363 and/or 364 of the
Bankruptcy Code prior to the Effective Date on account of the obligations
described in subparagraph (a) herein.
1.12 "Business Day" means a day other than a Saturday, Sunday or other day
on which banks in Portland, Oregon are authorized or required by law to be
closed.
1.13 "Cash Collateral Order" means an order of the Bankruptcy Court
authorizing the Debtor to use, subject to the terms and provisions thereof, the
cash proceeds of the Debtor's pre-Petition Date accounts receivable and
inventory.
1.14 "Chapter 11 Case" means the case under chapter 11 of the Bankruptcy
Code with respect to the Debtor, pending or to be pending in the District of
Oregon, administered as In re Americold Corporation, Case No. 395-_____________-
---------------------------
11.
1.15 "Claim" means (a) any right to payment from the Debtor arising before
the Effective Date, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or (b) any right to an
equitable remedy against the Debtor arising before the Effective Date for breach
4
<PAGE>
of performance if such breach gives rise to a right of payment from the Debtor,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
1.16 "Class" means one of the classes of Claims or Interests defined in
Article 3 hereof.
1.17 "Confirmation Date" means the date on which the Confirmation Order is
entered on the docket by the Clerk of the Bankruptcy Court.
1.18 "Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan in accordance with the provisions of chapter 11 of the
Bankruptcy Code.
1.19 "Creditors' Committee" means the official committee of unsecured
creditors appointed in the Chapter 11 Case by the United States Trustee pursuant
to Section 1102 of the Bankruptcy Code, as reconstituted by the addition or
removal of members from time to time.
1.20 "Debenture Holders Committee" means the official committee of holders
of the Old Subordinated Debentures appointed in the Chapter 11 case by the
United States Trustee pursuant to Section 1102 of the Bankruptcy Code, as
reconstituted by the addition or removal of members from time to time.
1.21 "Debtor" means Americold Corporation, as debtor and debtor-in-
possession in the Chapter 11 Case.
1.22 "Disclosure Statement" means the Debtor's Disclosure Statement, dated
April 14, 1995, as amended, modified, restated or supplemented from time to
time, pertaining to the Plan.
5
<PAGE>
1.23 "Distribution Record Date" means the date on which the Confirmation
Order is signed.
1.24 "Effective Date" means the Business Day on which all of the conditions
specified in Section 9.1 hereof are first satisfied and/or waived in accordance
with Article 9 of the Plan.
1.25 "Employee Claim" means a Claim based on salaries, wages, sales
commissions, expense reimbursements, accrued vacation pay, health-related
benefits, incentive programs, stock incentive programs, employee compensation
guarantees, severance or similar employee benefits.
1.26 "Filed" means filed with the Bankruptcy Court in the Chapter 11 Case.
1.27 "Final Order" means an order or judgment entered on the docket by the
Clerk of the Bankruptcy Court or any other court exercising jurisdiction over
the subject matter and the parties (a) that has not been reversed, stayed,
modified or amended, (b) as to which no appeal, certiorari proceeding,
reargument or other review or rehearing has been requested or is still pending
and (c) as to which the time for filing a notice of appeal or petition for
certiorari, or request for reargument or further review or rehearing shall have
expired.
1.28 "Financing Lease" means any lease pursuant to which the Debtor is the
lessee that is intended to grant a security interest in the leased property to
the lessor under such lease.
1.29 "First Mortgage Bonds" means the Debtor's 11.45% First Mortgage Bonds,
Series A, and 11 1/2% First Mortgage Bonds, Series B.
6
<PAGE>
1.30 "First Mortgage Bond Indenture" means the Amended and Restated
Indenture, dated as of March 9, 1993, as amended, modified, restated or
supplemented from time to time, between the Debtor and Shawmut Bank Connecticut,
National Association, as indenture trustee, relating to the First Mortgage
Bonds.
1.31 "Interest" means the rights of the owners of the issued and
outstanding shares of capital stock of Debtor, including preferred and common
stock, and options to acquire capital stock of Debtor.
1.32 "Institutional Investor" means Metropolitan Life Insurance Company.
1.33 "Lease Secured Claim" means any Claim of a lessor
under a Financing Lease.
1.34 "New Credit Agreement" means an agreement to be executed as of the
Effective Date between the Reorganized Debtor and the Bank pursuant to the
commitment letter dated April 3, 1995 from the Bank to the Debtor and attached
to the Plan as Exhibit 3.
1.35 "New Investment Agreement" means the Second Amended and Restated
Investment Agreement, dated as of the Effective Date, to be entered into by the
Reorganized Debtor and the Institutional Investor, substantially in the form of
Exhibit 2 attached to and incorporated in the Plan.
1.36 "New Subordinated Debentures" means the Debtor's 15% Senior
Subordinated Debentures due 2007, issuable pursuant to the New Subordinated
Debenture Indenture and described in the Disclosure Statement.
7
<PAGE>
1.37 "New Subordinated Debenture Indenture" means the Indenture, dated
as of the Effective Date, to be entered into by the Reorganized Debtor with
respect to the New Subordinated Debentures, substantially in the form of Exhibit
1 to the Plan.
1.38 "Old Credit Agreement" means the Credit Agreement, dated as of
February 3, 1993, as amended, modified, restated or supplemented from time to
time, between the Debtor and Bank.
1.39 "Old Investment Agreement" means the Amended and Restated Investment
Agreement, dated March 2, 1993, between Debtor and the Institutional Investor.
1.40 "Old Subordinated Debentures" means the Debtor's 11% Senior
Subordinated Debentures due 1997.
1.41 "Old Subordinated Debenture Claim" means a Claim of a holder of Old
Subordinated Debentures which, for purposes of the Plan, shall be deemed to be
an amount equal to the sum of (a) the face amount of Old Subordinated Debentures
held by such holder and (b) an amount equal to 100% of the accrued and unpaid
interest at the contract rate on such Old Subordinated Debentures, through but
not including the Effective Date.
1.42 "Old Subordinated Debenture Indenture" means the Indenture, dated as
of May 1, 1987, as amended, modified, restated or supplemented from time to
time, between the Debtor and United States Trust Company of New York, as
indenture trustee, relating to the Old Subordinated Debentures.
1.43 "Other Priority Claim" means any Claim for an amount entitled to
priority in right of payment under section 507(a)(3), (4), (5) or (6) of the
Bankruptcy Code.
8
<PAGE>
1.44 "Petition Date" means ______________, 1995, the date on which the
petition commencing the Chapter 11 Case was filed.
1.45 "Plan" means this plan of reorganization, as amended, modified,
restated or supplemented from time to time.
1.46 "Priority Tax Claim" means a Claim of a governmental unit of the kind
entitled to priority under section 507(a)(8) of the Bankruptcy Code.
1.47 "Reorganized Debtor" means the Debtor from and after the Effective
Date.
1.48 "Rejection Claim" means a Claim arising from the rejection of an
unexpired lease or executory contract pursuant to this Plan or Final Order of
the Bankruptcy Court.
1.49 "Restated Articles of Incorporation" means the restated articles of
incorporation of the Debtor, which shall modify and amend Debtor's Articles of
Incorporation to prohibit the issuance of non-voting equity securities to the
extent required by section 1123(a)(6) of the Bankruptcy Code.
1.50 "Schedules" means the schedules of assets and liabilities and the
statement of financial affairs Filed by the Debtor pursuant to section 521 of
the Bankruptcy Code, as amended, modified, restated or supplemented from time to
time.
1.51 "Secured Claim" means any Claim against the Debtor held by any Entity,
including, without limitation, an Affiliate or judgment creditor of the Debtor,
to the extent such Claim constitutes a secured Claim under sections 506(a) or
1111(b) of the Bankruptcy Code.
9
<PAGE>
1.52 "Series A Bonds" means the Debtor's 11.45% First Mortgage Bonds,
Series A, due 2002.
1.53 "Series A Bond Claim" means a Claim of a holder of Series A Bonds.
1.54 "Series B Bonds" means the Debtor's 11 1/2% First Mortgage Bonds,
Series B, due 2005.
1.55 "Series B Bond Claim" means a Claim of a holder of Series B Bonds.
1.56 "Trade Claim" means any Claim of any Entity against the Debtor for
goods provided and/or services in the ordinary course rendered by such Entity to
the Debtor.
ARTICLE 2.
ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
2.1 Administrative Expense Claims and Priority Tax Claims. Each holder of
------------------------------------------------------
an Allowed Administrative Expense Claim and each holder of an Allowed Priority
Tax Claim shall be paid in full in cash on the later of (a) the Effective Date
and (b) the date on which such Claim becomes Allowed, unless such holder shall
agree to a different treatment of such Claim (including, without limitation, any
different treatment that may be provided for in any documentation, statute or
regulation governing such Claim); provided, however, that Administrative Expense
Claims representing obligations incurred in the ordinary course of business by
the Debtor during the Chapter 11 Case shall be paid by the Debtor or the
Reorganized Debtor in the ordinary course of business and in accordance with any
terms and conditions of the particular transaction, and any agreements relating
thereto.
10
<PAGE>
Holders of Priority Tax Claims will not be required to file a Proof of Claim.
ARTICLE 3.
CLASSIFICATION
For purposes of the Plan, Claims and Interests are classified as provided
below. A Claim or Interest is classified in a particular Class only to the
extent that such Claim or Interest qualifies within the description of such
Class and is classified in a different Class to the extent that such Claim or
Interest qualifies within the description of such different Class.
3.1 Class 1. Other Priority Claims. Class 1 consists of all Allowed
-------------------------------
Other Priority Claims.
3.2 Class 2. Bank's Secured Claim. Class 2 consists of the Bank's
------------------------------
Secured Claim.
3.3 Class 3. Miscellaneous Secured Claims. Class 3 consists of all
--------------------------------------
Allowed Lease Secured Claims and all Allowed Secured Claims, other than the
Bank's Secured Claim. Each such Claim shall be deemed to be placed in a
separate subclass.
3.4 Class 4. Series B Bond Claims. Class 4 consists of the Allowed
------------------------------
Secured Claims of all holders of Series B Bonds.
3.5 Class 5. Series A Bond Claims. Class 5 consists of all Allowed
------------------------------
Secured Claims of the holders of Series A Bonds other than the Claim of the
Institutional Investor.
3.6 Class 6. Institutional Investor Claim. Class 6 consists of the
--------------------------------------
Allowed Secured Claim of the Institutional Investor.
11
<PAGE>
3.7 Class 7. General Unsecured Claims. Class 7 consists of all Allowed
----------------------------------
Claims (including, without limitation, Employee Claims and Trade Claims), other
than Claims that are otherwise classified hereby, Administrative Expense Claims
and Priority Tax Claims.
3.8 Class 8. Old Subordinated Debenture Claims. Class 8 consists of all
-------------------------------------------
Allowed Claims of holders of Old Subordinated Debentures.
3.9 Class 9. Preferred Stock Interests. Class 9 consists of the
-----------------------------------
Interests of the holders of Debtor's preferred stock.
3.10 Class 10. Interests. Class 10 consists of the Interests of the
--------------------
holders of Debtor's common stock, and holders of options to acquire common
stock.
ARTICLE 4.
TREATMENT OF UNIMPAIRED CLASSES
4.1 Class 1 (Other Priority Claims). Each holder of an Allowed Class 1
-------------------------------
Claim shall be paid in full in cash the amount of its Allowed Class 1 Claim on
the later of (a) the Effective Date and (b) the date on which such Claim becomes
Allowed, unless such holder shall agree to a different treatment of such Claim
(including, without limitation, any different treatment that may be provided for
in any documentation governing such Claim).
4.2 Class 2 (Bank's Secured Claim). The holder of the Bank's Secured
------------------------------
Claim shall receive one of the following alternative treatments, at the election
of the Debtor made on or prior to the Effective Date:
(a) Such Claim shall be paid in full in cash.
12
<PAGE>
(b) The legal, equitable, and contractual rights to which such Claim
entitles the holder thereof shall be unaltered by the Plan.
(c) Such Claim shall receive the treatment described in Section
1124(2) of the Bankruptcy Code.
4.3 Class 3 (Miscellaneous Secured Claims). With respect to each Allowed
--------------------------------------
Class 3 Claim, unless the holder thereof shall agree to a different treatment of
such Claim, such holder shall receive one of the following alternative
treatments, at the election of the Debtor made on or prior to the Effective
Date:
(a) The legal, equitable and contractual rights to which such Claim
entitles the holder thereof shall be unaltered by the Plan.
(b) Such Claim shall receive the treatment described in section
1124(2) of the Bankruptcy Code.
With respect to any Claim which receives the treatment described in
clause "a" or "b" above, the Debtor's failure to object to such Claim in the
Chapter 11 Case shall be without prejudice to the Debtor's right to contest or
otherwise defend against such Claim in an applicable nonbankruptcy forum when
and if such Claim is sought to be enforced by the holder thereof after the
Effective Date.
4.4 Class 4 (Series B Bond Claims). Each holder of an Allowed Class 4
------------------------------
Claim shall receive one of the following alternative treatments, at the election
of the Debtor made on or prior to the Effective Date:
13
<PAGE>
(a) The legal, equitable, and contractual rights to which such Claim
entitles the holder thereof shall be unaltered by the Plan.
(b) Such Claim shall receive the treatment described in Section
1124(2) of the Bankruptcy Code.
4.5 Class 5 (Series A Bond Claims). Each holder of an Allowed Class 5
------------------------------
Claim shall receive one of the following alternative treatments, at the election
of the Debtor made on or prior to the Effective Date:
(a) The legal, equitable, and contractual rights to which such Claim
entitles the holder thereof shall be unaltered by the Plan.
(b) Such Claim shall receive the treatment described in Section
1124(2) of the Bankruptcy Code.
4.6 Class 7 (General Unsecured Claims). With respect to each Allowed
----------------------------------
Class 7 Claim, unless the holder thereof shall agree to a different treatment,
such holder shall receive one of the following alternative treatments, at the
election of the Debtor made on or prior to the Effective Date:
(a) Such Claim shall be paid in full on the later of (i) the Effective
Date and (ii) the date on which such Claim becomes Allowed, unless such holder
shall agree to a different treatment of such Claim (including, without
limitation, any different treatment that may be provided for in any
documentation governing such Claim).
14
<PAGE>
(b) The legal, equitable and contractual rights to which such Claim
entitles the holder thereof shall be unaltered by the Plan.
(c) Such Claim shall receive the treatment described in section
1124(2) of the Bankruptcy Code.
With respect to any Claim which receives the treatment described in
clause "b" or "c" above, the Debtor's failure to object to such Claim in the
Chapter 11 Case shall be without prejudice to the Debtor's right to contest or
otherwise defend against such Claim in an applicable nonbankruptcy forum when
and if such Claim is sought to be enforced by the holder thereof after the
Effective Date.
4.7 Class 9 (Preferred Stock Interests). All holders of Class 9 Interests
-----------------------------------
shall retain their Interests in the Debtor and Reorganized Debtor without any
alteration of their legal, equitable, or contractual rights.
4.8 Class 10 (Interests). All holders of Class 10 Interests shall retain
--------------------
their Interests in the Debtor and Reorganized Debtor without any alteration of
their legal, equitable, or contractual rights.
4.9 Unimpaired Classes. By virtue of the foregoing provisions of this
------------------
Article 4, the Claims and Interests in Classes 1, 2, 3, 4, 5, 7, 9, and 10 are
not impaired by the Plan. Pursuant to Section 1126(f) of the Bankruptcy Code,
such Classes and each holder of a Claim or Interest in such Classes are
conclusively presumed to have accepted the Plan, and solicitation of acceptances
of holders in such Classes is not required.
15
<PAGE>
ARTICLE 5.
TREATMENT OF IMPAIRED CLASSES
5.1 Class 6 (Institutional Investor Claim). The Institutional
--------------------------------------
Investor is a holder of Series A Bonds and is a party to the Investment
Agreement. The Claim of the Institutional Investor as a holder of Series A
Bonds will receive the treatment set forth in Section 4.5 of this Plan relating
to Series A Bond Claims. As of the Effective Date,
(a) the Old Investment Agreement shall be cancelled and have no
further force or effect as provided in Section 7.6 of the Plan;
(b) the Reorganized Debtor shall execute and
deliver to the Institutional Investor the New Investment Agreement; and
(c) the New Investment Agreement shall be deemed effective and binding
as provided in Section 7.5 of the Plan.
5.2 Class 8 (Old Subordinated Debenture Claims). On the Effective
-------------------------------------------
Date, each holder of an Allowed Class 8 Claim shall receive the following:
(a) Cash in an amount equal to accrued but unpaid interest on such
holder's Old Subordinated Debentures up to but excluding the Effective Date; and
(b) New Subordinated Debentures in a principal amount equal to the
face amount of such holder's Old Subordinated Debentures.
5.3 Impaired Classes and Interests. By virtue of the foregoing
------------------------------
provisions of this Article 5, Classes 6 and 8 are impaired under the Plan.
Pursuant to section 1126(a) of the
16
<PAGE>
Bankruptcy Code, holders in Classes 6 and 8 are entitled to vote to accept or
reject the Plan.
ARTICLE 6.
NO BAR DATE; DISPUTED CLAIMS; OBJECTIONS TO CLAIMS
6.1 No Bar Date, Disputed Claims, Objections to Claims. Except as
--------------------------------------------------
set forth in Section 8.3 of this Plan relating to Rejection Claims, no bar date
pursuant to Bankruptcy Rule 3003(c)(3) shall be fixed as a deadline for the
filing of proofs of Claim against the Debtor. Only Claims that are Allowed
shall be entitled to distributions under the Plan. The Debtor reserves the right
to contest and object to any Claims, including, without limitation, those Claims
that are specifically referenced herein, are not listed in the Schedules, are
listed therein as disputed, contingent and/or unliquidated in amount, or are
listed therein at a lesser amount than asserted by the holder of such Claim.
Unless otherwise ordered by the Bankruptcy Court, all objections to Claims
(other than Administrative Expense Claims) shall be Filed and served upon
counsel to the Debtor, counsel to the Creditors' Committee, counsel to the
Debenture Holders Committee and the holder of the Claim objected to on or before
the later of (a) the Effective Date and (b) 60 days after the date (if any) on
which a proof of claim is Filed in respect of such Claim. The last day for
filing objections to Administrative Expense Claims shall be set pursuant to an
order of the Bankruptcy Court. All disputed Claims shall be resolved by the
Bankruptcy Court, except to the extent that (y) the Debtor may otherwise elect
consistent
17
<PAGE>
with the Plan and the Bankruptcy Code or (z) the Bankruptcy Court may otherwise
order.
ARTICLE 7.
IMPLEMENTATION OF THE PLAN
7.1 Restated Articles of Incorporation. The Reorganized Debtor shall
----------------------------------
be deemed to have adopted the Restated Articles of Incorporation on the
Effective Date and shall promptly thereafter cause the same to be filed with the
Secretary of State of the State of Oregon. After the Effective Date, the
Reorganized Debtor may amend the Restated Articles of Incorporation and may
amend its bylaws, in accordance with the Restated Articles of Incorporation,
such bylaws and applicable state law.
7.2 Issuance of New Subordinated Debentures. On the Effective Date,
---------------------------------------
the Reorganized Debtor shall, in accordance with the Plan, enter into the New
Subordinated Debenture Indenture and issue the New Subordinated Debentures
thereunder to the holders of the Allowed Subordinated Debenture Claims.
7.3 New Credit Agreement. On the Effective Date, the Reorganized
--------------------
Debtor shall, in accordance with the Plan, enter into the New Credit Agreement.
7.4 New Investment Agreement. On the Effective Date, the Reorganized
------------------------
Debtor shall, in accordance with the Plan, enter into the New Investment
Agreement.
7.5 Effectiveness of Securities, Instruments and Agreements. On the
-------------------------------------------------------
Effective Date, all securities, instruments and agreements entered into pursuant
to the Plan, including, without limitation, (a) the New Subordinated Debenture
Indenture,
18
<PAGE>
(b) the New Credit Agreement, (c) the New Investment Agreement and (d) any
security, instrument or agreement entered into in connection with any of the
foregoing shall become effective and binding in accordance with their respective
terms and conditions upon the parties thereto and shall be deemed to become
effective simultaneously.
7.6 Cancellation of Securities, Instruments and Agreements Relating
---------------------------------------------------------------
to Impaired Claims. On the Effective Date, except as otherwise provided herein,
- ------------------
the Old Investment Agreement, the Old Subordinated Debenture Indenture, and any
security, instrument or agreement entered into in connection with the foregoing
shall be deemed cancelled and terminated, and the obligations of the Debtor
relating to, arising under, in respect of or in connection with such agreement
shall be discharged.
7.7 Waiver of Subordination. The distributions under the Plan take
-----------------------
into account the relative priority of each Class in connection with any
contractual subordination provisions relating thereto. Accordingly, the
distributions under this Plan shall not be subject to levy, garnishment,
attachment or other legal process by any holder (a "Senior Creditor") of a Claim
purporting to be entitled to the benefits of such contractual subordination. On
the Effective Date, all Senior Creditors shall be deemed to have waived any and
all contractual subordination rights which they may have with respect to such
distribution, and shall be permanently enjoined from enforcing or attempting to
enforce any such rights with respect to the distributions under the Plan.
19
<PAGE>
7.8 Surrender of Securities. Each holder of Old Subordinated
-----------------------
Debentures shall surrender the same to the Debtor or the Reorganized Debtor, and
the Reorganized Debtor shall distribute or shall cause to be distributed to the
holders thereof the appropriate New Subordinated Debentures pursuant to this
Plan. No distribution of New Subordinated Debentures hereunder shall be made to
or on behalf of any such holder unless and until such Old Subordinated Debenture
is received by the Debtor or the Reorganized Debtor, or the unavailability of
such instrument is established to the satisfaction of the Debtor or the
Reorganized Debtor. Any such holder that fails to surrender or cause to be
surrendered such Old Subordinated Debenture, or to execute and deliver an
affidavit of loss and indemnity satisfactory to the Debtor or the Reorganized
Debtor, and, in the event that the Debtor or the Reorganized Debtor so requests
with respect to the Old Subordinated Debentures, fails to furnish a bond in form
and substance (including, without limitation, with respect to amount) reasonably
satisfactory to the Debtor or the Reorganized Debtor, within two years after the
Effective Date, shall be deemed to have forfeited all Claims against the Debtor
represented by such Old Subordinated Debenture and shall not participate in any
distribution hereunder in respect of such Old Subordinated Debenture and all
property in respect of such forfeited distribution, including (if applicable)
interest accrued thereon, shall revert to the Reorganized Debtor.
Notwithstanding the foregoing, all Claims shall be discharged and all Interests
shall be terminated by this Plan to the extent
20
<PAGE>
provided herein regardless of whether and when any surrender, indemnity or bond
required by this Section is provided, and regardless of whether the Reorganized
Debtor makes a distribution hereunder in the absence of compliance by any holder
of a Claim with the requirements of this Section. The Debtor or the Reorganized
Debtor may waive the requirements of this Section.
7.9 Registration of New Subordinated Debentures. The Reorganized
-------------------------------------------
Debtor will, at its expense, use its best efforts to file with the Securities
Exchange Commission (the "Commission") as soon as practicable after the
Effective Date a registration statement with respect to the New Subordinated
Debentures. If no such registration statement is filed within 60 days
immediately following the Effective Date, the Reorganized Debtor will file a
registration statement relating to the New Subordinated Debentures with the
Commission upon receipt of a written request for such registration from the
holders of 25% in principal amount of the New Subordinated Debentures. Such
written request must be received by the Reorganized Debtor on or before the
first anniversary of the Effective Date.
7.10 Setoffs. The Debtor may, but shall not be required to, set off
-------
against any Claim and the distributions to be made pursuant to the Plan in
respect of such Claim, any claims of any nature whatsoever which the Debtor may
have against the holder of such Claim, but neither the failure to do so nor the
allowance of any Claim hereunder shall constitute a waiver or release of any
such claim the Debtor may have against such holder.
21
<PAGE>
7.11 Distribution of Unclaimed Property. Any distribution of
----------------------------------
property under the Plan which is unclaimed after two years following the
Effective Date shall irrevocably revert to the Reorganized Debtor.
7.12 Saturday, Sunday or Legal Holiday. If any payment or act under
---------------------------------
the Plan is required to be made or performed on a date that is not a Business
Day, then the making of such payment or the performance of such act may be
completed on the next succeeding Business Day, but shall be deemed to have been
completed as of the required date.
7.13 Corporate Action. Upon entry of the Confirmation Order by the
----------------
Clerk of the Bankruptcy Court, all actions contemplated by the Plan shall be
authorized and approved in all respects (subject to the provisions of the Plan),
including, without limitation, the following: (a) the adoption and filing with
the Secretary of State of the State of Oregon of the Restated Articles of
Incorporation, (b) the execution, delivery and performance of the New Credit
Agreement, (c) the execution, delivery and performance of the New Subordinated
Debenture Indenture and the New Subordinated Debentures, (d) the execution,
delivery and performance of the New Investment Agreement, and (e) the execution,
delivery and performance of all documents and agreements relating to any of the
foregoing. On the Effective Date, the appropriate officers of the Reorganized
Debtor are authorized and directed to execute and deliver the agreements,
documents and instruments contemplated by the Plan and the
22
<PAGE>
Disclosure Statement in the name of and on behalf of the Reorganized Debtor.
7.14 Retiree Benefits. On and after the Effective Date, to the
----------------
extent required by section 1129(a)(13) of the Bankruptcy Code, the Reorganized
Debtor shall continue to pay all retiree benefits (if any), as that term is
defined in section 1114 of the Bankruptcy Code, maintained or established by the
Debtor prior to the Effective Date, without prejudice to the Reorganized
Debtor's rights under applicable non-bankruptcy law to modify, amend or
terminate the foregoing arrangements.
7.15 Timing of Distributions. Notwithstanding anything to the
-----------------------
contrary herein, (a) any distribution required by the Plan to be made on the
Effective Date in respect of a Claim shall be made as soon as practicable after
(but in any event within 15 days of) the later of (i) the Effective Date and
(ii) the date on which such Claim becomes Allowed and any other conditions to
distribution with respect to such Claim shall have been satisfied, and (b) any
distribution required by the Plan or any instrument issued pursuant to the Plan
to be made on a date subsequent to the Effective Date shall be made on the later
of (i) such date and (ii) as soon as practicable after (but in any event within
15 days of) the date on which the pertinent Claim becomes Allowed and any other
conditions to distribution with respect to such Claim shall have been satisfied.
7.16 Final Order. Any requirement in the Plan for a Final Order may
-----------
be waived by the Debtor, with the consent of the Institutional Investor and the
Debenture Holders Committee, or,
23
<PAGE>
in the event that no Debenture Holders Committee is appointed in this Chapter 11
case, the Creditors' Committee, upon written notice to the Bankruptcy Court;
provided, however, that nothing contained herein shall prejudice the right of
any party in interest to seek a stay pending appeal with respect to such Final
Order.
7.17 Ballot Record Date; Distribution Record Date. The Reorganized
--------------------------------------------
Debtor shall distribute, or cause to be distributed, all distributions of
property to be made pursuant to the Plan to the record holders of Allowed Old
Subordinated Debenture Claims as of the Ballot Record Date, unless, prior to the
Distribution Record Date, the holder of any such Claim furnishes (or causes its
transferee to furnish) the Debtor, or its agent, with sufficient evidence (in
the Debtor's or its agent's sole and absolute discretion) of the transfer of
such Claim, in which event the Reorganized Debtor shall distribute, or cause to
be distributed, all distributions of property to the holder of such Claim as of
the Distribution Record Date. As of the close of business on the Distribution
Record Date, the transfer ledgers with respect to the Old Subordinated
Debentures shall be closed and the Debtor, the Reorganized Debtor and the
indenture trustee with respect to the Old Subordinated Debenture Indenture shall
have no obligation to recognize any transfer of the Old Subordinated Debentures
occurring thereafter.
24
<PAGE>
ARTICLE 8.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1 Generally. Effective on and as of the Effective Date, all
---------
executory contracts and unexpired leases that exist between the Debtor and any
Entity are hereby specifically assumed, except for any executory contracts and
unexpired leases that have been specifically rejected by the Debtor with the
approval of the Bankruptcy Court on or before the Effective Date or in respect
of which a motion for rejection has been Filed on or before the Confirmation
Date.
8.2 Assumption. Entry of the Confirmation Order by the Clerk of the
----------
Bankruptcy Court shall constitute approval of all executory contracts and
unexpired leases to be assumed by the Debtor in accordance with Section 8.1
hereof pursuant to section 365(a) of the Bankruptcy Code.
8.3 Rejection. Rejection Claims must be Filed no later than 20 days
---------
after the entry of a Final Order authorizing such rejection. Any such Rejection
Claim not Filed within such time shall be forever barred from assertion against
the Debtor, the Reorganized Debtor and their property and estate. Each
Rejection Claim resulting from such rejection shall constitute a Class 3 Claim
if secured or a Class 7 Claim if unsecured.
8.4 Officers' and Directors' Indemnification Rights. Notwithstanding
-----------------------------------------------
any other provisions of the Plan, the obligations of the Debtor to indemnify its
or its Affiliates' (if any) directors, officers and employees as of the Petition
Date against any obligations, liabilities, costs or expenses pursuant to the
25
<PAGE>
articles of incorporation or bylaws of the Debtor, applicable state law or
specific agreement, or any combination of the foregoing, shall survive
confirmation of the Plan, remain unaffected thereby, and not be discharged,
regardless of whether indemnification is owed in connection with an event
occurring prior to, upon or subsequent to the commencement of the Chapter 11
Case.
8.5 Compensation and Benefit Programs. All employee compensation and
---------------------------------
benefit plans, policies and programs of the Debtor applicable generally to its
employees as in effect on the Effective Date, including, without limitation, all
savings plans, retirement plans, health care plans, disability plans, severance
benefit plans, incentive plans, stock incentive plans, and life, accidental
death and dismemberment insurance plans, shall continue in full force and
effect, without prejudice to the Reorganized Debtor's rights under applicable
non-bankruptcy law to modify, amend or terminate any of the foregoing
arrangements.
ARTICLE 9.
CONDITIONS PRECEDENT
9.1 Conditions to Effective Date. The Plan shall not become
----------------------------
effective unless each of the following conditions shall have been satisfied or
waived pursuant to Section 9.2 hereof:
(a) Each of the conditions set forth in subsections 9.1(b) through
9.1(f) shall have been satisfied on or before September 30, 1995.
(b) The Confirmation Order shall have become a Final Order.
26
<PAGE>
(c) The New Subordinated Debenture Indenture and all documents
contemplated by such document to be executed simultaneously therewith shall have
been executed by the respective parties thereto and all of the conditions
precedent to the effectiveness of such documents and agreements (other than that
the Plan be effective) shall have been satisfied in full or duly waived.
(d) The New Credit Agreement and all documents contemplated by the New
Credit Agreement to be executed simultaneously therewith shall have been
executed by the respective parties thereto, and all of the conditions precedent
to the effectiveness of such documents and agreements (other than that the Plan
be effective) shall have been satisfied in full or duly waived.
(e) The New Investment Agreement and all documents contemplated by the
New Investment Agreement to be executed simultaneously therewith shall have been
executed by the respective parties thereto, and all of the conditions precedent
to the effectiveness of such documents and agreements (other than that the Plan
be effective) shall have been satisfied in full or duly waived.
(f) All other actions required by Article 7 and Section 12.1 hereof to
occur on or before the Effective Date shall have occurred.
9.2 Waiver of Conditions. The Debtor, with the consent of the
--------------------
Institutional Investor and the Debenture Holders Committee, or, in the event
that no Debenture Holders Committee is appointed
27
<PAGE>
in this Chapter 11 Case, the Creditors' Committee, may waive any of the
conditions set forth in Section 9.1 hereof.
9.3 Notice to Bankruptcy Court. The Debtor shall notify the
--------------------------
Bankruptcy Court in writing promptly after the Effective Date that the Plan
shall have become effective.
ARTICLE 10.
MODIFICATION, REVOCATION OR WITHDRAWAL OF THE PLAN
10.1 Modification of Plan. The Debtor, with the consent of the
--------------------
Institutional Investor and the Debenture Holders Committee, or in the event that
no Debenture Holders Committee is appointed in this Chapter 11 Case, the
Creditors' Committee may alter, amend or modify the Plan pursuant to Section
1127 of the Bankruptcy Code and Bankruptcy Rule 3019 at any time prior to the
time that the Bankruptcy Court has signed the Confirmation Order. After such
time and prior to the substantial consummation of the Plan, the Debtor may, so
long as the treatment of holders of Claims and Interests under the Plan is not
adversely affected, institute proceedings in Bankruptcy Court to remedy any
defect or omission or to reconcile any inconsistencies in the Plan, the
Disclosure Statement or the Confirmation Order and any other matters as may be
necessary to carry out the purposes and effects of the Plan; provided, however
prior notice of such proceedings shall be served in accordance with Bankruptcy
Rule 2002.
10.2 Revocation or Withdrawal of Plan.
--------------------------------
(a) Right to Revoke. The Debtor reserves the right to revoke or
---------------
withdraw the Plan at any time prior to the Effective Date.
28
<PAGE>
(b) Effect of Withdrawal or Revocation. If the Debtor revokes or
----------------------------------
withdraws the Plan prior to the Effective Date, then the Plan shall be deemed
null and void. In such event, nothing contained herein shall be deemed to
constitute a waiver or release of any claims by or against the Debtor or any
other Entity or to prejudice in any manner the rights of the Debtor or any
Entity in any further proceedings involving the Debtor.
10.3 Nonconsensual Confirmation. The Debtor shall request that the
--------------------------
Bankruptcy Court confirm the Plan pursuant to section 1129(b) of the Bankruptcy
Code if the requirements of all provisions of section 1129(a) of the Bankruptcy
Code, except subsection 1129(a)(8), are met.
ARTICLE 11.
RETENTION OF JURISDICTION
11.1 Jurisdiction of Bankruptcy Court.
--------------------------------
(a) Following the Effective Date, the Bankruptcy Court will retain
exclusive jurisdiction of the Chapter 11 Case for the following purposes:
(i) To hear and determine any pending applications for the rejection
of executory contracts or unexpired leases, and the allowance of Claims
resulting therefrom.
(ii) To determine any adversary proceedings, applications, contested
matters and other litigated matters pending on the Effective Date.
(iii) To ensure that distributions to holders of Allowed Claims are
accomplished as provided herein.
29
<PAGE>
(iv) To hear and determine objections to or requests for estimation
of Claims, including any objections to the classification of any Claim, and
to allow, disallow and/or estimate any Claim, in whole or in part.
(v) To enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified or
vacated.
(vi) To issue any appropriate orders in aid of execution of the Plan
or to enforce the Confirmation Order and/or the discharge, or the effect of
such discharge, provided to the Debtor.
(vii) To hear and determine any applications to modify the Plan, to
cure any defect or omission or to reconcile any inconsistency in the Plan
or in any order of the Bankruptcy Court, including, without limitation, the
Confirmation Order.
(viii) To hear and determine all applications for compensation and
reimbursement of expenses of professionals or members of the Creditors'
Committee (and if applicable, the Debenture Holders Committee) under
sections 330, 331, 503(b) and/or 1103 of the Bankruptcy Code.
(ix) To hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan; provided,
however, that nothing herein shall be construed to vest in the Bankruptcy
Court jurisdiction to hear and determine disputes arising in connection
with the interpretation, implementation or
30
<PAGE>
enforcement of the instruments and securities being issued under the Plan.
(x) To hear and determine other issues presented or arising under the
Plan.
(xi) To hear and determine any other matters related hereto and not
inconsistent with Chapter 11 of the Bankruptcy Code.
(xii) To enter a final decree closing the Chapter 11 Case.
(b) Following the Effective Date, the Bankruptcy Court will retain
non-exclusive jurisdiction of the Chapter 11 Case for the following purposes:
(i) To recover all assets of the Debtor and property of the estate,
wherever located.
(ii) To hear and determine any motions or contested matters involving
taxes, tax refunds, tax attributes and tax benefits and similar or related
matters with respect to the Debtor or its estate arising prior to the
Effective Date or relating to the period of administration of the Chapter
11 Case, including, without limitation, matters concerning state, local and
federal taxes in accordance with sections 346, 505 and 1146 of the
Bankruptcy Code.
(iii) To hear any other matter not inconsistent with the Bankruptcy
Code.
11.2 Failure of Bankruptcy Court to Exercise Jurisdiction. If the
----------------------------------------------------
Bankruptcy Court abstains from exercising or declines to exercise jurisdiction
over any matter arising under, arising in
31
<PAGE>
or related to the Chapter 11 Case, including with respect to the matters set
forth above in Sections 11.01(a) and (b) hereof, this Article shall not prohibit
or limit the exercise of jurisdiction by any other court having competent
jurisdiction with respect to such subject matter.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1 Payment of Statutory Fees. All fees payable pursuant to section 1930
-------------------------
of title 28 of the United States Code, as determined by the Bankruptcy Court at
the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or
before the Effective Date.
12.2 Discharge of Debtor. Except as otherwise expressly provided herein,
-------------------
the confirmation of the Plan shall, provided that the Effective Date shall have
occurred, discharge all Claims, to the fullest extent authorized or provided for
by the Bankruptcy Code, including, without limitation, to the extent authorized
or provided for by sections 524 and 1141 thereof.
12.3 Injunction. Except as otherwise expressly provided herein, the entry
----------
of the Confirmation Order shall, provided that the Effective Date shall have
occurred, permanently enjoin all Entities that have held, currently hold or may
hold a Claim, or other debt or liability that is discharged pursuant to the Plan
from taking any of the following actions in respect of such discharged Claim,
debt or liability: (a) commencing, conducting or continuing in any manner,
directly or indirectly, any suit, action or other proceeding of any kind against
the Debtor, the
32
<PAGE>
Reorganized Debtor or their property; (b) enforcing, levying, attaching,
collecting or otherwise recovering in any manner or by any means, whether
directly or indirectly, any judgment, award, decree or order against the Debtor,
the Reorganized Debtor or their property; (c) creating, perfecting or enforcing
in any manner, directly or indirectly, any lien or encumbrance of any kind
against the Debtor, the Reorganized Debtor or their property; (d) asserting any
setoff, right of subrogation or recoupment of any kind, directly or indirectly,
against any debt, liability or obligation due to the Debtor, the Reorganized
Debtor or their property; and (e) proceeding in any manner in any place
whatsoever that does not conform to or comply with or is inconsistent with the
provisions of the Plan.
12.4 Revesting. Except as otherwise expressly provided herein, on the
---------
Effective Date, all property and assets of the estate of the Debtor shall revest
in the Reorganized Debtor, free and clear of all Claims, liens, encumbrances,
charges, and other interests of creditors arising on or before the Effective
Date, and the Reorganized Debtor may operate its business, from and after the
Effective Date, free of any restrictions imposed by the Bankruptcy Code or the
Bankruptcy Court.
12.5 Exculpation. Neither the Reorganized Debtor, the Bank, the
-----------
Institutional Investor, the Creditors' Committee, nor the Debenture Holders
Committee, nor any of their respective members, officers, directors,
shareholders, employees, agents, attorney's, accountants or other advisors,
shall have or incur any liability to any holder of a Claim or Interest for any
act or failure to
33
<PAGE>
act in connection with, or arising out of, the pursuit of confirmation of the
Plan, the consummation of the Plan or the administration of the Plan or the
property to be distributed under the Plan, except for any act or failure to act
that constitutes willful misconduct or recklessness as determined pursuant to a
Final Order; and in all respects, such Entities (a) shall be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan, and shall be fully protected from liability in acting or in
refraining from action in accordance with such advice and (b) shall be fully
protected from liability with respect to any act or failure to act that is
approved or ratified by the Bankruptcy Court.
12.6 Rights of Action. Any rights or causes of action (including, without
----------------
limitation, any and all avoidance actions) accruing to the Debtor shall remain
assets of the Reorganized Debtor. The Reorganized Debtor may pursue such rights
of action, as appropriate, in accordance with what is in its best interests and
for its benefit.
12.7 Creditors' Committee. The appointment of each official committee
--------------------
appointed in the Chapter 11 Case pursuant to Section 1102 of the Bankruptcy Code
shall terminate on the Effective Date.
12.8 Governing Law. Except to the extent the Bankruptcy Code, the
-------------
Bankruptcy Rules or other federal laws are applicable, the laws of the State of
Oregon shall govern the construction and implementation of the Plan and all
rights and obligations arising under the Plan.
34
<PAGE>
12.9 Withholding and Reporting Requirements. In connection with the
--------------------------------------
Plan and all instruments issued in connection therewith and distributions
thereon, the Debtor and the Reorganized Debtor shall comply with all
withholding, reporting, certification and information requirements imposed by
any federal, state, local or foreign taxing authority and all distributions
hereunder shall, to the extent applicable, be subject to any such withholding,
reporting, certification and information requirements. Entities entitled to
receive distributions hereunder shall, as a condition to receiving such
distributions, provide such information and take such steps as the Reorganized
Debtor may reasonably require to ensure compliance with such withholding and
reporting requirements, and to enable the Reorganized Debtor to obtain the
certifications and information as may be necessary or appropriate to satisfy the
provisions of any tax law.
12.10 Time. Unless otherwise specified herein, in computing any period of
----
time prescribed or allowed by the Plan, the day of the act or event from which
the designated period 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, in which
event the period runs until the end of the next succeeding day which is a
Business Day.
12.11 Section 1146 Exemption. Pursuant to Section 1146(c) of the
----------------------
Bankruptcy Code, the issuance, transfer or exchange of any security under the
Plan, or the execution, delivery or recording of an instrument of transfer
pursuant to, in implementation of or as contemplated by the Plan, or the
revesting, transfer or sale
35
<PAGE>
of any real property of the Debtor pursuant to, in implementation of or as
contemplated by the Plan shall not be taxed under any state or local law
imposing a stamp tax, transfer tax or similar tax or fee. Consistent with the
foregoing, each recorder of deeds or similar official for any county, city or
governmental unit in which any instrument hereunder is to be recorded shall,
pursuant to the Confirmation Order, be ordered and directed to accept such
instrument, without requiring the payment of any documentary stamp tax, deed
stamps, stamp tax, transfer tax, intangible tax or similar tax.
12.12 Severability. In the event that any provision of the Plan is
------------
determined to be unenforceable, such determination shall not limit or affect the
enforceability and operative effect of any other provisions of the Plan. To the
extent that any provision of the Plan would, by its inclusion in the Plan,
prevent or preclude the Bankruptcy Court from entering the Confirmation Order,
the Bankruptcy Court, on the request of the Debtor and with the consent of the
Institutional Investor, may modify or amend such provision, in whole or in part
as necessary to cure any defect or remove any impediment to the confirmation of
the Plan existing by reason of such provision; provided, however, that such
modification shall not be effected except in compliance with Section 10.1 of the
Plan.
12.13 Binding Effect. The provisions of the Plan shall bind all holders
--------------
of Claims and Interests, whether or not they have accepted the Plan.
36
<PAGE>
12.14 Plan Controls. In the event and to the extent that any provision of
-------------
the Plan is inconsistent with the provisions of the Disclosure Statement, or any
other instrument or agreement contemplated to be executed pursuant to the Plan,
the provisions of the Plan shall control and take precedence.
DATED this _________ day of ___________________, 1995.
Respectfully submitted,
AMERICOLD CORPORATION
By ___________________________
Title: _______________________
TONKON, TORP, GALEN,
MARMADUKE & BOOTH
By ________________________________
Albert N. Kennedy; OSB No. 82142
Of Attorneys for Debtor
37
<PAGE>
Appendix B
AMERICOLD CORPORATION
Chapter 7 Liquidation Analysis
Introduction
In conjunction with the development of the Plan and Disclosure Statement,
the Company's management developed the following Chapter 7 liquidation analysis
to assist holders of claims and interests in determining whether to accept or
reject the Plan. The liquidation analysis indicates the estimated values which
might be obtained by classes of claims and interests if the Company's assets
were sold pursuant to a Chapter 7 liquidation, as an alternative to continued
operation of the business and payments under the Plan. Based on the analysis,
management of the Company believes that a liquidation under Chapter 7 would
produce substantially less value for distribution to holders of claims than that
recoverable under the Plan.
Approach
The Chapter 7 liquidation period is assumed to average six months following
the appointment of a Chapter 7 trustee. While some assets may be liquidated in
less than six months, other assets may be more difficult to collect or sell,
requiring a liquidation period substantially longer than six months. This time
would allow for the collection of receivables, sale of assets and winding down
of daily operations.
Estimates were made of the cash proceeds which might be realized from the
liquidation of the Company's assets. For certain assets, such as real property,
estimates of liquidation values were made for each asset individually. For
other assets, such as machinery and equipment, liquidation values were assessed
for general classes of assets by estimating the percentage recoveries which the
Company might achieve through their disposition.
Underlying the liquidation analysis are a number of estimates and
assumptions that are inherently subject to significant economic, competitive and
operational uncertainties and contingencies beyond the control of the Company or
a trustee. Additionally, various liquidation decisions upon which certain
assumptions are based are subject to change. Therefore, there can be no
assurance that the assumptions and estimates employed in determining the
liquidation values of the Company's assets will result in an accurate estimate
of the proceeds which would be realized were the Company to undergo an actual
liquidation. The actual amounts of claims against the estate could vary
significantly from the Company's estimate, depending on the claims asserted
during the pendency of the case. This liquidation analysis does not include
liabilities that may arise as a result of lease or contract rejections,
litigation, certain
<PAGE>
new tax assessments or other potential claims. The analysis also does not
include potential recoveries from avoidance actions. No value was assigned to
additional proceeds which might result from the sale of certain items with
intangible value. Therefore, the actual liquidation value of the Company could
vary materially from the estimates provided herein.
The accompanying liquidation analysis was based on the estimated and
unaudited book values of the Company's assets on January 31, 1995. All assets
are shown net of any related reserves. Management of the Company does not
believe that more current historical information or projected information would
vary significantly. However, this analysis is subject to any changes due to the
Company's continued operations since this date. The book values used were
obtained from the Company's monthly internal financial statements and accounting
records. These values have not been subjected to any review, compilation or
audit by any independent accounting firm.
2
<PAGE>
Americold Corporation
Summary of Estimated Asset Values and Recoveries
Assuming a Chapter 7 Liquidation
As of January 31, 1995 (Unaudited)
($000)
<TABLE>
<CAPTION>
Estimated
Estimated Collateral/ Average
Debt(A) Liquidation Equity/ Recovery
Outstanding Value (Deficiency) Percentage
----------- ----- ------------ ----------
<S> <C> <C> <C> <C>
Secured Claims
First Mortgage Bonds $336,127 $286,337 $ (49,790) 85%
Capital Lease Debt 22,247 18,855 (3,969) (B) 82% (B)
Bank Term Debt 9,102 14,401 5,299 100%
Bank Letters of Credit 4,897 12,482 7,585 100%
Administrative Claims 107,320 60,971 (46,349) 57%
Priority Claims 9,544 0 (9,544) 0%
Unsecured Claims 183,104 0 (183,104) 0%
</TABLE>
____________________
(A) Includes pre- and post-petition interest, if applicable.
(B) Because certain capital leases are under-collateralized while others are
not, the deficiency claim and recovery percentage are calculated on a
lease-by-lease basis, rather than by comparing total debt to total
collateral.
3
<PAGE>
Americold Corporation
Estimate of Asset Values Assuming a Chapter 7 Liquidation
As of January 31, 1995 (Unaudited)
($000)
<TABLE>
<CAPTION>
(Unaudited)
Note Book Value Estimated
Ref At 1-31-95 Liquidation Value
---- ---------- -----------------
<S> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS (A) $ 21,310 $ 21,310 100%
ACCOUNTS AND NOTES RECEIVABLE (B)
Trade Accounts Receivable 20,272 12,482 62%
Notes Receivable 502 12 2%
Other Receivables 2,030 1,630 80%
-------- -------- ---
$ 22,805 $ 14,123 62%
-------- -------- ---
PREPAID EXPENSES AND OTHER ASSETS (C)
Inventory 217 0 0%
Prepaids and Other Assets 6,686 348 5%
-------- -------- ---
6,903 348 5%
-------- -------- ---
PROPERTY, PLANT AND EQUIPMENT (D)
First Mortgage Bond Collateral 301,236 262,877 87%
Property
Capital Lease Collateral Property 18,174 18,855 104%
Bank Collateral Property 12,846 14,401 112%
Other Real Property 23,088 13,629 59%
Equipment, Pallets, Furniture & 2,198 582 26%
Fixtures
Construction in Progress 7,404 0 0%
Other Fixed Assets 2,776 0 0%
-------- -------- ---
367,722 310,344 84%
-------- -------- ---
OTHER NON-CURRENT ASSETS (E)
Investments in Subsidiaries 1,447 0 0%
Goodwill, Net 80,239 0 0%
Debt Issuance Costs, Net 8,439 0 0%
Other Intangibles, Net 1,522 0 0%
-------- -------- ---
91,648 0 0%
-------- -------- ---
MORTGAGE BOND ESCROW (F) 25,225 23,459 93%
-------- -------- ---
(G) $535,612 $369,584 69%
======== ======== ===
</TABLE>
4
<PAGE>
Americold Corporation
Schedule of Liabilities Assuming a Chapter 7 Liquidation
As of January 31, 1995 (Unaudited)
($000)
<TABLE>
<CAPTION>
(Unaudited) Estimated
Note Debt Available Cash/ Deficiency
Ref At 1-31-95 Debt Extinguished Claim
----- ----------- ------------------- ----------
<S> <C> <C> <C> <C> <C>
Proceeds from Liquidation $ 369,584
Proceeds from Operations (H) 10,000
Wind Down, Net ---------
AVAILABLE CASH 379,584
---------
Less: Payments to Secured
Debtholders
First Mortgage Bonds (I) $326,250 (286,337) 88% $39,913
Pre-petition Accrued (I) 9,877 0 0% 9,877
Interest
Post-petition Accrued (I) 0 0 --
Interest
Capital Lease Debt (J) 22,051 (18,187) 82% 3,865
Pre-petition Accrued (J) 104 0 0% 104
Interest
Post-petition Accrued (J) 91 (91) 100%
Interest
Bank Term Debt (K) 8,645 (8,645) 100%
Pre-petition Accrued (K) 65 (65) 100%
Interest
Post-petition Accrued (K) 392 (392) 100%
Interest
Bank Letters of Credit (L) 4,897 (4,897) 100%
--------- ----------
Total Payments to (318,613) 53,759
Secured Debtholders ---------
Balance Available for 60,971
Administrative Claims ---------
Less: Administrative Claims
Trustee's Fees (M) 11,411 (6,483) 57%
Professional Fees (N) 2,000 (1,136) 57%
State & Federal Taxes - (O) 93,909 (53,352) 57%
Post Petition -------- --------- ---
107,320 (60,971) 57%
---------
Balance Available for 0
Priority Claims ---------
Less: Priority Claims
Employee Claims (P) 7,744 0 0%
Tax Claims: (Q)
Property Taxes Payable 0 0 --
State & Federal Taxes - 1,800 0 0%
Pre-Petition -------- --------- ---
9,544 0 0%
---------
Balance Available for 0
General Unsecured Claims ---------
Unsecured Claims (R)
General Unsecured Claims (S) 11,183 0 0%
Deficiency Claims (see 53,759 0 0%
above)
Old Subordinated 115,000 0 0%
Debentures
Accrued Interest on Old 3,163 0 0%
Subordinated Debentures -------- --------- ---
183,104 0 0%
---------
Balance Available for 0
Equity Claims =========
</TABLE>
5
<PAGE>
NOTES
A. Cash and Cash Equivalents
Cash consists of all cash in banks or operating accounts and liquid
investments with maturities of three months or less and is assumed to be
fully recoverable.
B. Accounts and Notes Receivable
1. Trade Accounts Receivable primarily consist of balances due from
-------------------------
customers for storage and handling services. The recovery of accounts
receivable is based on management's estimate of collection, given such
factors as the aging and historical collection patterns of the
receivables; the time and effort necessary to make inquiries and to
research and rebill disputed items; the Company's ability to place liens
on or hold product stored in warehouses until receivables are collected;
and the effect of the liquidation on collection. Certain accounts
receivable have been assumed to be wholly uncollectible as they relate
to revenues billed for services not yet performed and items subject to
dispute or offset.
2. Notes Receivable are primarily comprised of amounts receivable from the
----------------
lessor of certain property for a loan made to such lessor, as well as
longer term receivables from distressed customers. It is assumed in
Chapter 7 liquidation that, upon rejection of the lease held by this
lessor, the related note will no longer be collectible. Based on
management's experience, the remaining notes receivable are of
negligible value in a liquidation scenario.
3. Other Receivables include insurance proceeds receivable related to a
-----------------
claim for damage to a certain storage facility, earned revenues not yet
billed, and certain disputed amounts receivable. The insurance proceeds
are management's best estimate of the final amount receivable; it is
assumed that liquidation will likely have little effect on value.
Collectibility of the accrued revenues has been estimated in a manner
consistent with estimates made for trade accounts receivable. The
disputed amounts receivable have been netted against the offsetting
claim accrual, resulting in a 0% realization.
6
<PAGE>
C. Prepaid Expenses and Other Assets
1. Inventory is comprised of gravel and supplies located at the Company
---------
quarry. Proceeds from the sale of the quarry, included in the
liquidation of mortgage bond collateral property, are assumed to include
sale of the related inventory. Thus, the inventory has no separate
value in this Chapter 7 liquidation scenario.
2. Prepaids and Other Assets include a variety of prepayments for
-------------------------
insurance, rent, deposits, retainers and other items. Insurance policies
have been recorded at the gross unamortized premium value with a
corresponding liability to finance premium payments. The insurance
balance net of the liability is assumed to have a 10% recovery value in
liquidation. Rent is assumed to have no estimated liquidation value due
to lease rejections, and other prepaids are assumed to have a recovery
value of 10%.
D. Property, Plant and Equipment
1. Mortgage Bond Collateral Property includes owned land, buildings,
---------------------------------
fixtures and equipment at storage facilities which are collateral for
the First Mortgage Bonds. To develop the estimated recovery from the
liquidation of these properties, management projected net cash operating
earnings for fiscal year 1996 and assumed that such properties could be
sold at a capitalization rate which accounted for the risk of the
property cash flows in this scenario. Next, the recovery value was
reduced by management's estimate of the discount due to the decreased
selling time, reduced negotiating position and other factors related to
liquidation. The value of these properties was then reduced for
commissions and selling costs of 3% of proceeds to calculate the net
proceeds from dispositions. For properties for which a recent appraisal
has been performed, recent negotiations have been conducted with
potential purchasers, or current market and property conditions indicate
significant differences in value, the recovery from liquidation of these
properties has been adjusted to reflect this substantive information.
For all mortgage bond properties, these estimated liquidation values
could vary dramatically from the amounts which might be achieved in an
actual Chapter 7 liquidation.
2. Capital Lease Collateral Property is comprised of certain storage
---------------------------------
facilities, or portions thereof, as well as certain personal property
(primarily office and material handling equipment), which have been
financed
7
<PAGE>
through capital lease arrangements. The valuation of real property
under such capital leases has been made on a basis consistent with the
mortgage bond collateral property (discussed in D.1 above). For
properties of which a portion is financed under capital leases with the
remainder serving as collateral for the mortgage bonds, the estimated
liquidation value was allocated pro rata based on net book value. The
valuation of personal property under capital leases has been made on a
basis consistent with the equipment, pallets, furniture and fixtures
discussed in D.5 below.
3. Bank Collateral Property represents the real and personal property which
------------------------
serves as collateral for certain term debt due to the Bank in relation
to a financed storage facility. The valuation of such property has been
made on a basis consistent with the mortgage bond collateral property
(discussed in D.1 above).
4. Other Real Property includes all remaining real property which does not
-------------------
serve as security for any debt arrangements. For land, improvements and
buildings which are owned in whole by the Company, the valuation of such
property has been made on a basis consistent with the mortgage bond
collateral property (discussed in D.1 above). For the improvements
associated with property under operating lease arrangements, no value
has been ascribed in liquidation as the improvements will revert to the
lessor with the properties upon the discontinuation of the operating
leases.
5. Equipment, Pallets, Furniture and Fixtures include material handling
------------------------------------------
equipment, pallets, stacking devices, computers and other related
equipment. Based on management's review of these assets and the results
achieved in similar liquidations and sales, the machinery and equipment
liquidation recovery was estimated to be 30% of net book value, the
pallets liquidation recovery was estimated to be 25% of net book value,
and the furniture and fixture liquidation recovery was estimated to be
20% of net book value.
6. Construction in Progress includes the cost incurred for construction on
------------------------
a major project at the storage warehouse which serves as collateral for
the Bank debt, as well as costs incurred at a number of facilities for
smaller improvement projects. The liquidation values of the entire
facilities consider the additional value provided by the construction
work; thus, no additional liquidation value is ascribed.
8
<PAGE>
7. Other Fixed Assets include mineral rights and undeveloped mined space
------------------
related to the quarry. It is assumed that these other fixed assets
would be sold with the quarry as discussed in D.1, above; thus, there is
no standalone value in liquidation.
E. Other Non-Current Assets
Other non-current assets include investments in subsidiaries, net goodwill,
net debt issuance costs, and other net intangibles which, in the opinion of
management, have no estimated recoverable value in liquidation.
F. Mortgage Bond Escrow
The cash in mortgage bond escrow, which serves as collateral for the First
Mortgage Bonds, is held by a trustee pending expenditure on capital
projects. The book value at January 31, 1995 includes the estimated
substitution of approximately $4.8 million in cash as collateral for
property loss in the Kansas City Fire. Because the liquidation value of the
mortgage bond collateral property is inadequate to repay the First Mortgage
Bonds, use of the escrow cash will be penalized with a 7% pre-payment fee on
the portion required to settle the remaining debt.
G. Avoidance Actions
The Company does not believe it has any significant avoidance actions;
however, recoveries from any such claims have not been considered in this
analysis.
H. Operations Wind Down, Net
Management estimates that during the liquidation, operations would yield
approximately $10 million in pre-tax net cash proceeds. All wind-down
expenses have been assumed to be paid in full; the potential surcharge to
the collateral of secured creditors for the preservation and disposal of
property under Bankruptcy Code Section 506(c) has not been specifically
considered for purposes of this analysis.
I. First Mortgage Bonds
The mortgage bond collateral property and mortgage bond escrow serve as
collateral for the First Mortgage Bonds. Post petition interest on the First
Mortgage Bonds has been
9
<PAGE>
assumed to accrue for six months to the extent that such bonds are
overcollateralized in liquidation. Interest rates are 11.45% for the Series
A Bonds and 11.50% for the Series B Bonds.
J. Capital Lease Debt
The capital lease debt is comprised of a number of individual leases, each
secured by certain real or personal property. None of the leases are cross-
collateralized with other property, which may result in certain leases being
undercollateralized in liquidation while other leases are
overcollateralized. Post-petition interest has been calculated on a lease
by lease basis to the extent that the individual lease is overcollateralized
in liquidation. The post petition interest has been assumed to accrue for
six months at rates approximating those specified in the respective lease
agreements.
K. Bank Term Debt
The Bank collateral property secures the Bank term debt. Post petition
interest on the Bank term debt has been assumed to accrue at 9.01% for six
months to the extent that such debt is overcollateralized in liquidation.
L. Bank Letters of Credit
The letters of credit issued by the Bank back certain insurance and lease
obligations and are secured by receivables and the proceeds therefrom. For
purposes of this analysis, management has assumed that all letters of credit
are fully drawn, with the exception of those backing capital lease claims
paid as indicated in Note I above.
M. Trustee's Fees
Trustee's fees are assumed to be approximately 3% of cash distributed
according to (S)326(a) of the Bankruptcy Code.
N. Professional Fees
Professional fees represent the costs of a Chapter 7 case related to
attorneys, accountants, appraisers and other professionals retained by the
trustee. Based on management's review of the nature of these costs and the
10
<PAGE>
outcomes of similar liquidations, fees were estimated at $2 million.
O. State and Federal Taxes - Post Petition
The Company will be liable for the taxes related to recapture of
depreciation and capital gains on fixed assets sold during the liquidation
period. This claim amount is estimated as the difference between the
liquidation value of the fixed assets and their tax basis at an effective
rate of 40%. The tax basis in the assets owned by the Company is
significantly lower than both the book value and the estimated liquidation
value at January 31, 1995, leading to a large tax liability upon
liquidation. The Company will also be liable for taxes on income earned
during the wind down period at a 40% effective rate.
P. Employee Claims
Employee claims entitled to priority, including wages, vacation, and other
related compensation, have been estimated at their maximum exposure of
$4,000 per employee, with 1,936 employees as of January 1995.
Q. Tax Claims
For properties under mortgage or capital lease, the Company has exposure for
real property taxes only to the extent that the Company has equity in such
properties. The Company's liability for taxes on owned real and personal
property was negligible at January 31, 1995.
R. Unsecured Claims
Under the terms of the Old Subordinated Debenture agreement, in no case
shall Old Subordinated Debentureholders be paid prior to the settlement of
all Senior Debt. Senior Debt includes the First Mortgage Bonds, capital
leases, and potentially may include damage claims from the rejection of real
and personal property leases. In the event that proceeds are available to
be distributed among the unsecured claimants, these proceeds will be
allocated to all claimants on a pro rata basis. Then, the portion
ordinarily payable to the Old Subordinated Debentureholders under this
allocation will be paid to the Senior Debtholders to the extent of their
unpaid claims. Any proceeds remaining after settling these claims will then
be paid to the Old Subordinated Debentureholders.
11
<PAGE>
S. General Unsecured Claims
General unsecured claims include trade claims, liabilities for prepaid
services and other miscellaneous unsecured liabilities. A value has not
been estimated for purposes of this analysis for exposure to claims which
may arise from rejection of any contracts or leases or from other contingent
liabilities, with the exception that certain outstanding letters of credit
with the Bank have been considered. The Company has approximately 23 union
contracts, 14 major real property leases, and numerous employment, equipment
and other contracts and leases.
12
<PAGE>
APPENDIX C [LOGO OF U.S. BANK APPEARS HERE]
[LETTERHEAD OF
U.S. BANK
APPEARS HERE]
April 3, 1995
Americold Corporation
7007 S.W. Cardinal, Suite 135
Portland, Oregon 97224
Attention: Mr. Lon Leneve
Treasurer and Assistant Secretary
Subject: Commitment to Extend and Modify Credit Accommodations
Ladies and Gentlemen:
We are pleased to extend to you the commitment of United States National Bank of
Oregon, a national banking association (the "Bank"), to provide the following
extension and modification of existing credit accommodations, subject to the
following terms and conditions:
1. COMMITMENT EXTENSION. The Bank will extend and modify the existing
--------------------
revolving line of credit accommodations to Americold Corporation ("Americold")
in the amount of the lesser of the Borrowing Base (defined below) or $27.5
million (the "Operating Line"). The Operating Line may be used for any
combination of Letters of Credit (up to $10 million) and revolving loans, with
the face amount of Letters of Credit reducing revolving loan availability. The
following changes will be made to the existing agreement dated February 3, 1993,
as amended (the "Agreement"), as part of the extension:
a. MATURITY. February 28, 1999
--------
b. BORROWING BASE. The Borrowing Base for the Operating Line shall be equal
--------------
to (i) 85 percent of Eligible Accounts (as defined in the Agreement) and (ii) a
percentage determined by the Bank applied to the agreed value of additional
collateral to be pledged pursuant to subparagraph (c), below.
c. ADDITIONAL COLLATERAL. Americold will identify and pledge (with a first
---------------------
priority, perfected security interest) additional collateral acceptable to the
Bank, such that the Borrowing Base will support the entire Operating Line,
rather than only the revolving loan portion thereof It is currently anticipated
that this condition will be satisfied by mortgage of Americold's Portland,
Maine, real property, and the mortgage of Americold's Tampa, Florida real
property and/or other unencumbered real property. The Borrowing Base percentage
applied to the value of the real estate (as determined by the Bank) will be 70
percent.
<PAGE>
d. COMMITMENT FEE. The Operating Line commitment fee will be 3/8 percent
--------------
per annum of the average daily unused portion of the Operating Line, payable by
Americold to the Bank quarterly in arrears.
e. FACILITY RESTING REQUIREMENTS. Section 8.11 of the Agreement will be
-----------------------------
modified to require no resting in the year ending February 29, 1996, one thirty-
day consecutive rest period in the second year ending February 28, 1997, and two
thirty-day consecutive rest periods in each of the next years ending February
28, 1998, and February 28, 1999.
f. FINANCIAL COVENANTS. To be reviewed and reset, based on current
-------------------
projections and Subordinated Debt restructure impact.
g. EVENTS OF DEFAULT. Cross-default with Amended and Restated Investment
-----------------
Agreement to be explicitly described, in addition to other agreements related to
Indebtedness.
2. DOCUMENTATION. The loan documents to be executed by Americold in connection
-------------
with the extension and modification will include a loan agreement amendment,
replacement promissory note, trust deed(s), security agreement(s), financing
statement(s), and such other documents as are necessary in the Bank's judgment
to document the loan modification and extension.
3. FEES AND COSTS. Americold shall pay the Bank a nonrefundable commitment fee
--------------
equal to 1 percent of the Commitment ($275,000) to be paid at closing, in lieu
of 1/4 percent annual loan fees provided for in Section 4.1(a) of the Agreement.
In addition, Americold shall pay all of the Bank's out-of-pocket expenses
incurred in connection with the amendment documentation and maintenance of the
Operating Line, including, but not limited to, the costs of title insurance,
recording fees, and the Bank's reasonable legal expenses, whether or not the
closing of the amended and extended Operating Line discussed herein occurs.
4. TERM OF COMMITMENT. The commitment made herein shall expire on August 15,
------------------
1995, unless the closing of the extension of credit facilities discussed herein
has occurred or such term has been extended by mutual agreement. Thereafter,
neither Americold nor the Bank shall have any further obligation to the other
under this letter, unless the expenses incurred by the Bank have not been paid,
which expenses shall be continuing obligations of Americold until paid.
5. RELIANCE. The Bank has relied on certain representations and financial
--------
information made and provided by you in issuing this commitment. Accordingly,
the Bank may terminate this commitment without refund of fees should any of such
representations or information provide to be materially false, incomplete, or
misleading.
6. INTEGRATION. This loan commitment letter is complete and final. It
-----------
supersedes any prior or contemporaneous understanding or agreement relative to
loan extension or modification.
7. MODIFICATION. This loan commitment letter can be modified only in a writing
------------
signed by the undersigned or another duly authorized officer of the Bank.
<PAGE>
AMERICOLD CORPORATION
The Ballot Agent:
Tonkon, Torp, Galen, Marmaduke & Booth
By Mail/Overnight Delivery/Hand: By Facsimile:
Tonkon, Torp, Galen, Marmaduke & Booth Tonkon, Torp, Galen, Marmaduke & Booth
1600 Pioneer Tower (503) 274-8779
888 SW Fifth Avenue Attention: Albert N. Kennedy, Esq.
Portland, Oregon 97204-2099
Attention: Albert N. Kennedy, Esq.
The Information Agent and
Purchaser Representative:
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
(212) 703-4000
Attention: Alan K. Jones
