IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE:
FRUEHAUF TRAILER CORPORATION,
a Delaware corporation,
MARYLAND SHIPBUILDING &
DRYDOCK COMPANY,
a Maryland corporation,
F.G.R., INC.,
a Michigan corporation,
JACKSONVILLE SHIPYARDS, INC.,
a Florida corporation, Jointly Administered
FRUEHAUF INTERNATIONAL, LIMITED, CASE NO. 96-1563 (PJW)
a Delaware corporation,
FRUEHAUF CORPORATION, Chapter 11
a Delaware corporation
THE MERCER CO.,
DEUTSCHE-FRUEHAUF HOLDING CORPORATION,
a Delaware corporation,
MJ HOLDINGS, INC.,
an Ohio corporation, and
E. L. DEVICES, INC.,
a Florida corporation,
Debtors.
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AMENDED DISCLOSURE STATEMENT PURSUANT TO SECTION 1125
OF THE BANKRUPTCY CODE WITH RESPECT TO DEBTORS'
FIRST AMENDED JOINT PLAN OF REORGANIZATION DATED JULY 28, 1998
2
THIS AMENDED DISCLOSURE STATEMENT HAS BEEN PREPARED BY
FRUEHAUF TRAILER CORPORATION, MARYLAND SHIPBUILDING & DRYDOCK
COMPANY, F.G.R., INC., JACKSONVILLE SHIPYARDS, INC.,
FRUEHAUF INTERNATIONAL LIMITED, FRUEHAUF CORPORATION, THE
MERCER CO., DEUTSCHE-FRUEHAUF HOLDING CORPORATION, MJ
HOLDINGS, INC., AND E.L. DEVICES, INC. (COLLECTIVELY, THE
"DEBTORS," OR, TOGETHER WITH THEIR NON-DEBTOR AFFILIATES,
THE "COMPANY") AND DESCRIBES THE TERMS AND PROVISIONS OF THE
DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION DATED JULY 28,
1998 (THE "PLAN"). ANY TERM USED IN THIS DISCLOSURE STATEMENT
THAT IS NOT DEFINED HEREIN HAS THE MEANING ASCRIBED TO THAT
TERM IN THE PLAN.
DATED: July 28, 1998
CAMHY KARLINSKY & STEIN LLP MORRIS, NICHOLS, ARSHT & TUNNELL
David Neier William H. Sudell, Jr. (No. 463)
1740 Broadway, 16th Floor Robert J. Dehney (No. 3578)
New York, New York 10019-4315 1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
ATTORNEYS FOR THE DEBTORS
i
TABLE OF CONTENTS Page
I. INTRODUCTION 1
II. GENERAL INFORMATION CONCERNING THE DEBTORS AND
CERTAIN EVENTS PRECEDING THE DEBTORS' CHAPTER 11 FILING 2
A. General Description of the Debtors' Businesses Pre-petition 2
1. Background. 2
2. Marketing and Distribution 3
3. International Operations 4
4. Employees 4
5. Assumption Agreement 4
6. The Maritime Business 4
7. 1995 Recapitalization 6
8. The K-H Letter Agreement 6
9. Airlie Note 7
10. Sale of Foreign Assets 7
B. Financial Condition of the Debtors; Events
Necessitating Chapter 11 Protection 7
III. THE CHAPTER 11 CASE 8
A. Commencement of the Cases 8
B. First Day Relief 8
C. Formation of Unsecured Creditors' Committee and
Bondholders' Committee 9
D. First Asset Sales 9
E. Retention of Alvarez & Marsal Services 10
F. Key Employee Retention Program 10
G. Significant Events During the Case 10
1. Sale of Delphos Axle Plant to Holland Hitch 10
2. Sale of Debtors' U.S. Manufacturing and Sales and
Distribution Businesses to Wabash 11
3. Rejection of Collective Bargaining Agreements and
Termination of Retiree Benefits 12
a. Termination of Retiree Benefits 12
b. Collective Bargaining Agreements 13
4. Receipt of $6.5 Million Senior Mortgage on Certain
Jacksonville Property 13
5. Replacement of the Madeleine Facility with the BOA
Facility 14
6. Litigation with Alvarez & Marsal and Thomas E. Ireland 14
7. Relocation of Offices to California 15
8. Sales of Wabash Stock 15
H. Current Management of the Debtors and Disclosure of
Compensation 15
I. Assets and Liabilities of the Debtors 17
1. Debtors' Major Assets 17
a. Unrestricted Cash and Short Term Investments 17
b. Stock of Wabash National Corporation 17
c. Fruehauf de Mexico 18
d. Jacksonville Riverfront Development Note Receivable 20
e. Kearny Branch Note Receivable 20
f. Sindorf 20
g. Miscellaneous Real Estate 21
h. Miscellaneous Receivables and Escrows 21
i. Causes of action 21
2. Liabilities 22
IV. SUMMARY OF PLAN 23
A. Overview 23
B. Designation of Claims and Interests 23
1. Summary 23
C. Treatment of Unclassified Claims 24
1. Administrative Claims 24
2. Treatment of Pre-Petition Tax Claims 26
D. Classification and Treatment of Classified Claims and
Interests 26
1. Class 1 - Priority Claims 26
2. Class 2 - Secured Claims of Holders of Senior Notes 27
3. Class 3 - Secured Claims Other Than Claims of Holders
of Senior Notes 27
4. Class 4 - General Unsecured Claims 27
5. Class 5 - Old Common Stock 27
6. Class 6 - Old Warrants 28
7. Class 7 - Securities Claims 28
E. Acceptance or Rejection of the Plan 28
1. Voting Classes 28
2. Presumed Acceptance of Plan 28
3. Presumed Rejection of Plan 28
F. Means for Execution and Implementation of the Plan 28
1. Funding of the Distribution Fund 28
2. Transfer of Wabash Securities to Indenture Trustee 28
3. Change of Plan Sponsorship for the Management and
Union Plans 28
4. Transfer of Hogan's Creek Property and Picketville
Property 29
5. Foreclosure by Holders of Senior Notes 29
6. Transfer by Debtors of Assets to the Liquidating Trust 29
7. Ratification of Liquidating Trust Agreement 29
a. Powers and Duties 29
b. Compensation of Trustee 29
c. Limitation of Liability 29
d. Indemnity 30
e. Right to Hire Professionals 30
f. Treatment of Distribution Fund Surplus 30
g. Limitation on the Trustee 30
h. Distribution of Trust Certificates 31
i. Tax Treatment of the Liquidating Trust 31
j. Termination of Liquidating Trust 31
8. Dissolution of Corporate Entities 31
9. Cancellation of Old Securities 31
10. Registration Exemption for Debtors' Wabash Securities
and Beneficial Interests in the Liquidating Trust 31
11. Transferability of the Trust Certificates;
Applicability of Federal Securities Laws to the
Liquidating Trust 33
12. Corporate Action 34
13. Preservation of Rights of Action 34
14. Objections to Claims 34
15. Exemption from Stamp and Similar Taxes 35
G. Funding and Methods of Distribution and Provisions for
Treatment of Disputed Claims 35
1. Funding of Distributions Under the Plan 35
2. Distributions to Holders of Allowed Claims that are
Administrative Expense Claims, Pre-Petition Tax Claims
and Class 1 Priority Claims 35
3. Distributions to Holders of Allowed Class 2 Claim 36
4. Disputed Claims 36
5. Delivery of Distributions and Undeliverable or
Unclaimed Distributions; Failure to Negotiate Checks 36
6. Distributions on Account of Unsecured Class 4 Claims 36
7. De Minimis Distributions 36
8. Compliance with Tax Requirements 36
9. Setoffs 36
10. Fractional Interests 37
H. Treatment of Executory Contracts and Unexpired Leases 37
I. Effects of Plan Confirmation 37
1. Transfers to Liquidating Trust are Free and Clear
of Claims Against Debtors 37
2. No Liability for Solicitation or Participation 37
3. Limitation of Liability 37
4. Other Documents and Actions 38
5. Term of Injunctions or Stays 38
J. Confirmability of Plan and Cramdown 38
K. Retention of Jurisdiction 38
L. Post Confirmation Management of the Liquidating Trust 38
V. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN 41
A. Federal Income Tax Consequences to Fruehauf 42
B. Federal Income Tax Consequences to Holders of Claims 43
1. Holders of Claims 43
VI. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS 44
A. Confirmation of the Plan 44
1. Confirmation Hearing 44
2. Requirements for Confirmation of the Plan 45
a. Acceptance 45
b. Best Interests Test/Liquidation Analysis 46
c. Feasibility 46
d. Classification 46
B. Non-Consensual Confirmation 47
1. Fair and Equitable Standard 47
2. The Plan Must Not Discriminate Unfairly 47
C. Voting Procedures and Requirements 47
1. Voting Requirements - Generally 47
2. Ballot and Information Agent 48
3. Voting Procedures 48
4. Voting Deadline 50
INDEX TO APPENDIX
Exhibit A: Debtors' Amended Joint Plan of R
iv
INDEX TO APPENDIX
Exhibit A: Debtors' First Amended Joint Plan of Reorganization
Dated June 24, 1998
I.
INTRODUCTION
This Amended Disclosure Statement Pursuant to Section 1125 of
the Bankruptcy Code With Respect to the Debtors' Amended Joint
Plan of Reorganization Dated July 28, 1998 of Fruehauf Trailer
Corporation and Related Debtors (the "Disclosure Statement")
approved by Order of the United States Bankruptcy Court for the
District of Delaware on July 28, 1998, relates to the Debtors'
Amended Plan of Reorganization dated July 28, 1998 (the "Plan"),
a copy of which is annexed hereto as Exhibit "A". The Plan is
supported by and the Unofficial Committee of Holders of Senior
Secured Notes (the "Bondholders'' Committee") [and the Official
Committee of Unsecured Creditors].
THE DEBTORS BELIEVE THAT THE PLAN IS IN THE BEST INTERESTS OF
CREDITORS AND INTEREST HOLDERS, AND URGE ALL CREDITORS TO VOTE
IN FAVOR OF THE PLAN. CREDITORS ARE ENCOURAGED TO READ AND
CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING
THE PLAN OF REORGANIZATION ATTACHED HERETO.
VOTING INSTRUCTIONS ARE CONTAINED ON YOUR BALLOT AND ARE SET
FORTH IN THIS DISCLOSURE STATEMENT IN SECTION VI(C) TO BE
COUNTED, YOUR BALLOT MUST BE DULY COMPLETED, EXECUTED AND
ACTUALLY RECEIVED BY THE BALLOT AGENT NO LATER THAN 5:00 P.M.,
EASTERN TIME ON SEPTEMBER 9, 1998.
THE CONFIRMATION HEARING HAS BEEN SCHEDULED TO COMMENCE ON
SEPTEMBER 16, 1998 AT 2:00 P.M. BEFORE THE HONORABLE PETER J.
WALSH, AT THE UNITED STATES BANKRUPTCY COURT (THE "COURT"), 824
MARKET STREET, WILMINGTON, DELAWARE 19801. THE CONFIRMATION
HEARING MAY BE ADJOURNED WITHOUT FURTHER NOTICE TO
PARTIES-IN-INTEREST EXCEPT FOR AN ANNOUNCEMENT OF THE ADJOURNED
DATE MADE AT THE HEARING. OBJECTIONS TO CONFIRMATION OF THE
PLAN MUST BE IN WRITING, STATE THE NATURE AND AMOUNT OF CLAIMS
OR INTERESTS HELD OR ASSERTED BY THE OBJECTOR AGAINST THE
DEBTORS' ESTATE OR PROPERTY, THE BASIS FOR THE OBJECTION, AND
THE SPECIFIC GROUNDS THEREFOR, AND SHALL BE FILED WITH THE COURT
AND SERVED UPON THE DEBTORS, THEIR COUNSEL, COUNSEL TO
CREDITORS' COMMITTEE AND BONDHOLDERS' COMMITTEE, AND THE UNITED
STATES TRUSTEE IN THE MANNER SET FORTH IN THE CONFIRMATION
NOTICE SO AS TO BE RECEIVED NO LATER THAN 4:00 P.M. EASTERN TIME
ON SEPTEMBER 9, 1998.
NO PERSON IS AUTHORIZED BY THE DEBTORS TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE PLAN OR THE
SOLICITATION OF ACCEPTANCES OF THE PLAN OTHER THAN AS CONTAINED
IN THIS DISCLOSURE STATEMENT AND THE ATTACHMENTS HERETO. THE
DELIVERY OF THIS DISCLOSURE STATEMENT WILL NOT UNDER ANY
CIRCUMSTANCES IMPLY THAT ALL OF THE INFORMATION IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INFORMATION CONTAINED HEREIN REGARDING THE DEBTORS, THEIR
BUSINESSES, ASSETS AND LIABILITIES HAVE BEEN PROVIDED BY THE
DEBTORS. WHERE STATED, THE DEBTORS HAVE RELIED ON INFORMATION
PROVIDED BY THEIR ADVISORS. THE DEBTORS DISCLAIM ANY
RESPONSIBILITY FOR THE ACCURACY OF THAT INFORMATION. THE
DEBTORS AND THEIR ADVISORS ARE UNAWARE OF ANY FALSE OR
MISLEADING STATEMENT THAT WOULD MATERIALLY AFFECT A HYPOTHETICAL
INFORMED INVESTOR'S DETERMINATION ON HOW TO VOTE ON THE PLAN.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), NOR HAS THE SEC
PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED HEREIN.
II.
GENERAL INFORMATION CONCERNING THE DEBTORS
AND CERTAIN EVENTS PRECEDING THE DEBTORS' CHAPTER 11 FILING
A. General Description of the Debtors' Businesses Pre-petition.
1. Background.
On October 7, 1996 (the "Petition Date"), the following entities
filed petitions for relief in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court") under
Chapter 11 of the United States Bankruptcy Code (the "Code"):
FRUEHAUF TRAILER CORPORATION, a Delaware corporation,
JACKSONVILLE SHIPYARDS, INC., a Florida corporation, MARYLAND
SHIPBUILDING & DRYDOCK COMPANY, INC., a Maryland corporation,
FRUEHAUF INTERNATIONAL LIMITED, a Delaware corporation, FRUEHAUF
CORPORATION, a Delaware corporation, The Mercer Co., a Delaware
corporation, FGR, INC., a Michigan corporation,
DEUTSCHE-FRUEHAUF HOLDING CORPORATION, a Delaware corporation,
E.L. DEVICES, INC., a Florida corporation, M.J. HOLDINGS INC.,
an Ohio corporation, (collectively referred to as the
"Debtors").
Debtor Fruehauf Trailer Corporation ("Fruehauf") is the direct
or indirect parent company of all of the other Debtors.
Fruehauf was organized in 1989 to acquire certain assets and
assume certain liabilities related to the trailer and maritime
businesses (the "Maritime Business") of Fruehauf Corporation
("Old Fruehauf"). In July 1989, Fruehauf consummated this
acquisition and assumption (the "Fruehauf Acquisition").
Directly or indirectly, Fruehauf owns 100% of the outstanding
voting equity of all other Debtors. As of the Petition Date,
Fruehauf was in the business of designing, manufacturing,
selling and servicing truck trailers and related parts and
accessories. Fruehauf's products were sold and used throughout
the United States and in numerous foreign countries. Debtor
Fruehauf International Limited ("FIL") owns a 99.99% equity
interest in a foreign trailer manufacturer in Mexico, Fruehauf
de Mexico, S.A. de C.V. ("Fruehauf de Mexico"). The other
Debtors are either inoperative or engaged in trailer
transportation businesses similar to Fruehauf.
As of the Petition Date, the Debtors had over 20,000 creditors
and approximately 2,000 full-time and part-time employees.
Fruehauf was a public company that operated approximately 40
manufacturing, distribution, sales and servicing facilities
throughout the United States and was a leader in domestic used
trailer sales. Fruehauf trailers had been manufactured since
1914. Fruehauf trailers were noted for their quality and
durability and, therefore, commanded a premium price.
Fruehauf owned manufacturing facilities, in Fort Madison, Iowa
("Fort Madison"), Delphos, Ohio ("Delphos") and, through a
subsidiary, in Coacalco, Mexico, and Fruehauf leased a
manufacturing facility in Huntsville, Scott County, Tennessee
("Scott County"). Fruehauf also leased its wholesale parts
distribution center in Grove City, Ohio.
Fruehauf had an extensive distribution system, which management
believed at the Petition Date was the largest in the industry,
consisting of 31 branches (the largest company-owned national
sales network), six of which were leased. The branch facilities
consisted of office, warehouse and service space and generally
ranged in size from 20,000-35,000 square feet per facility.
Fruehauf's distribution system also included 79 "full-line" and
123 "parts-only" independent dealerships as of December 31,
1995. As of the Petition Date, Fruehauf manufactured or
marketed several truck trailer models, including dry freight
vans, platform trailers, dump trailers and liquid and bulk
hauler tank trailers. Dry freight vans represented the largest
selling product in the industry and historically accounted for
more than two-thirds of Fruehauf's unit sales of new trailers.
Fruehauf's axle manufacturing facility located in Delphos, Ohio,
supplied most of the trailer axles required in Fruehauf's
business. Most of the axles manufactured at the Delphos plant
were unique in their square beam configuration. All other major
domestic truck trailer manufacturers utilize round beam axles in
their trailers.
Fruehauf manufactured dry freight vans at the Fort Madison
manufacturing facility and dump and platform trailers at the
Scott County manufacturing facility. In May 1994, Fruehauf
entered into a series of agreements with LBT, Inc. ("LBT") that
included, among others, a private label manufacturing agreement
whereby LBT manufactured liquid and bulk hauler tank trailers
designed to Fruehauf's specifications and marketed the tank
trailers through Fruehauf's distribution network. New trailer
sales of LBT produced product totaled approximately $13.7
million for the year ended December 31, 1995.
Used trailer sales represented another source of revenue. Used
trailer sales were generally somewhat less cyclical than new
trailer sales. The sale of accessories and replacement parts
produced the highest gross margins of any of the Debtors'
product lines. All of Fruehauf's branches carried a large range
of replacement parts, many of which could be used on trailers
manufactured by competitors. Fruehauf also sold replacement
parts to its independent dealers on a wholesale basis.
2. Marketing and Distribution.
Fruehauf maintained a distribution network of 233 points of
distribution dedicated to servicing the trucking and transport
industry. Fruehauf's large distribution network afforded
Fruehauf the ability to generate sales to smaller independent
operators. In addition, this branch system enabled Fruehauf to
provide maintenance and other services to customers on a
nationwide basis and to take in large quantities of trade-ins,
which are common with large new trailer deals with fleet
customers.
In addition to the 31 Debtor-owned branches, Fruehauf also sold
its products through a nationwide network of approximately 79
"full-line" and 123 "parts-only" independent dealerships, which
generally served the trucking and transport industries.
Although these dealers carried the products of a variety of
manufacturers, each dealer generally carried only one
manufacturer's "brand" of each type of product. Fruehauf
maintained a Dealer Sales Organization to service these dealers.
The 79 "full-line" independent dealerships maintained various
levels of new trailer stock inventory.
3. International Operations.
At the Petition Date, the Debtors' international operations
principally included a Mexican subsidiary and an export
operation principally for trailer components and parts. As
mentioned, Fruehauf's wholly-owned subsidiary FIL currently
holds a 99.99% equity interest in Fruehauf de Mexico, a foreign
trailer manufacturing company that operates in Mexico. Shortly
before the Petition Date, as described more fully below, FIL
completed a transaction to sell certain of its interests in
other foreign trailer manufacturers.
Export sales from the Debtors' domestic operations were $9.8
million, $9.4 million and $8.1 million in 1995, 1994 and 1993,
respectively.
4. Employees.
As of September 15, 1996, the Debtors had approximately 2,000
employees. Approximately 52% of such employees were represented
by labor unions, which had entered into various separate
collective bargaining agreements with the Debtors. The Debtors
currently employ approximately 6 full time employees.
Approximately 417 people are employed by Fruehauf de Mexico.
5. Assumption Agreement.
Old Fruehauf and Terex Trailer Corporation (formerly FRH
Acquisition Corporation and now known as Fruehauf) entered into
an Assumption Agreement dated as of July 13, 1989 whereby
Fruehauf assumed certain liabilities. Fruehauf assumed
substantially all of the liabilities relating to certain trailer
subsidiaries, and the Maritime Business (as defined below),
including environmental liabilities, and liabilities relating to
employees and former employees of these businesses (such as
pension, retiree medical, and workers compensation benefits).
As described below, Maryland had already ceased operations at
the time of the Fruehauf Acquisition, Jacksonville ceased
operations in 1992 and substantially all of CEMCO's assets were
sold in December 1991. The Fruehauf Acquisition left Fruehauf
with substantial liabilities which took years to fully
materialize. These substantial "trailing liabilities" relating
to the closed businesses were a significant factor in Fruehauf
and the other Debtors' financial difficulties which resulted in
these Chapter 11 cases.
6. The Maritime Business.
The Maritime Business acquired by Fruehauf in the Fruehauf
Acquisition consisted of (a) 80% of the capital stock of Coast
Engineering and Manufacturing Company ("CEMCO"), (b) all of the
capital stock of Jacksonville Shipyards, Inc. ("Jacksonville")
and (c) all of the capital stock of Maryland Shipbuilding and
Drydock Company ("Maryland"). CEMCO was engaged in the design
and manufacture of heavy-duty equipment used in dockside loading
and unloading. Jacksonville was a major ship repair facility
located in Jacksonville, Florida that ceased operations in 1992.
Maryland was a shipbuilding facility located in Baltimore,
Maryland that ceased operations in 1984.
At the time of the Fruehauf Acquisition, Fruehauf announced its
intention to divest the Maritime Business. In December 1991,
substantially all of the operating assets of CEMCO were sold.
During 1992, Jacksonville's operations ceased, and a program was
implemented to liquidate its remaining assets, consisting
primarily of real estate and receivables. On February 10, 1995,
Jacksonville completed the sale of substantially all of its
remaining real estate in three separate transactions. As a
consequence of these transactions, all of Jacksonville's
liabilities associated with these properties, including certain
vendor, real and personal property tax and on-site environmental
liabilities, were assumed by the purchasers of the respective
properties or otherwise satisfied.
As part of these transactions, Jacksonville received a
promissory note in the principal amount of $3,777,100.00 secured
by a mortgage encumbering property owned by Jacksonville
Riverfront Development, Ltd. ("JRD"). The property securing the
mortgage was the site of Jacksonville's operations and consists
of approximately 50 acres of riverfront property, 27.47 acres of
uplands and 16.88 acres of submerged land, located near Alltel
Stadium in downtown Jacksonville, Duval County, Florida, on the
St. Johns River. The property is divided into two parcels. The
western parcel includes approximately ten acres of land and
contains four piers that are roughly six hundred feet long. The
eastern panel includes approximately eighteen acres of uplands
and four acres of submerged land and contains one pier that is
about six hundred feet long.
At the Petition Date (and currently), CEMCO, Jacksonville and
Maryland had (have) substantial liabilities relating to various
matters, including (a) workers compensation and retiree medical
benefits in the case of Jacksonville and Maryland, (b) off-site
environmental claims in the case of Jacksonville and (c)
products liability claims in the case of CEMCO. Such
liabilities far exceeded (and exceed) the value of the
respective salable assets of these entities. As a consequence,
Fruehauf had in certain circumstances funded these liabilities.
Due in part to these liabilities, on February 10, 1995, CEMCO
filed a petition for relief under chapter 7 of the Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware.
7. 1995 Recapitalization.
On May 3, 1995, Fruehauf completed a recapitalization (the "1995
Recapitalization") consisting of the following transactions: (a)
the issuance by Fruehauf pursuant to the terms of an indenture
(the "Indenture") of certain senior secured notes (the "Senior
Notes") to Fruehauf's lenders under its then existing bank
credit facility (the "Bank Credit Facility") as a result of an
amendment and restatement of the Bank Credit Facility; (b) the
issuance by Fruehauf of detachable warrants (the "Restructuring
Warrants") to purchase 2,791,907 shares of Fruehauf's common
stock, par value $.01 per share (the "Common Stock"), pro rata
to the holders of the Senior Notes; (c) an amendment to
Fruehauf's then existing revolving credit facility (the
"Revolving Credit Facility"), pursuant to which, among other
things, (i) Congress Financial Corporation (Central)
("Congress") assumed the obligations of the banks under the Bank
Credit Facility in respect of approximately $7.4 million of
letters of credit issued by such banks for the benefit of
Fruehauf through the issuance of replacement letters of credit
and (ii) Fruehauf's line of credit under the Revolving Credit
Facility was increased to $45 million less the amount of letter
of credit obligations; and (d) the issuance by Fruehauf of an
aggregate of 8,136,500 shares of Common Stock in a private
placement transaction in which Fruehauf received cash proceeds,
net of placement agent fees and other equity placement costs, of
approximately $20.7 million. The Trustee under the Indenture is
IBJ Schroder Bank & Trust Company, and the lender under the
Revolving Credit Facility was Congress.
The Senior Notes (a) were issued in an aggregate principal
amount of $74.1 million, which represents $66.6 million of then
outstanding indebtedness under the Bank Credit Facility, $4.1
million of previously accrued amendment fees and approximately
$3.4 million in fees associated with the Senior Notes; (b) bear
interest at a rate of 14.75% per annum; (c) do not have any
mandatory sinking fund; (d) have no scheduled payments of
principal until April 30, 2002; and (e) were secured by
substantially all of the assets of Fruehauf subject to a first
priority lien on accounts receivable and inventories held by
Congress to secure Fruehauf's obligations under the Revolving
Credit Facility and the right of Congress to look to other
assets of Fruehauf under certain circumstances. Pursuant to a
registration statement filed with the Securities and Exchange
Commission, Fruehauf exchanged the Senior Notes for debt
securities with substantially identical terms to the Senior
Notes and which were publicly tradeable securities (hereinafter
also referred to as "Senior Notes"). Interest on the Senior
Notes is payable semiannually on May l and November l of each
year. As of the Petition Date, approximately $54.5 million
principal balance of the Senior Notes remained outstanding.
8. The K-H Letter Agreement.
On April 19, 1996, Fruehauf entered into a letter agreement (the
"K-H Letter Agreement") with K-H Corporation ("K-H"), pursuant
to which, among other things, K-H purchased an aggregate $6.5
million interest in the Revolving Credit Facility (the "Working
Capital Term Note"). As part of the Letter Agreement, K-H
received five-year warrants to purchase 2,000,000 shares of
common stock for an exercise price of $2.50 per share.
On June 21, 1996, also pursuant to the K-H Letter Agreement,
Fruehauf and K-H entered into a loan agreement (the
"Subordinated Revolving Note") under which K-H agreed to lend at
least $3.5 million to Fruehauf (and additional amounts in K-H's
sole discretion) to fund trailing liabilities for which K-H may
have contingent liability. The Subordinated Revolving Note
bears interest at the rate of prime plus 2.5%. The debt owing
under the Subordinated Revolving Note is (a) fully subordinate
to the debt evidenced by the Revolving Credit Facility and the
Indenture and (b) secured by a lien on collateral subordinate to
the security interests of Congress and the trustee and
collateral agent under the Indenture.
9. Airlie Note.
The Airlie Group, L.P. was issued a Second Amended Restated
Subordinated Promissory Note (the "Airlie Note") by Fruehauf,
dated August 26, 1994, in the original principal amount of
$8,607,312.33 issued pursuant to an Exchange Agreement dated
June 28, 1991. The Airlie Note is subordinate to certain other
debt of Fruehauf, has a maturity date of October 1998 and
accrues interest at the rate of 15% per annum. On June 30,
1996, Fruehauf failed to make an interest payment due on the
Airlie Note.
10. Sale of Foreign Assets.
On June 21, 1996, Fruehauf completed the sale of certain of its
foreign assets (the "Foreign Sale") to FIL Partners, Ltd. as
follows: (a) (i) a 15% interest in Nippon Fruehauf Company,
Ltd., which operates in Japan; (ii) a 5% interest in Henred
Fruehauf (Pty) Ltd., which operates in South Africa; and (iii)
an approximate 23% interest (9% giving consideration to certain
dilutive securities) in Societe Europeenne de Semi-Remorques
S.A. ("SESR"), which, in turn, holds equity interests in trailer
manufacturing concerns in France, the United Kingdom and the
Netherlands; (b) certain trademark and technology licensing
agreements currently operative outside North America (including
all rights to any fees payable under any such existing
agreements and any renewals thereof that may be made in the
future); (c) the trademark "Fruehauf" outside of North America;
and (d) certain excess machinery and equipment and the rights to
collect certain export trade receivables. Proceeds to Fruehauf
from the Foreign Sale, net of transaction costs and $1 million
held in escrow, totaled approximately $18.3 million.
B. Financial Condition of the Debtors; Events Necessitating
Chapter 11 Protection.
Fruehauf experienced reduced booking levels during the second
half of 1995 and the first half of 1996 as well as an increase
in the level of cancellations. Although new trailer sales for
1995 were higher than the comparable 1994 period, new trailer
sales and gross margins during the third and fourth quarters of
1995 were less than anticipated due to production problems at
the Fort Madison and Scott County trailer assembly plants. As a
result, both plants experienced spot shortages in raw materials
and component parts, with corresponding difficulties in
optimizing production schedules. New trailer sales, gross margin
percentages and operating cash flows were negatively affected by
these events. The Debtors continued to experience cancellations
subsequent to December 31, 1995, with the backlog of customer
orders totaling approximately $43 million as of August 31, 1996.
In addition, Fruehauf de Mexico's revenue sources continued to
be adversely affected by the poor economic conditions in the
Republic of Mexico. The reduction in near-term production
levels had a drastically adverse effect on sales and operating
profitability and on cash flows.
Fruehauf incurred massive losses prior to the filing of the
Chapter 11 petition which resulted in an insufficiency of cash
to sustain its operations and meet its obligations.
As of September 23, 1996, the Debtors' manufacturing facility
in Fort Madison, Iowa was idled due to cash constraints. As of
the Petition Date, Scott County had been idled due to cash
constraints.
Effective as of September 13, 1996, Thomas B. Roller, the former
President and CEO of Fruehauf, resigned from the company to
become the President and CEO of Wolverine Tube, Inc. In
addition, also effective as of September 13, 1996, Timothy J.
Wiggins, the former Executive Vice President and Chief Financial
Officer of Fruehauf, resigned from the company. Fruehauf's
Board appointed Derek L. Nagle President to replace Mr. Roller.
Formerly, Mr. Nagle was the Senior Vice President -- North
American Sales and Distribution for Fruehauf.
III.
THE CHAPTER 11 CASE
A. Commencement of the Cases.
The Debtors commenced these cases under Chapter 11 of the
Bankruptcy Code on October 7, 1996 (the "Petition Date"). The
Debtors continue to operate as debtors-in-possession, managing
their properties and estates in accordance with Sections 1107
and 1108 of the Bankruptcy Code.
B. First Day Relief.
At a hearing held on the Petition Date, the Debtors sought a
variety of forms of relief, typically referred to as "First Day"
relief. Initially, the Debtors sought and the Court approved
the retention of Jones, Day, Reavis & Pogue as bankruptcy
counsel, Morris, Nichols, Arsht & Tunnell as co-counsel, Carson,
Fischer, PLC as special counsel, Price Waterhouse LLP as
independent auditors, accountants, and tax and financial
advisors, and Logan & Company, Inc. as claims and noticing agent.
In addition, the Debtors received the Court's approval of a
variety of routine motions allowing them, among other things, to
(1) continue to use their existing centralized cash management
system and bank accounts, (2) pay certain pre-petition employee
wages, salaries and related items, (3) honor certain
pre-petition obligations to customers, and (4) pay certain
pre-petition trust fund taxes.
Additionally, the Debtors sought interim approval of first
priority secured post-petition debtor-in-possession financing
(the "Madeleine Facility") in an interim amount not to exceed
$35 million from Madeleine, LLC ("Madeleine"), an affiliate of
Cerberus Partners, L.P.
The Madeleine Facility provided the Debtors with a line of
credit with two components: a $35 million borrowing base
facility and an over-advance facility of $20 million. On the
Petition Date, the Court approved the DIP Facility on an interim
basis pending a hearing with respect to a final order. As part
of the Interim Order approving the DIP Facility, the Debtors
were authorized to use proceeds from the DIP Facility to pay
$6,739,006.12 to K-H for amounts due under the pre-petition
working capital facility and $6,656,425.85 to Congress Financial
Corporation ("Congress") to cash collateralize undrawn letters
of credit issued by Congress and other indemnity obligations and
$7,871,561.19 to Congress for amounts due under the pre-petition
working capital facility. Under the payoff letters with K-H and
Congress, the Debtors remained obligated to continue to
indemnify K-H and Congress for any indemnification and
reimbursement obligations under the loan documents as
administrative expenses. Additionally, Congress retained
$312,448.85 as cash collateral for any of the indemnification
and reimbursement obligations due to Congress under the loan
documents.
The Court entered a final order approving the Madeleine Facility
on November 5, 1996.
C. Formation of Unsecured Creditors' Committee and Bondholders'
Committee.
On October 21, 1996, the United States Trustee for the District
of Delaware appointed an Official Committee of Unsecured
Creditors for the Debtors' jointly administered cases. The
following entities were appointed as members of the Unsecured
Creditors' Committee:
a. The Airlie Group, L.P.;
b. Southern Fabricators, Inc.;
c. Decatur Aluminum Corp.;
d. Aluminum Co. of America (Alcoa);
e. Goodyear Tire and Rubber Co.;
f. Ruan Transport Corporation; and
g. Leclerc Inc.
The Unsecured Creditors' Committee retained Stroock & Stroock &
Lavan, L.L.P. as its counsel, and Saul, Ewing, Remick & Saul as
its local counsel. The Committee also retained Ernst & Young,
L.L.P. as its accountants. The Unsecured Creditors' Committee
currently consists of four members: Southern Fabricators, Inc.;
Decatur Aluminum Corp.; Aluminum Co. of America (Alcoa); and
Goodyear Tire and Rubber Co.
The Court also recognized the Unofficial Committee of Senior
Secured Noteholders (the "Bondholders' Committee") as parties in
interest. The Bondholders' Committee consists of (a) Herzog,
Heine & Geldue; (b) Lehman Brothers; (c) Bartlett & Co.; (d)
M.H. Davidson & Co.; (e) Foster & Motley, Inc.; (f); OTA Limited
Partnership; (g) Everen Securities; (h) Baker Nye Advisors; (i)
Miller Tabak Hirsch & Co.; (j) Kennedy, Cabot & Co.; (k) Credit
Research & Trading LLC; (l) Aisel & Co., L.L.C.; (m) Yamaichi
International (America); (n) Mariner Investment Group, Inc.; (o)
Paloma Partners; (p) Societe Generale Securities Corp.; and (q)
CoMac Partners, L.P. The Bondholders' Committee retained Haynes
and Boone, L.L.P. and Young, Conaway Stargatt and Taylor as
counsel.
D. First Asset Sales.
On December 3, 1996, Debtor Fruehauf Trailer Corporation sought
the Court's approval of its sale of certain real property
located in Philadelphia, Pennsylvania free and clear of all
liens, claims and encumbrances pursuant to Section 363 of the
Bankruptcy Code. Again, the net proceeds of the sale were to be
paid to Madeline in accordance with the terms of the final DIP
order. By the motion, Fruehauf sought the Court's approval of a
post-petition agreement entered according to terms as to which
there had been substantial agreement pre-petition, in September
1996. Those terms called for the sale of the Philadelphia
property to Navistar free and clear of all liens and interest
therein for $850,000.00. The Court approved the sale of the
Philadelphia property by order dated December 23, 1996.
E. Retention of Alvarez & Marsal Services.
The Debtors retained Alvarez & Marsal, Inc. ("A&M") as crisis
managers, with the Court's approval, on or about October 9,
1996, as required by the Madeleine Facility. On December 10,
1996, the Debtors moved the Court for an order expanding the
scope of A&M's employment to include financial advisory and
investment banking services. In connection with the Debtors'
exploration of a variety of reorganization scenarios, the
Debtors determined that the sale of some or all of their
businesses might be the appropriate method by which to maximize
the value of their estates for the benefit of creditors. The
Court approved the expanded scope of A&M's employment on
December 23, 1996.
F. Key Employee Retention Program.
On December 9, 1996, the Debtors sought Court approval of their
assumption and performance of a two-part pre-petition employee
retention program. The first part of the plan provided for
certain retention payments consisting of a percentage of an
employee's annual salary payable over time to encourage the key
employees to remain with the Debtors. The second program,
consisting of key employees and top-level management roles,
provided similar benefits albeit at a higher payment rate and
accelerated schedule. The total amount of the retention
payments was estimated at approximately $1.3 million. The Court
approved the Key Employee Retention Program by Order dated
December 23, 1996. The Program was not extended after it
expired in March 1997.
G. Significant Events During the Case.
1. Sale of Delphos Axle Plant to Holland Hitch.
On January 22, 1997, Fruehauf and Holland Hitch Company
("Holland Hitch") entered into a purchase agreement for the sale
of Delphos Axle unit. The agreement provided that Holland Hitch
would purchase the Delphos assets as a going concern and take
assignments of the Delphos sales contracts in exchange for cash
in the amount of $13 million, plus the agreed value at closing
of the Delphos Axle unit's inventory and the assumption of
certain liabilities.
By motion dated January 22, 1997, Fruehauf sought Court approval
for a procedure to sell the Delphos assets free and clear of
liens, claims and other encumbrances. The procedure generally
provided for a Solicitation for Bids to Purchase Fruehauf
Trailer Corporation's Delphos Axle Business and Assets and Terms
and Conditions of Auction (the "Solicitation") to be sent to all
parties either known by Fruehauf to have an interest in the
Delphos assets or identified by Fruehauf as having a potential
interest in the assets. The Solicitation identified the
procedures to be followed by each potential bidder. The
procedures required the submission of initial written bids by no
later than February 14, 1997, accompanied by bid deposits and
certain information relating to the financial wherewithal of the
bidder. The procedures contemplated an auction being held on
February 18, 1997, and further contemplated certain minimum
bidding requirements, including minimum bidding increments. The
procedures also required that offers be in cash and not subject
to further due diligence financing or other contingencies except
those contingencies provided for in the Delphos purchase
agreement with Holland Hitch.
In conjunction with seeking approval of the asset sale
procedures, Fruehauf also sought approval of an expense
reimbursement agreement with Holland Hitch. The expense
reimbursement agreement required Fruehauf to pay to Holland
Hitch a topping fee of $460,000 and to reimburse certain of
Holland Hitch's reasonable out-of-pocket expenses in the event
that the Bankruptcy Court approved a sale to a party other than
Holland Hitch or that Fruehauf failed to close a sale with
Holland Hitch after the Court had approved such sale. The Court
approved the asset sale procedures and the expense reimbursement
agreement.
Holland Hitch modified its offer to eliminate an environmental
escrow and reduced its bid to $12,250,000 plus the agreed value
of the inventory. Wabash National Corporation timely submitted
a bid in the amount of $13,250,000 plus the agreed value of the
inventory. On February 18, 1997, as contemplated by the asset
sale procedures, the Debtors conducted an auction of the Delphos
assets where Holland Hitch was the successful bidder with a bid
of $14,390,000 plus the value of the inventory. Thus, as a
result of the auction, the purchase price for the Delphos assets
increased $2,140,000. The Bankruptcy Court approved the sale of
the assets to Holland Hitch.
2. Sale of Debtors' U.S. Manufacturing and Sales and
Distribution Businesses to Wabash.
On February 15, 1997, Fruehauf Trailer Corporation and Fruehauf
International, Ltd. sought the entry of an Order: (i)
establishing bidding and asset sale procedures for substantially
all of the Debtors' businesses and assets as going concerns,
(ii) authorizing the sale of the assets free and clear of liens,
claims and other encumbrances, and (iii) authorizing assumption
and assignment of related leases and executory contracts.
Essentially, the motion sought to establish the procedure for an
auction of Fruehauf's domestic trailer manufacturing and
domestic sales and distribution businesses. The Debtors
proposed and the Court approved a solicitation requiring the
submission of initial bids by March 14, 1997, with an auction to
be held on March 18, 1997. The procedures required bid
deposits, information relating to the financial ability of each
bidder to perform and contemplated minimum bidding increments
and the submission of bids with substantially identical terms
and conditions as established by a form purchase agreement.
On March 14, 1997, the day that bids for the Debtors' assets
were due, the Debtors appeared before the Court with an offer
from Wabash National Corporation ("Wabash"). The Debtors sought
approval of a topping fee and expense reimbursement agreement
with Wabash. The agreement, which was approved by the Court,
provided for the Debtors' reimbursement of Wabash's expenses up
to $250,000 and payment to Wabash of a topping fee of $1.5
million. The topping fee was not to be payable to Wabash if the
Debtor determined that the assets to be sold to Wabash should be
reorganized rather than sold. The topping fee was payable if
the Debtor accepted a higher offer for the same assets or if the
Debtor operated outside the ordinary course of its business in a
manner which lead to a material adverse change.
Wabash was the sole bidder at the March 17 auction. In
connection with the auction, Wabash altered the terms of its
prior purchase agreement with the Debtors to include the
purchase of the Debtors' Fort Madison plant and the purchase
price increased approximately $4 million as a result.
The Wabash consideration consisted of $19 million in cash,
1,000,000 shares of Wabash common stock, and $17,600,000 of par
value of Wabash preferred stock. Although the total
consideration was insufficient to pay both the secured DIP
lender and the claims of the senior secured Noteholders in full,
the Court concluded that the sale was in the best interests of
the Debtors and its creditors since it appeared to represent the
market value of the assets. Madeleine, the DIP lender, objected
to the Wabash sale on the grounds that the cash portion of the
proceeds was insufficient to pay off the Madeleine loan. The
Debtors addressed the objection by seeking the Court's authority
to pay to Bank of America certain due diligence and commitment
fees as a first step to finding a replacement DIP lender and the
sale to Wabash was approved by the Court.
3. Rejection of Collective Bargaining Agreements and Termination
of Retiree Benefits.
a. Termination of Retiree Benefits.
The Debtors had approximately 1,800 retirees and dependents of
retirees (collectively the "Retirees") all of whom at some time
had been entitled to medical and related benefits from the
Debtors (the "Benefits"). Historically, the Debtors were self
insured for all of the Benefits.
The Debtors continued uninterrupted payment of Benefits from the
Petition Date through April 15, 1997, the day prior to the
closing of the Wabash sale. Payment of the post-petition
amounts required certain financial accommodations from
Fruehauf's predecessor, K-H Corporation ("K-H"). Nearly 90% of
the Debtors' Retirees were employees of K-H who retired prior to
Fruehauf's acquisition of K-H's trailer and maritime businesses.
As a result of its decision to dispose of its domestic
operations through a going concern sale, the Debtors sent
notices to Retirees on January 31, 1997, indicating that
Benefits would terminate on April 15, 1997. Section 1114 of the
Bankruptcy Code provides a process for the modification or
termination of retiree benefits. Consistent with the required
process, on April 16, 1997, the Debtors made a proposal to the
Paperworkers Union to terminate Benefits to the Paperworkers
Retirees and filed a motion for interim and final orders
terminating these Benefits pursuant to Sections 1114(g) and (h)
of the Bankruptcy Code. On April 18, 1997, the Court entered an
Agreed Order among the Debtors, the Paperworkers Union and the
Bondholders' Committee immediately terminating the Paperworkers
Benefits on an interim basis. The Debtors then requested that
the Paperworkers Union be designated as the representative of
the Retirees with respect to the Debtors proposed termination of
the Benefits. The Court granted this request. The Debtors made
a proposal to the Paperworkers Union that Retiree Benefits be
terminated because (i) the Debtors had no unencumbered assets
from which to pay the Benefits on a going forward basis (in
fact, the secured creditors were not likely to be paid in full);
and (ii) termination of the Benefits was necessary to maximize
the value of the Debtors' estate and provide the Debtors with an
opportunity to propose a plan of reorganization that would
maximize recoveries to all creditors. Further, the Debtors
pointed out that many of the retiree benefit plans at issue were
subject to termination or modification pursuant to their terms.
On May 29, 1997, the Court entered a Final Order Authorizing
Debtors to Modify Certain Retiree Benefits, Pursuant to Section
1114 of the Bankruptcy Code in which all Retiree Benefits were
terminated. Continuing benefits may be available to some
retirees from Fruehauf predecessors who may be co-obligors on
Retiree Benefits. The termination of the Retiree Benefits will
not affect the pension rights of retirees.
b. Collective Bargaining Agreements.
The Debtors were parties to approximately 40 current or former
collective bargaining agreements (collectively, the "CBAs") with
various labor organizations (collectively, the "Unions")
representing certain former employees of the Debtors
(collectively, the "Employees"). Upon the sale of the Delphos
Axle plant and the sale of the domestic manufacturing and sales
and distribution operations to Wabash, virtually all of Debtors'
Employees were terminated. Although Holland Hitch and Wabash
agreed to hire many of the Employees, it did not agree to the
assignment of the CBAs in connection with the purchases. By
motion dated April 22, 1997, the Debtors sought authority to
terminate and reject their CBAs pursuant to Section 1113 of the
Bankruptcy Code. At the same time, the Debtors sent notice to
the Unions that it proposed to terminate and reject all CBAs and
agreed to meet with the Unions to discuss the proposed
termination and rejection, all as required by Section 1113 of
the Bankruptcy Code. In their motion, the Debtors pointed to
the sale of their assets and the termination of their Employees
as grounds for termination and rejection of the CBAs. The
Debtors also pointed out that they had no unencumbered assets
with which to pay any obligations that might arise under the
CBAs. The Debtors did not waive their right to assert that the
CBAs had already been terminated pursuant to their terms.
Following negotiations with the Unions and a hearing on notice,
the Bankruptcy Court approved termination of the Debtors' CBAs
on May 29, 1997.
4. Receipt of $6.5 Million Senior Mortgage on Certain
Jacksonville Property.
As noted above, Jacksonville held a promissory note in the
principal amount of $3,777,100.00 secured by a mortgage
encumbering property, a 50 acre parcel of land in Duval County,
Florida which is owned by JRD. On December 3, 1996, Debtor
Jacksonville sought Court approval of an agreement to sell the
promissory note and purchase money mortgage pursuant to Section
363(b) of the Bankruptcy Code. Under the agreement,
Jacksonville agreed to sell the note and mortgage to JRD for
$2.745 million, which, less certain fees, costs and expenses
related to the sale, would be paid to the Debtor's DIP lender in
accordance with the terms of the final DIP order entered on
November 5, 1996. In a hearing on December 23, 1996, the Court
approved the Debtor's motion authorizing it to sell the note and
mortgage. However, the sale never closed. JRD defaulted on its
obligations to pay the note and Jacksonville instituted
foreclosure proceedings. Subsequently, JRD filed chapter 11 in
Jacksonville, Florida to stay the foreclosure, and Jacksonville
pursued its rights in that bankruptcy case.
On May 22, 1998, JRD's plan of reorganization was confirmed.
With respect to JRD's default on the promissory note in the
principal amount of $3,777,100.00 secured by a mortgage,
Jacksonville received an allowed secured claim against JRD in
the amount of $5,140,000 (the "Claim"). In addition, under
JRD's plan, Jacksonville loaned JRD $1,342,046 (the "Tax Loan")
to redeem certain tax certificates that endangered
Jacksonville's recovery on its claim against JRD. To ensure
repayment of both the Tax Loan and the Claim, Jacksonville has
received a consolidated five year note in the amount of
$6,502,583.00 (the "Note") secured by a first mortgage on the
property. The Note accrues interest at 12.5% per annum and is
repayable in monthly payments based on a 20 year amortization.
JRD's monthly payments to Jacksonville on the Note will also
include payment of 12% of the interest owed, and an additional
0.5% in interest will accrue and be due on the sale of
Jacksonville's collateral, on refinancing or in 5 years, when
the Note matures. In addition, JRD is required to (i) fund a
tax escrow account maintained by Debtors' counsel to ensure
payment of all property taxes; (ii) adequately insure the
property, and (iii) comply with any orders issued by the Florida
Department of Environmental Protection (including an existing
consent order) relating to environmental concerns with respect
to the property.
5. Replacement of the Madeleine Facility with the BOA Facility.
In conjunction with the Debtors' efforts to close the sale to
Wabash, the Debtors sought court authority to enter into a
debtor-in-possession financing agreement (the "BOA Facility")
with Bank of America NT&SA. As described above, the Debtors'
original DIP lender was Madeleine. Under the terms of the
Madeleine Facility, Madeleine had the authority to disapprove a
sale of the Debtors' assets. Madeleine had opposed the sale to
Wabash on the limited basis that the sale would not produce
sufficient cash to retire the Madeleine Facility. Through the
BOA Facility, the Debtors sought sufficient financing to pay off
the Madeleine Facility with a combination of the cash proceeds
from the Wabash sale and a draw on the BOA Facility. The BOA
Facility was needed to finance the wind down of the estates.
The BOA Facility allowed the Debtors to borrow up to $12.5
million. The BOA Facility was secured by a first priority lien
and security interest in all property of the Debtor's estate,
including the Wabash stock that Debtors would receive in
conjunction with the Wabash sale. BOA was also granted a super
priority administrative expense claim to secure repayment of the
BOA Facility.
The BOA Facility was approved by the Bankruptcy Court and the
Madeleine Facility was retired at the closing of the Wabash
sale. In August 1997, the Debtors sold sufficient shares of
Wabash common stock in a private placement to pay off the BOA
Facility and to provide the Debtors with sufficient ongoing
working capital.
6. Litigation with Alvarez & Marsal and Thomas E. Ireland.
Fruehauf and the Unofficial Committee objected to the fee
application of A&M, the crisis managers and investment bankers
for Fruehauf. A&M was employed as the crisis manager (with
Thomas E. Ireland serving as Chief Executive Officer of
Fruehauf) shortly after the case was filed. The engagement was
expanded to include investment banking services effective
November 21, 1996. While A&M was employed in both roles,
Fruehauf sold substantially all of its assets, including an axle
manufacturing plant in Delphos Ohio to Holland Hitch. In
addition, Wabash purchased Fruehauf's sales and distribution
network and its Scott County and Fort Madison trailer
manufacturing plants.
A&M requested approval of crisis management fees of $708,333.33
and investment banking fees of $1,010,104.05 and also filed an
unliquidated administrative expense claim for indemnification by
Fruehauf for the litigation expenses. Oppenheimer & Co., which
had served as the Debtors' investment bankers before the
bankruptcy filing, filed an administrative claim asserting a
right to a fee for its pre-petition investment banking work.
Fruehauf and the Bondholders' Committee objected to
Oppenheimer's administrative claim and that dispute was
consolidated with the A&M application. After extensive
discovery and litigation, the dispute was settled. The
settlement, which was approved by the Bankruptcy Court, included
A&M reducing its investment banking fee by $550,000, and
returning the balance of its retainer after paying the balance
owed on its crisis management fees. Oppenheimer received
$100,000 in cash and an allowed unsecured claim of approximately
$1.6 million. From the litigation, Fruehauf received
approximately $535,000, net the payment to Oppenheimer. The
parties exchanged mutual releases and a joint press release
was issued by Fruehauf and A&M announcing the settlement.
7. Relocation of Offices to California.
After the sale of the remaining domestic manufacturing and Sales
and Distribution system to Wabash, the Debtors had no ongoing
need for their corporate headquarters to remain in its leased
space in Indianapolis. The headquarters lease was rejected on
June 1, 1997, and the remaining books, records and headquarters
were relocated to California to office space near the Debtors'
Chairman and President and its employees. The move, which did
not include relocating any employees, saved the Debtors' money
by reducing leasehold expenses and travel costs associated with
the Indianapolis headquarters.
8. Sales of Wabash Stock.
Fruehauf sold 800,000 of the 1,000,000 shares of unregistered
and restricted Wabash National Corporation stock it received in
April 1997. On August 15, 1997, Fruehauf sold 600,000 of its
shares of Wabash Common Stock to Merrill Lynch, Pierce Fenner &
Smith Incorporated ("Merrill Lynch") which realized cash
proceeds of $15,641,361.81. The sale to Merrill Lynch was done
to enable Fruehauf to pay, in full, the sum of $8,274,115.97 to
Bank of America, Fruehauf's debtor in possession lender, and to
obtain working capital. On November 7, 1997, Fruehauf sold an
additional 200,000 of its shares of Wabash Common Stock to
Merrill Lynch which realized cash proceeds of $5,591,625.00.
This sale was done to obtain additional working capital. The
sales were accomplished in private placements since the stock
had not been registered and was restricted when it was sold.
H. Current Management of the Debtors and Disclosure of
Compensation.
The Debtors' Boards of Directors each have two members -- Chriss
W. Street and Worth W. Frederick. From October 1996 through
April 16, 1997, Fruehauf's Board also included Jonathan Gallen
and Robert Incorvaia who had been designated by the initial DIP
lender and who resigned when that debt was paid.
The Debtors' current officers and their annual compensation is
as follows:
Chriss W. Street, Chair, President and CEO $270,000
James Wong, CFO and Treasurer $78,000
Worth W. Frederick, Vice President $90,000
Courtney Watson, Secretary $65,000
Chriss W. Street
In 1996, Mr. Street was elected to the Board of Directors of
Fruehauf Trailer Corporation and became its Chairman in October
of 1996. After the resignation of Mr. Ireland as CEO in April
1997, Mr. Street became Fruehauf's CEO. Mr. Street was
instrumental in negotiating the sale of Fruehauf's sales and
distributions and manufacturing assets to Wabash. Mr. Street
was also instrumental in obtaining and negotiating the
replacement DIP loan from Bank of America.
After the Effective Date, Mr. Street will serve as Liquidating
Trustee of the Liquidating Trust. In addition to his positions
with Fruehauf, Mr. Street is a principal in Chriss Street &
Company and the Chairman and CEO of Comprehensive Care
Corporation. Mr. Street is an investment banker and corporate
workout specialist with a proven background in assessing and
maximizing the value in troubled companies and their assets. A
former officer of Dean Witter Reynolds & Company and Kidder
Peabody & Co. and a managing director of Sidler Amdec
Securities, Mr. Street formed his own company, Chriss Street &
Company in 1992, and he currently serves as President. The firm
specializes in the securities of troubled companies.
Worth W. Frederick
Worth W. Frederick currently serves as Vice President and a
Director of Fruehauf Trailer Corporation and is the acting
President and managing director of Fruehauf de Mexico. Under
his leadership, the Mexican operations have tripled production
and obtained profitability.
Mr. Frederick has extensive hands-on experience in management
consulting services. He has helped a number of companies
analyze their business problems, increase productivity and
profitability, assessing manufacturing operations and improve
project planning, scheduling and quality control. He has served
as an interim Chief Executive Officer, Chief Operating Officer
and in other senior management positions. Prior to becoming a
consultant, Mr. Frederick had extensive experience in the
manufacturing area, including serving as an executive officer of
Teledyne Systems and of Ford Aerospace Corporation. Mr.
Frederick also served as the President and CEO of Asco Aerospace
Products. In these capacities, Mr. Frederick has directed all
aspects of manufacturing, including project planning, product
assurance, engineering, and materiel and logistics organization.
Mr. Frederick holds an M.S. in Industrial Management (comparable
to an M.B.A.) and a B.S. in electrical engineering from Purdue
University.
James Wong
James Wong serves as the Chief Financial Officer, Treasurer and
Vice President of Fruehauf Trailer Corporation. He also shares
responsibility with Mr. Frederick for oversight of the
operations of Fruehauf de Mexico. Mr. Wong managed the wind
down and transition of Fruehauf after the sale to Wabash. Mr.
Wong has also worked extensively on evaluating Fruehauf's
remaining assets and in trying to sell the remaining property,
much of which has environmental issues.
From 1994 through 1997, Mr. Wong served as Vice President of
Chriss Street & Company and as Senior Financial Analyst for
Comprehensive Care Corporation. Mr. Wong was instrumental in
the financial restructuring of Comprehensive Care Corporation,
which is listed on the New York Stock Exchange. In these
capacities, Mr. Wong analyzed a number of distressed companies
as well as certain debt and equity securities in a number of
industries, including the health care industry, and the ground
transportation, computer disk drive and soft line retail
industries. As Financial Analyst for Comprehensive Care
Corporation, Mr. Wong performed numerous standard corporate
accounting functions, analyzed merger and acquisition targets,
engaged in due diligence and performed company valuations and
deal structuring. Prior to joining Chriss Street & Company, Mr.
Wong served as a financial analyst with Merrill Lynch.
Courtney Watson
Courtney Watson currently serves as corporate secretary of
Fruehauf Trailer Corporation. In that capacity, she maintains
corporate records and administers a number of employee relations
functions as part of the winding down of Fruehauf's operations.
Ms. Watson has also attempted to create order from the remaining
financial records of Fruehauf and to assure payment of
post-petition obligations of the Debtor.
Ms. Watson also serves as the corporate secretary for
Comprehensive Care Corporation and is the Chief Financial
Officer of Chriss Street & Company where she is responsible for
accounting transactions, securities transactions and securities
compliance. She has securities License Series 7, Series 63 and
Series 28. Before joining Chriss Street & Company, Ms. Watson
operated a business that offered a wide range of accounting
services needed by small businesses and individuals. From 1980
through 1989, Ms. Watson was a project manager at Ford Aerospace
and Communications Corporation where she managed contracts and
presented cost versus budget performance using cost schedule
status reporting.
The officers will receive the following bonuses on the Effective
Date of the Plan:
Chriss W. Street $350,000
Worth W. Frederick $100,000
James Wong $50,000
Courtney Watson $50,000
These bonuses reward the officers for the significant results
they achieved in liquidating the Debtors' assets and the
substantial work performed before becoming employees of the
Debtors as well as after assuming these positions. The Debtors
do not intend to seek Court approval of these bonuses by
separate motion. These bonuses will be paid pursuant to Section
9.7 of the Plan, and the Debtors will request that approval of
the bonuses be included in the order approving the Plan.
I. Assets and Liabilities of the Debtors.
1. Debtors' Major Assets (*)
a. Unrestricted Cash and Short Term Investments
Debtors had $7,086,000 in cash and short term investments as of
May 31, 1998.
b. Stock of Wabash National Corporation
(*) This discussion does not indicate the specific Debtor that
owns each asset. All of the Debtors' assets are subject to the
liens of the holders of the Senior Notes. Since the value of
the assets does not exceed the amount owed to the holders of the
Senior Notes, the ownership of specific assets is irrelevant to
unsecured creditors. Distributions under the Plan to
administrative, priority and unsecured creditors are only being
made because the Senior Noteholders have agreed to allow such
distributions from their collateral.
(1) 200,000 shares of Common Stock of Wabash National
Corporation. Based on the closing price of the Wabash Common
Stock on July 15, 1998 (i.e., $26 3/16), the aggregate value of
the 200,000 shares was $5,237,500 as of that date.
(2) 352,000 shares of $50 Preferred Stock of Wabash National
Corporation convertible into shares of common stock of Wabash
National Corporation at a price of $21.375 per share. The
Preferred Stock includes a coupon rate of 6% on the face value
of $17,600,000 and is redeemable by Wabash under certain
circumstances. Based on the closing price of Wabash Common
Stock on July 15, 1998, the aggregate value of the 352,000
shares of Wabash Preferred Stock (each share of which is
convertible into approximately 2.34 shares of Wabash Common
Stock) was $21,562,551 as of that date.
c. Fruehauf de Mexico
(1) Operations
Fruehauf de Mexico owns and operates a trailer manufacturing
plant located approximately 45 minutes north of the Mexico City,
Mexico airport. In May 1998, the plant manufactured 156
trailers, primarily for sale in Mexico. The main plant covers
108,000 square feet (70 x 171 meters) and has the capacity to
manufacture 1920 trailers per year (using a single shift at
current efficiency without overtime or weekend work by
employees). Worth Frederick, Vice President, is responsible for
overseeing the plant and its operations. Fruehauf de Mexico has
shown a small operating profit (EBITDA) on a monthly basis since
June 1997.
(2) Assets and Liabilities
As of May 31, 1998, Fruehauf de Mexico's primary assets and
liabilities and their related book values in U.S. dollars were:
Assets
Cash $ 369,000
Accounts Receivable 3,414,000
Inventory 3,864,000
Property, Plant & Equipment 6,010,000
------------
Total $13,657,000
Liabilities
Trade Payables & Accrued Liabilities $ 2,547,000
Customer Advances 845,000
Short Term Debt 171,000
Other Current Liabilities 740,000
Note Payable to FTC 2,658,000
-----------
Total $ 6,961,000
*This value represents appraised fair market value of the
property, plant and equipment as of January 8, 1998.
Customarily, Fruehauf de Mexico's customers pay substantial
deposits with their orders for trailers.
(3) Labor situation
Fruehauf de Mexico employs approximately 357 full time
employees. The employees are represented by CTM for collective
bargaining purposes. Fruehauf de Mexico is not experiencing any
labor problems at this time.
(4) Competition
Fruehauf de Mexico's market share (in Mexico) is approximately
35%. Its primary competitors, and their respective market
shares, are Ramirez, 20%; Caytressa, 15%; and Gonzales, Rocsa,
Retessa, Wabash, and others, each with approximately 5%.
Fruehauf de Mexico currently manufactures the following types of
trailers: dry freight vans, reefers, bottom hoppers, end dumps,
rock dumps, liquid tankers and platforms.
(5) Intercompany obligation
As of May 31, 1998, Fruehauf de Mexico owed Fruehauf $2,658,000
on a revolving credit agreement.
(6) Financing
Fruehauf de Mexico entered into a $1 million (US) line-of-credit
financing agreement with Mercedes Benz Financing. Draws accrue
interest at LIBOR plus 6.5%. The balance as of May 31, 1998 is
$171,000 and the agreement expires in January 1999.
(7) Management
Worth Frederick is the general manager of Fruehauf de Mexico.
Mr. Frederick has many years of experience in the manufacturing
industry and has been a member of Fruehauf's Board since 1996.
James Wong, who has worked with Chriss Street in corporate
restructurings for the last four years, assists Mr. Frederick as
the Finance Director in overseeing Fruehauf de Mexico's
operations. Marcelino Carmona, who has been with the Company
for thirty (30) years, will continue as Director of Plant
Operations. Eliseo Flores, who has worked in trailer sales for
over 15 years and for the last six years in Mexico, will
continue as Director of Sales.
(8) Ownership
Fruehauf International Ltd. is the majority owner of Fruehauf de
Mexico.
d. Jacksonville Riverfront Development Note Receivable
As noted above, Jacksonville holds a five year promissory note
in the amount of $6,502,583.00 (the "Note") secured by a first
mortgage on approximately 50 acres of riverfront property
located in downtown Jacksonville, Duval County, Florida. The
Note accrues interest at 12.5% per annum and is repayable in
monthly payments based on a 20 year amortization. JRD's monthly
payments to Jacksonville on the Note will also include payment
of 12% of the interest owed, and an additional 0.5% interest
will accrue and be due on the sale of Jacksonville's collateral,
on refinancing or in 5 years, when the Note matures. In
addition, JRD is required to (i) fund a tax escrow account
maintained by Debtors' counsel to ensure payment of all property
taxes; (ii) adequately insure the property; and (iii) comply
with any orders issued by the Florida Department of
Environmental Protection (including an existing consent order)
relating to environmental concerns with respect to the property.
e. Kearny Branch Note Receivable
The Debtor sold its branch in Kearny, New Jersey to 15
Hackensack Avenue Corp. before these cases were filed. The
purchase price included a 60 month promissory note with an
original face amount of $2,400,000 and requiring monthly
payments of $10,000 in principal plus an additional amount for
interest, all of which is secured by the property. The note
balloons on February 1, 2001. As of March 31, 1998, the balance
owed the Debtor was approximately $1,734,000. The note has been
in default since February of 1997, although the borrower has
continued to pay $25,000 a month. Fruehauf is instituting
foreclosure proceedings against 15 Hackensack Avenue Corp.
This property has environmental damages which need to be
remediated. The note calls for these costs to be split evenly
between the purchaser of the property and FTC, with a maximum
exposure to FTC of $500,000. No such costs have yet been
incurred, and the $500,000 claim asserted by 15 Hackensack
Avenue Corp. against Fruehauf with respect to this contingent
liability has been disallowed by the bankruptcy court.
f. Sindorf
The Debtors believe that Fruehauf International Limited ("FIL"),
through various entities, has an interest or interests in
property located in Sindorf, Germany, an industrial municipality
near Cologne. The Debtors believe that FIL owns
Deutsche-Fruehauf Holdings Corporation and the Debtors believe
that FIL also owns Deutsche-Fruehauf Beteiligungs GmbH, which
owns 98% and 2%, respectively, of the partnership interests in
Fruehauf Corporation & Co. OHG, a German partnership. The
Debtors believe this partnership has an interest in 54,581
square meters of real property in Sindorf. At the present time,
despite investigation, it remains unclear what interest, if any,
FIL has in the Sindorf property. In addition, the German
Pension Protection Agency (PSVaG) has a claim against Fruehauf
for DM 6.01 million with respect to the Sindorf property.
Fruehauf also has other liabilities associated with the Sindorf
property that are approximately DM 0.2 million.
g. Miscellaneous Real Estate
The Debtors own various tracts of real estate throughout the
U.S. The Debtors own eight home lots in Lexington Township,
Davidson County, North Carolina, that do not meet certain city
ordinances governing home lots and thus have little, if any,
value. The Debtors own three additional sites in Jacksonville,
the Hogan's Creek property, the Pickettsville dump site and
Mayport. These sites have values that are very difficult to
determine. The Hogan's Creek property cannot be sold at this
time because it may be taken by eminent domain (the property
adjoins a highway). The Pickettsville dump site may contain
hazardous waste and an environmental study will have to be
undertaken to determine the future best use of this property.
The Mayport property consists of three lots of undeveloped light
industrial commercial real estate. Management has estimated the
value of this property at $300,000. Finally, Fruehauf owns 7.89
acres with a building in Harrisburg, Pennsylvania that has been
appraised for $350,000.
h. Miscellaneous Receivables and Escrows
The primary receivables and escrows, excluding the receivable
from Fruehauf de Mexico discussed above, arise from refunds of
insurance premiums and state sales tax payments. Other escrows
are held by the Debtors' former DIP lender, Madeleine and
various present and former professionals. The largest escrow is
from the Debtors' workers compensation carriers and providers of
financial responsibility bonds for Fruehauf prior to the
Petition Date, American International Group and its related
insurance companies ("AIG"), in the amount of approximately
$4.5 million. The AIG escrows will be released when the claims
against the policies have been resolved or through litigation
with AIG. There can be no assurance that any of these
receivables or escrows will have any value.
i. Causes of action
The Debtors are currently investigating possible causes of
action they might have against various parties. The bankruptcy
related causes of action include preferential and other
avoidable transfers. The Debtors have yet to identify a precise
amount that it would seek from the recipients of these
transfers.
With respect to preferences, any entity or person who received a
payment or other property from the Debtors within the 90 days
before the Petition Date (or one year before the Petition Date
if the entity or person is an insider, as defined in section
547(b)(4)(B) of the Bankruptcy Code) is a potential target by
the Debtors for a preference action under section 547 of the
Bankruptcy Code. The Debtors' efforts to investigate
preferences has been hampered by the lack of certain records
which should have been kept and maintained in the ordinary
course of business by the Company. To date, the following
entries or individuals are being investigated by the Debtors to
determine whether they received a preferential transfer:
Preferred Fabricators, Inc. ($177,000), West Michigan Trailer
Sales, Inc. ($67,000), Shiloh Corporation ($24,000).
The Debtors are also investigating possible causes of action
against Terex Corporation and K-H Corporation related to their
prior ownership of the Fruehauf business and their transactions
in that regard. It is also investigating possible causes of
action against officers and directors .
Efforts are being made to try to realize upon what the Debtors
believe are over-funded pension plans (on a consolidated basis)
presently maintained by the Debtors. In addition, the Debtors
have commenced an action with respect to Fruehauf Trailer
Corporation Retirement Plan No. 3 under section 548 of the
Bankruptcy Code with respect to an increase in pension benefits
approved for certain non-union, long-time employees of Fruehauf
just three weeks before the Debtors filed their chapter 11
petitions, alleging that such increase was a fraudulent transfer
which should be voided.
The Debtors presently intend to contest the various claims of
AIG, including the amount of the escrowed funds presently held
by AIG.
The Debtors are also evaluating a number of secured claims,
including priority and secured tax claims, and may object to
these claims either before or after confirmation.
All causes of action of the Debtors, whether arising under the
Bankruptcy Code or otherwise, are reserved and retained by the
Debtors and will be transferred to the Liquidating Trustee.
2. Liabilities
All of the Debtors' assets are encumbered by liens in favor of
the holders of the Senior Notes. The outstanding principal and
accrued interest amount of the Senior Notes on the filing date
was $57,988,778. To the extent that the value of the Debtors'
assets exceeds the principal amount owed to the holders of the
Senior Notes, the Senior Notes accrue post-petition interest.
The estimated values of the Debtors' assets, as described above,
total less than the principal amount owed to the holders of the
Senior Notes.
The Debtor believes that there are no more than three record
holders and no fewer than twenty beneficial holders of the
Senior Notes. Members of the Bondholders' Committee may hold as
much as 80% (in value) of the Senior Notes.
Pursuant to the terms of the Plan, the Senior Noteholders have
agreed to the creation of a Distribution Fund from which the
Administrative and Priority Claims of the Debtors shall be paid.
The Debtors currently estimate that Administrative Claims,
excluding unpaid professional fees, will be approximately
$450,000. As of May 31, 1998, unpaid professional fees were
approximately $1,539,069. Priority claims, including Priority
Tax Claims, could be as much as $1,250,000. The Debtors believe
they have meritorious defenses to a number of the Priority
Claims and that the total amount of Priority Claims will be
materially less than this amount.
In addition to the claims of the Senior Noteholders, other
creditors, whose claims may total as much as $385,000, assert
liens or security interests in the Debtors' assets. These
creditors are treated as Class 3 creditors under the Plan. Many
of these claims are contingent and disputed.
Over $936 million of Unsecured Claims have been asserted against
the Debtors. The Debtors have not attempted to estimate the
amount of Unsecured Claims that will ultimately be allowed. The
Debtors scheduled $49 million in Unsecured Claims, but
unliquidated, Disputed Claims that are ultimately allowed may
increase the total unsecured debt above the scheduled amount.
IV.
SUMMARY OF PLAN
A. Overview
Although the holders of the Senior Notes could foreclose their
liens in all of Debtors' assets leaving nothing for other
creditors, the holders of the Senior Notes have agreed to this
Plan which provides for the payment of Allowed Administrative,
Priority and Pre-Petition Tax Claims and for a potential
distribution to general unsecured creditors. The Wabash
Securities will be conveyed to the Indenture Trustee to be
distributed to the holders of the Senior Notes. The Debtors
remaining assets will be foreclosed and/or transferred to the
Liquidating Trust. The holders of Allowed Administrative,
Priority and Pre-Petition Tax Claims will receive Class B
beneficial interests in the Liquidating Trust's Distribution
Fund. The Senior Noteholders have also agreed that if Class 4
(unsecured creditors) accepts the Plan, holders of Allowed
unsecured Claims will receive 5.5% of the Class A Beneficial
Interests in the Liquidating Trust. Ownership of the Class A
Beneficial Interests in the Liquidating Trust will be evidenced
by Trust Certificates.
Chriss W. Street, the current Chair and CEO of the Debtors will
serve as Trustee of the Liquidating Trust. A Trust Advisory
Committee of two (2) holders of Senior Notes will also be
created to assist in the decision-making process.
THIS SECTION PROVIDES A SUMMARY OF THE CLASSIFICATION AND
TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN, AND THE MEANS
FOR IMPLEMENTATION OF THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE PLAN, WHICH IS ATTACHED TO THIS DISCLOSURE
STATEMENT AS EXHIBIT A, AND TO THE OTHER EXHIBITS ATTACHED
THERETO. ALL CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS
SECTION HAVE THE MEANINGS ASCRIBED TO SUCH TERMS IN THE PLAN.
B. Designation of Claims and Interests.
1. Summary.
The following is a designation of the classes of Claims and
Interests under this Plan. In accordance with section
1123(a)(1) of the Bankruptcy Code, Administrative Claims and Tax
Claims described in Article 3 of this Plan have not been
classified and are excluded from the following classes. A Claim
or Interest is classified in a particular class only to the
extent that the Claim or Interest qualifies within the
description of that class, and is classified in another class or
classes to the extent that any remainder of the Claim or
Interest qualifies within the description of such other class or
classes. A Claim or Interest is classified in a particular
class only to the extent that the Claim or Interest is an
Allowed Claim or Allowed Interest in that class and has not been
paid, released or otherwise satisfied before the Effective Date;
a Claim or Interest which is not an Allowed Claim or Interest is
not in any Class. Notwithstanding anything to the contrary
contained in this Plan, no distribution shall be made on account
of any Claim or Interest which is not an Allowed Claim or
Allowed Interest.
Class Status
A. Secured Claims
Class 2: Secured Claims of holders Impaired - entitled to vote
of Senior Notes
Class 3: Secured Claims other than Impaired - entitled to vote
Senior Note Claims
B. Unsecured Claims
Class 1: Priority Claims Unimpaired - no right to vote
Class 4: All Unsecured Claims Against Impaired - entitled to vote
the Debtors
C. Interests
Class 5: Old Common Stock Impaired - deemed to have
rejected
Class 6: Old Warrants Impaired - deemed to have
rejected
Class 7: Securities Claims Impaired - deemed to have
rejected
C. Treatment of Unclassified Claims
1. Administrative Claims.
a. General. Subject to the bar date provisions herein, unless
otherwise agreed to by the parties, each holder of an Allowed
Administrative Claim shall receive Cash equal to the unpaid
portion of such Allowed Administrative Claim on the later of (a)
the Effective Date or as soon as practicable thereafter, (b) the
date on which such Claim becomes an Allowed Administrative Claim
and (c) such other date as is mutually agreed upon by the
Debtors and the holder of such Claim. All holders of Allowed
Administrative Claims shall have a beneficial interest in the
Liquidating Trust's Distribution Fund, and the Distribution Fund
shall be the sole source of payment of such Claims.
b. Payment of Statutory Fees. All fees payable pursuant to 28
U.S.C. S 1930 shall be paid in Cash equal to the amount of such
Administrative Claim when due.
c. Bar Date for Administrative Claims.
(i) General Provisions. Subject to the exceptions provided in
sections 3.1(c)(ii) and (iii), by Order dated August 13, 1997,
the Court established October 6, 1997 as the date by which
certain holders of Administrative Claims arising prior to August
13, 1997 must have filed Proofs of Claim in lieu of requests for
payment of Administrative Claims. Holders of Administrative
Claims that have not filed such Proofs of Claim by the
applicable Administrative Claim bar date shall be forever barred
from asserting such Claims against the Debtors, the Liquidating
Trust or any of the Debtors' property.
(ii) Professionals. All professionals or other entities
requesting compensation or reimbursement of expenses pursuant to
sections 327, 328, 330, 331, 503(b) and 1103 of the Bankruptcy
Code for services rendered before the Effective Date (including,
without limitation, any compensation requested by any
professional or any other entity for making a substantial
contribution in the Reorganization Case) shall File and serve on
the Liquidating Trustee at 1111 Bayside Drive, Suite 100, Corona
del Mar, California 92625-1755; Haynes and Boone, L.L.P., (Attn:
Robin Phelan, Esq.) 901 Main Street, Dallas, Texas 75202-3789,
as counsel to the Bondholders' Committee; Camhy Karlinsky &
Stein LLP (Attn: David Neier, Esq.), 1740 Broadway, New York,
NY 10019; Morris, Nichols, Arsht & Tunnell (Attn: William H.
Sudell, Jr., Esq.), 1201 North Market Street, Wilmington,
Delaware 19801; and The Honorable Patricia A. Staiano, United
States Trustee, The Curtis Center, 601 Walnut Street, Suite
950W, Philadelphia, PA 19106; an application for final
allowance of compensation and reimbursement of expenses no later
than forty-five (45) days after the Effective Date. Objections
to applications of professionals for compensation or
reimbursement of expenses must be Filed and served on the
Liquidating Trustee and the professionals to whose application
the objections are addressed no later than seventy (70) days
after the Effective Date. Any professional fees and
reimbursements or expenses incurred by the Liquidating Trust
subsequent to the Effective Date may be paid by the Liquidating
Trust without application to the Bankruptcy Court. The
Liquidating Trustee shall pay the reasonable fees and expenses
of the professionals of the Bondholders' Committee incurred
prior to the Effective Date and the fees and expenses of the
Indenture Trustee incurred prior to the Effective Date as
determined by the Court.
d. Tax Claims. All requests for payment of Administrative
Claims and other Claims by a governmental unit for taxes (and
for interest and/or penalties related to such taxes) for any tax
year or period, all or any portion of which occurs or falls
within the period from and including the Petition Date through
and including the Effective Date ("Post-petition Tax Claims")
and for which no bar date has otherwise been previously
established, must be Filed on or before the later of (i) 45 days
following the Effective Date; and (ii) 90 days following the
filing with the applicable governmental unit of the tax return
for such taxes for such tax year or period. Any holder of any
Post-petition Tax Claim that is required to File a request for
payment of such taxes and does not File such a Claim by the
applicable bar date shall be forever barred from asserting any
such Post-petition Tax Claim against any of the Debtors, the
Liquidating Trust or their respective properties, whether any
such Post-petition Tax Claim is deemed to arise prior to, on, or
subsequent to the Effective Date. To the extent that the holder
of a Tax Claim holds a lien to secure its Claim under applicable
state or federal law that survives the deemed foreclosure by the
holders of the Senior Notes, the surviving lien shall attach to
the Distribution Fund and remain in effect until the Tax Claim
has been paid in full. To the extent that a Tax Claim is a
Disputed Claim, any lien securing such Disputed Claim under
applicable state or federal law shall attach to the Distribution
Fund for such Disputed Claim. Upon disallowance of a Disputed
Tax Claim or allowance and payment of such claim, such lien
shall be released. Failure by the Liquidating Trustee to make a
payment on an Allowed Tax Claim pursuant to the terms of the
Plan shall be an event of default. If the Liquidating Trustee
fails to cure an event of default as to an Allowed Tax Claim
within twenty (20) days after service of written notice of
default from the holder of such Allowed Tax Claim, then the
holder of such Allowed Tax Claim may enforce the entire amount
of its Claim, plus interest as provided under this Plan, against
the Liquidating Trust in accordance with applicable state or
federal law remedies. At the option of the Liquidating Trustee
and as an alternative to the treatment provided above, the
Liquidating Trustee may surrender the property securing the
post-petition Tax Claim and allow the holder to foreclose upon
the property. Surrendering the property will satisfy the Tax
Claim in full.
2. Treatment of Pre-Petition Tax Claims. Each holder of an
Allowed
Pre-Petition Tax Claim shall have a beneficial interest in the
Liquidating Trust's Distribution Fund and be paid in Cash from
the Distribution Fund on the latest of: (i) the first
practicable date after the Effective Date, (ii) 30 calendar days
after the date on which an Order allowing such Claim becomes a
Final Order, (iii) the last day the taxes may be paid under
applicable law without incurring penalties or interest, and (iv)
such other time or times as may be agreed by the holder of such
Claim and the Trustee. To the extent that the holder of a Tax
Claim holds a lien to secure its Claim under applicable state
law following the deemed foreclosure by the holders of the
Senior Notes, the surviving lien shall attach to the
Distribution Fund and remain in effect until such Allowed
Pre-petition Tax Claim has been paid. To the extent that a Tax
Claim is a Disputed Claim, any lien securing such Disputed Claim
under applicable state law shall either remain in effect or
attach to the Distribution Fund reserve for such Disputed Claim.
Upon disallowance of a Disputed Tax Claim or allowance and
payment of such claim, such lien shall be released. Subject to
the limitations of 11 U.S.C. S 506(b), Allowed Pre-Petition Tax
Claims that are secured by liens under applicable state or
federal law shall accrue interest, but not penalties, at the
rates provided under applicable state or federal law up to the
Effective Date, and thereafter, to the extent the liens have
survived the deemed foreclosure by the holders of the Senior
Notes, shall accrue interest at the rate of 7% per annum.
Failure by the Liquidating Trustee to make a payment on an
Allowed Tax Claim pursuant to the terms of the Plan shall be an
event of default. If the Liquidating Trust fails to cure an
event of default as to an Allowed Tax Claim within twenty (20)
days after service of written notice of default from the holder
of such Allowed Tax Claim, then the holder of such Allowed Tax
Claim may enforce the entire amount of its Claim, plus interest
as provided under this Plan, against the Liquidating Trust in
accordance with applicable state or federal law remedies. At
the option of the Liquidating Trustee and as an alternative to
the treatment provided above, the Liquidating Trustee may
surrender the property securing the Pre-petition Tax Claim and
allow the holder to foreclose upon the property. Surrendering
the property will satisfy the Tax Claim in full.
D. Classification and Treatment of Classified Claims and
Interests
1. Class 1 - Priority Claims.
a. Classification: Class 1 consists of all non-tax Priority
Claims.
b. Treatment: Class 1 is unimpaired and, accordingly, the
members of Class 1 are not entitled to vote on the Plan. Unless
otherwise agreed to by the parties, each holder of an Allowed
Claim in Class 1 will receive a beneficial interest in the
Liquidating Trust's Distribution Fund and will be paid the
Allowed amount of such Claim in full in Cash by the Liquidating
Trust from the Distribution Fund on or before the later of (a)
the first practicable date after the Effective Date, (b) the
date such Claim becomes an Allowed Claim, and (c) such other
date as is mutually agreed upon by the Debtor and the holder of
such Claim.
2. Class 2 - Secured Claims of Holders of Senior Notes
a. Classification: Class 2 consists of the Allowed Secured
Claims of the holders of the Senior Notes.
b. Treatment: Class 2 is impaired and, accordingly, members of
Class 2 are entitled to vote on the Plan. Each holder of an
Allowed Claim in Class 2 will receive (1) its Pro Rata share of
the Wabash Securities free and clear of liens, claims and
interests and, (2), either (a) its Pro Rata share of 100% of the
Class A Beneficial Interests in the Liquidating Trust, or (b) if
Class 4 accepts the Plan, its Pro Rata share of 94.5% of the
Class A Beneficial Interests in the Liquidating Trust.
3. Class 3 - Secured Claims Other Than Claims of Holders of
Senior Notes.
a. Classification: Class 3 consists of all Allowed Secured
Claims other than the Claims of holders of Senior Notes.
b. Treatment: Class 3 is impaired, and the holders of Allowed
Claims in such Class are entitled to vote on the Plan. At the
Debtors' option, on the Effective Date (a) the Plan may leave
unaltered the legal, equitable, and contractual rights of the
holder of an Allowed Secured Claim, or (b) the Debtors may
assume and assign the contract or agreement governing an Allowed
Secured Claim pursuant to section 365(b) of the Bankruptcy Code,
or (c) the Debtors may pay an Allowed Secured Claim in such
manner as may be agreed to between the Debtors and the holder of
such Claim, or (d) the Debtors may (i) pay an Allowed Secured
Claim in full, in cash, or (ii) the Debtors may surrender to the
holder of an Allowed Secured Claim the property securing such
Claim, in all of such events, the value of such holder's
interest in such property shall be determined (A) by agreement
of the Debtors or the Liquidating Trustee and the holder of such
Allowed Secured Claim or (B) if they do not agree, by the
Bankruptcy Court.
4. Class 4 - General Unsecured Claims
a. Classification: Class 4 consists of all Allowed Unsecured
Claims against any of the Debtors, including trade Claims,
Claims arising out of the Warrant Notes, the Rejection Claims,
any indemnification Claims, and any products liability or
personal injury Claims.
b. Treatment: If Class 4 accepts the Plan (i.e., of those
holders of Allowed Claims in Class 4 that vote on the Plan, the
holders of at least two-thirds (2/3) in amount and more than
one-half (1/2) in number of Allowed Claims in Class 4 vote in
favor of the Plan), each holder of an Allowed Class 4 Claim will
receive its Pro Rata share of 5.5% of the Class A Beneficial
Interests in the Liquidating Trust. If Class 4 rejects the
Plan, the holders of Allowed Claims will receive no distribution
under the Plan.
5. Class 5 - Old Common Stock.
a. Classification: Class 5 consists of all Interests in Old
Common Stock.
b. Treatment: Holders of Interests in Class 5 will receive no
distribution under the Plan and the Old Common Stock will be
canceled.
6. Class 6 - Old Warrants
a. Classification: Class 6 consists of all Interests of holders
of Old Warrants.
b. Treatment: Holders of Old Warrants will receive no
distribution under the Plan and all Old Warrants shall be
canceled.
7. Class 7 - Securities Claims
a. Classification: Class 7 consists of Securities Claims (if
any exist).
b. Treatment: Any Allowed Securities Claims shall be treated
respectively with the same priorities as the Old Common Stock
and the Old Warrants pursuant to section 510(b) of the
Bankruptcy Code, and the holders of such Allowed Securities
Claims shall receive no distribution under the Plan.
E. Acceptance or Rejection of the Plan
1. Voting Classes. The holders of Claims in Classes 2, 3 and 4
are impaired and shall be entitled to vote to accept or reject
the Plan.
2. Presumed Acceptance of Plan. Class 1 is unimpaired under the
Plan, and therefore, is conclusively presumed to accept the Plan.
3. Presumed Rejection of Plan. The holders of Interests in
Classes 5, 6 and 7 are not being solicited to accept or reject
the Plan and will be deemed to have rejected the Plan.
F. Means for Execution and Implementation of the Plan
1. Funding of the Distribution Fund. On the Effective Date, the
Debtors shall first fund the Distribution Fund which shall be
transferred to the Liquidating Trust on behalf of and for the
benefit of the holders of Allowed Administrative, Priority and
Pre-Petition Tax Claims.
2. Transfer of Wabash Securities to Indenture Trustee. On the
Effective Date, the Debtors shall then transfer the Wabash
Securities to the Indenture Trustee for distribution to the
holders of the Senior Notes in accordance with the terms of this
Plan.
3. Change of Plan Sponsorship for the Management and Union
Plans. Prior to or on the Effective Date, the Debtors shall
transfer sponsorship of the current Management Plan and Union
Plan to Pension Corp., which will be owned by the Liquidating
Trust. It is not anticipated that Pension Corp. will have
significant operations. The transfer of the sponsorship of the
Management Plan and the Union Plan to Pension Corp. and the
transfer of Pension Corp. to the Liquidating Trust will not
affect the rights of the retirees. The current sponsors are
Fruehauf Trailer Corporation for the Management Plan and
Jacksonville Shipyards, Inc. for the Union Plan. The Board of
Directors of the respective sponsors shall approve the change in
sponsorship. The administrative provisions of the Management
Plan and Union Plan allow for a change in plan sponsorship. The
appropriate notices and governmental filings to comply with
federal law shall be provided in a timely manner to the
appropriate parties. Once the change in sponsorship has been
completed, Pension Corp. may elect to merge the Management Plan
and Union Plan to form a single plan.
The Pension Benefit Guaranty Corporation ("PBGC") filed three
(3) claims relating to the Union Plan and the Management Plan in
each of the In re Fruehauf Corp., et al. bankruptcies (Case Nos.
1563-1572). The PBGC is a wholly-owned United States government
corporation created by Title IV of the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. SS 1301-1461
("ERISA"), to administer the mandatory pension plan termination
insurance program established under Title IV of ERISA. The PBGC
guarantees the payment of certain pension benefits upon
termination of a pension plan covered by Title IV of ERISA.
According to PBGC, if the transfer of sponsorship of the pension
plans occurs and the pension plans remain on going after
confirmation of the Plan, PBGC will withdraw its claims.
Nothing in the Plan, therefore, shall be construed as releasing
or in any way discharging PBGC's claims.
4. Transfer of Hogan's Creek Property and Picketville Property.
On the Effective Date, Jacksonville Shipyards, Inc. shall next
transfer the Hogan's Creek Property and Picketville Property to
JSI Property Corp.
5. Foreclosure by Holders of Senior Notes. On the Effective
Date, the Indenture Trustee will be deemed to have foreclosed
the liens of the holders of the Senior Notes on the Foreclosed
Assets and to have transferred the Foreclosed Assets to the
Liquidating Trust. The Foreclosed Assets shall be transferred
to the Liquidating Trust on behalf of and for the benefit of the
holders of Class A Beneficial Interests in the Liquidating Trust.
6. Transfer by Debtors of Assets to the Liquidating Trust. On
the Effective Date, the Debtors shall convey all of their
remaining assets to the Liquidating Trust free and clear of all
liens, claims and encumbrances on behalf of and for the benefit
of the creditors who will receive a beneficial interest in the
Liquidating Trust.
7. Ratification of Liquidating Trust Agreement. On the
Effective Date, each holder of each Claim will be deemed to have
ratified and become bound by the terms of the Liquidating Trust
Agreement. The Liquidating Trustee is empowered to execute the
Liquidating Trust Agreement on behalf of each holder of a Claim.
a. Powers and Duties. The Liquidating Trustee shall have the
powers, duties and obligations specified in this Plan and the
Liquidating Trust Agreement.
b. Compensation of Liquidating Trustee. The Liquidating Trustee
shall be entitled to receive from the Trust Estate compensation
for his services as Trustee substantially in accordance with the
description at Section IV.F.7.b. of this Disclosure Statement
which compensation shall be approved by the Court at the
Confirmation Hearing. The Liquidating Trustee shall also be
reimbursed by the Trust Estate for all reasonable out-of-pocket
expenses incurred by the Trustee in the performance of his
duties.
c. Limitation of Liability. The Liquidating Trustee shall use
reasonable discretion in exercising each of the powers herein
granted. No Liquidating Trustee or any attorney, agent, or
servant of the Liquidating Trustee shall be personally liable in
any case whatsoever arising in connection with the performance
of obligations under this Plan, whether for their acts or their
failure to act unless they shall have been guilty of willful
fraud or gross negligence.
The Liquidating Trustee may consult with attorneys, accountants,
and agents, and the opinions of the same shall be full
protection and justification to the Liquidating Trustee and his
employees for anything done or admitted or omitted or suffered
to be done in accordance with said opinions. The Liquidating
Trustee shall not be required to give any bond for the faithful
performance of his duties hereunder.
d. Indemnity. The Liquidating Trustee and his employees and
agents will be indemnified by the Liquidating Trust against
claims arising from the good faith performance of duties under
the Bankruptcy Code or this Plan.
e. Right to Hire Professionals. The Liquidating Trustee shall
have the right to reasonably utilize the services of attorneys
or any other professionals which, in the discretion of the
Liquidating Trustee, are necessary to perform the duties of the
Liquidating Trustee. Reasonable fees and expenses incurred by
the attorneys, accountants or other agents of the Liquidating
Trustee shall be paid by the Liquidating Trust.
f. Treatment of Distribution Fund Surplus. After the payment of
the Allowed Administrative Expense Claims, Priority Claims and
Pre-Petition Tax Claims of the Class B Beneficial
Interestholders, any remaining funds in the Distribution Fund
shall be available for distribution to the holders of the Class
A Beneficial Interests in the Liquidating Trust.
g. Limitation on the Liquidating Trustee. Two holders of Senior
Notes will serve as the Trust Advisory Committee. Either
Bankruptcy Court approval or unanimity among the Trust Advisory
Committee members and Liquidating Trustee is required before the
Liquidating Trustee can:
(1) borrow money in excess of $500,000 or grant liens on any
part of the Trust Estate in excess of $500,000;
(2) sell assets of the Trust Estate with a value in excess of $500,000;
(3) modify the Plan;
(4) initiate and prosecute litigation, including but not
limited to claim objections with expected fees and costs in
excess of $250,000;
(5) dispose of or settle any claim or litigation with a
potential value to the Liquidating Trust in excess of $500,000;
and
(6) forego making the annual distribution to Certificate
Holders required by Section 6.2 of the Liquidating Trust.
If unanimity does not exist regarding the proposed action and
Bankruptcy Court approval is requested, the Liquidating Trust
shall pay the attorneys fees incurred by the objecting Committee
member, up to $25,000 per member during the term of the
Liquidating Trust.
The Liquidating Trust Agreement may be modified only with the
written approval of the Class A Beneficial Interestholders
holding over 50% of the Class A
Beneficial Interests.
h. Distribution of Trust Certificates. The Liquidating Trust
shall distribute Trust Certificates to the holders of the Class
A Beneficial Interests in the Liquidating Trust which shall
reflect each holders' proportional interest in the Liquidating
Trust, subject to the interests of the holders of Class B
Beneficial Interests in the Distribution Fund.
i. Tax Treatment of the Liquidating Trust. It is intended that
the Liquidating Trust will be treated as a "liquidating trust"
within the meaning of Treasury Regulations Section
301.7701-4(d). Accordingly, for federal income tax purposes,
the transfer and assignment of the Debtors' assets shall be
treated as a deemed transfer and assignment of such assets to
the holders of Claims followed by a deemed transfer and
assignment by such holders to the Liquidating Trust. The
Liquidating Trust shall provide the holders of Claims with a
valuation of the assets transferred to the Liquidating Trust and
such valuation shall be used consistently for all federal income
tax purposes. All items of income, deduction, credit or loss of
the Liquidating Trust shall be allocated for federal, state and
local income tax purposes among the holders of Claims as set
forth in the Liquidating Trust agreement; provided, however,
that to the extent that any item of income cannot be allocated
in the taxable year in which it arises, the Liquidating Trust
shall pay the federal, state and local taxes attributable to
such income (net of related deductions) and the amount of such
taxes shall be treated as having been received by, and paid on
behalf of, the holders of Claims receiving such allocations when
such allocations are ultimately made.
j. Termination of Liquidating Trust. The duties, powers and
responsibilities of the Liquidating Trustee shall terminate upon
the liquidation and distribution to Beneficial Interestholders
of all proceeds in the Liquidating Trust estate in accordance
with this Plan.
8. Dissolution of Corporate Entities. Following the creation of
the Distribution Fund, the transfer of the Wabash Securities to
the Indenture Trustee, the deemed foreclosure of the Foreclosed
Assets by the Indenture Trustee, and the transfer of any
remaining assets to the Liquidating Trust on behalf of and for
the benefit of the Beneficial Interestholders, the Debtors shall
be dissolved or liquidated.
9. Cancellation of Old Securities. On the Effective Date, all
Old Securities shall be terminated and canceled, and the
indentures or statements of resolution governing such Old
Securities shall be rendered void. Notwithstanding the
foregoing, such termination will not impair the rights and
duties under any indenture as between the Indenture Trustee and
the beneficiaries of the trust created thereby (the holders of
the Senior Notes) including, but not limited to, the rights of
the Indenture Trustee to receive payment of its fees and
expenses, to the extent not paid by the Company, from amounts
distributable to holders of Senior Notes.
10. Registration Exemption for Debtors' Wabash Securities and
Beneficial Interests in the Liquidating Trust. The Confirmation
Order shall provide that (a) the distribution of the Wabash
Securities to holders of Allowed Class 2 Claims, (b) the
transfer to the Liquidating Trust of the stock of Pension Corp.
and JSI Property Corp., and (c) the issuance and transfer
pursuant to the Plan of the beneficial interests in the
Liquidating Trust and the Trust Certificates and any resale of
such property shall be exempt from any and all federal, state
and local laws requiring the registration of such security, to
the fullest extent provided by section 1145 of the Bankruptcy
Code.
The Debtors believe that the exemption under Bankruptcy Code
Section 1145(a)(1) from the application of the registration
provisions of the Securities Act of 1933, as amended (the
"Securities Act"), is available for each of (a), (b) and (c) for
the following reasons:
(i) The distribution, transfer and/or issuance of each of the
securities referred to in (a), (b) and (c) is being made wholly
in exchange for claims made against the Debtors.
(ii) The Wabash Securities constitute securities of a successor
to the Debtors (withing the meaning of Bankruptcy Code Section
1145(a)), since Wabash, by virtue of its purchase in April 1997
from Fruehauf Trailer of the United States trailer manufacturing
and sales and distribution businesses of Fruehauf, became a
successor to Fruehauf Trailer as of the date of such purchase.
The conclusion that Wabash is a successor to the Debtors is
based on the fact that the sale to Wabash constituted a sale of
substantially all of the assets owned by the Debtors as of the
date of sale, a fact which was confirmed by the order of the
Bankruptcy Court approving the sale. The businesses sold to
Wabash by the Debtors generated 100% of the operating revenues
recognized by the Debtors immediately prior to the sale of the
businesses, and following the sale to Wabash, the Debtors owned
no other operating assets and the number of persons employed by
the Debtors declined from more than 1,100 to 5. In addition,
based on the aggregate value of the consideration paid in
connection with the sale (i.e., $19,000,000 in cash plus the
Wabash Securities), the Debtors believe that the value of the
assets transferred represented significantly in excess of 50% of
the total value of the assets owned by the Debtors immediately
prior to the sale. Furthermore, in connection with the sale of
the businesses, Wabash assumed rights and obligations associated
with ownership and operation of those businesses following the
sale. For all of the foregoing reasons, the Debtors believe
that Wabash should be considered a "successor" to the Debtors
for purposes of Section 1145(a) of the Bankruptcy Code.
The sale to Wabash needed to be consummated in advance of
confirmation of the Plan. The debtor-in-possession financing
facility which the Debtors had obtained upon commencement of the
bankruptcy proceeding was due and payable on April 30, 1997, and
the DIP lender had advised the Debtors that it was unwilling to
extend or renew the facility. In addition, the Debtors were
unsuccessful in obtaining a new DIP facility that would replace
the initial DIP facility (although the Debtors were eventually
able to obtain, concurrent with the sale to Wabash, a much
smaller replacement DIP loan from Bank of America that was
secured principally by the Wabash Securities). Indeed, the
Debtors had continued to experience a decline in sales and
further losses during the post-petition period prior to the sale
and were already in default on the DIP facility. The sale
ensured that the DIP lender would not exercise its post-petition
first priority security interest, which would have effectively
eliminated the opportunity for recovery by pre-petition
creditors of the Debtors pursuant to the Plan. Pursuant to an
order of the Bankruptcy Court, notice of the auction, which
resulted in the sale to Wabash, was published in the National
Edition of The Wall Street Journal and a copy of the notice was
served on all parties who filed notices of appearance in the
bankruptcy and all known parties claiming a lien or any interest
in the assets that were sold. All parties in interest were
given an opportunity to object to the sale prior to final
approval by the Bankruptcy Court.
(iii) The stock of Pension Corp., JSI Property Corp. and
Fruehauf de Mexico constitute stock of "affiliates" of the
Debtors who are participating in the Plan with the Debtors.
(iv) The Trust Certificates constitute securities of a
"successor" to the Debtors, since the Liquidating Trust will be
a successor to the assets of the Debtors as they exist on the
Effective Date of the Plan.
With respect to the distribution of the Wabash Securities, in
addition to the exemption which the Debtors believe is available
under Bankruptcy Code Section 1145, Wabash has filed with the
Securities and Exchange Commission ("SEC") a registration
statement with respect to the disposition of the Wabash
Securities currently held by Fruehauf Trailer Corporation. This
registration statement was declared effective by the SEC in
April 1998. Moreover, Wabash has agreed, assuming that the
Bankruptcy Code Section 1145 exemption is available for the
distribution of the Wabash Securities pursuant to the Plan, to
supplement the existing effective registration statement to
enable the holders of Allowed Class 2 Claims who may be deemed
"underwriters" (within the meaning of the Securities Act and
Section 1145) with respect to the Wabash Securities they receive
pursuant to the Plan to utilize the registration statement as
"selling stockholders" for their disposition of the Wabash
Securities. Wabash has further agreed, if the Section 1145
exemption is not deemed available for the distribution of the
Wabash Securities pursuant to the Plan, to file a new
registration statement with the SEC, within five business days
following confirmation of the Plan, to enable holders of Allowed
Class 2 Claims who may be deemed "underwriters" to dispose of
their Wabash Securities, and to use its best efforts to have
such registration statement declared effective by the SEC by the
date of distribution of the Wabash Securities pursuant to the
Plan. Accordingly, based on the foregoing, the Debtors
anticipate that the Wabash Securities will be eligible for an
immediate resale by the holders of Allowed Class 2 Claims upon
distribution pursuant to the Plan, although there can be no
assurance that a delay in the registration process or other
circumstance will not prevent such holders from effecting an
immediate resale of the Wabash Securities.
11. Transferability of the Trust Certificates; Applicability of
Federal Securities Laws to the Liquidating Trust. The Trust
Certificates constituting the beneficial interests in the
Liquidating Trust will be transferable. However, the Trust
Certificates will not be listed on any national securities
exchange or on the Nasdaq Stock Market, and the Liquidating
Trust will not facilitate the development of an active trading
market or encourage others to do so, will not place any
advertisement in the media promoting an investment in the Trust
Certificates and will not collect or publish information about
prices at which the Trust Certificates may be transferred,
except to the extent required to comply with disclosure
requirements under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Furthermore, the Liquidating
Trust will not be obligated, nor is it anticipated that the
Liquidating Trust would cooperate in any attempt to, facilitate
quotations for the Trust Certificates pursuant to Rule 15c2-11
of the Exchange Act. Although it is possible that some trading
will occur in the Trust Certificates, the Debtors believe that
it is unlikely that such trading will be active or that a
significant market will develop beyond the initial recipients of
the Trust Certificates.
The Liquidating Trust presently intends to register under
Section 12(g) of the Exchange Act and keep such registration in
effect until there are either (i) less than 300 holders of Trust
Certificates or (ii) there are less than 500 holders of Trust
Certificates and the assets of the Liquidating Trust have not
exceeded $10 million on the last day of each of the Liquidating
Trust's immediately preceding three fiscal years. As an entity
registered under the Exchange Act, the Liquidating Trust will be
required to file certain annual and other reports with the SEC.
The Liquidating Trust may also distribute to holders of Trust
Certificates audited annual financial statements of the
Liquidating Trust as of the end of each fiscal year of the
Liquidating Trust. However, after consultation with the
Official Committee for Unsecured Creditors and the Securities
and Exchange Commission, the Debtors may seek to have the Trust
Certificates issued in two classes to Class A Beneficial
Interestholders, Class A(1) for Class 2 Creditors and Class A(2)
for Class 4 Creditors, if it is possible to avoid the
requirement to register the Liquidating Trust under Section
12(g) of the Exchange Act.
The Debtors do not believe that the Liquidating Trust is
required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"). The Liquidating Trust (i) exists solely to
liquidate the assets to be transferred to the Liquidating Trust
by the Debtors pursuant to the Plan, (ii) will not conduct a
trade or business (other than maintaining Fruehauf de Mexico as
a going concern pending sale or liquidation thereof) and will
not make any investments, except for temporary investments in
money market instruments, government short-term securities or
other investment grade short-term debt securities pending
distribution of liquidation proceeds to the Liquidating Trust
beneficiaries, (iii) will not hold itself out as an investment
company, but only as a liquidating entity and (iv) will have a
limited life span (i.e., a period of three years from the
Effective Date, subject to renewal for one or more one-year
periods in the event any assets of the Liquidating Trust have
not been fully liquidated and the proceeds thereof distributed
to the beneficiaries by the end of the then current term). The
Debtor's conclusion is also based on the fact that the
Liquidating Trust will refrain from taking any action to
facilitate a trading market in the Trust Certificates (as
described in the first paragraph of this section) and will be
registering under the Exchange Act. However, the Debtors do not
intend to request a "no-action" letter from the SEC with respect
to the application of the registration provisions of the
Investment Company Act to the Liquidating Trust, and there is no
assurance that the SEC would not take the position that the
Liquidating Trust would have to register under the Investment
Company Act. If so, the Debtors would propose certain changes
to the Liquidating Trust, including but not limited to limiting
the transferability of the Trust Certificates, so as to avoid
having to register the Liquidating Trust as an investment
company under the Investment Company Act.
12. Corporate Action. Upon entry of the Confirmation Order, the
dissolutions contemplated by Section 6.8 shall be deemed
authorized and approved in all respects pursuant to applicable
state laws without any requirement of further action by the
stockholders or directors of the Debtors. On the Effective
Date, the Indenture Trustee and the Liquidating Trustee shall be
authorized and directed to take all necessary and appropriate
actions to effectuate the transactions contemplated by the Plan
and Disclosure Statement.
13. Preservation of Rights of Action. Except as otherwise
provided in the Plan, or in any contract, instrument, release,
or other agreement entered into in connection with the Plan in
accordance with section 1123(b) of the Bankruptcy Code, the
Liquidating Trust, as ultimate successor to the Debtors, shall
retain and may enforce any claims, rights and causes of action
that the Debtors or the Estates may hold against any entity,
including, without limitation, any claims, rights or causes of
action arising under sections 544 through 551 or other sections
of the Bankruptcy Code or any similar provisions of state law,
or any other statute or legal theory. The Liquidating Trust or
any successor to or designee thereof may pursue those rights of
action, as appropriate, in accordance with what is in the best
interests of the Liquidating Trust and those holding interests
in the Liquidating Trust.
14. Objections to Claims. Except as otherwise provided for
with respect to applications of professionals for compensation
and reimbursement of expenses under Article 3, or as otherwise
ordered by the Bankruptcy Court after notice and a hearing,
objections to Claims, including Administrative Claims, shall be
Filed and served upon the holder of such Claim or Administrative
Claim not later than the later of (a) one hundred twenty (120)
days after the Effective Date, and (b) one hundred twenty (120)
days after a proof of claim or request for payment of such
Administrative Claim is Filed, unless this period is extended by
the Court. Such extension may occur ex parte. After the
Effective Date, the Liquidating Trust shall have the exclusive
right to object to Claims.
15. Treatment of Identical Claims Asserted by Single Creditor
Against Multiple Debtors. Because all of the Debtors' assets
are fully encumbered by liens securing the Senior Notes, absent
the agreement of the Senior Noteholders, holders of Allowed
Administrative, Priority, Pre-Petition Tax and Unsecured Claims
would receive no distribution under the Plan. The Senior
Noteholders have agreed to the distribution of the Distribution
Fund to holders of Allowed Administrative and Priority Claims
and the distribution of 5.5% of the Class A Beneficial Interests
in the Liquidating Trust to holders of Allowed Unsecured Claims
if Class 4 accepts the Plan. That agreement is conditioned upon
the Claims against the Debtors being consolidated so that a
single creditor who has a right of recovery against more than
one Debtor for the same Claim will be limited to one Allowed
Claim in the Allowed amount owed to the creditor. Attached as
Exhibit "B" to the Plan is a schedule of creditors that filed
multiple claims for the same liability. The maximum amount of
the Allowed Claim of any of these creditors shall be the amount
indicated as the "Surviving Claim." The Liquidating Trust
reserves the right to object to the Surviving Claim.
16. Exemption from Stamp and Similar Taxes. The issuance and
transfer of the Wabash Securities, the issuance and distribution
of the Pension Corp. and JSI Property Corp. Stock, and the
transfer and ultimate sale of the Foreclosed Assets as provided
in this Plan shall not be taxed under any law imposing a stamp
tax or similar tax in accordance with 11 U.S.C. S 1146(c).
G. Funding and Methods of Distribution and Provisions for
Treatment of Disputed Claims
1. Funding of Distributions Under the Plan. The Debtors have
liquidated 800,000 shares of the Wabash Common Stock. The
Debtors will fund the Distribution Fund from Cash on hand. The
Debtors may seek one or more orders of the Bankruptcy Court
estimating or limiting the amount of property to be deposited in
the Distribution Fund. The Distribution Fund shall be the sole
source of funds for the payment of Allowed Administrative
Claims, Pre-Petition Tax Claims and Priority Claims.
2. Distributions to Holders of Allowed Claims that are
Administrative Expense Claims, Pre-Petition Tax Claims and Class
1 Priority Claims. Commencing on the Effective Date, the
Liquidating Trustee shall, in accordance with Article 3 of the
Plan, distribute to each holder of a then unpaid Allowed
Administrative Expense Claim, Allowed Pre-Petition Tax Claim, or
Allowed Priority Claim Cash in the Allowed amount of such
holder's Claim. The Distribution Fund shall be distributed to
the holders of Disputed Administrative Expense Claims,
Pre-Petition Tax Claims and other Priority Claims pursuant to
Article 3 of the Plan if and to the extent that the balance, if
any, of such Claims is Allowed by Final Order. The Liquidating
Trust must hold the Distribution Fund in a segregated account
for the benefit of the holders of Allowed Administrative,
Priority and Pre-Petition Tax Claims until all Disputed Claims
that are alleged to be Administrative, Pre-Petition Tax or
Priority Claims have been Allowed or disallowed.
3. Distributions to Holders of Allowed Class 2 Claims. The
Debtors shall deliver all of the Wabash Securities and the Trust
Certificates representing the Requisite Percentage of Class A
Beneficial Interests to the Indenture Trustee. The Indenture
Trustee shall make the Pro Rata distribution required by Section
4.2 of the Plan to the holders of the Senior Notes. The
Liquidating Trust shall pay all reasonable fees and expenses of
the Indenture Trustee in acting as distribution agent as and
when such fees and expenses become due without further order of
the Bankruptcy Court. The Plan provides for distributions to be
made only to record holders as of the Ballot Record Date unless
the Indenture Trustee is provided evidence of a transfer that is
satisfactory to the Indenture Trustee, in its sole discretion.
Holders of Senior Notes must surrender their notes or have been
deemed to have surrendered their notes (see Plan section 7.5(c))
to receive a distribution. Any holder of a Senior Note that has
not surrendered or been deemed to have surrendered its Senior
Notes prior to the time that the Indenture Trustee distributes
the Wabash Securities and Trust Certificates or the Liquidating
Trustee makes a distribution to holders of Trust Certificates
may have its distribution reduced by any taxes that the
Indenture Trustee or Liquidating Trustee has paid on account of
such distribution. The Plan also provides for the cancellation
of the Senior Notes.
4. Disputed Claims. Notwithstanding any other provisions of the
Plan, no payments or distributions shall be made on account of
any Disputed Claim until such Claim becomes an Allowed Claim,
and then only to the extent that it becomes an Allowed Claim.
5. Delivery of Distributions and Undeliverable or Unclaimed
Distributions; Failure to Negotiate Checks. The Plan
established procedures for the delivery of distributions and for
the disposition of undeliverable distributions and checks that
are not timely negotiated.
6. Distributions on Account of Unsecured Class 4 Claims. If
Class 4 accepts the Plan, Trust Certificates representing 5.5%
of the Class A Beneficial Interests in the Liquidating Trust
shall be distributed, Pro Rata, to holders of Allowed Claims in
Class 4. The Liquidating Trust shall not be required to make
distributions of Trust Certificates to holders of Allowed Claims
in Class 4 until the Liquidating Trust has resolved its
objections to Disputed Claims in Class 4, a process which shall
be completed no later than the first anniversary of the
Effective Date. Any distributions of Cash to which the holders
of Trust Certificates become entitled during this claims
resolution period shall be distributed to the holders of Allowed
Claims in Class 4, Pro Rata, with any accrued interest thereon
at the time the Trust Certificates are distributed; provided,
however, that such distribution shall be reduced by any taxes
paid by the Liquidating Trust on account of interest or other
income earned thereon.
7. De Minimis Distributions. No Cash payment of less than
twenty dollars ($20.00) shall be made to any holder on account
of an Allowed Claim unless a request therefor is made in writing
to the Liquidating Trust.
8. Compliance with Tax Requirements. In connection with the
Plan, to the extent applicable, the Liquidating Trust shall
comply with all withholding and reporting requirements imposed
on it by any governmental unit, and all distributions pursuant
to the Plan shall be subject to such withholding and reporting
requirements.
9. Setoffs. Unless otherwise provided in a Final Order or in
this Plan, the Liquidating Trust may, but shall not be required
to, set off against any Claim and the payments to be made
pursuant to the Plan in respect of such Claim, any claims of any
nature whatsoever the Debtors may have against the holder
thereof or its predecessor, but neither the failure to do so nor
the allowance of any Claim hereunder shall constitute a waiver
or release by any Debtor or the Liquidating Trust of any such
Claims the Debtors or the Liquidating Trust may have against
such holder or its predecessor.
10. Fractional Interests. The calculation of the percentage
distribution of Wabash Securities or Trust Certificates to be
made to holders of certain Allowed Claims as provided elsewhere
in this Plan may mathematically entitle the holder of such an
Allowed Claim to a fractional interest in such Stock or Trust
Certificates. The number of shares of Wabash Securities or
Trust Certificates to be received by a holder of an Allowed
Claim shall be rounded to the next lower whole number of shares
or Trust Certificates. The total number of shares of Wabash
Securities or Trust Certificates to be distributed to a class of
Claims shall be adjusted as necessary to account for the
rounding provided for in this section. Any fractional shares of
Wabash Securities that are rounded down and not issued to
holders of Senior Notes shall be contributed to the Liquidating
Trust.
H. Treatment of Executory Contracts and Unexpired Leases
The Plan constitutes and incorporates a motion by the Debtors to
reject, as of the Effective Date, all pre-petition executory
contracts and unexpired leases to which the Debtors are a party,
except for any executory contract or unexpired lease that (i)
has been assumed or rejected pursuant to a Final Order, or (ii)
is the subject of a pending motion for authority to assume the
contract or lease Filed by the Debtors prior to the Confirmation
Date. The Plan establishes a bar date for filing Rejection
Claims not already barred.
I. Effects of Plan Confirmation
1. Transfers to Liquidating Trust are Free and Clear of Claims
Against Debtors. As a result of the foreclosure and sale of the
Debtors' assets contemplated by Articles 6.5 and 6.6 of this
Plan, the assets transferred to the Liquidating Trust on behalf
of and for the benefit of the holders of Allowed Claims shall be
held by the Liquidating Trust free and clear of all liens,
claims or interests in such property that arose before the
Confirmation Date.
2. No Liability for Solicitation or Participation. As specified
in section 1125(e) of the Bankruptcy Code, Persons that solicit
acceptances or rejections of the Plan and/or that participate in
the offer, issuance, sale, or purchase of securities offered or
sold under the Plan, in good faith and in compliance with the
applicable provisions of the Bankruptcy Code, are not liable, on
account of such solicitation or participation, for violation of
any applicable law, rule, or regulation governing the
solicitation of acceptances or rejections of the Plan or the
offer
3. Limitation of Liability. None of the Unsecured Creditors'
Committee and its members and the professional Persons employed
by the Unsecured Creditors' Committee; the Indenture Trustee and
any professional Persons retained by it; the Bondholders'
Committee and its members and professional Persons employed by
the Bondholders' Committee; the Authorized Representative of
Retirees and its professional Persons; the Liquidating Trust and
any professional Persons retained by it; the Liquidating
Trustee; Morris, Nichols, Arsht & Tunnell; Camhy Karlinsky &
Stein; Price Waterhouse; Haynes and Boone, L.L.P.; Alvarez &
Marsal, Inc.; and Oppenheimer & Co., Inc.; any of their
affiliates nor any of their officers, directors, partners,
associates, employees, members or agents (collectively the
"Exculpated Persons"), shall have or incur any liability to any
Person for any act taken or omission made in good faith in
connection with or related to the Bankruptcy Cases or actions
taken therein, including negotiating, formulating, implementing,
confirming or consummating the Plan, the Disclosure Statement,
or any contract, instrument, or other agreement or document
created in connection with the Plan. The Exculpated Persons
shall have no liability to any Creditors or Equity Security
Holders for actions taken under the Plan, in connection
therewith or with respect thereto in good faith, including,
without limitation, failure to obtain Confirmation of the Plan
or to satisfy any condition or conditions, or refusal to waive
any condition or conditions, precedent to Confirmation or to the
occurrence of the Effective Date. Further, the Exculpated
Persons will not have or incur any liability to any holder of a
Claim, holder of an Interest, or party-in-interest herein or any
other Person for any act or omission in connection with or
arising out of their administration of the Plan or the property
to be distributed under the Plan, except for gross negligence or
willful misconduct as finally determined by the Bankruptcy
Court, and in all respects such persons will be entitled to rely
upon the advice of counsel with respect to their duties and
responsibilities under the Plan.
4. Other Documents and Actions. The Debtors, the
Debtors-In-Possession, the Indenture Trustee and Liquidating
Trustee may execute such documents and take such other action as
is necessary to effectuate the transactions provided for in the
Plan.
5. Term of Injunctions or Stays. Unless otherwise provided, all
injunctions or stays provided for in the Reorganization Case
pursuant to sections 105 or 362 of the Bankruptcy Code or
otherwise and in effect on the Confirmation Date shall remain in
full force and effect until the Effective Date.
J. Confirmability of Plan and Cramdown
The Debtors request Confirmation under section 1129(b) of the
Bankruptcy Code if any impaired class does not accept the Plan
pursuant to section 1126 of the Bankruptcy Code. In that event,
the Debtor reserves the right to modify the Plan to the extent,
if any, that Confirmation of the Plan under section 1129(b) of
the Bankruptcy Code requires modification.
K. Retention of Jurisdiction. The Plan provides for the
Bankruptcy Court to retain the broadest jurisdiction over the
reorganization case as is legally permissible so that the
Bankruptcy Court can hear all matters related to the
consummation of the Plan, the claims resolution process, and the
administration of the Liquidating Trust.
L. Post Confirmation Management of the Liquidating Trust
The Debtors contemplate that, from and after the Effective Date
of the Plan, Chriss Street will serve as the Trustee of the
Liquidating Trust and will continue to serve as Chairman of the
Board and Chief Executive Officer of Fruehauf de Mexico. It is
also anticipated that Worth Frederick and James Wong will share
operational oversight responsibility for Fruehauf de Mexico.
Mr. Worth will be paid an annual salary of $100,000 by Fruehauf
de Mexico, and will also receive an annual salary fee of $20,000
from the Liquidating Trust for services which he is expected to
perform on behalf of the Liquidating Trust. Mr. Wong will be
paid an annual salary of $75,000 by Fruehauf de Mexico, and will
also be eligible to receive an annual bonus of up to $10,000
from Fruehauf de Mexico. Courtney Watson will also provide
services to the Liquidating Trust in liquidating assets, making
distributions, and maintaining proper records. Ms. Watson will
be paid $65,000 a year by the Liquidating Trust.
It is anticipated that Mr. Street, on or before the Effective
Date of the Plan, will enter into (i) an employment agreement
with the Liquidating Trust which will provide for his employment
as Trustee, and (ii) an employment agreement with Fruehauf de
Mexico, which will provide for his employment as Chairman of the
Board and Chief Executive Officer of Fruehauf de Mexico. The
terms and conditions of the agreements as currently contemplated
are described below. These terms and conditions are subject to
change and may be amended prior to the hearing on approval of
this Disclosure Statement.
1. Employment Agreement with Liquidating Trust
Mr. Street will be employed as trustee for a term of three
years, which term will be automatically renewable for additional
one year periods (or until such earlier time as the Liquidating
Trust may be dissolved) unless the Trust Advisory Committee
shall advise Mr. Street, not less than 90 days prior to the end
of the initial three year term, that it desires to terminate his
services as trustee at the end of the term. No co-trustee may
be appointed without Mr. Street's prior written consent.
Subject to such other and further terms and conditions that may
be mutually agreed upon as between the holders of the Senior
Notes and Mr. Street, for serving as trustee, Mr. Street will be
entitled to the following compensation described below:
(1) An annual salary of $200,000 per year, payable in
semi-monthly installments (hereinafter referred to as the
"Annual Fee").
(2) A percentage of the cumulative amount distributed to the
holders of Senior Notes from the Liquidating Trust or otherwise
pursuant to the Plan, in excess of the aggregate principal
amount of the Senior Notes outstanding on the Effective Date of
the Plan (the "Par Amount"), which percentage shall be 12.5%
unless the amount distributed to the holders of the Senior Notes
prior to the first anniversary of the Effective Date equals or
exceeds the Par Amount, in which event the percentage shall be
15%. Amounts payable to Mr. Street pursuant to this arrangement
(the "Percentage Fee"), if any, shall be made on a quarterly
basis within 30 days following each calendar quarter in which
any distribution in excess of the Par Amount is made to the
holders of the Senior Notes. For purposes of determining the
cumulative amount distributed to the holders of the Senior
Notes, the following will apply:
(a) The value of the shares of Common Stock of Wabash
distributed to the holders of the Senior Notes will be equal to
the higher of (i) the average of the closing sale prices of the
Common Stock as reported by the New York Stock Exchange for the
10 consecutive trading days commencing on the date (the
"Distribution Date") on which such shares are distributed to the
holders of the Senior Notes; and (ii) the average of the daily
closing sale prices of the Common Stock as reported by the New
York Stock Exchange for the period of three months following the
Distribution Date (the higher of (i) or (ii) being referred to
as the "Average Price"). No other change in the market price of
the Common Stock will be given any effect in calculating the
amount distributed to the holders of the Senior Notes.
(b) The value of the shares of Series B 6% Cumulative
Convertible Exchangeable Preferred Stock (the "Preferred Stock")
of Wabash distributed to the holders of the Senior Notes will be
equal to the product of (i) and (ii), where (i) is the result
obtained by dividing the sum of $17,600,000 plus the amount of
any accrued dividends on the Preferred Stock as of the
Distribution Date by the conversion price of the Preferred Stock
(i.e., $21.375, subject to anti-dilution adjustments) and (ii)
is the Average Price (as defined above). No other change in the
market price of the Common Stock will be given any effect in
calculating the amount distributed to the holders of the Senior
Notes.
(c) The value of all other assets distributed to the holders of
the Senior Notes shall be fair market value of such assets on
the respective dates of distribution, which fair market value
shall be determined by mutual agreement of Mr. Street and the
Advisory Committee, except if no such agreement is reached, fair
market value shall be determined by an independent appraiser
whose selection will be mutually agreed upon by Mr. Street and
the Advisory Committee.
In the event Mr. Street ceases to serve as trustee during the
initial or any renewal term for any reason other than death,
Cause (as defined), Permanent Disability (as defined), or
voluntary resignation, Mr. Street shall continue to receive the
Annual Fee for the remainder of the applicable term. In
addition, Mr. Street shall continue to receive the Percentage
Fee in accordance with the following terms: (i) if the amount
distributed to the holders of the Senior Notes prior to the date
of termination has equaled or exceeded the Par Amount, Mr.
Street will continue to receive the Percentage Fee (if any) for
a period of two years following the date on which he ceases to
serve as trustee; (ii) if, as of the date on which Mr. Street
ceases to serve as trustee, an amount equal to or greater than
90% but less than 100% of the Par Amount has been distributed to
the holders of the Senior Notes, and within one year following
such date the cumulative amount distributed to the holders
exceeds 100% of the Par Amount, Mr. Street will receive the
Percentage Fee on amounts distributed to the holders in excess
of the Par Amount within 18 months after the date he ceases to
serve as Trustee; and (iii) if Mr. Street is terminated as
trustee at any time prior to the first anniversary of the
Effective Date other than for Cause, Mr. Street will be entitled
to receive the Percentage Fee (if any) until the third
anniversary of the Effective Date irrespective of the cumulative
amount which has been distributed to the holders of the Senior
Notes on the date of termination.
Upon Mr. Street's death or termination as trustee as a result
of a Permanent Disability during the initial or any renewal
term, Mr. Street (or his heirs, as the case may be) shall be
entitled to receive the Annual Fee and Percentage Fee (if any)
for a period of one year following the date on which he ceases
to serve as Trustee. The Liquidating Trust shall be authorized
to obtain insurance to cover the amounts owed to Mr. Street in
the event of death or termination as a result of Permanent
Disability and Mr. Street shall submit to a physical or such
other tests as may be required to obtain such insurance.
If Mr. Street is terminated as trustee either for Cause or
ceases to serve as Trustee as a result of a voluntary
resignation, Mr. Street shall be entitled to the Annual Fee and
Percentage Fee (if any) through the date of termination.
"Cause" for purposes of the agreement (as well as the employment
agreement with Fruehauf de Mexico) shall mean Mr. Street having
either (i) been engaged in an act of fraud or dishonesty against
the Liquidating Trust (or Fruehauf de Mexico, as the case may
be), (ii) been convicted of, or enter a plea of nolo contendre
to, a felony or a misdemeanor involving moral turpitude under
the laws of the United States or any state thereof, (iii)
admitted or been found by a court of law to have been involved
in either the distribution, possession or use of illegal drugs,
or (iv) knowingly violated in a material way any policy
maintained by the Liquidating Trust (or Fruehauf de Mexico, as
the case may be). "Permanent Disability" for purposes of this
Agreement (as well as the employment agreement with Fruehauf de
Mexico) shall mean that Mr. Street, as a result of an incapacity
due to physical or mental illness, has been unable to perform
the duties of trustee (or Chairman and Chief Executive Officer
of Fruehauf de Mexico, as the case may be) for a period of not
less than 90 consecutive days and, within 30 days of notice of
termination being sent to Mr. Street based on such incapacity,
shall have failed to return to the performance of his duties.
2. Employment Agreement with Fruehauf de Mexico.
Under the agreement with Fruehauf de Mexico, Mr. Street will be
employed as Chairman of the Board and Chief Executive Officer
and will be entitled to serve in such capacity so long as he is
trustee of the Liquidating Trust and the Liquidating Trust owns,
directly or indirectly, a majority of the voting stock of
Fruehauf de Mexico. He may not be removed as an officer or
director of Fruehauf de Mexico unless he ceases to serve as
trustee. For serving as Chairman and Chief Executive Officer of
Fruehauf de Mexico, Mr. Street shall receive an annual salary of
$50,000 per year, payable in semi-monthly installments. He will
also be provided with all fringe benefits and perquisites that
are provided to senior executives of Fruehauf de Mexico, and
will also be entitled to participate in all employee benefit
plans, programs and arrangements, now or hereafter in effect,
that are applicable to employees of Fruehauf de Mexico generally
or its senior executives. During the term of the agreement, Mr.
Street will be entitled to designate those persons whom Fruehauf
de Mexico will nominate for election as directors.
In the event that Mr. Street ceases to serve as Chairman and
Chief Executive Officer of Fruehauf de Mexico as a result of the
sale or other disposition of the capital stock or assets of
Fruehauf de Mexico, Mr. Street will receive, upon such sale or
other disposition, a lump sum payment equal to the aggregate
amount that would have been paid to him as Chairman and Chief
Executive Officer for the remainder of the then applicable term
of the agreement. In addition, in the event that Mr. Street
ceases to serve as trustee of the Liquidating Trust and is
entitled to receive the Annual Fee as trustee for any period
thereafter under the employment agreement with the Liquidating
Trust, he shall also receive payment of his annual salary under
the employment agreement with Fruehauf de Mexico for the same
period.
Under both employment agreements, Mr. Street will only be
required to devote as much of his business time as he, in his
sole discretion, reasonably deems necessary to perform his
duties as trustee and as Chairman of the Board and Chief
Executive Officer of Fruehauf de Mexico, respectively (and both
entities will acknowledge that he will be employed by, or
perform services for, unrelated entities during the terms of the
agreements). Under both agreements, Mr. Street will be entitled
to procure such office space, facilities and secretarial and
other support services as he deems reasonably necessary for the
performance of services under each agreement, with the cost
thereof to be borne by the Liquidating Trust or Fruehauf de
Mexico, as applicable. He shall also be reimbursed for all
costs and expenses which he incurs in the performance of
services under each agreement. In addition, Mr. Street will be
indemnified for liabilities incurred by him in the performance
of services under the agreements, except for liabilities arising
from his intentional misconduct.
V.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is a summary of certain federal income
tax aspects of the Plan and is for general information only.
This discussion is based upon existing provisions of the
Internal Revenue Code of 1986, as amended ("IRC"), existing
regulations thereunder, and current administrative rulings and
court decisions. No assurance can be given that legislative or
administrative changes or court decisions may not be forthcoming
which would require significant modification of the statements
expressed in this section. The discussion does not address
foreign, state or local tax consequences of the Plan, nor does
it purport to address the federal tax consequences of the Plan
to special classes of taxpayers (such as foreign companies,
nonresident alien individuals, S corporations, mutual funds,
insurance companies, financial institutions, small business
investment companies, regulated investment companies,
broker-dealers and tax-exempt organizations). Accordingly, it
should not be relied upon for purposes of determining the
specific tax consequences of the Plan with respect to a
particular holder of a Claim or Interest.
Due to the complexity of the transactions to be consummated
pursuant to the Plan, some of which are discussed below; the
lack of applicable legal precedent and the possibility of
changes in law; differences in the nature of various Claims;
differences in individual Claim holders' methods of accounting;
and the potential for disputes as to legal and factual matters,
the federal income tax consequences described herein are subject
to significant uncertainties.
NO RULING HAS BEEN SOUGHT OR OBTAINED FROM THE IRS WITH RESPECT
TO ANY OF THE TAX ASPECTS OF THE PLAN AND NO OPINION OF COUNSEL
HAS BEEN OBTAINED BY DEBTORS WITH RESPECT THERETO. NO
REPRESENTATIONS OR ASSURANCES ARE BEING MADE WITH RESPECT TO THE
FEDERAL INCOME TAX CONSEQUENCES AS DESCRIBED HEREIN. CERTAIN
TYPES OF CLAIMANTS AND INTEREST HOLDERS MAY BE SUBJECT TO
SPECIAL RULES NOT ADDRESSED IN THIS SUMMARY OF FEDERAL INCOME
TAX CONSEQUENCES. THERE ALSO MAY BE STATE, LOCAL, OR FOREIGN
TAX CONSIDERATIONS APPLICABLE TO A HOLDER OF A CLAIM OR INTEREST
THAT ARE NOT ADDRESSED HEREIN. EACH HOLDER OF A CLAIM OR
INTEREST AFFECTED BY THE PLAN MUST CONSULT, AND RELY UPON, HIS
OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
OF THE PLAN WITH RESPECT TO THAT HOLDER'S CLAIM OR INTEREST.
THIS INFORMATION MAY NOT BE USED OR QUOTED IN WHOLE OR IN PART
IN CONNECTION WITH THE OFFERING FOR SALE OF SECURITIES.
A. Federal Income Tax Consequences to Fruehauf.
Under the Plan, the Debtors are transferring substantially all
of their assets to the Senior Noteholders and to the Liquidating
Trust. These transfers of assets will result in the recognition
by the Debtors of gain or loss based on the difference between
the fair market value and tax basis of the assets being so
transferred. To the extent that the Debtors recognize a net
gain from the transfer of these assets, such gain will be offset
by Debtors' net operating loss and/or capital loss
carryforwards. The Debtors may, however, recognize some
alternative minimum tax as a result of the transfer of these
assets. Any resulting tax will be paid by the Debtors to the
Internal Revenue Service. The Plan also provides that the
Debtors will be liquidated and dissolved. As a result, there
will be no net operating loss or capital loss carryforwards
available to the Debtors or the Liquidating Trust following the
Effective Date after giving effect to the transactions
contemplated by the Plan.
B. Federal Income Tax Consequences to Holders of Claims.
1. Holders of Claims
Holders of Claims will recognize a gain or loss equal to their
respective amounts realized (if any) under the Plan in respect
of their Claims less their respective tax bases in their Claims.
The amounts realized for this purpose generally will equal the
sum of the cash and the fair market value of any other
consideration received under the Plan in respect of their
Claims, including the fair market value of a holder's
proportionate share of the assets transferred to the Liquidating
Trust on the behalf and for the benefit of such holder. The
recognition of gain or loss by a holder of Claims may also be
affected by the holder's accounting method and other factors and
circumstances particular to such holder.
The transfer of assets to the Liquidating Trust by the Debtors
will be treated as a transfer of such assets to the holders of
Allowed Class 2 and possibly Allowed Class 4 Claims, to the
extent they are beneficiaries, followed by a deemed transfer of
such assets by such beneficiaries to the Liquidating Trust. As
a result of such treatment, holders of such Allowed Claims will
have to take into account the fair market value of their Pro
Rata share, if any, of the assets transferred on their behalf to
the Liquidating Trust in determining the amount of gain realized
and required to be recognized upon consummation of the Plan. In
addition, since a holder's share of the assets held in the
Liquidating Trust may change depending upon the resolution of
Disputed Claims, the holder may be prevented from recognizing
any loss in connection with consummation of the Plan until the
time that all such Disputed Claims have been resolved. The
Trustee will provide the holders of Allowed Claims with
valuations of the assets transferred to the Liquidating Trust
and such valuations should be used consistently by the
Liquidating Trust and such holders for all federal income tax
purposes.
Any gain or loss recognized by the Holders of Claims in the
exchange will be capital or ordinary depending on the status of
the Claim in the holder's hands. The holder's aggregate tax
basis for any consideration received under the Plan will
generally equal the amount realized in the exchange (less any
amount allocable to interest as described in the next
paragraph). The holding period for any consideration received
under the Plan will generally begin on the day following the
receipt of such consideration.
Holders of Claims not previously required to include in their
taxable income any accrued but unpaid interest on a Claim may be
treated as receiving taxable interest, to the extent any
consideration they receive under the Plan is allocable to such
accrued but unpaid interest. Holders previously required to
include in their taxable income any accrued but unpaid interest
on a Claim may be entitled to recognize a deductible loss, to
the extent that such accrued but unpaid interest is not
satisfied under the Plan.
C. Liquidating Trust
The Plan provides, and this discussion has assumed, that the
Liquidating Trust will be treated for federal income tax
purposes as a "liquidating trust." As a liquidating trust, the
Liquidating Trust itself generally will not be subject to tax;
rather, holders of Allowed Claims will be taxed on their
allocable share of the taxable income earned and gain recognized
by the Liquidating Trust in each taxable year without regard to
whether the Liquidating Trust makes any distributions to such
holders in that taxable year. The Liquidating Trust, however,
will pay federal, state and local tax on the taxable income
allocable to unidentified holders and, when such holders are
ultimately identified, they will receive distributions from the
Liquidating Trust net of taxes which the Liquidating Trust has
previously paid on their behalf.
Although the Liquidating Trust will be formed in accordance with
established guidelines for the formation of liquidating trusts,
there is no assurance that the Liquidating Trust will be treated
as a liquidating trust for federal income tax purposes. If the
Liquidating Trust is determined by the Internal Revenue Service
to be taxable not as a liquidating trust, the taxation of the
Liquidating Trust and the transfer of assets by the Debtors to
the Liquidating Trust may be materially different than is
described herein and may have a material adverse effect on the
holders of Allowed Class 2 and possibly Allowed Class 4 Claims.
D. Backup Withholding and Information Reporting
Payors of interest, dividends, and certain other reportable
payments are generally required to withhold thirty-one percent
(31%) of such payments if the payee fails to furnish such
payee's correct taxpayer identification number (social security
number or employer identification number), to the payor. The
Liquidating Trust may be required to withhold a portion of any
payments made to a holder of an Allowed Claim which does not
provide its taxpayer identification number.
E. Importance of Obtaining Professional Tax Assistance
THE FOREGOING IS INTENDED AS A SUMMARY ONLY, AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL.
THE FEDERAL, STATE AND LOCAL INCOME AND OTHER TAX CONSEQUENCES
OF THE PLAN ARE COMPLEX AND, IN SOME CASES, UNCERTAIN. SUCH
CONSEQUENCES MAY ALSO VARY BASED ON THE PARTICULAR CIRCUMSTANCES
OF EACH CLAIM HOLDER. ACCORDINGLY, EACH CLAIM AND INTEREST
HOLDER IS STRONGLY URGED TO CONSULT WITH HIS, HER OR ITS OWN TAX
ADVISOR REGARDING THE FEDERAL, STATE AND LOCAL INCOME AND OTHER
TAX CONSEQUENCES UNDER THE PLAN.
VI.
VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS.
A. Confirmation of the Plan.
1. Confirmation Hearing.
Section 1128 of the Bankruptcy Code requires the Court, after
notice, to hold a hearing on whether the Plan and its proponents
have fulfilled the confirmation requirements of section 1129 of
the Bankruptcy Code. A hearing (the "Confirmation Hearing") to
consider confirmation of the Plan has been scheduled for
September 16, 1998 at 2:00 p.m. before the Honorable Peter J.
Walsh, at the United States Bankruptcy Court for the District of
Delaware, Marine Midland Plaza, 824 Market Street, 6th Floor,
Wilmington, Delaware 19801. The Confirmation Hearing may be
adjourned from time to time by the Court without further notice
except for the announcement of the adjourned date at the
Confirmation Hearing.
Any objection to confirmation must be made in writing and must
specify in detail the name and the address of the Person
objecting, the grounds for the objection and the nature and
amount of the Claim or Interest held by the objector. Any such
objection must be filed with the Court and served upon the
parties designated in the notice of the confirmation hearing
(the "Confirmation Notice") on or before September 9, 1998 at
4:00 p.m., Wilmington, Delaware time. Unless an objection to
confirmation is timely served and filed, it will not be
considered by the Court.
2. Requirements for Confirmation of the Plan.
In order to confirm the Plan, the Bankruptcy Code requires that
the Court make a series of findings concerning the Plan and the
Debtors, including that: (a) Claims and Interests are classified
in the Plan in a permissible manner; (b) the Plan complies with
the applicable provisions of the Bankruptcy Code; (c) the
Debtors have complied with applicable provisions of the
Bankruptcy Code; (d) the Debtors have proposed the Plan in good
faith and not by any means forbidden by law; (e) the disclosure
required by section 1125 of the Bankruptcy Code has been made;
(f) the Plan has been accepted by the requisite majorities of
holders of Claims and Interests in each impaired Class of Claims
or Interests, or, if accepted by at least one but not all of
such Classes, is "fair and equitable," and does not discriminate
unfairly as to any non-accepting class, as required by the
"cramdown" provisions of section 1129(b) of the Bankruptcy Code;
(g) the Plan is feasible; (h) the Plan is in the "best
interests" of all holders of Claims and Interests in an impaired
class by providing to such holders property of a value, as of
the Effective Date, that is not less than the amount that such
holder would receive or retain in a chapter 7 liquidation,
unless each holder of a Claim or Interest in such Class has
accepted the Plan; and (i) all bankruptcy fees payable to the
Clerk of the Court and the U.S. Trustee under 28 U.S.C. S 1930
have been paid, or the Plan provides for the payment of such
fees on the Effective Date.
a. Acceptance.
Pursuant to Section 1126 of the Bankruptcy Code, the Plan is
accepted by an impaired Class of Claims if holders of two-thirds
in dollar amount and a majority in number of Claims of that
Class vote to accept the Plan. Only the votes of those holders
of Claims who actually vote (and are entitled to vote) to accept
or reject the Plan count in this tabulation. The Plan will be
accepted by an impaired Class of Interests if holders of
two-thirds of the amount of outstanding shares in such class
vote to accept the Plan (and only those voting count in the
tabulation). Pursuant to Section 1129(a)(8), all the impaired
Classes of Claims and Interests must vote to accept the Plan in
order for the Plan to be confirmed on a consensual basis (and at
least one such Impaired Class must accept the Plan without
including the acceptance by an insider). However, under the
cramdown provisions of Section 1129(b), only one impaired Class
of Claims (determined without including the acceptance by an
insider) needs to accept the Plan if the other conditions to
cramdown are met.
The Plan has three Classes of Claims which are Impaired and are
entitled to vote on the Plan (Classes 2, 3, and 4). The Plan
provides for three Classes of Interests (Classes 5, 6 and 7)
which are impaired and which are deemed to have rejected the
Plan.
b. Best Interests Test/Liquidation Analysis.
Notwithstanding the acceptance of the Plan by each Impaired
Class, section 1129(a)(7) of the Bankruptcy Code requires that
the Bankruptcy Court determine that the Plan is in the best
interests of each holder of a Claim or Interest in an Impaired
Class if any holder in that Class has voted against the Plan.
Accordingly, if an Impaired Class under the Plan does not
unanimously accept that Plan, the "best interests" test requires
that the Bankruptcy Court find that the Plan provides to each
member of such Impaired Class a recovery on account of the
member's Claim or Interest that has a value, as of the Effective
Date, that is not less than the value of the distribution that
each such member would receive or retain if Debtors were
liquidated under Chapter 7 of the Bankruptcy Code commencing on
the Effective Date.
To determine what members of the each impaired Class of Claims
would receive if the Debtors were liquidated under Chapter 7,
the Court must consider the values that would be generated from
a liquidation of the Debtors' assets and properties in the
context of a hypothetical liquidation under Chapter 7. Because
the Debtors' assets are all encumbered by liens in favor of the
holders of the Senior Notes and the value of the Debtors' assets
in an orderly liquidation is less than the principal amount of
the Senior Noteholders' debt, unsecured creditors, including
holders of Administrative and Priority Claims, would receive
nothing in a Chapter 7 liquidation of Debtors. Thus, the Plan,
which provides for the payment of Administrative and Priority
Claims and which potentially provides a distribution of
beneficial interests in the Liquidating Trust to general
unsecured creditors, provides the unsecured creditors with a
greater distribution than they would receive in Chapter 7.
Further, the Plan is designed to maximize the value of the
Debtors' assets for the benefit of Creditors. The Liquidating
Trustee will have the flexibility in liquidating the assets to
assure the highest recovery. The Liquidating Trustee may hold
assets or improve them or take whatever action is necessary to
secure the maximum value.
c. Feasibility.
Section 1129(a)(11) of the Bankruptcy Code requires a finding
that Confirmation of the Plan is not likely to be followed by
the liquidation, or the need for further financial
reorganization, of the Debtors or any successor in interest,
unless as here, liquidation is expressly contemplated by the
Plan. Since the Plan is a liquidating plan in which the cash
and securities representing the sale proceeds and the proceeds
of all other assets of the Debtors are distributed to a trust
for the benefit of creditors, the Debtors believe that they will
be able to perform their obligations under the Plan and that
therefore the Plan is feasible within the meaning of section
1129(a)(11) of the Bankruptcy Code.
d. Classification.
Section 1122 of the Bankruptcy Code sets forth the requirements
relating to classification of claims. Section 1122(a) provides
that claims or interest may be placed in a particular class only
if they are substantially similar to the other claims or
interest in that class. The Debtors believe that all Classes
under the Plan satisfy the requirements of section 1122(a). The
Debtors believe that the classification of Claims set forth in
the Plan is appropriate in classifying substantially similar
Claims together, and does not discriminate unfairly in the
treatment of those Classes. The Debtors believe that the Plan
adheres to the absolute priority rule and treats holders of
Claims and Interests in accordance with their contractual
entitlement and applicable law.
B. Non-Consensual Confirmation.
The Bankruptcy Code provides for confirmation of the Plan even
if it is not accepted by all impaired Classes, as long as at
least one impaired Class of Claims has accepted it (without
counting the acceptances of insiders). These so-called
"cramdown" provisions are set forth in section 1129(b) of the
Bankruptcy Code. The Plan may be confirmed under the cramdown
provisions if, in addition to satisfying the other requirements
of section 1129 of the Bankruptcy Code, it (i) is "fair and
equitable" and (ii) "does not discriminate unfairly" with
respect to each Class of Claims or Interests that is impaired
under, and has not accepted, such Plan.
1. Fair and Equitable Standard.
With respect to a dissenting Class of unsecured creditors, the
"fair and equitable" standard requires, among other things, that
the Plan contain one of two elements. It must provide either
that each unsecured creditor in the Class receive or retain
property having a value, as of the Effective Date, equal to the
Allowed amount of its Claim, or that no holder of Allowed Claims
or Interests in any junior Class may receive or retain any
property on account of such Claims or Interest. The strict
requirements as to the allocation of full value to dissenting
Classes before junior Classes can receive a distribution is
known as the "absolute priority rule." In addition, the "fair
and equitable" standard has also been interpreted to prohibit
any class senior to a dissenting class from receiving under a
plan more than one hundred percent (100%) of its Allowed Claims.
2. The Plan Must Not Discriminate Unfairly.
As a further condition to approving a cramdown, the Bankruptcy
Court must find that the Plan does not "discriminate unfairly"
in its treatment of dissenting Classes. A Plan of
Reorganization does not "discriminate unfairly" if (a) the Plan
does not treat any dissenting impaired Class of Claims or
Interests in a manner that is materially less favorable than the
treatment afforded to another Class with similar legal Claims
against or Interests in the Debtors and (b) no Class receives
payments in excess of that which it is legally entitled to
receive for its Claims or Interests. The Debtors believe that
the Plan does not discriminate unfairly as to any impaired Class
of Claims or Interests.
If any impaired Class votes to reject the Plan, the Debtors
intend to seek to confirm the Plan pursuant to the cramdown
provisions, and, if the Court were to determine it to be
necessary, modify the Plan in order to comply with such cramdown
requirements.
C. Voting Procedures and Requirements.
1. Voting Requirements - Generally.
Pursuant to the Bankruptcy Code, only holders of Claims against
or Interests in Debtors that are Allowed pursuant to Section 502
of the Bankruptcy Code and that are impaired under the terms and
provisions of the Plan are entitled to vote to accept or reject
that Plan. In these cases, the Interests in Debtors are
impaired and are deemed to have rejected the Plan because they
are receiving no distribution. Thus, holders of Interests are
not entitled to vote. Pursuant to the Plan, the Beneficial
Holders of Claims in Class 2 as of the Voting Record Date are
entitled to vote to accept or reject the Plan.
All creditors who filed proofs of claim in an amount different
from the amount set forth in the Debtors' Schedules or whose
Claim was not included in the Debtors' Schedules are treated as
the holder of a Disputed Claim under the Plan. However, all
creditors whose Claims are impaired under the Plan will be
treated as holders of Allowed Claims for voting purposes only.
A Claim recorded in the Schedules or in the Clerk's records as
wholly unliquidated, contingent and/or undetermined shall be
accorded one vote and valued at one dollar for purposes of
section 1126(c) of the Bankruptcy Code, unless the holder of
such Claim files with the Court and serves a request for
temporary allowance of such Claim in a greater amount for voting
purposes. If a Claim is recorded in the Schedules or in the
Clerk's records as unliquidated, contingent and/or undetermined
in part, the holder of the Claim shall be entitled to vote that
portion of the claim that is liquidated, non-contingent and
undisputed in the liquidated, non-contingent and undisputed
amount, subject to any limitations set forth herein and unless
otherwise ordered by the Court. The Debtors' agreement to allow
such creditors to vote on the Plan shall not waive the Debtors'
right to treat such Claims as Disputed Claims for all other
purposes.
Pursuant to the Bankruptcy Code a class of claims or interests
is "impaired" if the legal, equitable, or contractual rights
attaching to the claims or interests of that class are altered,
other than by curing defaults and reinstating maturity.
Classes of Claims and Interests that are not impaired are not
entitled to vote on the Plan, are presumed to have accepted the
Plan and will not receive a Ballot. As set forth above, the
Claims in Class 1 are not impaired, and such Class of Claims is
not entitled to vote on the plan and is presumed to have
accepted the Plan pursuant to Section 1126(f) of the Bankruptcy
Code. The Claims in Classes 2, 3 and 4 are impaired and are
entitled to vote on the Plan. The Interests in Classes 5, 6 and
7 will not receive any distribution or retain any property under
the Plan and are deemed to have rejected the Plan pursuant to
Section 1129(g) of the Bankruptcy Code. The classification of
Claims and Interests and their designation as impaired or not
impaired is summarized above in Section V, (A) entitled
"Classification and Treatment of Claims and Interests".
2. Solicitation Agent.
Logan and Company, Inc. will act as the Solicitation Agent in
connection with the solicitation. All deliveries,
correspondence and questions should be directed to the
Solicitation Agent at the following address or telephone number:
615 Washington Street, Hoboken, New Jersey 07030, Attn: Kathleen
Logan, (201) 798-1031. The Solicitation Agent will provide
holders with information regarding the solicitation, assist
holders in obtaining copies of this Disclosure Statement,
Ballots and Master Ballots and respond to questions with respect
to any of the foregoing.
3. Voting Procedures.
A Ballot for voting to accept or reject the Plan is enclosed
with each copy of the Disclosure Statement. In most cases, the
Ballot enclosed with this Disclosure Statement is printed with
the amount of your Claim for voting purposes. Such amount is
based either on your proof of claim, the Debtors' Schedules, or
an order of the Court. All votes to accept or reject the Plan
must be cast by using the Ballot enclosed with this Disclosure
Statement.
IF YOU HAVE A CLAIM THAT IS IMPAIRED UNDER THE PLAN ENTITLING
YOU TO VOTE AND YOU DID NOT RECEIVE A BALLOT, RECEIVED A DAMAGED
BALLOT, OR LOST YOUR BALLOT, PLEASE CONTACT LOGAN AND COMPANY,
INC., THE SOLICITATION AGENT, AT 615 WASHINGTON STREET, HOBOKEN,
NEW JERSEY 07030, ATTN: KATHLEEN LOGAN, (201) 798-1031. IF YOU
HOLD CLAIMS IN MORE THAN ONE CLASS, YOU MAY RECEIVE MORE THAN
ONE BALLOT. YOU SHOULD COMPLETE, SIGN AND RETURN EACH BALLOT
YOU RECEIVE.
Consistent with the provisions of Bankruptcy Rule 3018, the
Court has fixed the close of business on August 7, 1998, as the
record date for the determining the holders of Claims who are
entitled to receive a copy of this Disclosure Statement and to
vote to accept or reject the Plan (the "Ballot Record Date").
Entities that acquire Claims after the Ballot Record Date will
not be entitled to vote on the Plan.
Any person who is a "record holder" of a Senior Note (a person
shown as the registered holder of a security in the registry
maintained by the Indenture Trustee for the Senior Notes) on the
Ballot Record Date -- including any bank, agent, broker or other
nominee who holds Senior Notes in its name (the "Nominal
Holder" or "Nominee") for a beneficial holder or holders -should
receive Solicitation Packages for distribution to the
appropriate beneficial holders. A Nominee shall, upon receipt
of the Solicitation Packages, immediately forward the
Solicitation Packages to the beneficial owners so that such
beneficial security holders may vote on the Plan pursuant to 11
U.S.C. S 1126. The Debtors shall provide for reimbursement, as
an administrative expense, of all the reasonable and customary
expenses of Nominal Holders in distributing the Solicitation
Packages to said beneficial security holders. Nominal Holders
will have two options for obtaining the votes of beneficial
owners of securities, consistent with usual customary practices
for obtaining the votes of securities held in street name: (i)
the Nominal Holder may prevalidate the individual ballot
contained in the Solicitation Package (by indicating the record
holders of the securities voted, and the appropriate account
numbers through which the beneficial owner's holdings are
derived) and then forward the Solicitation Package to the
beneficial owner of the securities, which beneficial owner will
then indicate its acceptance or rejection of the Plan and
otherwise indicate his choices to the extent requested to do so
on the ballot, and then return the individual ballot directly to
the Solicitation Agent in the return envelope to be provided in
the Solicitation Package, or (ii) the Nominal Holder may forward
the Solicitation Package to the beneficial owner of the
securities for voting along with a return envelope provided by
and addressed to the Nominal Holder, with the beneficial owner
then returning the individual ballot to the Nominal Holder, the
Nominal Holder will subsequently summarize the votes, including,
at a minimum, the number of beneficial holders voting to accept
and to reject the Plan who submitted ballots to the Nominal
Holder and the amount of such securities so voted, in an
affidavit (the "Affidavit of Voting Results"), and then return
the Affidavit of Voting Results to the Solicitation Agent. By
submitting an Affidavit of Voting Results, each such Nominal
Holder certifies that the Affidavit of Voting Results accurately
reflects votes and choices reflected on the ballots received
from beneficial owners holding such securities as of the Ballot
Record Date.
Pursuant to 28 U.S.C. SS 157 and 1334, 11 U.S.C. S 105, and
Bankruptcy Rule 1007(i) and (j), the Nominee Holders shall
maintain the individual ballots of its beneficial owners and
evidence of authority to vote on behalf of such beneficial
owners. No such ballots shall be destroyed or otherwise
disposed of or made unavailable without such action first being
approved by prior order of the Bankruptcy Court.
Under the Bankruptcy Code, for purposes of determining whether
the requisite acceptances have been received, only those holders
that vote to accept or reject the Plan will be counted. Votes
cannot be transmitted orally or by facsimile transmission.
Accordingly, it is important that you return your signed and
completed Ballot(s) promptly. Failure by any holder to send a
duly executed Ballot with an original signature will be deemed
an abstention by such holder with respect to a vote on the Plan
and will not be counted as vote for or against the Plan. To
accept Plan, the holder must check the box entitled "accept the
Plan" on the appropriate Ballot. Any Ballot cast that does not
indicate whether the holder of the Claim or Interest is voting
to accept or reject the Plan will not be counted as either an
acceptance or rejection of the Plan. A vote may be disregarded
if the Bankruptcy Court determines, after and a hearing, that
such acceptances or rejection was not solicited or procured in
good faith or other in accordance with the provision of the
Bankruptcy Code or if a Claim was voted in bad faith.
4. Voting Deadline.
Voting on the Plan by each holder of a Claim in an Impaired
Class is important. After carefully reviewing the Plan and this
Disclosure Statement, please indicate your vote on each enclosed
Ballot and return it in the pre-addressed envelope provided for
this purpose.
IN ORDER TO BE COUNTED, BALLOTS MUST BE SIGNED AND RETURNED SO
THAT THEY ARE RECEIVED EITHER BY THE BALLOTING AGENT NO LATER
THAN 4:00 P.M. DELAWARE TIME ON SEPTEMBER 9, 1998 (THE "VOTING
DEADLINE"), OR (ii) IF YOU ARE NOT THE RECORD HOLDER, BY YOUR
BROKER, BANK OR NOMINEE NO LATER THAN 4:00P.M. NEW YORK TIME ON
AUGUST 7, 1998 (THE "BENEFICIAL OWNERS DEADLINE").
TO HAVE YOUR VOTE COUNT, YOU MUST COMPLETE, SIGN AND RETURN THE
BALLOT TO:
LOGAN AND COMPANY, INC.
615 Washington Street
Hoboken, New Jersey 07030
PLEASE FOLLOW THE DIRECTIONS CONTAINED ON THE ENCLOSED BALLOT
CAREFULLY. BALLOTS THAT ARE RECEIVED AFTER THE VOTING DEADLINE
WILL NOT BE ACCEPTED OR USED BY THE DEBTORS IN SEEKING
CONFIRMATION OF THE PLAN. IT IS OF THE UTMOST IMPORTANCE TO
DEBTORS THAT YOU VOTE PROMPTLY TO ACCEPT THE PLAN.
DATED: July 28, 1998
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ William H. Sudell, Jr.
---------------------------
William H. Sudell, Jr. (No. 463)
Robert J. Dehney (No. 3578)
Derek C. Abbott (No. 3376)
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899
and
CAMHY KARLINSKY & STEIN LLP
David Neier
1740 Broadway, 16th Floor
New York, New York 10019-4315
Attorneys for Debtors
EXHIBIT "A"
DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION
DATED JULY 28, 1998