UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF MISSOURI
In re: ) In Proceedings under Chapter 11
)
FARMLAND INDUSTRIES, INC., ) Case No. 02-50557
FARMLAND FOODS, INC., ) Case No. 02-50561
SFA, INC., ) Case No. 02-50562
FARMLAND TRANSPORTATION, INC., ) Case No. 02-50564
FARMLAND PIPE LINE COMPANY, ) Case No. 02-50565
)
Debtors. ) Joint Administration
DISCLOSURE STATEMENT FOR
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
---------------------------------------------------
Gregory D. Willard, Esq. Laurence M. Frazen, Esq.
David M. Unseth, Esq. Cynthia Dillard Parres, Esq.
Cullen K. Kuhn, Esq. Robert M. Thompson, Esq.
BRYAN CAVE LLP BRYAN CAVE LLP
211 North Broadway, Suite 3600 1200 Main Street, Suite 3500
St. Louis, Missouri 63102-2750 Kansas City, Missouri 64105
Dated: July 31, 2003
THE UNITED STATES BANKRUPTCY COURT HAS NOT APPROVED THE DISCLOSURE
STATEMENT, THE PLAN OR THE MERITS OF THE PLAN AND THE DISCLOSURE STATEMENT
AND THE PLAN REMAIN SUBJECT TO FURTHER REVIEW BY THE BANKRUPTCY COMMITTEES.
THE DISCLOSURE STATEMENT AND PLAN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE PLAN OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO
SOLICITATIONS OF ACCEPTANCES TO THE PLAN HAVE BEEN AUTHORIZED BY THE
BANKRUPTCY COURT. ANY PERSON OR ENTITY PURPORTING TO SOLICIT SUCH
ACCEPTANCE BY OR ON BEHALF OF ANY PERSON OR ENTITY, INCLUDING THE DEBTORS,
IS NOT AUTHORIZED TO DO SO. THE DISCLOSURE STATEMENT AND THE PLAN,
INCLUDING ARTICLES V AND XI OF THE PLAN, REMAIN SUBJECT TO REVIEW AND
MODIFICATION.
TABLE OF CONTENTS
PAGE
I. INTRODUCTION...........................................................1
A. General.........................................................1
B. Voting Instructions And Procedures..............................1
1. Voting Procedures, Ballots And Balloting Deadline........1
2. Voting Record Date.......................................3
3. Voting Multiple Claims...................................3
4. Incomplete Ballots.......................................3
5. Defects And Irregularities...............................3
6. Withdrawal Of Ballot.....................................3
7. Confirmation Hearing.....................................4
8. Recommendations..........................................4
II. HISTORY AND STRUCTURE OF THE DEBTORS...................................5
A. Introduction....................................................5
B. Description Of The Debtors' Businesses..........................6
1. Meat Processing And Marketing............................6
2. Crop Production Business.................................7
3. Petroleum Business.......................................8
4. Other Businesses.........................................8
C. Historical Financial Results...................................10
D. Events Leading To Chapter 11...................................10
E. General Corporate Structure....................................11
F. Pre-Petition Secured Debt Obligations..........................12
III. THE CHAPTER 11 CASE...................................................12
A. Continuation Of Business Operations After The Petition Date....12
B. Corporate Management...........................................12
C. First Day Orders...............................................13
D. DIP Financing And Use Of Cash Collateral.......................14
E. Appointment Of The Bankruptcy Committees.......................15
1. Creditors' Committee....................................15
2. Bondholders' Committee..................................15
F. Key Employee Retention And Incentive Target Plan...............15
G. Marketing and Disposition of the Debtors' Assets...............16
1. Asset Sales Authorized To Date..........................16
2. Disposition Of The Pork Business........................21
3. Disposition Of The Beef Interests.......................23
4. Other Business Operations...............................25
H. Case Administration............................................26
1. Claims Information And Estimates........................26
2. Claims Agent............................................26
3. Balloting Agent.........................................26
4. Claims Transfer Procedures..............................26
I. Significant Business And Legal Matters.........................26
1. Procedures For Workers' Compensation Claims.............26
2. Procedures For Mechanics' Lien Claims...................27
3. Proposed Termination Of Certain Employee Benefits.......27
4. Proposed Settlement With U.S. EPA.......................27
5. Pending Environmental Claims............................29
6. Adjudication Regarding Subordinated Certificates........29
7. Insurance Proceeds For Albert Lea Plant.................30
IV. SUMMARY OF THE PLAN...................................................30
A. Introduction...................................................30
B. Classification Of Claims And Interests.........................30
C. Treatment Of Claims And Interests And Summary Of
Distributions Under The Plan...................................31
D. Provisions Governing Distributions.............................39
1. Distributions...........................................40
2. Interest On Claims......................................40
3. Means Of Cash Payment...................................40
4. Distributions On The Initial Distribution Date..........40
5. Distributions On A Subsequent Distribution Date.........40
6. Distributions On The Final Distribution Date............41
7. Delivery Of Distributions; Undeliverable Distributions..41
8. Tender Of Securities And Instruments....................42
9. Withholding And Reporting Requirements..................43
10. Setoffs.................................................43
11. No Recourse.............................................43
12. Transactions On Business Days...........................43
13. No Distributions In Excess Of Allowed Amounts Of Claim..43
14. Intercompany Advances...................................44
E. Implementation of the Plan.....................................44
1. Continued Existence of the Debtors; Vesting Of Assets...44
2. Funding For The Plan....................................45
3. Accounts................................................45
4. Liquidating Trust; Liquidating Trustee..................45
5. Post-Confirmation Committee.............................47
6. Effectuating Documents; Further Transactions............47
7. Exemption From Certain Transfer Taxes...................47
8. Releases and Related Matters............................48
9. Closing Of The Chapter 11 Case..........................48
10. Rights of Action........................................49
F. Retiree Benefits...............................................49
G. Establishment Of Class 11 Distribution Pool....................49
H. Treatment Of Executory Contracts and Unexpired Leases..........49
1. Rejected Executory Contracts And Unexpired Leases.......49
2. Rejection Damages Bar Date..............................50
3. Assumed Executory Contracts And Unexpired Leases........50
4. Payments Related To Assumed Executory Contracts And
Unexpired Leases........................................50
I. Disputed, Contingent and Unliquidated Claims...................51
1. Prosecution of Objections to Claims.....................51
2. Treatment of Disputed Claims............................51
3. Estimation..............................................51
J. Conditions Precedent To Confirmation And Consummation Of
The Plan.......................................................52
1. Conditions To Effective Date............................52
2. Waiver of Conditions....................................52
3. Notice of Effective Date................................52
K. Payment Of Certain Fees And Expenses...........................52
1. Professional Fee Claims.................................52
2. Administrative Claims...................................53
3. Fees and Expenses of the Indenture Trustees.............53
4. Statutory Fees..........................................53
L. Modifications Of The Plan; Severability Of Plan Provisions.....53
M. Successors And Assigns.........................................54
N. Revocation, Withdrawal, Or Non-Consummation....................54
O. Indemnification And Related Matters............................55
P. Dissolution Of The Bankruptcy Committees.......................55
Q. Terms Of Injunctions Or Stays..................................55
V. CONFIRMATION OF THE PLAN..............................................55
A. Introduction...................................................55
B. Voting.........................................................56
C. Acceptance.....................................................56
D. Confirmation Of The Plan.......................................56
1. Best Interests Of Holders Of Claims And Interests.......58
2. Financial Feasibility...................................63
3. Acceptance By Impaired Classes..........................63
4. Cram Down...............................................64
5. Classification Of Claims And Interests..................65
E. Effect Of Confirmation Of The Plan.............................65
1. No Discharge............................................65
2. Release Of Assets.......................................65
3. Exculpation And Limitation Of Liability.................65
4. Binding Effect..........................................66
F. Retention of Jurisdiction......................................66
VI. CERTAIN FACTORS TO BE CONSIDERED......................................66
A. Risk That Distributions May Be Less Than Estimated By Debtors..66
B. Risk Of Non-Confirmation Of The Plan...........................67
C. Non-Consensual Confirmation Of The Plan........................67
D. Conditions Precedent To The Occurrence Of The Effective Date...68
E. Liquidation Of The Debtors' Assets.............................68
F. Litigation Risks...............................................68
G. Alternatives To The Plan.......................................68
VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES...............................68
A. Certain Federal Income Tax Consequences to the Debtors.........69
1. Transfer Of Assets To The Liquidating Trust.............69
2. Merger Of Foods Into Industries.........................70
3. Cancellation Of Industries Common Shares................70
4. Cancellation Of Indebtedness And Reduction Of Tax
Attributes..............................................72
5. Alternative Minimum Tax.................................73
B. United States Federal Income Tax Consequences To Holders Of
Claims And Interests...........................................73
1. Holders Of Allowed Claims And Interests Receiving
Consideration...........................................73
2. Holders Of Industries Common Shares.....................75
3. Holders Of Old Securities Of Foods......................76
4. Holders Of Old Securities Of Transportation, SFA And
Pipeline................................................76
5. Holders Of Subordinated Claims..........................76
6. Distributions In Discharge Of Accrued Interest..........77
7. Information Reporting And Backup Withholding............77
C. Tax Treatment Of The Liquidating Trust.........................77
1. Classification Of The Liquidating Trust And Ownership
Of Beneficial Interests In Liquidating Trust............78
2. Tax Reporting...........................................78
VIII. CONCLUSION............................................................80
TABLE OF APPENDICES
Appendix A First Amended Joint Plan of Reorganization
Appendix B Historical Statements
Appendix C Organization Structure of the Debtors
Appendix D Liquidation Analysis for the Debtors
DISCLAIMER
THIS DISCLOSURE STATEMENT AND ITS RELATED DOCUMENTS ARE THE ONLY
DOCUMENTS AUTHORIZED BY THE BANKRUPTCY COURT TO BE USED IN CONNECTION WITH
THE SOLICITATION OF VOTES ACCEPTING THE DEBTORS' FIRST AMENDED JOINT PLAN
OF REORGANIZATION, DATED JULY 31, 2003 (AS MAY BE FURTHER AMENDED, THE
"PLAN"). NO REPRESENTATIONS HAVE BEEN AUTHORIZED BY THE BANKRUPTCY COURT
CONCERNING THE DEBTORS, THEIR BUSINESS OPERATIONS OR THE VALUE OF THEIR
ASSETS, EXCEPT AS EXPLICITLY SET FORTH IN THIS DISCLOSURE STATEMENT.
THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF
THE PLAN, STATUTORY PROVISIONS, DOCUMENTS RELATED TO THE PLAN, EVENTS IN
THE CHAPTER 11 CASES AND FINANCIAL INFORMATION. THIS DISCLOSURE STATEMENT
IS NOT INTENDED TO REPLACE CAREFUL AND DETAILED REVIEW AND ANALYSIS OF THE
PLAN OR SUCH STATUTORY PROVISIONS, DOCUMENTS OR FINANCIAL INFORMATION, BUT
IS RATHER INTENDED ONLY TO AID AND TO SUPPLEMENT SUCH REVIEW. THIS
DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED PROVISIONS SET FORTH IN THE PLAN (WHICH IS INCLUDED AS APPENDIX A
HERETO). IN THE EVENT OF A CONFLICT BETWEEN THE PLAN AND THIS DISCLOSURE
STATEMENT, THE PROVISIONS OF THE PLAN SHALL GOVERN. ALL HOLDERS OF ALLOWED
CLAIMS IN VOTING CLASSES ARE ENCOURAGED TO REVIEW THE FULL TEXT OF THE PLAN
AND TO READ CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT, INCLUDING ALL
APPENDICES ANNEXED HERETO, BEFORE DECIDING WHETHER TO VOTE TO ACCEPT OR TO
REJECT THE PLAN.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF
THE DATE HEREOF, AND THE DELIVERY OF THIS DISCLOSURE STATEMENT SHALL NOT,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF. THE
DEBTORS DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN,
INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR
OMISSION.
THE SOLICITATION PERIOD PURSUANT TO THIS DISCLOSURE STATEMENT WILL
EXPIRE AT ___________________, 2003 (THE "BALLOTING DEADLINE"). TO BE
COUNTED, BALLOTS MUST BE ACTUALLY RECEIVED IN ACCORDANCE WITH THE VOTING
INSTRUCTIONS BY THE BALLOTING AGENT ON OR BEFORE THE BALLOTING DEADLINE.
PLEASE SEE THE DISCLOSURE STATEMENT FOR THE VOTING INSTRUCTIONS. BALLOTS
WILL NOT BE ACCEPTED VIA FACSIMILE OR ELECTRONIC MAIL.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION
1125 OF THE BANKRUPTCY CODE AND RULE 3016 OF THE BANKRUPTCY RULES AND NOT
NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAW OR OTHER
NON-BANKRUPTCY LAW. THIS DISCLOSURE STATEMENT HAS BEEN NEITHER APPROVED NOR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS
THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN. PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING OR
TRANSFERRING CLAIMS OR INTERESTS OF THE DEBTORS SHOULD EVALUATE THIS
DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY
WERE PREPARED. HOLDERS OF CLAIMS AND INTERESTS SHOULD NOT CONSTRUE THE
CONTENTS OF THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS,
FINANCIAL OR TAX ADVICE. EACH SUCH HOLDER SHOULD, THEREFORE, CONSULT WITH
ITS OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY SUCH MATTERS
CONCERNING THE SOLICITATION, THE PLAN AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT BE CONSTRUED AS AN
ADMISSION, STIPULATION OR WAIVER, BUT RATHER AS A STATEMENT MADE IN
SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE
IN ANY NON-BANKRUPTCY PROCEEDING.
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT AND BECOMES
EFFECTIVE, ALL HOLDERS OF CLAIMS AND INTERESTS (INCLUDING THOSE WHO
REJECTED OR WHO ARE DEEMED TO HAVE REJECTED OR ACCEPTED THE PLAN AND THOSE
WHO DID NOT SUBMIT BALLOTS TO ACCEPT OR TO REJECT THE PLAN) SHALL BE BOUND
BY THE TERMS OF THE PLAN.
I. INTRODUCTION
A. GENERAL
Farmland Industries, Inc., Farmland Foods, Inc., Farmland
Transportation, Inc., SFA, Inc. and Farmland Pipe Line Company
(collectively, the "Debtors") hereby propose the following disclosure
statement (the "Disclosure Statement") pursuant to section 1125 of the
Bankruptcy Code, for use in the solicitation of votes for the Debtors'
First Amended Joint Plan of Reorganization (the "Plan").
This Disclosure Statement sets forth certain information regarding the
Debtors' operations and finances, the Debtors' need to seek chapter 11
protection and the utilization of the Debtors' assets. This Disclosure
Statement also describes the terms and provisions of the Plan, including
potential alternatives to the Plan, certain effects of confirmation of the
Plan and the distributions proposed to be made under the Plan. In addition,
this Disclosure Statement discusses the confirmation process and the voting
procedures that the holders of Allowed Claims and Allowed Interests in the
Voting Classes must follow for their votes to be counted.
CAPITALIZED TERMS USED AND NOT DEFINED HEREIN SHALL HAVE THE MEANING
ASCRIBED TO THEM IN THE PLAN UNLESS THE CONTEXT REQUIRES OTHERWISE.
The Bankruptcy Court has approved this Disclosure Statement as
containing "adequate information" in accordance with section 1125(b) of the
Bankruptcy Code to enable a hypothetical, reasonable investor holding an
Allowed Claim in each of the relevant Voting Classes to make an informed
judgment about the Plan.
B. VOTING INSTRUCTIONS AND PROCEDURES
1. VOTING PROCEDURES, BALLOTS AND BALLOTING DEADLINE
Under the Plan, all holders of Allowed Claims and Allowed Interests in
Classes 4, 5, 7, 9, 10, 11, 12, 14, 16 and 19 (the "Voting Classes") are
Impaired and entitled to vote on the Plan. Holders of Claims in each of
Classes 1, 2, 3, 6, 8 and 20 are Unimpaired under the Plan and are deemed
to have accepted the Plan. Holders of Claims and Interests in Classes 13,
15, 17 and 18 are conclusively deemed to accept the Plan as proponents of
the Plan. For a description of the Classes of Claims and Interests and
their treatment under the Plan, see Section IV.C, Treatment of Claims and
Interests and Summary of Distributions under the Plan.
ONLY PERSONS WHO HOLD CLAIMS AND INTERESTS ON THE RECORD DATE ARE
ENTITLED TO RECEIVE A COPY OF THIS DISCLOSURE STATEMENT. ONLY PERSONS WHO
HOLD ALLOWED CLAIMS AND ALLOWED INTERESTS IN THE VOTING CLASSES ON THE
RECORD DATE ARE ENTITLED TO VOTE WHETHER TO ACCEPT THE PLAN.
Separate pre-addressed return envelopes have been supplied for the
Ballots. Holders of Allowed Claims and Allowed Interests in the Voting
Classes should take care to use the proper pre-addressed envelope to ensure
that Ballots are returned to the proper address. In most cases, each Ballot
enclosed with this Disclosure Statement has been encoded with the amount of
the Allowed Claim for voting purposes (if the Claim is now or hereafter
determined to be a Disputed Claim this amount may not be the amount
ultimately allowed for purposes of distribution) and the Debtor and the
Class to which the Claim or Interest has been attributed. PLEASE CAREFULLY
FOLLOW THE DIRECTIONS CONTAINED ON EACH ENCLOSED BALLOT. ALL VOTES TO
ACCEPT OR TO REJECT THE PLAN MUST BE CAST BY USING THE BALLOT ENCLOSED WITH
THIS DISCLOSURE STATEMENT. In order for a Ballot to be counted, it must be
completed, signed and sent in the enclosed pre-addressed envelope to the
"Balloting Agent" so as to be received by the Balloting Deadline at the
following address:
if by mail to:
Bankruptcy Management Corporation
P.O. Box 905
El Segundo, California 90245-0905
if by overnight courier to:
Bankruptcy Management Corporation
1330 East Franklin Avenue
El Segundo, California 90245
Each holder of Allowed Class 7 Claim(s) totaling in excess of $1,000
may indicate on the Ballot (i) acceptance or rejection of the Plan or (ii)
an election to have such Allowed Claim(s) treated as a Class 6 Claim (which
election shall have the effect of reducing such Claim(s) to $1,000.00 and
having such reduced Claim(s) classified in Class 6). Any Ballot that
indicates both (i) acceptance or rejection of the Plan and (ii) an election
to have such Allowed Class 7 Claim(s) treated as a Class 6 Claim shall be
deemed to have elected to have such Allowed Claim(s) treated as a Class 6
Claim.
If you are a holder of an Allowed Claim or an Allowed Interest in a
Voting Class and (i) did not receive a Ballot, (ii) received a damaged
Ballot, (iii) lost your Ballot, (iv) have any question about balloting
procedures, or (v) wish to obtain, at your own expense (unless otherwise
specifically required by Bankruptcy Rule 3017(d)), an additional copy of
the Plan or this Disclosure Statement, please contact:
Bankruptcy Management Corporation
1330 East Franklin Avenue
El Segundo, California 90245
(888) 909-0100
ONLY PROPERLY COMPLETED AND SIGNED BALLOTS RECEIVED BY THE BALLOTING
AGENT PRIOR TO THE BALLOTING DEADLINE WILL BE COUNTED FOR PURPOSES OF
DETERMINING WHETHER EACH VOTING CLASS HAS ACCEPTED THE PLAN. ANY BALLOTS
RECEIVED AFTER THE BALLOTING DEADLINE WILL NOT BE COUNTED, NOR WILL ANY
BALLOTS RECEIVED BY FACSIMILE OR ELECTRONIC MAIL BE COUNTED. The Balloting
Agent will prepare and file with the Bankruptcy Court a certification of
the results of the balloting with respect to the Plan.
Your vote on the Plan is important. The Bankruptcy Code requires as a
condition to confirmation of a plan of reorganization that each class that
is Impaired under such plan vote to accept such plan, unless the "cram
down" provisions of the Bankruptcy Code are employed. The Debtors have
reserved their right to seek to "cram down" the Plan on non-accepting
Impaired Classes of Claims and Interests. See Section V.D.4, Cram Down.
2. VOTING RECORD DATE
The record date for voting on the Plan is the close of business
(Kansas City time) on _____________, 2003 (the "Record Date"). Only holders
of Allowed Claims and Allowed Interests in the Voting Classes as of the
Record Date are entitled to vote to accept or reject the Plan.
3. VOTING MULTIPLE CLAIMS
Any person who holds Allowed Claims in more than one Voting Class is
required to vote separately with respect to each such Voting Class in which
such person holds an Allowed Claim. Please use a separate Ballot to vote
all Allowed Claims in each Voting Class.
4. INCOMPLETE BALLOTS
Any Ballot received which is not signed or does not indicate either an
acceptance or a rejection of the Plan shall be an invalid Ballot and shall
not be counted for purposes of determining acceptance or rejection of the
Plan.
5. DEFECTS AND IRREGULARITIES
Unless otherwise directed by the Bankruptcy Court, all questions as to
the validity, form, eligibility (including time of receipt), acceptance,
and revocation or withdrawal of Ballots will be determined by the Debtors
in their sole discretion, whose determination will be final and binding.
Unless the Ballot being furnished is timely submitted to the Balloting
Agent by the Balloting Deadline, together with any other documents required
by such Ballot, the Debtors may, in their sole discretion, reject such
Ballot as invalid and, therefore, decline to use it in connection with
seeking confirmation of the Plan by the Bankruptcy Court. In the event of a
dispute with respect to a Ballot, any vote to accept or reject the Plan
cast with respect to such Ballot will not be counted for purposes of
determining whether the Plan has been accepted or rejected, unless the
Bankruptcy Court orders otherwise. The Debtors reserve the right to reject
any and all Ballots not in proper form. The Debtors further reserve the
right to waive any defects or irregularities or conditions of delivery as
to any particular Ballot. The interpretation (including the Ballot and the
respective instructions thereto) by the Debtors, unless otherwise directed
by the Bankruptcy Court, will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with delivery of a
Ballot must be cured within such time as the Debtors (or the Bankruptcy
Court) determine. Neither the Debtors nor any other person will be under
any duty to provide notification of defects or irregularities with respect
to deliveries of Ballots nor will any of them incur any liabilities for
failure to provide such notification. Unless otherwise directed by the
Bankruptcy Court, delivery of such Ballots will not be deemed to have been
made until such irregularities have been cured or waived.
6. WITHDRAWAL OF BALLOT
All properly completed, valid Ballots will be irrevocable upon the
Balloting Deadline. Prior to the Balloting Deadline, any holder of an
Allowed Claim or Allowed Interest in a Voting Class who has delivered a
valid Ballot may withdraw its vote by delivering a written notice of
withdrawal to the Balloting Agent so as to be received by the Balloting
Agent before the Balloting Deadline. To be valid, the notice of withdrawal
must (a) describe the Claim or Interest to which it relates, (b) be signed
by the party who signed the Ballot to be revoked, and (c) be received by
the Balloting Agent by the Balloting Deadline. Withdrawal of a Ballot can
only be accomplished pursuant to the foregoing procedure. Prior to the
Balloting Deadline, any holder of an Allowed Claim or Allowed Interest in a
Voting Class who has delivered a valid Ballot may change its vote by
delivering to the Balloting Agent a properly completed subsequent Ballot so
as to be received before the Balloting Deadline. In the case where more
than one timely, properly completed Ballot for the same Allowed Claim or
Allowed Interest is received by the Balloting Deadline, only the Ballot
that bears the latest date will be counted. After the Balloting Deadline, a
vote of the holder of an Allowed Claim or Allowed Interest in a Voting
Class may only be changed or withdrawn with the permission of the
Bankruptcy Court upon a showing of "cause" pursuant to Bankruptcy Rule
3018(a).
7. CONFIRMATION HEARING
THE BANKRUPTCY COURT WILL HOLD THE HEARING REGARDING CONFIRMATION OF
THE PLAN (THE "CONFIRMATION HEARING") COMMENCING AT _______________, 2003
AT __:____ __.M. AT THE UNITED STATES BANKRUPTCY COURT, CHARLES EVANS
WHITTAKER COURTHOUSE, 400 E. 9TH STREET, KANSAS CITY, MISSOURI 64106,
BEFORE BANKRUPTCY JUDGE JERRY W. VENTERS. The Confirmation Hearing may be
adjourned from time to time without further notice other than by
announcement in the Bankruptcy Court on the scheduled date of such hearing.
At the Confirmation Hearing, the Bankruptcy Court will (i) determine
whether the requisite vote has been obtained for each of the Voting
Classes, (ii) hear and determine objections, if any, to the Plan and to
confirmation of the Plan that have not been previously disposed of, (iii)
determine whether the Plan meets the confirmation requirements of the
Bankruptcy Code, and (iv) determine whether to confirm the Plan.
Any objection to the confirmation of the Plan must be in writing and
must comply in all respects with the Notice accompanying this Disclosure
Statement.
8. RECOMMENDATIONS
THE DEBTORS SUPPORT CONFIRMATION OF THE PLAN AND URGE ALL HOLDERS OF
ALLOWED CLAIMS AND ALLOWED INTERESTS IN THE VOTING CLASSES TO ACCEPT THE
PLAN.
II. HISTORY AND STRUCTURE OF THE DEBTORS
A. INTRODUCTION
Industries, founded in 1929 and formally incorporated in Kansas in
1931, is a farm supply cooperative and a processing and marketing
cooperative. Its principal executive offices are at 12200 North Ambassador
Drive, Kansas City, Missouri 64163.
Industries was originally founded as the Union Oil Co. when six
farmer-owned cooperatives joined together to buy and distribute petroleum
products. It continued to grow over the years, becoming known as the
Consumer Cooperative Association. In 1966, the company changed its name to
"Farmland Industries, Inc." By its 72nd anniversary in 2001, Industries was
one of the nation's largest companies, with annual revenues of $11.8
billion. As of the Petition Date, Industries functioned as a farm-to-table
agribusiness company. The other Debtors are subsidiaries of Industries.
As of the Petition Date, the Debtors conducted business primarily in
two operating areas. First, on the output side of the agricultural
industry, they operated as a processing and marketing cooperative. Second,
on the input side of the agricultural industry, they operated as a farm
supply cooperative.
The output side of the Debtors' business consisted of the processing
and marketing of pork products, through Foods, and the processing and
marketing of beef products, through Farmland National Beef Packing Company,
L.P. ("National Beef"), which is 71.2% owned by the Debtors. In 2002,
approximately 73% of the hogs and 23% of the cattle processed by Foods and
National Beef, respectively, were supplied by the Debtors' cooperative
members. Substantially all the pork and beef products that Foods and
National Beef sold in 2002 were processed in plants they own or lease.
As of the Petition Date, the Debtors' farm supply operations consisted
of two principal product divisions: crop production and petroleum.
Principal products of the crop production division were nitrogen and
phosphate-based fertilizers and, through an ownership interest in a joint
venture, a complete line of insecticides, herbicides and mixed chemicals.
Principal products of the petroleum division were refined fuels, propane
and petroleum refining by-products. The Debtors manufactured approximately
80% of the dollar value of their crop production and petroleum products
sold in 2002. Approximately 82% of the crop production products and 23% of
the petroleum products sold in 2002 were sold through the Debtors' ventures
to farm cooperative associations which are members of Industries and who,
in turn, distribute these products primarily to farmers and ranchers.
The farm supply businesses of the Debtors have been highly seasonal.
Historically, the majority of sales of crop production products occur in
the spring and fall. Margins for refined petroleum fuels historically has
been concentrated in the summer.
The Debtors competed for market share with numerous participants of
various sizes and with various levels of vertical integration, and product
and geographical diversification. Competitors in the crop production
industry include global producers of nitrogen- and phosphate-based
fertilizers, major chemical companies and product importers and brokers. In
the petroleum industry, competitors include major oil companies and
independent refiners. The pork and beef processing industries are comprised
of a large variety of competitive participants.
B. DESCRIPTION OF THE DEBTORS' BUSINESSES
1. MEAT PROCESSING AND MARKETING
The Debtors' meat processing and marketing businesses are primarily
conducted by Foods and National Beef. National Beef is not a Debtor in
these Chapter 11 proceedings.
a) Pork Processing and Marketing
Foods is a food processor, supplying fresh pork and processed meat
products to U.S. retailers, foodservice operators, industrial accounts and
international customers. Started in 1959, Foods began as a one-facility hog
slaughtering operation and has grown to be the sixth largest pork processor
in the United States, with three plants that have an annual slaughter
capacity of 7.5 million hogs. In addition to processing and marketing fresh
pork, Foods also processes and markets branded pork and processed meats,
including bacon, processed ham products, fresh and processed sausage
products and specialty deli meats. These products are marketed under a
variety of brand names including: Farmland, Farmstead, OhSe, Maple River,
Carando and Roegelein. Product distribution is through national and
regional retail and food service chains, distributors and in international
markets. Although Foods does not directly own any hog production
facilities, during the 1990's Foods synthetically vertically integrated
into hog production through contractual arrangements with farmer-owned hog
production operations.
Foods' slaughtering facilities are located in Denison, Iowa; Monmouth,
Illinois; and Crete, Nebraska. During 2000, 2001 and 2002, Foods
slaughtered approximately 7.4 million, 6.4 million and 6.9 million hogs,
respectively. Facilities to further process primal beef and pork cuts are
located in Springfield, Massachusetts; New Riegel, Ohio; Wichita, Kansas;
and Carroll, Iowa. Foods leases and operates two "case ready" facilities,
which are located in Salt Lake City, Utah and Omaha, Nebraska. Foods also
has a "case ready" co-packaging arrangement at a facility in Madison,
Wisconsin. ("Case ready" refers to meat products which are prepared to the
specifications of retailers and which do not require additional preparation
work prior to sale by the retailer). In aggregate, Foods has the capacity
to produce close to 3 billion pounds of pork products, representing
approximately 15% of projected 2002 U.S. pork production. Foods enjoys a
customer base that includes such blue-chip retailers as Wal-Mart, which has
allowed Foods to increase its sales of branded and other value-added
products.
b) Beef Processing and Marketing
Industries first invested in National Beef in 1993. National Beef
engages in meat packing and processing and is the fourth largest beef
packer in the United States. As of the Petition Date, Industries directly
or indirectly owned 71.2% of the ownership interests of National Beef
(i.e., the Beef Interests). Operating from five facilities, National Beef
produces fresh, frozen, and "case-ready" branded and nonbranded products
for domestic consumption as well as foreign consumption in 25 countries. It
has two main slaughtering facilities and a portion-control facility in
Kansas, one "case-ready" facility in Pennsylvania and a second "case-ready"
facility in Georgia. During 2000, 2001 and 2002, National Beef slaughtered
approximately 2.7 million, 2.8 million and 3.1 million cattle,
respectively. National Beef's products include fresh and frozen beef, boxed
beef and "case ready" beef. Product distribution is through national and
regional retail and food service chains, distributors and in international
markets. National Beef estimates that slightly more than 55% of its sales
are to the retail sector and approximately 30% of its sales are to the
foodservice sector.
National Beef has four wholly-owned subsidiaries and owns a
controlling interest in Kansas City Steak Company, L.L.C., a
portion-control company that provides steaks to premium steak houses in the
United States and directly to consumers via mail-order catalogs. In
addition, through a wholly-owned subsidiary, National Beef owns a 47.5%
interest in aLF Ventures, LLC, a joint venture with DMV International. aLF
Ventures, LLC holds the worldwide exclusive rights to market activated
lactoferrin, a natural product that has been recently granted "Generally
Recognized as Safe" status by the Food and Drug Administration for use in
protecting fresh beef from bacteria such as E. coli.
2. CROP PRODUCTION BUSINESS
As of the Petition Date, the Debtors manufactured nitrogen-based
fertilizer at five U.S. facilities and, through a 50% owned joint venture,
Farmland MissChem, Limited ("FMCL"), operated an off-shore facility in the
Republic of Trinidad and Tobago. The operating domestic nitrogen plants
were located in Enid, Oklahoma; Dodge City, Kansas; Coffeyville, Kansas;
Fort Dodge, Iowa; and Beatrice, Nebraska. The Debtors also owned nitrogen
fertilizer plants in Lawrence, Kansas and Pollock, Louisiana, which were
permanently shut down prior to the Petition Date. The Debtors also owned a
50% interest in two phosphate fertilizer manufacturing joint ventures:
Farmland-Hydro, LP ("FHLP"), a joint venture in Florida, and SF Phosphates,
Limited Company ("SF Phosphates"), a joint venture with operations in Utah
and Wyoming. Substantially all of the Debtors' domestic fertilizer
production is sold to Agriliance LLC, an agronomy marketing joint venture
in which the Debtors have an indirect minority ownership interest.
Due to unfavorable market conditions during 2002, the Debtors
temporarily curtailed production of nitrogen-based fertilizers at various
production plants. Also, the Debtors experienced mechanical problems at the
Coffeyville, Kansas nitrogen facility which limited production to 70% of
the facility's planned capacity. As a result, the production plants in
aggregate operated at approximately 63% of their capacity during the 2002
fiscal year. Annual anhydrous ammonia production of nitrogen-based plant
foods for fiscal years 2000, 2001 and 2002, including Industries' 50% share
of the output of Farmland MissChem Limited, totaled approximately 2.9
million tons, 2.4 million tons and 2.1 million tons, respectively.
Prior to the Petition Date, Industries closed its Lawrence, Kansas and
Pollock, Louisiana plants. These two plants contributed 29% of Industries'
total anhydrous ammonia production capacity.
Each of the operating domestic nitrogen fertilizer plants had capacity
to further process anhydrous ammonia into upgraded nitrogen products (UAN
solutions, urea and liquid nitrogen). In 2000, 2001 and 2002, production of
these upgraded products was approximately 1.8 million tons, 1.8 million
tons and 1.5 million tons, respectively.
In May 2003, the Debtors sold four of the domestic nitrogen fertilizer
production plants and all of its interest in Farmland MissChem, Limited to
Koch Nitrogen Company. The Debtors entered into a contract to sell the
closed Pollock, Louisiana plant. See Section III.G.1.r, Nitrogen Fertilizer
Assets. The only nitrogen facilities the Debtors currently own are (i) the
Lawrence, Kansas facility, which facility is no longer manufacturing
nitrogen-based fertilizer, and (ii) the Coffeyville, Kansas facility, which
facility in fiscal 2002 accounted for approximately 12% of the Debtors'
anhydrous ammonia production, approximately 34% of the Debtors' UAN
production and approximately 18% of the Debtors' total nitrogen production.
The Debtors intend to continue operating the Coffeyville, Kansas facility.
In November 2002, the Debtors sold their interest in the FHLP
phosphate fertilizer operations to Cargill.
Industries continues to be a 50% owner of SF Phosphates. The SF
Phosphates plant produces monoammonium phosphate and super phosphoric acid
with annual production for 2000, 2001 and 2002 of 543,000 tons, 553,000
tons and 536,000 tons, respectively. Under the venture agreement, each
owner purchases 50% of SF Phosphates' production. Industries sells its
share of such production to Agriliance LLC. Simplot, Industries' venture
partner in SF Phosphates, has initiated litigation alleging that, by
operation of the Utah Revised Limited Liability Act, the commencement of
the Chapter 11 Case caused Industries to cease to be a member of SF
Phosphates and was no longer entitled to participate in the governance of
the company (although Industries would continue to be entitled to receive
its shares of profits, losses and distributions as though it were still a
member). The Debtors are vigorously defending this litigation.
Industries continues to have a 50% ownership interest in United
Country Brands ("UCB"), and UCB has a 50% ownership interests in Agriliance
LLC. Industries' 50% ownership interest in UCB is reduced by 13.1% of the
Agriliance LLC crop production products earnings which, in the past, were
allocated to Wilbur-Ellis Company and are now allocated to CHS
Cooperatives. Agriliance LLC markets and distributes a complete line of
crop production products, including nitrogen and phosphate-based plant
foods, as well as a complete line of crop protection products such as
insecticides, herbicides and mixed chemicals. Industries continues to sell
substantially all of its crop production products, including its share of
SF Phosphates' production, to Agriliance LLC at a formula price based on
the prevailing market price.
3. PETROLEUM BUSINESS
Industries participates in the petroleum industry as a mid-continent
refiner and, through November 30, 2001, participated as a wholesale
distributor of petroleum products. The principal products of this business
segment are refined fuels, propane and by-products of the petroleum
refinery.
Industries manages and operates a petroleum refinery at Coffeyville,
Kansas with approximately 95,000 barrel per day capacity. The refinery
converts crude oil into refined products such as gasoline, diesel fuel, and
distillates. Production at the refinery accounted for approximately 90% of
Industries' refined fuel sales in 2002. Substantially all of the refined
fuels produced at the refinery are sold to CHS Cooperatives at a formula
price tied to market value.
4. OTHER BUSINESSES
Industries participates in various other businesses, including the
following:
a) Feed
Industries has an 8% ownership interest in Land O'Lakes Farmland Feed
("LOLFF"). LOLFF is a leading market producer of animal feed in the United
States, producing both commercial and lifestyle feed for a variety of
animals, including dairy cattle, beef cattle, swine, poultry, horses and
other specialty animals such as laboratory and zoo animals. LOLFF markets
animal feed products under the Land O'Lakes Feed label. Through its
wholly-owned subsidiary Purina Mills LLC, LOLFF also markets animal feed
(other than dog and cat food) under the leading brands in the industry:
Purina, Chow and the "Checkerboard" Nine Square logo. As of December 31,
2002, LOLFF operated a geographically diverse network of 100 feed mills and
distributed its animal feed nationally through approximately 1,300 local
cooperatives, through approximately 3,500 independent dealers operating
under the Purina brand name and directly to customers.
b) Domestic Grain
Industries owns or leases approximately 25 inland grain elevators,
including one export elevator, with a total capacity in excess of 170
million bushels of grain. These elevators are leased or subleased to
ADM/Farmland, a wholly-owned subsidiary of Archer Daniels Midland. The
leases between Industries and ADM/Farmland are structured to cover the
depreciation, amortization and taxes related to the elevators. Through this
arrangement, Industries receives 50% of any income and is responsible for
50% of any loss related to ADM/Farmland's operations of these elevators.
c) International Grain
Industries owns a number of foreign subsidiaries (collectively
referred to as "Tradigrain"), which were engaged in international grain
operations through February 2002. Subsequent to February 2002, Industries
has overseen the orderly windup of Tradigrain operations and assets. This
process continues and should be substantially completed by December 2003.
C. HISTORICAL FINANCIAL RESULTS
Set forth in Appendix B is selected historical financial data for each
of the Debtors for the nine-month period ended May 31, 2003, for the
three-month period ended August 31, 2002, for the nine-month period ended
May 31, 2002, and for the years ended August 31, 1999, 2000 and 2001. The
financial statements for the years ended August 31, 1999, 2000 and 2001
were included in Industries' Annual Report on Form 10-K filed with the SEC.
D. EVENTS LEADING TO CHAPTER 11
In the 1990's, the Debtors pursued an expansion strategy that
emphasized acquisition of new businesses and expansion of existing
operations. This strategy resulted in rising corporate expenses and
increased debt. The combination of higher debt levels and decreased
earnings left the Debtors vulnerable to an economic downturn.
In 2001, the Debtors' management implemented a strategic initiative
called Navigating Tomorrow, designed to reduce debt and secure the
long-term financial success of the Debtors.
During the twelve months ended February 28, 2002, Industries reduced
its debt (including off balance sheet debt related to its Coffeyville
nitrogen facility) by over $500 million, the largest reduction in the
cooperative's history. General and administrative expenses were reduced by
approximately $29 million, or 38%. Cash flow reached a five-year high,
increasing more than $400 million from 2000.
Notwithstanding these cost reductions, the Debtors experienced
liquidity problems due to the underperformance of certain business
segments. Principally, margins available in fertilizer manufacturing eroded
dramatically.
Lack of rain in the wheat belt that hampered fertilizer demand, low
commodity prices, and continued volatility in domestic natural gas prices
resulted in the Debtors' Crop Production business segment reporting a loss
of $78 million for the first six months of fiscal year 2002.
During the year leading up to the Petition Date, nitrogen fertilizer
prices dropped significantly. Ammonia prices fell approximately 55 percent
and urea prices decreased 49 percent between the fall of 2001 and the
Petition Date.
Despite strong financial performance by the meat segment of the
Debtors' business, losses in the fertilizer business caused severe cash
flow problems for the Debtors. During the first five months of calendar
year 2002, the Debtors' liquidity situation continued to erode as
fertilizer sales did not develop as expected.
The operating losses in the Debtors' crop production and petroleum
businesses, coupled with planned maintenance on the Debtors' Coffeyville,
Kansas refinery, significantly hampered cash flow during the spring of
2002. In Industries' Quarterly Report on Form 10-Q for the quarter ended
February 28, 2002 (filed with the SEC), Industries stated that it may not
be able to generate sufficient cash flow from operations to avoid covenant
defaults under the Pre-Petition Credit Agreement at the end of the third
quarter or maintain its ability to borrow under the Pre-Petition Credit
Agreement and might be forced to seek protection from creditors if
conditions did not improve. Concerns regarding the Debtors' financial
condition led to increased cash demands and more restrictive payment terms
from trade creditors, as well as increased demands for early redemptions of
subordinated debt, which adversely affected the Debtors' ability to fund
ongoing operations and service debt. Because of this liquidity crisis, the
Debtors filed their respective Chapter 11 petitions.
On May 31, 2002, the Debtors filed voluntary petitions for protection
under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The
filings were made in order to facilitate the restructuring of the Debtors'
trade liabilities, debt, and other obligations. The Debtors continue to
manage their businesses as debtors-in-possession.
E. GENERAL CORPORATE STRUCTURE
Industries is a farm supply cooperative and a processing and marketing
cooperative that is incorporated in the state of Kansas. Industries owns
virtually all of the stock of the other Debtors, which are incorporated in
Kansas, Missouri and Arkansas. In addition, Industries owns interests in
several other subsidiaries and joint ventures. A current organizational
chart of the Debtors is attached hereto as Appendix C.
F. PRE-PETITION SECURED DEBT OBLIGATIONS
On February 7, 2002, Industries, Foods and a syndicate of banks
entered into the Pre-Petition Credit Agreement. As of the Petition Date,
the Debtors were indebted under the Pre-Petition Credit Agreement in the
approximate amount of $399.7 million (consisting of $233.0 million in
revolving loans, $31.7 million of letters of credit obligations and a
$135.0 million term loan) plus additional fees and expenses. The
Pre-Petition Credit Agreement was secured by substantially all of the
Debtors' major assets, including accounts receivable, inventories,
property, plant and equipment and intangible assets. Capital derived from
the Pre-Petition Credit Agreement was used for capitalizing fixed assets
and working capital and other operating expenses.
III. THE CHAPTER 11 CASE
A. CONTINUATION OF BUSINESS OPERATIONS AFTER THE PETITION DATE
On May 31, 2002, the Debtors filed petitions for relief under Chapter
11 of the Bankruptcy Code. Since the Petition Date, the Debtors have
continued to operate as debtors-in-possession subject to the supervision of
the Bankruptcy Court and in accordance with the Bankruptcy Code. The
Debtors are authorized to operate their business in the ordinary course of
business. Transactions outside of the ordinary course of business require
Bankruptcy Court approval.
An immediate effect of the filing of the Debtors' bankruptcy petitions
was the imposition of the automatic stay under the Bankruptcy Code which,
with limited exceptions, enjoins the commencement or continuation of all
collection efforts by creditors and the enforcement of liens against
property of the Debtors. This relief provides the Debtors with the
"breathing spell" necessary to assess and reorganize their business. The
automatic stay remains in effect, unless modified by the Bankruptcy Court,
until consummation of a plan of reorganization.
B. CORPORATE MANAGEMENT
The current executive officers of Industries are as follows:
Robert B. Terry is President and Chief Executive Officer of
Industries. Mr. Terry was appointed to his present position in May 2002.
Previously he was Executive Vice President, General Counsel & Corporate
Secretary. Mr. Terry joined Industries in 1989.
Steven R. Rhodes is Executive Vice President and Chief Financial
Officer of Industries. Mr. Rhodes was appointed to his present position in
May 2002. Previously he held various positions in North American Grain,
Transportation, and Corporate Divisions of Industries. Mr. Rhodes joined
Industries in 1979.
Stanley A. Riemann is Executive Vice President of Industries and
President of Crop Production. Mr. Riemann was appointed to his present
position in May 1999. Previously he held various positions in the Crop
Nutrients and Crop Protection areas. Mr. Riemann joined Industries in 1974.
Robert W. Schuller is Vice President, General Counsel and Corporate
Secretary of Industries. Mr. Schuller was appointed to his present position
in May 2002. Mr. Schuller joined Industries in 1994 in the Legal Division.
J. Randall Vance is Vice President and Treasurer of Industries. Mr.
Vance was appointed to his present position in July 2002. Previously he
served as Assistant Treasurer. Mr. Vance joined Industries in 1991.
Dennis M. Alt is Vice President, Strategic Projects of Industries. Mr.
Alt was appointed to this position in June 2002. Before his appointment,
Mr. Alt was an Associate General Counsel in Industries' Legal Division.
Prior to re-joining Industries in 2002, he was a shareholder with Stinson
Mag & Fizzell.
George Richter is Vice President of Industries and President of the
Pork Division. Mr. Richter was appointed to his present position in 1999.
Previously he served as Vice President, Sales and Marketing for Foods. Mr.
Richter joined Industries in 1971.
Timothy R. Daugherty is Vice President, Administration of Industries.
Mr. Daugherty was appointed to his present position in June 2002.
Previously he served as Vice President and President of World Grain and as
Vice President of Marketing for a geographic territory that included
Kansas, Colorado and Utah. Mr. Daugherty joined Industries in 1985.
C. FIRST DAY ORDERS
On the Petition Date, the Debtors filed several motions seeking
certain relief by virtue of so-called "first day orders." First day orders
are intended to facilitate the transition between a debtor's pre-petition
and post-petition business operations by approving certain regular business
practices that may not be specifically authorized under the Bankruptcy Code
or as to which the Bankruptcy Code requires prior approval by the
Bankruptcy Court. The first day orders obtained in these cases are typical
for large Chapter 11 cases.
The first day orders in the Chapter 11 Cases authorized, among other
things:
a) Joint administration of each of the Debtor's bankruptcy
cases;
b) The DIP Credit Agreement, on an interim basis (the
"Interim DIP Order");
c) The retention of the following professionals to serve on
behalf of the Debtors: (i) Bryan Cave LLP, as bankruptcy counsel; and
(ii) Bankruptcy Management Corporation, as claims agent;
d) The maintenance of the Debtors' bank accounts and
operation of their cash management systems substantially as such
systems existed prior to the Petition Date;
e) Payment of employees' accrued pre-petition wages and
employee benefit claims;
f) Continued utility services during the pendency of the
Chapter 11 Case;
g) The continued retention of professionals regularly
employed by the Debtors in the ordinary course of business;
h) The maintenance of certain pre-petition customer programs
and practices;
i) Administrative expense treatment for certain holders of
valid reclamation claims;
j) The payment of certain pre-petition tax claims;
k) The payment of certain pre-petition critical trade vendor
claims;
l) The payment of certain pre-petition obligations to sales
brokers; and
m) The payment of certain obligations under the Packers and
Stockyards Act.
D. DIP FINANCING AND USE OF CASH COLLATERAL
Subsequent to the Petition Date, the Debtors and a syndicate of banks
entered into the DIP Credit Agreement, which was subsequently revised and
approved by the Bankruptcy Court, to provide up to $306.0 million in
post-petition financing. The credit facility created under the DIP Credit
Agreement (the "DIP Credit Facility") expires on the occurrence of an event
that constitutes a commitment termination date (as defined in the DIP
Credit Agreement) or, if no such event has occurred, on November 30, 2003.
The DIP Credit Facility was authorized by the Bankruptcy Court on an
interim basis pursuant to the Interim DIP Order, and on a final basis
pursuant to an order dated July 2, 2002 (the "Final DIP Order").
The DIP Credit Facility is collateralized by a first priority priming
lien on all assets of the Debtors including all real, personal and mixed
property, both tangible and intangible, but excluding rights in respect of
avoidance actions approved by the Bankruptcy Court under the Bankruptcy
Code. The DIP Credit Agreement allows for super priority administrative
expense claim status in the Chapter 11 Case with priority over certain
other administrative expenses of the kind specified or ordered pursuant to
provisions of the Bankruptcy Code. The DIP Credit Agreement also includes
various restrictive covenants prohibiting the Debtors from, among other
things, incurring additional indebtedness, permitting any liens or
encumbrances on property or assets, making investments, or becoming liable
for any contingent obligations. Subsequent to the execution of the DIP
Credit Agreement, cash received by the Debtors from their operations was
used to pay, in full, the revolving loans outstanding under the
Pre-Petition Credit Agreement.
On or about January 14, 2003, the Debtors filed their Motion for Order
Authorizing First Amendment to DIP Credit Agreement, seeking authority to
enter into a first amendment to the DIP Credit Agreement (the "First DIP
Amendment"). The First DIP Amendment granted the Debtors the ability to
request additional time necessary to formulate the necessary analyses
required for the Plan and this Disclosure Statement in exchange for, among
other things, certain reductions in availability under the DIP Credit
Facility, certain principal reduction payments under the DIP Credit
Facility and schedules and timelines for the marketing and sale of certain
of the Debtors' assets. On March 3, 2003, the Bankruptcy Court entered an
interim order approving the First DIP Amendment. On April 17, 2003, the
Bankruptcy Court entered its Memorandum Opinion and Order, approving the
First DIP Amendment on a final basis.
As of July 29, 2003, the Debtors had borrowings under the DIP Credit
Agreement of $0, and $14.1 million of the facility was being utilized to
support letters of credit. Management of the Debtors believes the DIP
Credit Agreement provides adequate liquidity to enable the Debtors to
continue operations during the Chapter 11 Case.
E. APPOINTMENT OF THE BANKRUPTCY COMMITTEES
1. CREDITORS' COMMITTEE
On June 7, 2002, the United States Trustee appointed the Creditors'
Committee. The Creditors' Committee is currently comprised of the following
members: BP Companies; Sempra Energy Trading Corp.; Cap Gemini Ernst &
Young; PSC Industrial Outsourcing Inc.; Dynegy Marketing and Trade;
Packaging Corporation of America; and Ray K. Pardun. The Creditors'
Committee has retained the law firms of Akin, Gump, Strauss, Hauer & Feld
and Husch & Eppenberger as its counsel.
2. BONDHOLDERS' COMMITTEE
On June 7, 2002, the United States Trustee appointed the Bondholders'
Committee. The Bondholders' Committee is currently comprised of seven
members: J P Morgan Chase Bank; DeSoto County Cooperative; UMB Bank, NA;
Farmland Insurance; Robert A. Reseigh; Peter S. Hancock; and Keith A.
Sharf. The Bondholders' Committee has retained the law firms of Foley &
Lardner and Polsinelli Shalton & Welte as its counsel.
F. KEY EMPLOYEE RETENTION AND INCENTIVE TARGET PLAN
Following the Petition Date, the Debtors' management has sought to
maximize value for creditors in these reorganization proceedings. Part of
this process necessarily includes marketing certain of the Debtors' assets
and businesses for potential sale. The sale process, as with any sale
process, will likely lead to the loss of employment by many of the Debtors'
key employees. In essence, many of the Debtors' key employees have been
asked to work tirelessly toward the elimination of their own employment.
Without protection against sudden loss of income, many of those individuals
comprising the Debtors' key personnel (the "Key Employees") may have been
forced to seek alternative employment to protect the well being of
themselves and their families. Such a premature loss of these Key Employees
would obviously have had a devastating impact on the Debtors' ability to
maximize recoveries to creditors. Moreover, the economic cost to replace
these Key Employees, both in terms of actual dollars spent and lost
productivity, could have been enormous.
Accordingly, to provide the financial security that enabled these Key
Employees to continue working diligently to maximize the value of these
estates, the Debtors determined that it was necessary and appropriate to
offer incentive compensation to these Key Employees. Therefore, with input
from the Bankruptcy Committees and other constituent groups, the Debtors
proposed their Key Employee Retention and Incentive Target Plan (the "KERIT
Plan"). The KERIT Plan provides incentive compensation and retention
payments to the Key Employees critical to the ongoing operation of the
Debtors' businesses. The maximum potential incremental cost of the KERIT
Plan to the Debtors is approximately $8 million. The KERIT Plan payments
were structured to maximize the likelihood that the Key Employees would
remain in the employ of the Debtors for the period of time required for a
successful outcome in the Chapter 11 Cases. By order dated November 4,
2002, the Bankruptcy Court approved the KERIT Plan.
G. MARKETING AND DISPOSITION OF THE DEBTORS' ASSETS
1. ASSET SALES AUTHORIZED TO DATE
The Debtors are currently marketing and selling substantially all of
their assets. To date, the Bankruptcy Court has authorized the Debtors to
sell certain of their assets, including the following:
a) Warehouse Assets in Port Lavaca, Texas
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including assets associated with a warehouse in Port
Lavaca, Texas, together with the assumption and assignment of certain
executory contracts and unexpired leases. Helena Chemical Company made the
highest and best offer for these assets. The Bankruptcy Court subsequently
authorized the sale of these assets to Helena Chemical Company for a
purchase price of $588,550.
b) Warehouse Assets in Memphis, Tennessee
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including assets associated with a warehouse in Memphis,
Tennessee, together with the assumption and assignment of certain executory
contracts and unexpired leases. Agriliance LLC made the highest and best
offer for these assets. The Bankruptcy Court subsequently authorized the
sale of these assets to Agriliance LLC for a purchase price of $5,302,500.
c) Assets in Iowa, Louisiana and Mowata, Louisiana
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets located in Iowa, Louisiana and Mowata, Louisiana,
together with the assumption and assignment of certain executory contracts
and unexpired leases. G&H Seed Company made the highest and best offer for
these assets. The Bankruptcy Court subsequently authorized the sale of
these assets to G&H Seed Company for a purchase price of $440,000 plus
certain inventory and receivables.
d) Assets in Minden, Louisiana
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets located in Minden, Louisiana. Minden Farm and Gardens,
LLC made the highest and best offer for these assets. The Bankruptcy Court
subsequently authorized the sale of these assets to Minden Farm and
Gardens, LLC for a purchase price of $266,500 plus certain inventory and
receivables.
e) Assets in Clarksdale, Mississippi
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets located in Clarksdale, Mississippi. Rayburn and Sons,
Inc. made the highest and best offer for these assets. The Bankruptcy Court
subsequently authorized the sale of these assets to Rayburn and Sons, Inc.
for a purchase price of $20,881.
f) Pipeline Assets in Kansas
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets related to a 32-mile segment of pipeline from Caney,
Kansas to Neodesha, Kansas. Cherokee Basin Pipeline, L.L.C. made the
highest and best offer for these assets. The Bankruptcy Court subsequently
authorized the sale of these assets to Cherokee Basin Pipeline, L.L.C. for
a purchase price of $875,000.
g) Farm Supply Store in Collins, Mississippi
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including the Farm Supply Store a/k/a Collins Farm
Supply, consisting of an office, warehouse, 400-ton capacity dry fertilizer
storage shed, 4 1/2 acres of land, furniture, fixtures and equipment in
Collins, Mississippi. Richard Woolwine made the highest and best offer for
these assets. The Bankruptcy Court subsequently authorized the sale of
these assets to Richard Woolwine for a purchase price of $175,000 plus 45%
of the wholesale price for the inventory.
h) Grain Elevator in Paul, Idaho
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including a steel elevator with a 245,000 bushel
capacity located on 1.82 acres of land in Paul, Idaho. Magic Valley
Produce, Inc. made the highest and best offer for these assets. The
Bankruptcy Court subsequently authorized the sale of these assets to Magic
Valley Produce for a purchase price of $290,000.
i) Ownership Interest in Flag, Inc. and Flag, L.P.
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including 2,500 shares of common stock of Flag, Inc. and
the Debtors' 24.75% limited partnership interest in Flag, L.P. Flag, L.P.
made the highest and best offer for these assets. The Bankruptcy Court
subsequently authorized the sale of these assets to Flag, L.P. for a
purchase price consisting of (i) $204,000 in cash, (ii) 388 shares of $25
par value common stock of Industries, and (iii) $170,500 non-negotiable
qualified patronage equity credits issued by Industries.
j) Assets Utilized by Farmland Transportation Operations
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including the transportation equipment, inventory, shop
and office equipment and customer lists utilized by Farmland Transportation
Operations, together with the assumption and assignment of executory
contracts and unexpired leases related to these assets. Cenex Harvest
States Cooperatives made the highest and best offer for these assets. The
Bankruptcy Court subsequently authorized the sale of these assets to Cenex
Harvest States Cooperatives for a purchase price of $1,300,000, plus the
value of truck and tractor parts inventory.
k) Fertilizer River Terminal Warehouse in North Little Rock,
Arkansas
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including the liquid and dry fertilizer river terminal
warehouse located in North Little Rock, Arkansas and various assets used in
connection with the operations, together with the assumption and assignment
of executory contracts and unexpired leases related to these assets.
HelmFertilizer Corporation made the highest and best offer for these
assets. The Bankruptcy Court subsequently authorized the sale of these
assets to HelmFertilizer Corporation for a purchase price of $2,775,000.
l) Fertilizer River Terminal Warehouse in Sugar Creek,
Missouri
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including the dry fertilizer river terminal warehouse
located in Sugar Creek, Missouri and the decommissioned facilities for the
storage or liquid fertilizer and anhydrous ammonia. At an auction held on
February 24, 2003, LaFarge North America, Inc.. was the highest and best
bidder for these assets. The Bankruptcy Court subsequently authorized the
sale of these assets to LaFarge North America, Inc. for a purchase price of
$1,000,000.
m) Ownership Interest in Farmer's Grain Terminal, L.L.C.
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including the Debtors' 48% ownership interest in
Farmer's Grain Terminal, L.L.C., a grain storage and handling joint venture
located in Slater, Missouri, together with the assumption and assignment of
certain executory contracts related to these assets. At an auction held on
January 13, 2003, Fletcher Grain Company, Inc. was the highest and best
bidder for these assets. The Bankruptcy Court subsequently authorized the
sale of these assets to Fletcher Grain Company, Inc. for a purchase price
of $825,000.
n) Fertilizer Warehouse in Greenville, Mississippi
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including a fertilizer warehouse located in Greenville,
Mississippi. At an auction held on March 21, 2003, United Agri-Products,
Inc. d/b/a UAP Midsouth was the highest and best bidder for these assets.
The Bankruptcy Court subsequently authorized the sale of these assets to
United Agri-Products, Inc. d/b/a UAP Midsouth for a purchase price of
$3,130,000.
o) Ownership Interest in National Carriers, Inc.
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including the Debtors' 99.44% ownership interest in
National Carriers, Inc., a trucking company located in Liberal, Kansas that
operates approximately 975 tractors and 1,175 trailers. At an auction held
on March 10, 2003, Farmland National Beef Packing Company L.P. was the
highest and best bidder for these assets. The Bankruptcy Court subsequently
authorized the sale of these assets to Farmland National Beef Packing
Company L.P. for a purchase price of $5,050,000.
p) Vacant Land in East Lawrence, Kansas
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, including approximately 179 acres of vacant land located
in East Lawrence, Kansas. After consideration of all of the circumstances,
the Debtors identified a lead bid in the amount of $5,040,000. At an
auction, Eastside Acquisitions LLC was the highest and best bidder for
these assets. The sale of this vacant land to Eastside Acquisitions LLC
closed on June 25, 2003.
q) Grease Plant Assets in North Kansas City, Missouri
The Bankruptcy Court authorized the sale of certain furniture,
fixtures, leasehold improvements, computer hardware and software, office
supplies, telephone numbers, business records and goodwill associated with
a lubricating grease manufacturing and packing plant in a leased industrial
complex in North Kansas City, Missouri to N L Grease, LLC, for
consideration consisting of the following acts by N L Grease, LLC: (i)
hiring 7 of the 10 employees currently working at the plant; (ii)
reimbursing the Debtors the lesser of $40,000 or the actual cost of
severance benefits for those employees of the plant not hired by N L
Grease, LLC; and (iii) entering into a new lease with the landlord for the
real estate upon which the plant operates.
In conjunction with this sale, Cenex Harvest Sale Cooperatives has
elected to exercise its option to purchase the equipment located at this
plant for the sum of $1,000 and to purchase the raw material inventory,
work in progress and finished goods inventory at cost, estimated to be
approximately $1,307,000.
r) Nitrogen Fertilizer Assets
The Debtors retained UBS Warburg LLC ("UBS") as financial advisor
charged with the marketing of the following: (i) certain assets associated
with the anhydrous ammonia production and terminal facilities owned or
leased by the Debtors in Kansas, Nebraska, Oklahoma, Minnesota, Iowa,
Texas, Illinois and Louisiana (the "Domestic Fertilizer Assets"), and (ii)
certain of the Debtors' interests in an anhydrous ammonia production
facility in The Republic of Trinidad and Tobago (the "Foreign Fertilizer
Assets" and, together with the Domestic Fertilizer Assets, the "Fertilizer
Assets"). After identifying potential purchasers of the Fertilizer Assets,
the Debtors and UBS initiated discussions with these potential purchasers.
After consideration of all of the circumstances, the Debtors identified
Koch Nitrogen Company ("Koch") as the "stalking horse" bidder for the sale
of the Domestic Fertilizer Assets and the Foreign Fertilizer Assets.
The Bankruptcy Court approved auction and bidding procedures for the
sale of the Fertilizer Assets, including the assumption and assignment of
certain executory contracts and unexpired leases related to the Fertilizer
Assets. Pursuant to these auction and bid procedures, the Debtors conducted
an auction of Fertilizer Assets on March 26-27, 2003. At the conclusion of
the auction, the Debtors determined that: (i) Koch made the highest and
best bid for substantially all of the Domestic Fertilizer Assets for an
estimated purchase price of $131,171,548, consisting of an estimated
$98,102,912 in cash and an estimated $33,068,636 in assumed liabilities,
together with additional consideration consisting of various amendments to
its asset purchase agreement; (ii) Koch made the highest and best bid for
the Foreign Fertilizer Assets for an estimated purchase price of
$128,617,030. The Bankruptcy Court authorized the sale of the Domestic
Fertilizer Assets and the Foreign Fertilizer Assets to Koch on April 17,
2003.
Also in connection with the auction for the Fertilizer Assets,
Vanguard Synfuels, LLC made the highest and best bid for the ammonia plant
in Pollock, Louisiana for a purchase price of $2,040,000; and CF
Industries, Inc. made the highest and best bid for the ammonia terminal in
Devils Lake, North Dakota for a purchase price of $200,000. The Bankruptcy
Court authorized the sale of these assets to Vanguard Synfuels, LLC and CF
Industries, Inc. on April 30, 2003 and June 3, 2003.
s) North America Grain Assets
The Debtors are currently considering a possible sale of substantially
all of the Debtors' North America Grain assets. These assets are currently
leased to Archer Daniels Midland Company ("ADM"). ADM would be a possible
candidate for purchase of the assets. If the board of directors of
Industries approves the acceptance of an offer, then the Debtors would
present the offer to the Bankruptcy Committees for review, with a view,
ultimately, to presenting the offer to the Bankruptcy Court for approval.
t) Petroleum Assets
The Debtors have initiated a marketing process for the Debtors'
petroleum assets. The Debtors continue to market the petroleum assets and
are currently discussing with several parties the sale of certain petroleum
assets.
u) Crop Production Phosphate Assets
Prior to August 31, 2002, the board of directors of Industries
authorized the sale of substantially all of the assets of Farmland Hydro.
Subsequent to August 31, 2002, Industries and Norsk Hydro a.s, the other
50% owner of Farmland Hydro, signed an agreement with Cargill Fertilizer,
Inc. under which Cargill agreed to purchase substantially all the assets
and assume substantially all the liabilities of Farmland Hydro. The
Bankruptcy Court approved the sales agreement in October 2002. This
transaction was consummated in November 2002.
v) Miscellaneous Assets
On September 27, 2002, the Bankruptcy Court entered its Order
Approving Procedures For Sale of Miscellaneous Assets of Debtors Pursuant
to Section 363 of the Bankruptcy Code (the "Miscellaneous Assets Order"),
pursuant to which the Bankruptcy Court approved certain procedures for the
sale of certain miscellaneous assets of the Debtors without further
Bankruptcy Court authorization. To date, the Debtors have concluded sales
totaling approximately $973,000 pursuant to the Miscellaneous Assets Order:
w) Anhydrous Ammonia Trailers
On February 27, 2003, the Bankruptcy Court entered its Order Approving
Procedures For Sale of Trailers Pursuant to Section 363 of the Bankruptcy
Code (the "Trailer Sale Order"), pursuant to which the Bankruptcy Court
approved certain procedures for the sale of the Debtors' fleet of anhydrous
ammonia trailers. To date, the Debtors have concluded sales of
approximately 243 trailers, generating net sale proceeds in excess of $4.8
million.
x) Assets in Hastings, Nebraska
The Bankruptcy Court approved auction and bid procedures for the sale
of certain assets, located in Hastings, Nebraska. Pursuant to these auction
and bid procedures, the Debtors held an auction of these assets on May 12,
2003. The Bankruptcy Court authorized the sale of these assets to
Equalizer, Inc. on May 19, 2003 for $1,925,000.
y) Ownership Interest in Alton Grain Terminal, LLC
On April 30, 2003, the Bankruptcy Court entered its Order Approving
the Sale of Debtors' 14% Membership Interest in Alton Grain Terminal, LLC,
an entity that owns and operates a grain handling and storage facility in
Alton, North Dakota, to Alton Grain Terminal, LLC, for the purchase price
of $530,950.
z) Ownership Interest in Southern Farm Fish Processors, Inc.
On February 25, 2003, the Bankruptcy Court authorized the Debtors to
vote their 100 % interest in Southern Farm Fish Processors, Inc. ("SFFP")
in favor of the sale by SFFP of substantially all of SFFP's assets, which
include a 10 acre parcel of land, a building, equipment, inventory and
accounts receivable associated with a catfish processing plant in Eudora,
Arkansas to Arkansas Catfish Growers, LLC ("ACG"), and to compromise
certain claims in connection with such asset sale. The purchase price for
these assets was $200,000 plus the value of the inventory and accounts
receivable.
aa) Ownership Interest in Alliance Farms, LLC
On December 10, 2002, the Bankruptcy Court authorized the Debtors to
vote their 34.7% interest in Alliance Farms, LLC, a limited liability
company formed for the purpose of hog production, in favor of the marketing
of Alliance Farms, LLC's assets.
bb) Ownership Interest in Northeast Arkansas Oil Company,
LLC
The Bankruptcy Court entered its Order authorizing the Debtors vote
their 100 % interest in Northeast Arkansas Oil Company, LLC ("NEA") in
favor of the sale by NEA of substantially all of NEA's assets, which
include leasehold rights, fixtures and equipment used in the operation of
the Newport Tiger Mart Truck Stop in Newport, Arkansas, to Magness Oil Co.
for the purchase price of $537,500.
cc) Outstanding Loan to Perryton Equity Exchange
The Bankruptcy Court approved a compromised settlement of a loan due
the Debtors by Perryton Equity Exchange of Perryton, Texas. The approximate
outstanding loan value of $6.8 million was settled for the amount of $5.5
million cash. The settlement was completed in December 2002.
dd) Ownership Interest in Parts and Equipment in Lawrence,
Kansas
The Debtors have filed a motion with the Bankruptcy Court for
authorization to sell their ownership interest in certain spare parts and
ancillary equipment located in Lawrence, Kansas. Subject to Bankruptcy
Court authorization, the Debtors anticipate that these assets will be sold
at an auction to be held in late summer / early fall 2003.
2. DISPOSITION OF THE PORK BUSINESS
a) Evaluation of a Possible Sale of the Pork Business
The Debtors retained Goldsmith Agio Helms ("Goldsmith") to, among
other things, assist the Debtors in exploring a possible sale of the Pork
Business. Goldsmith held numerous discussions with officers and key
employees involved with the Pork Business, reviewed financial and
non-financial information on the Pork Business, and worked with management
to prepare a Confidential Memorandum on the Pork Business (the "Goldsmith
Confidential Memorandum"). While the Goldsmith Confidential Memorandum was
being prepared, Goldsmith contacted numerous potential strategic and
financial buyers to determine their level of interest in acquiring the Pork
Business. Confidential and other business information was provided to
interested parties. Several interested parties made initial indications of
interest in the Pork Business.
b) Evaluation of a Possible Reorganization of the Pork
Business
The Debtors also retained Trinity Capital, LLC ("Trinity") to, among
other things, assist the Debtors in evaluating options for the
reorganization of the Pork Business, including the valuation of the Pork
Business, conducting due diligence of the operations and assets of the Pork
Business, identifying and reviewing prospective alliance partners
(including negotiations with such potential alliance partners and any
financing relating thereto), and advising and assisting with business plans
and the presentation of such plans. As part of this process, various
producer groups were solicited. Ultimately, no producer group made a
proposal to purchase an ownership interest in the Pork Business.
c) Sale of the Pork Business
Following discussions with interested parties, the Debtors, in
consultation with the Bankruptcy Committees, reviewed both the sale and
reorganization options and concluded that a sale of the Pork Business
provided the greatest opportunity to maximize value for the Estates. On
July 14, 2003, Foods and Industries entered into an Asset Sale and Purchase
Agreement (the "Pork Purchase Agreement") with KC Acquisition, Inc. and
Smithfield Foods, Inc. (collectively, "Smithfield") pursuant to which Foods
and Industries agreed to sell the Pork Business in accordance with Section
363 of the Bankruptcy Code. The sale of the Pork Business will be
consummated through the sale of substantially all the assets of the Pork
Business.
The Pork Purchase Agreement provides that the purchase price for the
Pork Business will be $363,500,000. Smithfield has deposited $35,000,000 in
an escrow account (the "Pork Escrow Deposit") for the benefit of Industries
and Foods.
On July 15, 2003, the Debtors filed a motion with the Bankruptcy
Court, requesting entry of an order: (i) authorizing the sale of the Pork
Business (subject to higher and better offers); (ii) approving auction and
bid procedures; (iii) approving a $10,000,000 break-up fee (the "Pork
Break-Up Fee") to be paid to Smithfield in the event that the Pork Purchase
Agreement is terminated as a result of the acceptance of a competing bid;
(iv) approving the assumption and assignment of executory contracts and
leases in connection with such sale. A hearing on this motion is scheduled
for July 29, 2003.
The proposed auction and bid procedures for the submission and
consideration of competing offers for the Pork Business contemplate, among
other things, that:
o Any person submitting a competing offer demonstrate evidence of
committed financing and otherwise demonstrate its ability to
consummate the proposed transaction in a time period acceptable
to Industries and Foods;
o Any competing bid be in writing, contain substantially similar
terms and conditions as the Pork Purchase Agreement and identify:
(i) the bidder, (ii) the consideration, and if such consideration
includes non-cash consideration, the bidder's opinion as to its
cash equivalency and method of determination thereof, (iii)
financial information with respect to the bidder and its ability
to consummate the proposed transaction and (iv) all terms and
conditions of the competing bid;
o Any competing bid include information and representations
regarding compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended;
o To be a "higher or better offer," any competing bid must be at
least $374,500,000 (which represents Smithfield's offer, plus the
Pork Break-Up Fee, plus $1,000,000) and must not (i) be subject
to terms, conditions or restrictions unacceptable to Industries
and Foods, or (ii) require any break-up fee, termination fee, or
any similar buyer protections;
o Any competing offer include an earnest money deposit which equals
or exceeds the Pork Escrow Deposit, or if the competing bid is
for less than all of the Pork Business, then the earnest money
deposit shall be no less than 10% of the competing bid; and
o Any competing bid be submitted prior to 5:00 p.m. Central Time on
September 12, 2003 (the "Pork Competing Bid Deadline");
If any competing bids are received by the Pork Competing Bid Deadline,
an auction is scheduled to be held no later than October 12, 2003.
3. DISPOSITION OF THE BEEF INTERESTS
Industries' current ownership of the Beef Interests gives it
approximately 71.2% of the voting interests of National Beef. USPBCo., LLC
("USPBCo.") and U.S. Premium, Ltd. (together with USPBCo., the "USPB
Group"), a large producer-owned cattle marketing cooperative, own the
remaining partnership interests and supply approximately 30% of National
Beef's cattle.
a) The Governance of National Beef
Founded in 1969, National Beef engages in meat packing and processing
and is the fourth largest beef packer in the United States. Operating from
five facilities, National Beef produces fresh, frozen, and case-ready
branded and nonbranded products for domestic consumption as well as foreign
consumption in 25 countries. It has two main slaughtering facilities and a
portion-control facility in Kansas, one case-ready facility in Pennsylvania
and a second case-ready facility in Georgia. National Beef estimates that
slightly more than 55% of its sales are to the retail sector and
approximately 30% of its sales are to the foodservice sector. National Beef
enjoys a customer base that includes such blue-chip retailers as Wal-Mart,
which has allowed National Beef to increase its sales of branded and other
value-added products.
National Beef has four wholly-owned subsidiaries and owns a
controlling interest in Kansas City Steak Company, L.L.C., a
portion-control company that provides steaks to premium steak houses in the
United States and directly to consumers via mail-order catalogs. In
addition, through a wholly-owned subsidiary, National Beef owns a 47.5%
interest in aLF Ventures, LLC, a joint venture with DMV International. aLF
Ventures holds the worldwide exclusive rights to market activated
lactoferrin, a natural product that has been recently granted "Generally
Recognized as Safe" status by the Food and Drug Administration for use in
protecting fresh beef from bacteria such as E. coli.
b) Marketing Process
The Debtors retained Goldsmith to, among other things, assist the
Debtors in marketing the Beef Interests. Goldsmith prepared and distributed
a Confidential Memorandum on National Beef (the "Beef Confidential
Memorandum") aimed at educating potential buyers on National Beef and
intended to establish valuation and interest in order to pursue potential
transactions involving National Beef.
The Beef Confidential Memorandum was prepared from information
provided to Goldsmith by Industries and National Beef. Prior to its
distribution, Goldsmith and Industries provided the Beef Confidential
Memorandum to management of National Beef and to the USPB Group and
received comments on the Beef Confidential Memorandum, which were
incorporated into the Beef Confidential Memorandum. In addition, the list
of companies that were approached by Goldsmith was reviewed with
Industries, National Beef management and the USPB Group.
c) Sale of the Beef Interests
On June 12, 2003, Foods, Industries and NBPCo. entered into an Asset
Purchase and Sale Agreement with the USPB Group and U.S. Premium Products,
LLC (the "Beef Purchase Agreement") pursuant to which Foods and Industries
agreed to sell the Beef Interests in accordance with Section 363 of the
Bankruptcy Code. The sale of the Beef Interests will be consummated through
the sale of: (i) Industries' limited partnership interest in National Beef
and (ii) Industries' and Foods' equity interests in NBPCo.
The Beef Purchase Agreement provides for a $232,000,000 purchase price
for the Beef Interests. The USPB Group has deposited an aggregate of
$10,000,000 in an escrow account (the "Deposit Escrow Account") for the
benefit of Industries and Foods. The net proceeds of the sale will be
distributed pursuant to the Final DIP Order.
On June 13, 2003, the Bankruptcy Court issued an order: (i)
authorizing the sale of the Beef Interests (subject to higher and better
offers); (ii) approving auction and bid procedures; and (iii) approving a
$7,000,000 break-up fee (the "Beef Break-Up Fee") to be paid by Industries
and Foods to the USPB Group in the event that the Beef Purchase Agreement
is terminated as a result of Industries' and Foods' acceptance of a
competing bid.
The court-approved procedures for the submission and consideration of
competing offers for the Beef Interests required, among other things, that:
o Any person submitting a competing offer demonstrate evidence of
committed financing or otherwise demonstrate its ability to
consummate the proposed transaction in a time period acceptable
to Industries and Foods;
o Any competing offer be in writing, contain substantially similar
terms and conditions as the Beef Purchase Agreement and identify:
(i) the bidder, (ii) the consideration, (iii) financial
information with respect to the bidder and its ability to
consummate the transaction and (iv) all terms and conditions of
the competing offer;
o Any competing offer include information and representations
regarding compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended;
o To be a "higher or better offer," any competing offer must be at
least $239,500,000 (which represents the USPB Group's offer, plus
the Break-Up Fee, plus $500,000) and must not (i) require
financing, (ii) be subject to terms, conditions or restrictions
unacceptable to Industries or Foods, or (iii) require any
break-up fee, termination fee, or any similar buyer protections;
o Any competing offer include an earnest money deposit which equals
or exceeds the USPB Group's deposit; and
o Any competing offer be submitted by 5:00 p.m. Central Time on
July 7, 2003 (the "Beef Competing Bid Deadline").
An auction was scheduled for July 9, 2003 to address any competing
bids submitted prior to the Beef Competing Bid Deadline. No competing bids
were received by the Beef Competing Bid Deadline so the auction was not
held.
The Sale Hearing was conducted on July 15, 2003 and the Debtors sought
the Bankruptcy Court's approval of the Beef Purchase Agreement and the
transactions contemplated thereby. The Bankruptcy Court entered its final
order authorizing the sale of the Beef Interests, free and clear of liens,
claims and encumbrances, on July 22, 2003. The parties to the Beef Purchase
Agreement expect the transactions to close during the first week in August
2003.
4. OTHER BUSINESS OPERATIONS
Industries is currently winding up its international grain business.
As a part of this process, Industries has sold its export elevator located
in Argentina, sold substantially all of its inventories related to its
international grain business and has settled litigation in Brazil related
to misappropriated soybeans. Industries continues to collect certain
long-term receivables, governmental receivables and trade receivables from
troubled accounts related to the business. The Debtors anticipate that
Industries will receive in excess of $10 million from the windup of
Industries' international grain business.
Industries continues to operate its petroleum refinery, which has been
generating positive cash flow, and its Coffeyville, Kansas nitrogen
facility. Industries also continues to hold its ownership interest in its
SF Phosphates, Agriliance LLC and LOLFF ventures.
H. CASE ADMINISTRATION
1. CLAIMS INFORMATION AND ESTIMATES
The Debtors filed their Schedules in July 2002 and filed amended
Schedules in October 2002. Thereafter, by its Order Establishing Bar Date
for Filing Proofs of Claim and Interest and Approving Form of Notice dated
October 24, 2002, the Bankruptcy Court established January 10, 2003, as the
final date for filing proofs of claim against the Debtors. The Debtors have
not completed their analysis of all Claims asserted against the Debtors.
2. CLAIMS AGENT
By order of the Bankruptcy Court, dated June 5, 2002, Bankruptcy
Management Corporation ("BMC") was appointed the official claims agent of
the clerk of the Bankruptcy Court and assumed responsibility to: (a)
provide notice to the Debtors' creditors of the Bankruptcy Code Section 341
meeting; (b) provide form proofs of claim and notices related thereto to
creditors; and (c) docket and maintain proofs of claim filed in the Chapter
11 Cases.
3. BALLOTING AGENT
By order of the Bankruptcy Court, dated June 5, 2002, BMC was employed
to assist the Debtors with the balloting process in connection with the
Plan.
4. CLAIMS TRANSFER PROCEDURES
On December 20, 2002, the Bankruptcy Court entered its Interim Order
Pursuant to Sections 362 and 105(a) of the Bankruptcy Code Establishing
Notification Procedures Regarding (A) Applicability of the Automatic Stay
Enjoining Certain Transfers of Claims and (B) Approval Procedures for
Trading in Claims Against Farmland Industries, Inc., Et Al., establishing,
on an interim basis, certain procedures that must be satisfied before the
sale or other transfer of claims against the Debtors would be deemed
effective. On February 11, 2003, the Bankruptcy Court entered its Final
Order Pursuant to Sections 362 and 105(a) of the Bankruptcy Code
Establishing Notification Procedures Regarding (A) Applicability of the
Automatic Stay Enjoining Certain Transfers of Claims and (B) Approval
Procedures for Trading in Claims Against Farmland Industries, Inc., Et Al.,
establishing, on a final basis, certain procedures that must be satisfied
before the sale or other transfer of claims against the Debtors would be
deemed effective.
I. SIGNIFICANT BUSINESS AND LEGAL MATTERS
1. PROCEDURES FOR WORKERS' COMPENSATION CLAIMS
On June 5, 2002, the Bankruptcy Court entered its Order Authorizing
Payment of Prepetition Wages, Salaries, Reimbursable Employee Expenses and
Medical and Other Employee Benefits, granting the Debtors, among other
things, the authority to settle and pay worker's compensation claims under
the Debtors' workers' compensation program in the ordinary course of
business.
On February 19, 2003, the Bankruptcy Court entered its Order Granting
Debtors' Motion for Omnibus Authority to Effectuate Settlements with
Workers' Compensation Claimants and Establishing Procedures for Resolution
of Contested Workers' Compensation Claims, establishing procedures for
workers' compensation claims that the Debtors are unable to settle in the
ordinary course of their business. Under these procedures, the Bankruptcy
Court will approve immediately upon submission (without the necessity of
filing a motion, providing notice or holding a hearing) any stipulation for
relief from stay filed by the Debtors and workers' compensation claimants
for final settlement workers' compensation claims against the Debtors that
are subject to administrative court approval. Prior to the submission of
such stipulations to the Bankruptcy Court, the Debtors must circulate the
stipulations to certain designated representatives of the Bankruptcy
Committees and the Lenders.
2. PROCEDURES FOR MECHANICS' LIEN CLAIMS
On October 17, 2002, the Debtors filed a motion for an order
authorizing procedures for determining the extend, validity and priority of
mechanics' and/or artisans' liens (the "Mechanics' Lien Procedures"). The
Mechanics' Lien Procedures proposed a schedule and process for filing and
prosecuting adversary proceedings in the Bankruptcy Court to resolve more
than 100 mechanics' and artisans' liens affecting property of the Debtors
situated in five states. On November 8, 2002, the Bankruptcy Court entered
its memorandum opinion and order, granting the Mechanics' Lien Procedures,
with certain modifications as set forth therein. Accordingly, adversary
proceedings are now pending in the Bankruptcy Court to resolve the extent,
validity and priority of each of these mechanics' and/or artisans' liens.
3. PROPOSED TERMINATION OF CERTAIN EMPLOYEE BENEFITS
The Debtors currently provide benefits to former or retired employees
under a group term life insurance policy with Minnesota Life Insurance
Company (the "Group Policy") at an annual cost of approximately $756,000.
Having determined, in the reasonable exercise of their business judgment,
that the termination of benefits to former or retired employees under the
Group Policy was in the best economic interest of the Debtors' estates and
creditors, the Debtors filed a motion seeking authority to terminate
certain life insurance benefits to former or retired employees under the
Group Policy. Pursuant to negotiations with the carrier for the Group
Policy, the affected former or retired employees could elect to continue
their individual life insurance policies in force and effect at their own
cost if they choose to do so following termination of their benefits under
the Group Policy. On May 28, 2003, the Bankruptcy Court entered an order
denying this motion without prejudice to a later refiling of the motion in
compliance with Section 1114 of the Bankruptcy Code.
The Debtors currently provide several benefits programs for certain
current and former executive employees and members of the board of
directors of Industries. Having determined, in a reasonable exercise of
their business judgment, that termination of these benefits programs are in
the best interest of the Debtors' estates and creditors, the Debtors filed
a motion seeking authority to terminate these benefits programs and to
reject certain executory employment agreements. On May 28, 2003, the
Bankruptcy Court entered an order granting, in part, and denying, in part,
this motion.
4. PROPOSED SETTLEMENT WITH U.S. EPA
The U.S. Environmental Protection Agency (the "EPA") has asserted that
Industries is liable for response costs incurred and to be incurred by the
United States in the course of responding to releases and threats of
releases of hazardous substances into the environment for the following
sites: (i) 57th and North Broadway Site, Wichita, Kansas; (ii) Hastings
Area-Wide Groundwater Site - Operable Unit 19, Hastings, Nebraska; (iii)
FAR-MAR-CO subsite of the Hastings Groundwater Site; (iv) Obee Road Site,
Hutchison, Kansas; (v) Container Recycling, Inc. Site in Kansas City,
Kansas; and (vi) Taracorp Site, Granite City, Illinois (collectively, the
"Liquidated Sites"). The EPA has also asserted that Industries is liable
for penalties for violations of certain environmental statutes,
specifically, that Industries is liable for civil penalties for three
violations of Section 311 of the Clean Water Act (CWA) for oil spills which
occurred (i) into the Verdigris River on November 19, 1998; (ii) near Rock,
Kansas on January 4, 2002; (iii) in Osage County near Bartlesville,
Oklahoma on July 23, 2001. Further, the EPA contended that Industries is
liable for civil penalties for violations of the "mobile source"
requirements of Sections 211(h) and (k) of the Clean Air Act (CAA) at the
Coffeyville refinery in Coffeyville, Kansas (collectively, the "Liquidated
Civil Penalties").
Industries and the EPA have proposed to compromise and settle the
Liquidated Sites and the Liquidated Civil Penalties (the "EPA Settlement")
as follows:
o With respect to the EPA's claim for penalties based on the
Debtors' alleged violations of Section 311 of the CWA, 33 U.S.C.
ss. 1321, by spills of oil into (i) the Verdigris River on
November 19, 1998; (ii) near Rock, Kansas on January 4, 2002;
(iii) in Osage County near Bartlesville, Oklahoma on July
23,2001: the EPA shall have an Allowed General Unsecured Claim
against Industries of $1,575,000, as authorized by Section
311(b)(7)(A) of the CWA, 33 U.S.C. ss. 1321(b)(7)(A).
o With respect to the EPA's claim for penalties based on the
Debtors' alleged violation of Sections 211(h) and (k) of the
Clean Air Act (CAA), 42 U.S.C. ss. 7545(h) and (k), at
Industries' refinery in Coffeyville, Kansas: the EPA shall have
an Allowed General Unsecured Claim against Industries of $17,000,
as authorized by Sections 211 and 205 of the CAA, 42 U.S.C.
ss.ss. 7545 and 7524.
o With respect to the 57th and North Broadway Site, Wichita,
Kansas: the EPA shall have an Allowed General Unsecured Claim
against Industries of $250,000.
o With respect to the Hastings Area-Wide Groundwater Site -
Operable Unit 19, Hastings, Nebraska: the EPA shall have an
Allowed General Unsecured Claim against Industries of $333,340.
o With respect to the FAR-MAR-CO subsite of the Hastings Area-Wide
Groundwater Site, Hastings, Nebraska: the EPA shall have an
Allowed General Unsecured Claim against Industries of $10,000.
o With respect to the Obee Road Site, Hutchison, Kansas: the EPA
shall have an Allowed General Unsecured Claim against Industries
of $65,598.60 in settlement of past costs but excluding
settlement of claims for future costs.
o With respect to the Container Recycling, Inc., Site, Kansas City,
Kansas: the EPA shall have an Allowed General Unsecured Claim
against Industries of $351,360.
o With respect to the Taracorp Site, Granite City, Illinois: the
EPA shall have an Allowed General Unsecured Claim against
Industries of $91,584.
In exchange for resolution of the Liquidated Sites and Liquidated
Civil Penalties pursuant to the EPA Settlement, EPA provides a covenant not
to sue and contribution protection as to the Debtors with regard to the
claims addressed, and agrees not to object to provisions of the Plan that
are consistent with the EPA Settlement. To the extent that a provision of
the Plan is not addressed by the EPA Settlement, the Debtors and the EPA
reserve all rights with regard to the Plan. The EPA Settlement also creates
a structure for analysis and payment of future EPA response cost claims as
allowed unsecured claims under the Plan.
The Debtors' entry into the EPA Settlement was approved by the
Bankruptcy Court on April 17, 2003. Notice of the EPA Settlement appeared
in the federal register on April 17, 2003. 68 Fed. Reg. 19006 (April 17,
2003). After the public comment period on the EPA Settlement ended, the EPA
filed a joint motion for final approval of the EPA Settlement on June 12,
2003, which motion was granted by the Bankruptcy Court by order dated July
22, 2003.
5. PENDING ENVIRONMENTAL CLAIMS
Claims totaling in excess of $100 million that relate to environmental
matters based on Industries' alleged pre-petition conduct have been filed
against Industries. The largest of these claims is a natural resource
damage ("NRD") claim filed by the Missouri Department of Natural Resources
("MDNR"). The remaining claims are primarily private party claims for
contribution related to past and future cleanup costs resulting from
alleged pre-petition releases of hazardous substances by Industries. Many
of these private party claims overlap with each other and with government
claims and some are barred by the contribution protection obtained in the
EPA Settlement discussed above. The Debtors believe that, with regard to
the majority of these claims (including the NRD claim), they have defenses,
under applicable bankruptcy and/or environmental law, to either the claim
or the amount of the claim. The validity and amount of these claims will be
resolved through the claims objection process.
To the extent that the Liquidating Trust and/or Reorganized Industries
own properties (such as the refinery located in Coffeyville, Kansas) that
are the subject of these claims or other applicable environmental
regulatory requirements after the Effective Date, such entities may have
ongoing obligations to address certain environmental issues in their
capacity as the owner of such properties.
6. ADJUDICATION REGARDING SUBORDINATED CERTIFICATES
On December 24, 2002, Industries filed a Complaint for Declaratory
Judgment (the "Declaratory Judgment Complaint"), seeking declaratory relief
to determine the relative priority between and among the Subordinated
Certificates. In the Declaratory Judgment Complaint, Industries alleged
that the documents evidencing and otherwise related to the Subordinated
Certificates demonstrated the parties' intent for each issue of
Subordinated Certificates to share equal priority with each other issue of
Subordinated Certificates. On February 18, 2003, Wells Fargo Bank
Minnesota, National Association, in its capacity as successor trustee for
the Subordinated Certificates filed its answer to the Declaratory Judgment
Complaint, admitting each of the material allegations contained in the
Complaint and stated further that it did not oppose the declaratory relief
sought by Industries in the Declaratory Judgment Complaint. On March 24,
2003, the Bankruptcy Court entered its Declaratory Judgment, ordering that,
between and among themselves, each issue of Subordinated Certificates
shared equal priority.
7. INSURANCE PROCEEDS FOR ALBERT LEA PLANT
On July 8, 2001, a fire occurred at the Albert Lea, Minnesota meat
processing facility (the "Albert Lea Plant"), which fire severely damaged
and/or destroyed buildings, equipment and inventory located at the Albert
Lea Plant. On January 14, 2002, the Albert Lea City Council adopted a
resolution approving and authorizing an Order for Removal requiring the
demolition of the entire building and facilities at the Albert Lea Plant
and brought an action for such demolition. On March 3, 2003, Freebourn
County District Court entered judgment for the demolition and removal of
the entire building and facilities at the Albert Lea Plant.
The fire loss at the Albert Lea Plant was insured under a $500 million
blanket policy. This policy provides for replacement coverage or, in the
alternative, coverage on an actual cash value basis. The Debtors have
submitted the Insurance Claim to the insurers based upon the total loss
sustained at the Albert Lea Plant and continue to prosecute the Insurance
Claim. In the event that the Debtors have not completed their prosecution
of the Insurance Claim by the Effective Date, the Plan provides that
Reorganized Industries will retain and continue to prosecute the Insurance
Claim from and after the Effective Date.
IV. SUMMARY OF THE PLAN
A. INTRODUCTION
Set forth in this Article is a description of the basic terms of the
Plan. This description is not intended, nor should it be relied upon, to
substitute for a careful review of the actual terms of the Plan, a complete
copy of which is annexed hereto as Appendix A.
B. CLASSIFICATION OF CLAIMS AND INTERESTS
Section 1122 of the Bankruptcy Code provides that, except for certain
claims classified for administrative convenience, a plan may place a claim
of a creditor or an interest of an equity holder in a particular class only
if such claim or interest is substantially similar to the other claims or
interests of such class.
The Bankruptcy Code also requires that a plan provide the same
treatment for each claim or interest of a particular class unless the
holder of a particular claim or interest agrees to a less favorable
treatment of its claim or interest. The Debtors believe that the Plan
complies with this standard. The Plan divides Claims against and Interests
in the Debtors into the following Classes:
Class 1 consists of all Other Priority Claims.
Class 2 consists of all Secured Lender Claims.
Class 3 consists of all Other Secured Claims.
Class 4 consists of all Demand Certificates Claims.
Class 5 consists of all Subordinated Certificates Claims.
Class 6 consists of all Convenience Claims against Industries.
Class 7 consists of all General Unsecured Claims against Industries.
Class 8 consists of all Industries Preferred Shares.
Class 9 consists of all Industries Common Shares.
Class 10 consists of all General Unsecured Claims against Foods.
Class 11 consists of all Old Securities of Foods.
Class 12 consists of all General Unsecured Claims against Transportation.
Class 13 consists of all Old Securities of Transportation.
Class 14 consists of all General Unsecured Claims against SFA.
Class 15 consists of all Old Securities of SFA..
Class 16 consists of all General Unsecured Claims against Pipeline.
Class 17 consists of all Old Securities of Pipeline.
Class 18 consists of all Intercompany Claims.
Class 19 consists of all Subordinated Claims.
Class 20 consists of the PBGC Claims.
For a description of the treatment of the Claims and Interests and a
summary of distributions under the Plan, see Section IV.C, Treatment of
Claims and Interests and Summary of Distributions under the Plan.
A Claim or Interest is placed in a particular Class only to the extent
that the Claim or Interest falls within the description of that Class. A
Claim or Interest may be and is classified in other Classes to the extent
that any portion of the Claim or Interest falls within the description of
such other Classes. A Claim or Interest is also placed in a particular
Class for the purpose of receiving distributions pursuant to the Plan only
to the extent that such Claim or Interest is an Allowed Claim or Allowed
Interest in that Class and such Claim or Interest has not been paid,
released, or otherwise settled prior to the Effective Date.
The Plan, though proposed jointly, constitutes a separate plan
proposed by each Debtor. Therefore, the classifications set forth below
shall be deemed to apply separately (as appropriate) with respect to each
such plan.
C. TREATMENT OF CLAIMS AND INTERESTS AND SUMMARY OF DISTRIBUTIONS
UNDER THE PLAN
The following table sets forth a brief summary of the classification
and treatment of Claims and Interests and the estimated distributions to
the holders of Allowed Claims and Allowed Interests under the Plan. The
information set forth in the tables is for convenience of reference only.
Each holder of a Claim or Interest should refer to Article III of the Plan,
Section IV.B, Classification of Claims and Interests, and the liquidation
analysis annexed as Appendix D hereto for a full understanding of the
classification and treatment of Claims and Interests provided under the
Plan. The estimates set forth in the table constitute the Debtors'
estimates of the likely distributions from the Debtors' orderly liquidating
of their Estates and may differ from actual distributions by reason of,
among other things, variations in the amounts of Allowed Claims and the
existence and resolution of Disputed Claims. The Debtors reserve their
rights to update or modify the estimated distributions set forth in the
table. Unless otherwise noted, these estimates are as of July 22, 2003.
- ----------- -------------------------- ------------------------------------------------------------
TYPE OF CLAIM OR INTEREST TREATMENT
- ----------- -------------------------- ------------------------------------------------------------
_ ADMINISTRATIVE CLAIMS Except as otherwise provided for in the Plan, and subject
to the requirements of Sections 11.1-11.3 of the Plan, on,
or as soon as reasonably practicable after, the latest of
(i) the Initial Distribution Date, (ii) the date such
Administrative Claim becomes an Allowed Administrative
Claim, or (iii) the date such Administrative Claim becomes
payable pursuant to any agreement between a Debtor (with
the consent of the Bankruptcy Committees) or the
Liquidating Trustee, as the case may be, and the holder of
such Administrative Claim, each holder of an Allowed
Administrative Claim shall receive in full satisfaction,
settlement, release, and discharge of and in exchange for
such Allowed Administrative Claim (x) Cash equal to the
unpaid portion of such Allowed Administrative Claim or (y)
such other treatment as to which a Debtor (with the
consent of the Bankruptcy Committees) or the Liquidating
Estimated Allowed Trustee, as the case may be, and such holder shall have
Claims: $263.1 million agreed upon in writing; provided, however, that Allowed
Administrative Claims with respect to liabilities incurred
Estimated Percentage by a Debtor in the ordinary course of business during the
Recovery: 100% Chapter 11 Case shall be paid in the ordinary course of
business in accordance with the terms and conditions of
any agreements relating thereto.
- ----------- -------------------------- ------------------------------------------------------------
_ PRIORITY TAX CLAIMS Except as otherwise provided for in the Plan, on, or as
soon as reasonably practicable after, the latest of (i)
the Initial Distribution Date, (ii) the date such Priority
Tax Claim becomes an Allowed Priority Tax Claim, or (iii)
the date such Priority Tax Claim becomes payable pursuant
to any agreement between a Debtor (with the consent of the
Bankruptcy Committees) or the Liquidating Trustee, as the
case may be, and the holder of such Priority Tax Claim,
each holder of an Allowed Priority Tax Claim shall receive
in full satisfaction, settlement, release, and discharge
Estimated Allowed of and in exchange for such Allowed Priority Tax Claim (x)
Claims: $10.7 million Cash equal to the unpaid portion of such Allowed Priority
Tax Claim or (y) such other treatment as to which a Debtor
Estimated Percentage (with the consent of the Bankruptcy Committees) or the
Recovery: 100% Liquidating Trustee, as the case may be, and such holder
shall have agreed upon in writing.
- ----------- -------------------------- ------------------------------------------------------------
_ DIP LOAN CLAIMS If then outstanding on the Effective Date, the DIP Loan
Claims shall be paid in full on the Effective Date
Estimated Allowed according to the terms of the DIP Credit Agreement.
Claims: $14.5 million Notwithstanding anything in the Plan to the contrary, the
DIP Loan Claims shall have the superpriority status set
Estimated Percentage forth in the orders authorizing and evidencing the DIP
Recovery: 100% Loan Claims.
- ----------- -------------------------- ------------------------------------------------------------
1 OTHER PRIORITY CLAIMS On, or as soon as reasonably practicable after, the latest
of (i) the Initial Distribution Date, (ii) the date such
Claim becomes an Allowed Class 1 Claim, or (iii) the date
such Class 1 Claim becomes payable pursuant to any
agreement between a Debtor (with the consent of the
Bankruptcy Committees) or the Liquidating Trustee, as the
case may be, and the holder of such Class 1 Claim, each
holder of an Allowed Class 1 Claim shall receive, in full
Estimated Allowed satisfaction, settlement release, and discharge of and in
Claims: $0.1 million exchange for such Allowed Class 1 Claim (x) Cash equal to
the unpaid portion of such Allowed Class 1 Claim or (y)
Estimated Percentage such other treatment as to which a Debtor (with the
Recovery: 100% consent of the Bankruptcy Committees) or the Liquidating
Trustee, as the case may be, and such holder shall have
agreed upon in writing. The legal, equitable and
contractual rights of the holders of Allowed Class 1
Claims are Unimpaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
2 SECURED LENDER CLAIMS On the Effective Date, the Allowed Secured Lender Claims,
if any, shall be satisfied and paid in full in the amount
of said Claims then outstanding. Net cash proceeds from
Section 363 asset sales prior to the Confirmation Date
shall be remitted for application against the Secured
Lender Claims. The Secured Lender Claims, if any,
Estimated Allowed outstanding on the Effective Date shall be paid in full in
Claims: $10.4 million Cash from net cash proceeds from Section 363 asset sales
that occur after the Confirmation Date and prior to the
Estimated Percentage Effective Date. Nothing in the Plan shall alter or affect
Recovery: 100% any intermediate payments made by the Debtors to the
Secured Lenders prior to the Effective Date. Class 2 is
Unimpaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
3 OTHER SECURED CLAIMS On or as soon as reasonably practicable after the
Effective Date, each holder of an Allowed Class 3 Claim
shall receive one of the following distributions: (a)
payment of such holder's Allowed Other Secured Claim in
full in Cash; (b) the sale or disposition proceeds of the
Collateral securing such Allowed Other Secured Claim to
the extent of the value of the Debtors' interest in such
Collateral; (c) the surrender of the Collateral securing
such Allowed Other Secured Claim to the holder of such
Allowed Other Secured Claim; (d) the Reinstatement of such
Allowed Other Secured Claim; or (e) such other
distribution or treatment as shall be necessary to satisfy
the requirements of the Bankruptcy Code. The manner and
treatment of each Allowed Other Secured Claim shall be
Estimated Allowed determined by the Liquidating Trustee in his sole and
Claims: $44.2 million absolute discretion. Nothing in Section 3.4 or elsewhere
in the Plan shall preclude the Liquidating Trustee from
Estimated Percentage challenging the validity of any alleged Lien on any asset
Recovery: 100% of a Debtor or the value of such Collateral. The legal,
equitable and contractual rights of the holders of Allowed
Class 3 Claims are Unimpaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
4 DEMAND CERTIFICATES As of the Effective Date, all notes, instruments and other
CLAIMS document evidencing the Demand Certificates shall be
deemed canceled without further act or action under any
applicable agreement, law, regulation, order or rule, and
the Demand Certificates evidenced thereby shall be
extinguished. In accordance with the provisions of Article
VII of the Plan and the Liquidating Trust Agreement, each
holder of an Allowed Class 4 Claim shall receive, in full
satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 4 Claim, (i) its Pro Rata
share of the Industries Distribution Pool plus (ii) its
Estimated Allowed Pro Rata share of any funds that would otherwise be
Claims: $17.9 million payable to holders of Allowed Class 5 Claims, in an amount
necessary to pay its Allowed Claim 4 Claim in full in
Estimated Percentage accordance with any relevant agreement or applicable law,
Recovery: 100% including the Bankruptcy Code. Class 4 is Impaired by the
Plan.
- ----------- -------------------------- ------------------------------------------------------------
5 SUBORDINATED As of the Effective Date, all notes, instruments and other
CERTIFICATES CLAIMS document evidencing the Subordinated Certificates shall be
deemed canceled without further act or action under any
applicable agreement, law, regulation, order or rule, and
the Subordinated Certificates evidenced thereby shall be
extinguished. In accordance with provisions of Article
VII of the Plan and the Liquidating Trust Agreement, each
holder of an Allowed Class 5 Claim shall receive, in full
Estimated Allowed satisfaction, settlement, release and discharge of and in
Claims: $557.3 million exchange for such Allowed Class 5 Claim, (i) its Pro Rata
share of the Industries Distribution Pool less (ii) those
Estimated Percentage funds payable to holders of Allowed Class 4 Claims in
Recovery: 50% - 65% accordance with Section 3.5 of the Plan. Class 5 is
Impaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
6 CONVENIENCE CLAIMS Subject to the provisions of Article VII of the Plan and
AGAINST INDUSTRIES the Liquidating Trust Agreement, each holder of an Allowed
Class 6 Claim shall receive, in full satisfaction,
Estimated Allowed settlement, release, and discharge of and in exchange for
Claims: $2.0 million such Allowed Class 6 Claim, Cash equal to the amount of
such Allowed Claim. Class 6 is Unimpaired by the Plan.
Estimated Percentage
Recovery: 100%
- ----------- -------------------------- ------------------------------------------------------------
7 GENERAL UNSECURED CLAIMS Subject to the provisions of Article VII of the Plan and
AGAINST INDUSTRIES the Liquidating Trust Agreement, each holder of an Allowed
Class 7 Claim shall receive, in full satisfaction,
Estimated Allowed settlement, release and discharge of and in exchange for
Claims: $308.5 million - such Allowed Class 7 Claim, its Pro Rata share of the
$535.3 million Industries Distribution Pool. Class 7 is Impaired by the
Plan.
Estimated Percentage
Recovery: 50% - 65%
- ----------- -------------------------- ------------------------------------------------------------
8 INDUSTRIES PREFERRED The Industries Preferred Shares shall be Reinstated on the
SHARES Effective Date. Notwithstanding such Reinstatement and in
accordance with applicable law, no distribution shall be
made on account of the Industries Preferred Shares until
all Administrative Claims against Industries, all Priority
Estimated Percentage Tax Claims against Industries, all Class 1 Claims against
Recovery: 0% Industries, all Class 3 Claims against Industries, all
Class 4 Claims, all Class 5 Claims, all Class 7 Claims,
all Class 18 Claims against Industries and all Class 20
Claims against Industries have been (i) Allowed and paid
in full (including, with respect to Classes 4, 5, and 7,
payment of interest at the Plan Rate), (ii) disallowed or
(iii) withdrawn, and all Intercompany Advances payable by
Industries have been repaid. Class 8 is Unimpaired by the
Plan.
- ----------- -------------------------- ------------------------------------------------------------
9 INDUSTRIES COMMON SHARES On the Effective Date (or such later date(s) as may be
determined by the Liquidating Trustee), (i) that amount of
Industries Common Shares whose cancellation, in the
Debtors' reasonable judgment, can be offset in full
Estimated Percentage against appropriate losses and net operating losses shall
Recovery: 0% be deemed canceled on a Pro Rata basis without further act
or action under any applicable agreement, law, regulation,
order or rule, and the Industries Common Shares evidenced
thereby shall be extinguished, and (ii) any remaining
Industries Common Shares shall be Reinstated.
Notwithstanding such Reinstatement and in accordance with
applicable law, no distribution shall be made on account
of any remaining Industries Common Shares until all
Administrative Claims against Industries, all Priority Tax
Claims against Industries, all Class 1 Claims against
Industries, all Class 3 Claims against Industries, all
Class 4 Claims, all Class 5 Claims, all Class 7 Claims,
all Interests in Class 8, all Class 18 Claims against
Industries, all Class 20 Claims against Industries have
been (i) Allowed and paid in full (including, with respect
to Classes 4, 5 and 7, payment of interest at the Plan
Rate), (ii) disallowed or (iii) withdrawn, and all
Intercompany Advances payable by Industries have been
repaid. In accordance with and as provided by the Plan,
any remaining Industries Common Shares shall be deemed to
continue in effect and shall not be deemed canceled or
extinguished under any other law or regulation. Class 9
is Impaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
10 GENERAL UNSECURED CLAIMS Subject to the provisions of Article VII of the Plan and
AGAINST FOODS the Liquidating Trust Agreement, each holder of an Allowed
Class 10 Claim shall receive, in full satisfaction,
Estimated Allowed settlement, release and discharge of and in exchange for
Claims: $35.4 million such Allowed Class 10 Claim, Cash equal to the amount of
its Allowed Class 10 Claim plus interest at the Plan Rate
Estimated Percentage from the Petition Date through the Effective Date. Class
Recovery: 100% 10 is Impaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
11 OLD SECURITIES OF FOODS As of the Effective Date, the stock certificates and other
instruments evidencing the Old Securities of Foods shall
be deemed canceled without further act or action under any
applicable agreement, law, regulation, order or rule, the
Old Securities of Foods evidenced thereby shall be
extinguished, and Foods shall be merged into Industries.
The holders of Allowed Class 11 Interests that constitute
Minority Foods Shares shall receive their Pro Rata share
of the Class 11 Distribution Pool. Class 11 is Impaired
by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
12 GENERAL UNSECURED CLAIMS Subject to the provisions of Article VII of the Plan and
AGAINST TRANSPORTATION the Liquidating Trust Agreement, each holder of an Allowed
Class 12 Claim shall receive, in full satisfaction,
Estimated Allowed settlement, release and discharge of and in exchange for
Claims: $3.3 million such Allowed Class 12 Claim, Cash equal to the amount of
its Allowed Class 12 Claim. Class 12 is Impaired by the
Estimated Percentage Plan.
Recovery: 100%
- ----------- -------------------------- ------------------------------------------------------------
13 OLD SECURITIES OF As of the Effective Date, the stock certificates and other
TRANSPORTATION instruments evidencing the Old Securities of
Transportation shall be deemed canceled without further
Estimated Percentage act or action under any applicable agreement, law,
Recovery: 0% regulation, order or rule, and the Old Securities of
Transportation evidenced thereby shall be extinguished.
Any Cash remaining in the Estate of Transportation after
all Administrative Claims against Transportation, all
Priority Tax Claims against Transportation, all Class 1
Claims against Transportation, all Class 3 Claims against
Transportation, all Class 12 Claims, all Class 18 Claims
against Transportation and all Class 20 Claims against
Transportation have been (i) Allowed and paid, (ii)
disallowed or (iii) withdrawn, and all Intercompany
Advances payable by Transportation have been repaid, shall
vest in the Liquidating Trust. Class 13 is Impaired by
the Plan.
- ----------- -------------------------- ------------------------------------------------------------
14 GENERAL UNSECURED CLAIMS Subject to the provisions of Article VII of the Plan and
AGAINST SFA the Liquidating Trust Agreement, each holder of an Allowed
Class 14 Claim shall receive, in full satisfaction,
Estimated Allowed settlement, release and discharge of and in exchange for
Claims: $4.3 million such Allowed Class 14 Claim, Cash equal to the amount of
its Allowed Class 14 Claim. Class 14 is Impaired by the
Estimated Percentage Plan.
Recovery: 100%
- ----------- -------------------------- ------------------------------------------------------------
15 OLD SECURITIES OF SFA As of the Effective Date, the stock certificates and
other instruments evidencing the Old Securities of SFA
shall be deemed canceled without further act or action
under any applicable agreement, law, regulation, order or
rule, and the Old Securities of SFA evidenced thereby
Estimated Percentage shall be extinguished. Any Cash remaining in the Estate
Recovery: 0% of SFA after all Administrative Claims against SFA, all
Priority Tax Claims against SFA, all Class 1 Claims
against SFA, all Class 3 Claims against SFA, all Class 14
Claims, all Class 18 Claims against SFA and all Class 20
Claims against SFA have been (i) Allowed and paid, (ii)
disallowed or (iii) withdrawn, and all Intercompany
Advances payable by SFA have been repaid, shall vest in
the Liquidating Trust. Class 15 is Impaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
16 GENERAL UNSECURED CLAIMS Subject to the provisions of Article VII of the Plan and
AGAINST PIPELINE the Liquidating Trust Agreement, each holder of an Allowed
Class 16 Claim shall receive, in full satisfaction,
Estimated Allowed settlement, release and discharge of and in exchange for
Claims: $1.0 million such Allowed Class 16 Claim, Cash equal to the amount of
its Allowed Class 16 Claim. Class 16 is Impaired by the
Estimated Percentage Plan.
Recovery: 100%
- ----------- -------------------------- ------------------------------------------------------------
17 OLD SECURITIES OF As of the Effective Date, the stock certificates and other
PIPELINE instruments evidencing the Old Securities of Pipeline
shall be deemed canceled without further act or action
under any applicable agreement, law, regulation, order or
rule, and the Old Securities of Pipeline evidenced thereby
Estimated Percentage shall be extinguished. Any Cash remaining in the Estate
Recovery: 0% of Pipeline after all Administrative Claims against
Pipeline, all Priority Tax Claims against Pipeline, all
Class 1 Claims against Pipeline, all Class 3 Claims
against Pipeline, all Class 16 Claims, all Class 18 Claims
against Pipeline and all Class 20 Claims against Pipeline
have been (i) Allowed and paid, (ii) disallowed or (iii)
withdrawn, and all Intercompany Advances payable by
Pipeline have been repaid, shall vest in the Liquidating
Trust. Class 17 is Impaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
18 INTERCOMPANY CLAIMS On or as soon as reasonably practicable after the
Effective Date, each holder of an Allowed Class 18 Claim
Estimated Allowed shall receive, in full satisfaction, settlement, release
Claims: $170.5 million and discharge of and in exchange for such Allowed Class 18
Claim, (x) Cash equal to the unpaid portion of such
Estimated Percentage Allowed Class 18 Claim or (y) such other treatment as to
Recovery: 100% which the Debtors or the Liquidating Trustee, as the case
may be, and such holder shall have agreed upon in
writing. Class 18 is Impaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
19 SUBORDINATED CLAIMS In accordance with section 510(b) and (c) of the
Bankruptcy Code, no distribution shall be made on account
Estimated Allowed of the Subordinated Claims until all Administrative Claims
Claims: $0.0 million against Industries, all Priority Tax Claims against
Industries, all Class 1 Claims against Industries, all
Estimated Percentage Class 3 Claims against Industries, all Class 4 Claims, all
Recovery: 0% Class 5 Claims, all Class 7 Claims, all Interests in Class
8, all Class 18 Claims against Industries, all Class 20
Claims against Industries have been (i) Allowed and paid
in full (including, with respect to Classes 4, 5 and 7,
payment of interest at the Plan Rate), (ii) disallowed or
(iii) withdrawn, and all Intercompany Advances payable by
Industries have been repaid. Class 19 is Impaired by the
Plan.
- ----------- -------------------------- ------------------------------------------------------------
20 PBGC CLAIMS The Allowed Class 20 Claims shall be satisfied by either
(i) Cash payments equal to the amount of such Allowed
Estimated Allowed Class 20 Claims (as such amount may be adjudicated,
Claims: $0.0 million - estimated by the Bankruptcy Court or mutually agreed by
$141.7 million the Debtors and the PBGC), or (ii) the underlying pension
plans, as may be modified prior to the Effective Date,
Estimated Percentage remaining in full force and effect. Class 20 is
Recovery: 100% Unimpaired by the Plan.
- ----------- -------------------------- ------------------------------------------------------------
D. PROVISIONS GOVERNING DISTRIBUTIONS
1. DISTRIBUTIONS
Subject to Bankruptcy Rule 9010, all distributions under the Plan
shall be made by the Liquidating Trustee pursuant to the terms and
conditions contained in the Plan and the Liquidating Trust Agreement;
provided, however, that no distribution shall be made on behalf of any
Claim which may be subject to disallowance under section 502(d) of the
Bankruptcy Code. At the close of business on the Effective Date, the Claims
and Interest register shall be closed, and there shall be no further
changes in the record holders of any Claims or Interests. The Liquidating
Trustee shall have no obligation to recognize any transfer of any Claims or
Interest occurring after the Effective Date. The Liquidating Trustee shall
instead be entitled to recognize and deal for all purposes under the Plan
(except as to voting to accept or reject the Plan pursuant to Article 4 of
the Plan) with only those record holders stated on the Claims register as
of the close of business on the Effective Date.
2. INTEREST ON CLAIMS
Unless otherwise specifically provided for in the Plan or the
Confirmation Order, or required by applicable law, including section
1129(a) of the Bankruptcy Code, post-petition interest shall not accrue or
be paid on Claims, and no holder of a Claim shall be entitled to interest
accruing on or after the Petition Date on any Claim; provided, however,
that any interest determined to be payable in respect of any Claim shall be
calculated at the Plan Rate. Interest shall not accrue or be paid upon any
Disputed Claim in respect of the period from the Petition Date to the date
a final distribution is made thereon if and after such Disputed Claim
becomes an Allowed Claim. This provision shall not apply to Allowed Secured
Lender Claims and DIP Loan Claims.
3. MEANS OF CASH PAYMENT
Any payment to be made by the Liquidating Trustee pursuant to the Plan
will be in U.S. dollars and may be made, at the sole discretion of the
Liquidating Trustee, by draft, check, electronic funds transfer, or as
otherwise required or provided in any relevant agreement or applicable law.
4. DISTRIBUTIONS ON THE INITIAL DISTRIBUTION DATE
As soon as is practicable after the Effective Date, subject to the
reservation of adequate funds in the Liquidating Trust Administrative
Reserve and each Disputed Claims Reserve as and when appropriate, the
Liquidating Trustee shall deliver proceeds of Collateral and/or Available
Cash to holders of Claims entitled to distributions under the Plan that
were Allowed as of the Effective Date. All payments shall be made in
accordance with the priorities established by the Plan and in accordance
with the terms and conditions of the Plan and the Confirmation Order.
5. DISTRIBUTIONS ON A SUBSEQUENT DISTRIBUTION DATE
Unless otherwise provided in the Plan, to the extent that proceeds of
Collateral and/or Available Cash or other reasonably distributable assets
are available subsequent to the Initial Distribution Date, the Liquidating
Trustee shall, on a Subsequent Distribution Date, which date shall be
whenever the aggregate amount distributable to holders of Allowed Claims
equals or exceeds $1,000,000 (but in no event shall such date be less than
three months, or more than one year, after the next previous distribution
date), distribute such proceeds of Collateral and/or Available Cash or
other reasonably distributable assets to the holders of Claims entitled to
distributions under the Plan that were Allowed as of the Effective Date or
subsequently have become Allowed Claims on or before the Subsequent
Distribution Date in amounts necessary to cause such holders to have
received aggregate distributions of Cash in respect of such Allowed Claims
on the Initial Distribution Date if (a) such proceeds of Collateral and/or
Available Cash had been available for distribution on the Initial
Distribution Date, (b) such Allowed Claims had been Allowed on the Initial
Distribution Date in the amounts in which they are Allowed on the
Subsequent Distribution Date, and (c) Claims or portions thereof that have
become disallowed subsequent to the Initial Distribution Date and on or
before the Subsequent Distribution Date had been disallowed on the Initial
Distribution Date; provided, however, that the Liquidating Trustee shall
not be required to make any distribution on a Subsequent Distribution Date
on account of an Allowed Claim or Interest in an amount less than $100;
provided further, however, that in no event shall the foregoing impair the
right of the Liquidating Trustee to use funds in any Disputed Claims
Reserve to satisfy the costs of administering the Plan and the Liquidating
Trustee. All payments shall be made in accordance with the priorities
established by the Plan and in accordance with the terms and conditions of
the Plan and the Confirmation Order.
6. DISTRIBUTIONS ON THE FINAL DISTRIBUTION DATE
Unless otherwise provided in the Plan, to the extent that proceeds of
Collateral and/or Available Cash or other reasonably distributable assets
are available subsequent to the Initial Distribution Date, any Subsequent
Distribution Date and after the liquidation of any and all assets of the
Debtors, the Liquidating Trustee shall establish the Final Distribution
Date upon which the Liquidating Trustee shall distribute such proceeds of
Collateral and/or Available Cash or other assets to the holders of Claims
entitled to distributions under the Plan that were Allowed as of the
Effective Date or subsequently have become Allowed Claims on or before the
Final Distribution Date in amounts necessary to cause such holders to have
received aggregate distributions of Cash in respect of such Allowed Claims
on the Initial Distribution Date if (a) such proceeds of Collateral and/or
Available Cash had been available for distribution on the Initial
Distribution Date, (b) such Allowed Claims had been Allowed on the Initial
Distribution Date in the amounts in which they are Allowed on the Final
Distribution Date, and (c) Claims or portions thereof that have become
disallowed subsequent to the Initial Distribution Date and on or before the
Final Distribution Date had been disallowed on the Initial Distribution
Date, taking into account all previous distributions; provided, however,
that in no event shall the foregoing impair the right of the Liquidating
Trustee to use funds in any Disputed Claims Reserve to satisfy the costs of
administering the Plan and the Liquidating Trust. Within 20 Business Days
prior to making the final distribution, the Liquidating Trustee shall
notify the Post-Confirmation Committee that the Liquidating Trustee deems
all assets to be liquidated and that the Liquidating Trustee intends to
establish the Final Distribution Date.
7. DELIVERY OF DISTRIBUTIONS; UNDELIVERABLE DISTRIBUTIONS
Distributions to holders of Allowed Claims and Allowed Interests shall
be made by the Liquidating Trustee (a) at the addresses set forth on the
proofs of Claim or Interest filed by such holders (or at the last known
addresses of such holders if no proof of Claim or Interest is filed or if
the Debtors have been notified of a change of address), (b) at the
addresses set forth in any written notices of address changes delivered to
the Liquidating Trustee after the date of any related proof of Claim or
Interest, (c) at the addresses reflected in the Schedules if no proof of
Claim or Interest has been filed and the Liquidating Trustee has not
received a written notice of a change of address, or (d) at the addresses
contained in the official records of the applicable Indenture Trustee, or
(e) at the addresses set forth in a properly completed letter of
transmittal accompanying securities properly remitted to the Debtors. If
any holder's distribution is returned as undeliverable, no further
distributions to such holder shall be made unless and until the Liquidating
Trustee is notified, in accordance with the Liquidating Trust Agreement, of
such holder's then current address. Claims or Interests held by holders
whose distributions are returned as undeliverable and who fail to notify
the Liquidating Trustee of their respective correct addresses within one
year after such distributions are returned to the Liquidating Trustee as
undeliverable shall be expunged, after which date all unclaimed property
(including, without limitation, all unclaimed property held in the Class 11
Distribution Pool) shall revert to the Liquidating Trust free of any
restrictions thereon and the Claims or Interests of any holder or successor
to such holder with respect to such property shall be discharged and
forever barred, notwithstanding any federal or state escheat laws to the
contrary. All undeliverable distributions that revert to the Liquidating
Trust shall be used to satisfy the costs of administering the Plan and the
Liquidating Trust and/or distributed to other holders of Allowed Claims or
Allowed Interests of the same Class on the Final Distribution Date. Nothing
contained in the Plan shall require the Liquidating Trustee to attempt to
locate any holder of an Allowed Claim or Allowed Interest.
8. TENDER OF SECURITIES AND INSTRUMENTS
Except as otherwise required by the Liquidating Trustee, as a
condition precedent to receiving any distribution pursuant to the Plan on
account of an Allowed Claim or Allowed Interest, each holder of Industrial
Revenue Bonds not Reinstated on the Effective Date, Demand Certificates,
Subordinated Certificates or Old Securities of Foods shall tender the
applicable instruments, securities or other documentation evidencing such
Claim or Interest to the Liquidating Trustee in accordance with written
instructions to be provided to such holders by the Liquidating Trustee as
promptly as practicable following the Effective Date. All tendered
instruments and documentation relating to Industrial Revenue Bonds, Demand
Certificates and Subordinated Certificates shall be marked as cancelled.
All tendered securities and documentation relating to Old Securities of
Foods shall be held by the Liquidating Trustee.
In addition to any requirements under the applicable certificate or
articles of incorporation or by-laws of the applicable Debtor, any holder
of Industrial Revenue Bonds not Reinstated on the Effective Date, Demand
Certificates, Subordinated Certificates or Old Securities of Foods that has
been lost, stolen, mutilated or destroyed shall, in lieu of tendering such
instrument, security or documentation, deliver to the Liquidating Trustee
(i) evidence satisfactory to the Liquidating Trustee or Indenture Trustee
of the loss, theft, mutilation or destruction; and (ii) such indemnity or
security as may be required by the Liquidating Trustee to hold the
Liquidating Trustee and the Liquidating Trust harmless from any damages,
liabilities or costs incurred in treating such individual as a holder of
Industrial Revenue Bonds, Demand Certificates, Subordinated Certificates or
Old Securities of Foods that has been lost, stolen, mutilated or destroyed.
Upon compliance with Section 7.8(b) of the Plan by a holder of a Claim or
Interest evidenced by Industrial Revenue Bonds, Demand Certificates,
Subordinated Certificates or Old Securities of Foods, such holder shall,
for all purposes under the Plan, be deemed to have tendered its Industrial
Revenue Bonds, Demand Certificates, Subordinated Certificates or Old
Securities of Foods.
Except as otherwise required by the Liquidating Trustee, any holder of
Industrial Revenue Bonds not Reinstated on the Effective Date, Demand
Certificates, Subordinated Certificates or Old Securities of Foods that
fails to tender or is deemed to have failed to tender the applicable
instruments, securities and documentation required to be tendered hereunder
within one year after the Effective Date shall have its Claim or Interest
discharged and shall be forever barred from asserting such Claim or
Interest against the Liquidating Trust or its property and any distribution
to have been made on account of such Claim or Interest shall be treated as
an undeliverable distribution in accordance with Section 7.7 of the Plan.
The notice of the Confirmation Order shall contain a description of
the requirements contained in Section 7.8 of the Plan.
9. WITHHOLDING AND REPORTING REQUIREMENTS
In connection with the Plan and all distributions hereunder, the
Liquidating Trustee shall, to the extent applicable, comply with all tax
withholding and reporting requirements imposed by any federal, state,
provincial, local, or foreign taxing authority, and all distributions
hereunder shall be subject to any such withholding and reporting
requirements. The Liquidating Trustee shall be authorized to take any and
all actions that may be necessary or appropriate to comply with such
withholding and reporting requirements.
10. SETOFFS
The Liquidating Trustee may, but shall not be required to, set off
against any Allowed Claim, and the payments or other distributions to be
made pursuant to the Plan in respect of such Allowed Claim, claims, right
and causes of action of any nature whatsoever that the Liquidating Trustee
may have against the holder of such Allowed Claim; provided, however, that
neither the failure to do so nor the allowance of any Claim hereunder shall
constitute a waiver or release by the Liquidating Trustee of any such claim
that the Liquidating Trustee may have against such holder.
11. NO RECOURSE
Notwithstanding that the Allowed amount of any particular Claim may be
reconsidered under the applicable provisions of the Bankruptcy Code and
Bankruptcy Rules or Allowed in an amount for which there is insufficient
Cash in the relevant account to provide a recovery equal to that received
by other holders of Allowed Claims in the relevant Class, no such holder
shall have recourse to the Estates, the Bankruptcy Committees, the
Liquidating Trust, the Liquidating Trustee, the Post-Confirmation
Committee, Reorganized Industries or any of their respective professionals,
or their successors or assigns, or the holder of any other Claim, or any of
their respective property. Nothing in the Plan, however, shall modify any
right of a holder of a Claim under section 502(j) of the Bankruptcy Code.
12. TRANSACTIONS ON BUSINESS DAYS
If the Effective Date or any other date on which a transaction may
occur under the Plan shall occur on a day that is not a Business Date, the
transactions contemplated by the Plan to occur on such day shall instead
occur on the next succeeding Business Day and shall be deemed to have been
completed as of the required date.
13. NO DISTRIBUTIONS IN EXCESS OF ALLOWED AMOUNTS OF CLAIM
Notwithstanding anything to the contrary in the Plan, no holder of an
Allowed Claim shall receive in respect of such Claim any distribution in
excess of the Allowed amount of such Claim plus interest at the Plan Rate
from the Petition Date through the Effective Date.
14. INTERCOMPANY ADVANCES
In the event that the Liquidating Trustee determines that there does
not exist sufficient Cash in the Estate of any Debtor (a "Benefited
Debtor") to make payments to all holders of Allowed Administrative Claims,
Allowed Priority Tax Claims and Allowed Class 1 Claims asserted against
such Benefited Debtor and all holders of Allowed Class 16 Claims (or to
deposit sufficient funds in Disputed Claims Reserves for all Disputed
Administrative Claims, Disputed Priority Tax Claims and Disputed Class 1
Claims asserted against such Benefited Debtor and all Disputed Class 16
Claims), then the Liquidating Trustee shall utilize Cash in the one or more
of the other Estates to make such payments or deposit such funds on behalf
of the Estate of such Benefited Debtor (such payments and deposits, the
"Intercompany Advances") and the Estate(s) of such Debtor(s) shall
thereupon have a direct right of reimbursement from the Estate of such
Benefited Debtor to the extent of the Intercompany Advances extended to
such Benefited Debtor (a "Reimbursement Right"). Except as otherwise
provided in the Plan, the Liquidating Trustee shall ensure that all
Intercompany Advances are repaid prior to making any distributions to
holders of Allowed General Unsecured Claims asserted against such Benefited
Debtor.
E. IMPLEMENTATION OF THE PLAN
1. CONTINUED EXISTENCE OF THE DEBTORS; VESTING OF ASSETS
From and after the Confirmation Date and through the Effective Date,
the Debtors shall continue in existence solely for the purpose of (subject
to approval of the Bankruptcy Committees) (i) winding up their affairs as
expeditiously as reasonably possible, (ii) liquidating, by conversion to
Cash or other methods, any remaining assets of their Estates, as
expeditiously as reasonably possible, including liquidating the assets of
the Non-Debtor Subsidiaries, (iii) in accordance with section 1123(b)(3)(B)
of the Bankruptcy Code, retaining, enforcing and prosecuting claims,
interests, rights and privileges of the Debtors, including, without
limitation, the prosecution of Litigation Claims in conjunction with the
marshaling of assets of the Debtors, (iv) resolving Disputed Claims, and
(v) taking all prudent actions to comply with tax laws and minimize tax
costs to their Estates, including filing all appropriate tax returns and
eliminating the Intercompany Claims between the Debtors.
From and after the Confirmation Date and through the Effective Date,
each then current officer of the Debtors shall continue to serve in his or
her respective capacity through the earlier of the Effective Date and the
date such officer resigns, is replaced or is terminated.
On the Effective Date, all right, title and interest in all of the
Debtors' property and assets (excluding the Retained Assets), including
without limitation, all rights and causes of action, whether arising by
contract, under the Bankruptcy Code (including, without limitation pursuant
to Section 1123(b)(3)(B) of the Bankruptcy Code), under the Plan or under
other applicable law, including, without limitation, all rights the Debtors
have under the Plan, shall vest in the Liquidating Trust.
On the Effective Date, Foods shall be merged into Industries, after
which Industries shall continue to exist as Reorganized Industries.
Reorganized Industries shall be governed and managed in accordance with the
Management Agreement. Reorganized Industries shall be authorized to
effectuate the Plan and the transactions contemplated by the Plan and to
take any proceedings or actions provided for or contemplated by the Plan,
including, without limitation, such proceedings or actions related to the
Retained Assets as may be necessary and appropriate, all without further
action by the stockholders of Reorganized Industries, and with like effect
as if such actions had been taken by unanimous action of the stockholders
of Reorganized Industries. The operations of Reorganized Industries shall
be funded from the Liquidating Trust Administrative Reserve. All recoveries
received by Reorganized Industries on account of the Retained Assets or any
other assets of the Debtors shall be remitted to the Liquidating Trust and
held by the Liquidating Trustee on account of the Estate to which such
recoveries are allocable. Forms of the amended certificate of incorporation
and bylaws of Reorganized Industries shall be filed with the Bankruptcy
Court prior to the Confirmation Hearing.
On the Effective Date, SFA, Transportation and Pipeline shall be
deemed dissolved for all purposes without the necessity for any other or
further actions to be taken by or on behalf of the Debtors or payments to
be made in connection therewith; provided, however, that the Debtors shall
file with the appropriate public office certificates of dissolution.
From and after the Effective Date, the Debtors shall not be required
to file any document, or take any other action, to withdraw their business
operation from any state in which the Debtors were previously conducting
their business operation.
2. FUNDING FOR THE PLAN
The Plan shall be funded in accordance with the provisions of the Plan
from (a) Available Cash on the Effective Date and (b) Cash available after
the Effective Date from, among other things, the liquidation of the
Debtors' remaining assets, the prosecution and enforcement of Litigation
Claims, and any release of funds from the Disputed Claims Reserve after the
Effective Date. All Available Cash realized from the liquidation of the
Debtors' remaining assets that is not Collateral for the Secured Lender
Claims or DIP Loan Claims, the prosecution and enforcement of Litigation
Claims, and the release of funds from the Disputed Claims Reserve (to the
extent not otherwise payable to the Pre-Petition Lenders or the DIP
Lenders) shall be allocated to the appropriate Estate(s) and shall be
maintained by the Liquidating Trustee for distribution to the holders of
Allowed Claims as provided in the Plan and the Liquidating Trust Agreement.
3. ACCOUNTS
The Debtors (subject to approval of the Bankruptcy Committees, which
approval shall not be unreasonably withheld) and, from and after the
Effective Date, the Liquidating Trustee may establish or maintain one or
more interest-bearing accounts as they determine may be necessary or
appropriate to effectuate the provisions of the Plan consistent with
section 345 of the Bankruptcy Code and any orders of the Bankruptcy Court.
4. LIQUIDATING TRUST; LIQUIDATING TRUSTEE
Prior to the Effective Date, the Debtors shall establish the
Liquidating Trust in accordance with Section 5.1(c) of the Plan and subject
to the terms of the Liquidating Trust Agreement and the Plan. The
Bankruptcy Committees shall establish the Post-Confirmation Committee and
appoint the Committee Members in accordance with the Liquidating Trust
Agreement and the Plan. By Confirmation of the Plan, the Bankruptcy Court
specifically approves and designates the Liquidating Trust and the
Liquidating Trustee as a representative of each Estate and finds that the
Liquidating Trust and the Liquidating Trustee are acting on behalf of and
for the benefit of the Beneficiaries in accordance with the distribution
scheme set forth in the Plan. The establishment of the Liquidating Trust
shall not give a holder of a Claim against any Debtor or any Estate any
rights as against any other Debtor or any other Estate, except as provided
for in Section 7.11 of the Plan. The Liquidating Trust is an intended
third-party beneficiary of the Plan to the fullest extent allowable under
the laws of the State of Delaware, the laws of the United States or any
other applicable law.
The Liquidating Trust and the Liquidating Trustee, as the
representative of each Estate, except as otherwise limited in the
Liquidating Trust Agreement, Plan or the Confirmation Order, shall be
vested with all property, rights, interests, and powers of the Debtors.
Subject to the provisions of the Liquidating Trust Agreement, the
Liquidating Trustee's rights and authority include, without limitation, all
of the following:
(a) control, management and disposal of all Liquidating Trust
Assets for the benefit of the holders of Allowed Claims who may
receive distributions under the Plan;
(b) prosecution of Litigation Claims on behalf of the Debtors
and/or the Estates and/or the Liquidating Trust, including preference,
fraudulent conveyance, avoidance and other actions whether against
insiders or any other third parties;
(c) filing of objections to Claims or actions to subordinate
Claims or recharacterize debt as equity and the filing and pursuit of
any other pleading, motion, stipulation or other item in connection
with any matter arising under, in or in connection with the Chapter 11
Case;
(d) filing of tax returns;
(e) transfer (subject to Bankruptcy Court approval) of right,
title and interest in and to any Liquidating Trust Assets; and
(f) undertake any other action in the best interests of the Trust
and/or its beneficiaries and not inconsistent with the provisions of
the Liquidating Trust Agreement, the Plan, and the Confirmation Order.
The funding of the Liquidating Trust pursuant to Section 5.1(c) hereof
shall be treated for all purposes of the Tax Code as a deemed transfer to
the Beneficiaries, followed by a deemed transfer by the Beneficiaries to
the Liquidating Trust. The Beneficiaries shall be treated as the grantors
and deemed owners of the Liquidating Trust. The valuation of the property
and assets transferred to the Liquidating Trust shall be consistent and
shall be used for all federal income tax purposes.
Neither the Liquidating Trust nor the Liquidating Trustee shall have
any successor or transferee liability for liabilities of the Debtors or
shall be deemed a joint employer, co-employer or successor employer with
the Debtors and shall have no obligation to pay wages, severance pay, WARN
Act claims, benefits (including, without limitation, benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985) or any other
payment to employees of the Debtors, except to the extent that such
payments are payable in respect of Allowed Claims against the Debtors.
From and after the Effective Date, the Liquidating Trust shall be
subject to all terms and conditions contained in the Liquidating Trust
Agreement and the Plan.
5. POST-CONFIRMATION COMMITTEE
On the Effective Date, there shall be constituted the
Post-Confirmation Committee consisting of the Committee Members, the number
and method for selection of which shall be agreed to by the Bankruptcy
Committees prior to the Confirmation Hearing or otherwise ordered by the
Bankruptcy Court. The identities of the Committee Members shall be
disclosed to the Bankruptcy Court on the Confirmation Date. In the event
that (a) no one is willing to serve on the Post-Confirmation Committee or
(b) there shall have been fewer than one-half of the original number of
Committee Members serving for a period of 30 consecutive days, then the
Liquidating Trustee may, during such vacancy, ignore any reference in the
Plan, the Liquidating Trust Agreement, or the Confirmation Order to a
Post-Confirmation Committee, and all references to the Post-Confirmation
Committee's ongoing duties and rights in the Plan, the Liquidating Trust
Agreement, and the Confirmation Order shall be null and void during such
time period.
The Post-Confirmation Committee shall have the rights and
responsibilities set forth in the Plan and the Liquidating Trust Agreement.
The Committee Members shall be entitled to reimbursement of their
reasonable expenses. The Committee Members shall receive such compensation
as shall be disclosed to the Bankruptcy Court, upon consent of the Debtors
and the Bankruptcy Committees, not less than five days prior to the
Confirmation Hearing.
Neither the Post-Confirmation Committee nor any of the Committee
Members shall be liable for the acts or omissions of any other member of
the Post-Confirmation Committee, nor shall any Committee Member be liable
for any act or omission taken in its capacity as a Committee Member, other
than acts or omissions resulting from such Committee Member's willful
misconduct or gross negligence.
The Post-Confirmation Committee shall adopt by-laws which shall
provide for the governance of the Post-Confirmation Committee.
A Committee Member shall recuse himself or herself from any decisions
or deliberations regarding actions taken or proposed to be taken by the
Liquidating Trustee or the Estates with respect to the Claims, Interests,
or rights of such Committee Member, the entity appointing such Committee
Member, or any affiliate of the foregoing.
6. EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS
Prior to the Effective Date, the chief executive officer, chief
financial officer, or any other appropriate officer of Industries or any
other applicable Debtor, as the case may be, shall be authorized to
execute, deliver, file, or record such contracts, instruments, releases,
indentures, and other agreements or documents, and take such actions as may
be necessary or appropriate to effectuate and further evidence the terms
and conditions of the Plan. The secretary or assistant secretary of
Industries or any other applicable Debtor, as the case may be, shall be
authorized to certify or attest to any of the foregoing actions.
7. EXEMPTION FROM CERTAIN TRANSFER TAXES
Pursuant to section 1146(c) of the Bankruptcy Code, any transfers in
the United States from a Debtor to the Liquidating Trust or any other
Entity pursuant to the Plan shall not be subject to any document recording
tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax,
stamp act, real estate transfer tax, mortgage recording tax or other
similar tax or governmental assessment, and the Confirmation Order shall
direct the appropriate state or local governmental officials or agents to
forego the collection of any such tax or governmental assessment and to
accept for filing and recordation any of the foregoing instruments or other
documents without the payment of any such tax or governmental assessment.
8. RELEASES AND RELATED MATTERS
a) Releases by Debtors
As of the Effective Date, for good and valuable consideration, the
adequacy of which is hereby confirmed, the Debtors and the Liquidating
Trustee, on behalf of the Liquidating Trust, will be deemed to forever
release, waive and discharge all claims, obligations, suits, judgments,
damages, demands, debts, rights, causes of action and liabilities
whatsoever in connection with or related to the Debtors, the Liquidating
Trust, the Liquidating Trustee, the Non-Debtor Subsidiaries, the Chapter 11
Case or the Plan (other than the rights of the Debtor, the Liquidating
Trust or the Liquidating Trustee to enforce the Plan and the contracts,
instruments, releases, indentures, and other agreements or documents
delivered thereunder) whether liquidated or unliquidated, fixed or
contingent, matured or unmatured, known or unknown, foreseen or unforeseen,
then existing or thereafter arising, in law, equity or otherwise that are
based in whole or part on any act, omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way
relating to the Debtors, the Liquidating Trust, the Liquidating Trustee,
the Non-Debtor Subsidiaries, the Chapter 11 Case or the Plan, and that may
be asserted by or on behalf of the Debtors or their Estates or the
Liquidating Trust against (i) the Debtors' and the Non-Debtor Subsidiaries'
present and former directors, officers, employees, agents and professionals
as of the Petition Date or thereafter, (ii) the Bankruptcy Committees and
their members, agents and professionals, and (iii) the Lenders, the agents
under the Pre-Petition Credit Agreement, and their respective agents and
professionals.
b) Injunction Related to Releases
As further provided in Article XI of the Plan, the Confirmation Order
will enjoin the prosecution, whether directly, derivatively or otherwise,
of any claim, obligation, suit, judgment, damage, demand, debt, right,
cause of action, liability or interest released, discharged or terminated
pursuant to the Plan.
9. CLOSING OF THE CHAPTER 11 CASE
When all remaining assets of the Debtors, Reorganized Industries or
the Liquidating Trust, as the case may be, have been liquidated and
converted into Cash (other than those assets abandoned by Debtors or the
Liquidating Trust, as the case may be), and such Cash has been distributed
in accordance with the Plan, the Liquidating Trustee shall seek authority
from the Bankruptcy Court to close the Chapter 11 Case in accordance with
the Bankruptcy Code and the Bankruptcy Rules.
10. RIGHTS OF ACTION
On and after the Effective Date, except as provided in Section 11.9 of
the Plan, the Liquidating Trustee, on behalf of and as a court-appointed
representative of each Debtor and for the benefit of each Estate (as vested
in the Liquidating Trust pursuant to the Plan), will, pursuant to section
1123(b)(3)(B) of the Bankruptcy Code, retain and become the holder of, and
have the exclusive right to enforce any and all present or future
Litigation Claims and any and all rights of any and all of the Debtors that
arose before or after the Commencement Date, including, but not limited to,
rights, claims, causes of action, avoiding powers, suits and proceedings
arising under Sections 544, 545, 547, 548, 549, 550 and 553 of the
Bankruptcy Code, including, without limitation, any and all potential
rights, claims and causes of action related to payments made by the Debtors
prior to the Petition Date and disclosed in the Schedules. The Liquidating
Trustee may pursue, abandon, settle or release any or all such Litigation
Claims and rights of action, as it deems appropriate, without the need to
obtain approval or any other or further relief from the Bankruptcy Court.
On and after the Effective Date, all Entities are permanently enjoined
from commencing or continuing in any manner any action or proceeding
(whether directly, indirectly, derivatively or otherwise) on account of or
respecting any Claim, Litigation Claim, debt, right or cause of action of
Debtors, which the Liquidating Trustee retains sole and exclusive authority
to pursue in accordance with Section 5.10 of the Plan.
F. RETIREE BENEFITS
Any "retiree benefits" (as that term is defined in section 1114 of the
Bankruptcy Code) of the Debtors not terminated during the Chapter 11 Case
shall continue after the Effective Date to the extent required by section
1129(a)(13) of the Bankruptcy Code, without prejudice to the Debtor's right
under applicable non-bankruptcy law to modify, amend or terminate the such
benefits. To the extent that any "retiree benefits" continue after the
Effective Date, the Liquidating Trustee and/or Reorganized Industries
expressly reserve the right to terminate such benefits in accordance with
applicable non-bankruptcy law.
G. ESTABLISHMENT OF CLASS 11 DISTRIBUTION POOL
On or prior to the Effective Date, and subject to approval of the
Bankruptcy Court, the Debtors, in consultation with the Bankruptcy
Committees, shall determine the amount of Cash to be reserved by the
Liquidating Trustee in Class 11 Distribution Pool for distribution to
holders of Allowed Class 11 Interests that constitute Minority Foods Shares
in accordance with the Plan and the Liquidating Trust Agreement, which
amount shall represent the Available Cash estimated to be available for
distribution to Allowed Class 11 Interests constituting Minority Foods
Shares after all Administrative Claims against Foods, all Priority Tax
Claims against Foods, all Class 1 Claims against Foods, all Class 3 Claims
against Foods, all Class 10 Claims, all Class 18 Claims against Foods and
all Class 20 Claims against Foods have been (i) Allowed and paid in full
(including, with respect to Class 10, payment of interest at the Plan Rate)
(ii) disallowed or (iii) withdrawn, and all Intercompany Advances payable
by Foods have been repaid.
H. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
1. REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Except as otherwise provided in Section 6.3 of the Plan, on the
Effective Date, all executory contracts and unexpired leases that exist
between a Debtor and any Entity (including, without limitation, the Trust
Indentures) shall be deemed rejected as of the Confirmation Date, except
for any executory contract or unexpired lease (a) which has been assumed or
rejected pursuant to an order of the Bankruptcy Court entered prior to the
Confirmation Date or pursuant to the Confirmation Order, or (b) as to which
a motion for approval of the assumption or such executory contract or
unexpired lease has been filed and served prior to the Confirmation Date.
Entry of the Confirmation Order shall constitute the approval, pursuant to
section 365(a) of the Bankruptcy Code, of the rejection of the executory
contracts and unexpired leases pursuant to the Plan.
2. REJECTION DAMAGES BAR DATE
If the rejection of an executory contract or unexpired lease during
the Chapter 11 Case (including any rejection of an executory contract or
unexpired lease pursuant to Section 6.1 of the Plan) results in a Claim,
then such Claim shall be forever barred and shall not be enforceable
against any Debtor, the Liquidating Trust, the Liquidating Trustee or the
properties of any of them unless a proof of Claim is filed with the clerk
of the Bankruptcy Court and served upon counsel to the Debtors, and counsel
to the Bankruptcy Committees, within 30 days after (i) the Confirmation
Date, or (ii) if such rejection is pursuant to Section 6.1 of the Plan,
notice of the Confirmation Order.
3. ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED LEASES
On the Effective Date, Reorganized Industries shall be deemed to have
assumed or assumed and assigned, as the case may be, each executory
contract and unexpired lease listed on Plan Exhibit C, provided, however,
that the Debtors reserve their right, at any time prior to the Confirmation
Date, to amend Plan Exhibit C to delete an unexpired lease or executory
contract therefrom or add any unexpired lease or executory contract
thereto. The Confirmation Order shall constitute an order of the Bankruptcy
Court under section 365 of the Bankruptcy Code approving the contract and
lease assumptions or assumptions and assignments, as the case may be,
described above, as of the Effective Date.
4. PAYMENTS RELATED TO ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED
LEASES
Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default shall be satisfied,
under section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor
party to the contract or lease or the assignee of such Debtor party
assuming such contract or lease, by Cure. If there is a dispute regarding
(a) the nature or amount of any Cure, (b) the ability of Reorganized
Industries or any assignee to provide "adequate assurance of future
performance" (within the meaning of section 365 of the Bankruptcy Code)
under the contract or lease to be assumed, or (c) any other matter
pertaining to assumption, Cure shall occur following the entry of a Final
Order resolving the dispute and approving the assumption or assumption and
assignment, as the case may be; provided, however, that if there is a
dispute as to the amount of Cure or any requirement for adequate assurance
of future performance that cannot be resolved consensually among the
parties, the Debtors or the Liquidating Trustee, as the case may be, shall
have the right to reject the contract or lease for a period of five days
after entry of a Final Order establishing a Cure amount in excess of that
provided by the Debtors or any requirement for adequate assurance of future
performance that is not acceptable to the Debtors or the Liquidating
Trustee, as the case may be. The Confirmation Order shall contain
provisions providing for notices of proposed assumptions and proposed cure
amounts to be sent to applicable third parties and for procedures for
objecting thereto (which shall provide not less than twenty days notice of
such procedures and any deadlines pursuant thereto) and resolution of
disputes by the Bankruptcy Court.
I. DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS
1. PROSECUTION OF OBJECTIONS TO CLAIMS
a) Objections to Claims
All objections to Claims (other than Professional Fee Claims) and
Interests must be filed and served on the holders of such Claims and
Interests by the Objection Deadline.
b) Authority to Prosecute Objections
From and after the Effective Date, the Liquidating Trustee shall have
the exclusive right to make and file objections to the allowance,
classification and/or amount of any Claim or Interest with the Bankruptcy
Court, and shall serve such objections upon holders of each of the Claims
and Interests to which objections are made by the Objection Deadline. The
Liquidating Trustee is authorized and empowered, but not required, to
resolve consensually any disputes regarding the allowance, classification
and/or amount of any Claim or Interest. All objections by the Liquidating
Trustee shall be litigated to a Final Order except to the extent the
Liquidating Trustee, in his discretion, elects to withdraw any such
objection, or compromise, settle or otherwise resolve any such objection,
in which event the Liquidating Trustee may settle, compromise or otherwise
resolve any Disputed Claim or Interest without approval of the Bankruptcy
Court. The Liquidating Trustee and the Post-Confirmation Committee shall
establish appropriate protocol for the prosecution, settlement, compromise,
withdrawal or litigation to judgment of all objections to Claims and
Interests.
2. TREATMENT OF DISPUTED CLAIMS
Subject to the provisions of Section 7.1 of the Plan and
notwithstanding any other provisions of the Plan or the Liquidating Trust
Agreement to the contrary, no payments or distributions will be made on
account of a Disputed Claim or Disputed Interest, or, if less than the
entire Claim or Interest is a Disputed Claim or Disputed Interest, the
portion of a Claim or Interest that is Disputed, until such Claim or
Interest becomes an Allowed Claim or Allowed Interest.
3. ESTIMATION
The Debtors or the Liquidating Trustee, as the case may be, may, at
any time, request that the Bankruptcy Court estimate any Disputed Claim
pursuant to section 502(c) of the Bankruptcy Code regardless of whether the
Debtors or the Liquidating Trustee, as the case may be, have previously
objected to such Claim, and the Bankruptcy Court will retain jurisdiction
to estimate any Claim at any time, including during litigation concerning
any objection to such Claim. In the event that the Bankruptcy Court
estimates any Disputed Claim, that estimated amount may constitute either
the Allowed amount of such Claim or a maximum limitation on such Claim, as
determined by the Bankruptcy Court. If the estimated amount constitutes a
maximum limitation on such Claim, the Debtors or the Liquidating Trustee,
as the case may be, may elect to pursue any supplemental proceedings to
object to any ultimate payment of such Claim. All of the aforementioned
Claims objection, estimation and resolution procedures are cumulative and
not necessarily exclusive of one another. On and after the Effective Date,
Claims which have been estimated subsequently may be compromised, settled,
withdrawn or otherwise resolved without further order of the Bankruptcy
Court as provided in Section 8.1(b) of the Plan.
J. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN
1. CONDITIONS TO EFFECTIVE DATE
The following are conditions precedent to the occurrence of the
Effective Date, each of which must be satisfied or waived in accordance
with Article IX of the Plan:
a) The Confirmation Order shall have been entered and become
a Final Order in form and substance reasonably satisfactory to the
Debtors and the Bankruptcy Committees and shall provide that the
Debtors and the Liquidating Trustee are authorized and directed to
take all actions necessary or appropriate to enter into, implement and
consummate the contracts, instruments, releases, leases, indentures
and other agreements or documents created in connection with the Plan.
b) All Plan Exhibits shall be in form and substance
reasonably acceptable to the Debtors and the Bankruptcy Committees and
shall have been executed and delivered.
c) All actions, documents and agreements necessary to
implement the Plan shall have been effected or executed.
d) The Debtors shall have paid the then outstanding balances
of the Secured Lender Claims and the DIP Loan Claims in full.
e) The closing of the sales of the Beef Interests and the
Pork Business.
f) The Debtors shall have determined, in consultation with
the Committees, that the occurrence of the Effective Date is in the
best interest of creditors and parties in interest.
2. WAIVER OF CONDITIONS
The requirement that the Confirmation Order must be a Final Order may
be waived by the Debtors, with the consent of the Bankruptcy Committees,
which consent shall not be unreasonably withheld.
3. NOTICE OF EFFECTIVE DATE
The Liquidating Trust shall file and serve an appropriate notice of
the Effective Date within seven Business Days of the Effective Date.
K. PAYMENT OF CERTAIN FEES AND EXPENSES
1. PROFESSIONAL FEE CLAIMS
All final requests for compensation or reimbursement for Professionals
pursuant to sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy
Code for services rendered prior to the Effective Date and Substantial
Contribution Claims under section 503(b)(4) of the Bankruptcy Code must be
filed with the Bankruptcy Court and served on the Liquidating Trustee and
its counsel no later than 45 days after the Effective Date, unless
otherwise ordered by the Bankruptcy Court. Objections to applications of
such Professionals or other Entities for compensation or reimbursement of
expenses must be filed and served on the Liquidating Trustee and its
counsel and the requesting Professional or other Entity no later than 30
days (or such longer period as may be allowed by order of the Bankruptcy
Court) after the date on which the applicable application for compensation
or reimbursement was served.
2. ADMINISTRATIVE CLAIMS
All requests for payment of an Administrative Claim (other than as set
forth in Section 11.1 of the Plan) must be filed with the Bankruptcy Court
and served on counsel for the Liquidating Trust and, if prior to the
Effective Date, counsel for the Debtors and each Bankruptcy Committee no
later than 30 days after the Effective Date. In the event that the Debtors
or the Liquidating Trustee, as the case may be, object to an Administrative
Claim, the Bankruptcy Court shall determine the Allowed amount of such
Administrative Claim.
3. FEES AND EXPENSES OF THE INDENTURE TRUSTEES
The Indenture Trustees must file all requests for compensation or
reimbursement of unpaid fees and expenses for services rendered prior to
the Effective Date with the Bankruptcy Court and must serve such requests
no later than 45 days after the Effective Date. Objections to such requests
must be filed and served no later than 30 days (or such longer period as
may be allowed by order of the Bankruptcy Court) after the date on which
the applicable request was served.
4. STATUTORY FEES
All fees payable pursuant to section 1930 of Title 28 of the United
States Code, as determined by the Bankruptcy Court at the Confirmation
shall be paid on or before the Effective Date.
L. MODIFICATIONS OF THE PLAN; SEVERABILITY OF PLAN PROVISIONS
The Debtors reserve the right (with the consent of the Bankruptcy
Committees in the case of material modifications or amendments), and in
accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or
modify the Plan and the Liquidating Trust Agreement at any time prior to
the entry of the Confirmation Order. After the entry of the Confirmation
Order, the Debtors (subject to consent of the Bankruptcy Committees and the
administrative agent under the Pre-Petition Credit Agreement, which consent
shall not be unreasonably withheld) may amend or modify the Plan and the
Liquidating Trust Agreement, in accordance with Section 1127 of the
Bankruptcy Code, or remedy any defect or omission or reconcile any
inconsistency in the Plan in such manner as may be necessary to carry out
the purpose and intent of the Plan. A holder of an Allowed Claim or Allowed
Interest that is deemed to have accepted the Plan shall be deemed to have
accepted the Plan as modified if the proposed modification does not
materially and adversely change the treatment of the Claim or Interest of
such holder. In addition, the Plan shall be deemed automatically amended
and modified to the extent determined necessary by the Bankruptcy Court to
comply with the DIP Credit Agreement.
In the event that any Impaired Class shall not accept the Plan, at the
written election of the Debtors filed with the Bankruptcy Court with
respect to any one or more of said nonaccepting Classes and any Classes
junior to such nonaccepting Classes, the Plan shall be modified and amended
automatically and without further notice to provide such treatment, as
determined necessary by the Bankruptcy Court, sufficient to assure that the
Plan does not discriminate unfairly, and is fair and equitable, with
respect to the Classes rejecting the Plan, and, in particular, the
treatment necessary to meet the requirements of Sections 1129(a) and (b) of
the Bankruptcy Code with respect to (i) the rejecting Classes and (ii) any
other Classes adversely affected by such modifications. In particular, the
treatment of any nonaccepting Classes or adversely affected Classes shall
be modified and amended from that set forth in Article III, even if less
favorable, to the minimum treatment necessary to meet the requirements of
sections 1129(a) and (b) of the Bankruptcy Code.
If, prior to Confirmation, any term or provision of the Plan is held
by the Bankruptcy Court to be invalid, void or unenforceable, the
Bankruptcy Court, at the request of any Debtor, shall have the power to
alter and interpret such term or provision to make it valid or enforceable
to the maximum extent practicable, consistent with the original purpose of
the term or provision held to be invalid, void or unenforceable, and such
term or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration or interpretation, the
remainder of the terms and provisions of the Plan shall remain in full
force and effect and shall in no way be affected, impaired or invalidated
by such holding, alteration or interpretation. The Confirmation Order shall
constitute a judicial determination and shall provide that each term and
provision of the Plan, as it may have been altered or interpreted in
accordance with the foregoing, is valid and enforceable pursuant to its
terms.
M. SUCCESSORS AND ASSIGNS
The rights, benefits and obligations of any Entity named or referred
to in the Plan shall be binding on, and shall inure to the benefit of, any
heir, executor, administrator, successor or assign of such Entity.
N. REVOCATION, WITHDRAWAL, OR NON-CONSUMMATION
The Debtors reserve the right to revoke or withdraw the Plan at any
time prior to the Effective Date and to file subsequent plans of
reorganization; provided, however, that any revocation or withdrawal of the
Plan after the Confirmation Date shall be with the consent of the
Bankruptcy Committees and the administrative agent under the Pre-Petition
Credit Agreement, which consent shall not be unreasonably withheld. If the
Debtors revoke or withdraw the Plan, or if Confirmation or consummation
does not occur, then (a) the Plan shall be null and void in all respects,
(b) any settlement or compromise embodied in the Plan (including the fixing
or limiting to an amount certain any Claim or Class of Claims), assumption
or rejection of executory contracts or leases effected by the Plan, and any
document or agreement executed pursuant to the Plan shall be deemed null
and void, and (c) nothing contained in the Plan, and no acts taken in
preparation for consummation of the Plan, shall (x) constitute or be deemed
to constitute a waiver or release of any Claims by or against, or any
Interests in, any Debtor or any other Entity, (y) prejudice in any manner
the rights of any Debtor or any Entity in any further proceedings involving
a Debtor, or (z) constitute an admission of any sort by any Debtor or any
other Entity.
O. INDEMNIFICATION AND RELATED MATTERS
Indemnification Obligations owed to any present or former officers,
directors, employees, professionals, advisors or representatives of the
Debtors arising out of acts that occurred prior to the Petition Date,
including, without limitation, accountants, auditors, financial
consultants, underwriters, or attorneys, shall be deemed to be, and shall
be treated as though they are, executory contracts that are assumed
pursuant to section 365 of the Bankruptcy Code under the Plan. The
Liquidating Trust shall provide standard and customary indemnification for
all officers and directors of the Debtors and the Liquidating Trust (as of
the Petition Date and thereafter) for all actions or events occurring after
the Petition Date.
P. DISSOLUTION OF THE BANKRUPTCY COMMITTEES
On the Effective Date, the Bankruptcy Committees will dissolve and
their respective members (only in their capacity as members of the
Bankruptcy Committees) will be released and discharged from all further
authority, duties, responsibilities and obligations arising from or related
to the Chapter 11 Case. The members of the Bankruptcy Committees and the
Professionals retained by the Bankruptcy Committees will not be entitled to
compensation or reimbursement of expenses for any services rendered after
the Effective Date.
Q. TERMS OF INJUNCTIONS OR STAYS
Unless expressly modified or lifted by the Bankruptcy Court, all
injunctions or stays provided for in the Chapter 11 Case, including in the
Confirmation Order, under sections 105 or 362 of the Bankruptcy Code or
otherwise, and extant on the Confirmation Date (excluding any injunctions
or stays contained in the Plan or the Confirmation Order), shall remain in
full force and effect until the Final Distribution Date.
V. CONFIRMATION OF THE PLAN
A. INTRODUCTION
The Bankruptcy Code requires a bankruptcy court to determine whether a
plan complies with the technical requirements of chapter 11 of the
Bankruptcy Code before such plan can be confirmed. It requires further that
a debtor's disclosure statement concerning such plan is adequate and
includes information concerning all payments made or promised by the debtor
in connection with the plan.
If the Plan is confirmed, the Debtors expect the Effective Date to
occur as promptly as practicable after the Confirmation Date.
To confirm the Plan, the Bankruptcy Court must find that the
requirements of the Bankruptcy Code have been met. Thus, even if the
requisite vote is achieved for each Voting Class, the Bankruptcy Court must
make independent findings respecting the Plan's conformity with the
requirements of the Bankruptcy Code before it may confirm the Plan. Some of
these statutory requirements are discussed below.
B. VOTING
Pursuant to the Bankruptcy Code, only holders of Allowed Claims or
Allowed Interests that are Impaired under the terms and provisions of the
Plan and that receive distributions thereunder are entitled to vote for
acceptance or rejection of the Plan. A holder of a Claim or Interest whose
legal, equitable, or contractual rights are altered, modified or changed by
the proposed treatment under the Plan or whose treatment under the Plan is
not provided for in section 1124 of the Bankruptcy Code is considered
Impaired. Pursuant to section 1126(f) of the Bankruptcy Code, holders of
Claims and Interests that are Unimpaired are conclusively presumed to have
accepted the Plan and are not entitled to vote.
Votes on the Plan will be counted only in respect of Allowed Claims
and Allowed Interests that (i) belong to a Voting Class or (ii) are
otherwise permitted by the Bankruptcy Court to vote.
C. ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by an Impaired class
of claims as acceptance by holders of at least two-thirds in dollar amount,
and more than one-half in number, of claims of that class that actually
vote. Acceptance of a plan need only be solicited from holders of claims
whose claims are Impaired and not deemed to have rejected the Plan. Except
in the context of a "cram down" pursuant to section 1129(b) of the
Bankruptcy Code, as a condition to confirmation of a plan the Bankruptcy
Code requires that, with certain exceptions, each class of Impaired claims
accepts the plan.
In the event the requisite vote is not obtained, the Debtors have the
right, assuming that at least one Class of Impaired Claims has accepted the
Plan, to request confirmation of the Plan pursuant to section 1129(b) of
the Bankruptcy Code. Section 1129(b) permits confirmation of a plan
notwithstanding rejection by one or more classes of impaired claims or
impaired interests if the bankruptcy court finds that the plan does not
discriminate unfairly and is "fair and equitable" with respect to the
rejecting class or classes. This procedure is commonly referred to in
bankruptcy parlance as "cram down." For a more detailed description of the
requirements for acceptance of a plan and of the criteria for confirmation
of a plan notwithstanding rejection by certain Impaired classes, see
Section V.D.4, Cram Down. The Plan is predicated on all Voting Classes
voting to accept the Plan; however, if any Voting Classes vote to reject
the Plan, the Debtors may request a "cram down" of such Classes at the
Confirmation Hearing. In any event, the Debtors will seek a "cram down" of
the Plan on Classes deemed to reject the Plan by virtue of receiving no
distributions thereunder.
D. CONFIRMATION OF THE PLAN
At the Confirmation Hearing, the Bankruptcy Court will determine
whether the requirements of section 1129(a) of the Bankruptcy Code have
been satisfied with respect to the Plan. Section 1129(a) of the Bankruptcy
Code requires that, among other things, for a plan to be confirmed:
o The plan satisfies the applicable provisions of the Bankruptcy Code.
o The proponent of the plan has complied with the applicable
provisions of the Bankruptcy Code.
o The plan has been proposed in good faith and not by any means
forbidden by law.
o Any payment made or promised by the proponent under the plan for
services or for costs and expenses in, or in connection with, the chapter
11 case, or in connection with the plan and incident to the case, has been
disclosed to the Bankruptcy Court, and any such payment made before the
confirmation of the plan is reasonable, or if such payment is to be fixed
after confirmation of the plan, such payment is subject to the approval of
the Bankruptcy Court as reasonable.
o The proponent has disclosed the identity and affiliations of any
individual proposed to serve, after confirmation of the plan, as a
director, officer or trustee of the debtor, an affiliate of the debtor
participating in the plan with the debtor, or a successor to the debtor
under the plan. The appointment to, or continuance in, such office of such
individual must be consistent with the interests of creditors and equity
security holders and with public policy and the proponent must have
disclosed the identity of any insider that the reorganized debtors will
employ or retain, and the nature of any compensation for such insider.
o With respect to each class of impaired claims or interests, either
each holder of a claim or interest of such class has accepted the plan, or
will receive or retain under the plan on account of such claim or interest,
property of a value, as of the effective date of the plan, that is not less
than the amount that such holder would receive or retain if the debtor were
liquidated on such date under chapter 7 of the Bankruptcy Code.
o Each class of claims or interests has either accepted the plan or is
not impaired under the plan.
o Except to the extent that the holder of a particular claim has
agreed to a different treatment of such claim, the plan provides that
allowed administrative expenses and priority claims (other than tax claims)
will be paid in full on the effective date and that priority tax claims
will receive on account of such claims deferred cash payments, over a
period not exceeding six years after the date of assessment of such claim,
of a value, as of the effective date, equal to the allowed amount of such
claim.
o If a class of claims is impaired, at least one impaired class of
claims has accepted the plan, determined without including any acceptance
of the plan by any insider holding a claim in such class.
o Confirmation of the plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of the
debtor or any successor to the debtor under the plan, unless such
liquidation or reorganization is proposed in the plan.
Subject to receiving the requisite votes in accordance with section
1129(a)(8) of the Bankruptcy Code and the "cram down" of Impaired Classes
not receiving any distribution under the Plan, the Debtors believe that (i)
the Plan satisfies all of the statutory requirements of chapter 11 of the
Bankruptcy Code, (ii) the Debtors have complied or will have complied with
all of the requirements of chapter 11, and (iii) the Plan has been proposed
in good faith.
Set forth below is a more detailed summary of the relevant statutory
confirmation requirements.
1. BEST INTERESTS OF HOLDERS OF CLAIMS AND INTERESTS
The "best interests" test requires that a bankruptcy court find either
that all members of each Impaired class have accepted the plan or that each
holder of an allowed claim or interest of each Impaired class of claims or
interests will receive or retain under the plan on account of such claim or
interest property of a value, as of the effective date of the plan, that is
not less than the amount that such holder would so receive or retain if the
debtor were liquidated under chapter 7 of the Bankruptcy Code on such date.
Annexed as Appendix D hereto is a liquidation analysis which demonstrates
that the Plan satisfies the "best interests" test.
The Debtors believe that, under the Plan, holders of Impaired Claims
and Impaired Interests against the Debtors will receive property with a
value equal to or in excess of the value such holders would receive in the
event each of the Debtors was liquidated under Chapter 7 of the Bankruptcy
Code.
To estimate the likely return to holders of Claims and Interests in
the event of Chapter 7 liquidations of the Debtors, the Debtors have
estimated the amount of liquidation proceeds with respect to each Debtor
that would be available for distribution and the allocation of such
proceeds among the Classes of Claims and Interests of each Debtor based
upon their relative priority. In conducting this analysis, the Debtors were
assisted by Crossroads LLC, one of their advisors in this matter. As
further described below, to estimate the liquidation proceeds, the Debtors
assumed that the assets of each of the Debtors were sold in a straight
liquidation. Liquidation proceeds available for distribution to holders of
Claims and Interests of each Debtor would consist of the net proceeds from
the disposition of such Debtor's assets, augmented by other cash held by
such Debtor.
The relative priority in the distribution of liquidation proceeds with
respect to any Claim or Interest depends upon (i) its status as secured,
priority unsecured, non-priority unsecured or equity, and (ii) its relative
subordination.
In general, the liquidation proceeds for each Debtor would be
allocated in the following priority: (i) first, to the Claims of secured
creditors of each Debtor to the extent of the value of their collateral;
(ii) second, to the costs, fees and expenses of the liquidation, as well as
other administrative expenses of each Debtors' Chapter 7 case, including
certain tax liabilities; (iii) third, to the unpaid Administrative Claims
of each Debtor's Chapter 11 case; (iv) fourth, to Priority Tax Claims and
other Claims entitled to priority in payment under the Bankruptcy Code; (v)
fifth, to the General Unsecured Claims of each Debtor (subject to any
relative subordination of Claims); and (vi) sixth, to equity holders of
each Debtor. Each Debtor's liquidation costs in Chapter 7 would include the
compensation of a bankruptcy trustee, as well as compensation of counsel
and of other professionals retained by such trustee, asset disposition
expenses, applicable taxes, litigation costs, claims arising from the
operation of the Debtor during the pendency of the Chapter 7 case and all
unpaid Administrative Claims incurred by the Debtor during the Chapter 11
case that are Allowed Claims in the Chapter 7 case. The liquidation itself
may trigger certain Claims entitled to priority in payment under the
Bankruptcy Code, such as Claims for severance pay to certain employees.
As set forth below, the Debtors' have estimated the range of gross
liquidation proceeds for each of the Debtors. Based upon the priorities
outlined above, the Debtors believe that net proceeds, if any, available
for distribution to Impaired Claims in a Chapter 7 liquidation would be
significantly less than the estimated distributions to Impaired Claims
under the Plan.
This Chapter 7 liquidation analysis is intended solely for the purpose
of discussing the effects of hypothetical Chapter 7 liquidations of the
Debtors. This Chapter 7 liquidation analysis is based upon numerous
estimates and assumptions that, although developed and considered
reasonable by the Debtors' management and its financial advisors, are
inherently subject to significant economic and competitive uncertainties
and contingencies beyond the control of the Debtors. This liquidation
analysis is also based upon assumptions with regard to liquidation
decisions that are subject to change. Accordingly, there can be no
assurance that the values reflected in the liquidation analysis would be
realized if the Debtors were, in fact, to undergo such liquidations.
a) Significant Uncertainties
In addition to the General Assumptions and the Specific Assumptions
that are set forth below, there are significant areas of uncertainty that
exist with respect to this liquidation analysis.
The liquidation analysis assumes that the liquidation of the Debtors'
estates would commence on November 30, 2003 and would be substantially
complete within a six-month period. The wind-down costs during this
six-month liquidation period have been estimated by the Debtors'
management, and any deviation from this time frame could have a material
impact on the wind-down costs, Administrative Claims, proceeds from asset
sales and the ultimate recovery to the holders of Claims and Interests.
If the implementation of the liquidation were delayed, there is a
possibility that the Debtors would sustain significant operating losses
during the delay period, thus adversely impacting the net liquidation
proceeds available to each Debtor's estate.
In any liquidation there is a general risk of unanticipated events,
which could have a significant impact on the projected cash receipts and
disbursements. These events include changes in the general economic
condition, changes in the market value of the respective Debtors' assets
and problems with current and former employees.
In addition to the Specific Assumptions described below and in the
footnotes to the table below, the following General Assumptions were used
in formulating the liquidation analysis.
b) General Assumptions
A. Operations During Liquidation Process and Wind-Down Expense -
With the exception of SFA, which has already substantially wound
down operations, all Debtor entities will maintain operations
during the liquidation process to the extent possible. It is
assumed that all operations will be break-even on a cash flow
basis. As such, the incremental wind-down expense will consist
primarily of stay bonuses and other incentives intended to
encourage maximization of liquidation proceeds.
B. Estimation of Outstanding Claims - Given the accelerated
liquidation conditions of a Chapter 7 proceeding, the Debtors
have assumed there will be significant additional contract
rejection claims. As such, the estimate of total claims for the
purposes of this analysis is based on the upper end of the range
as contemplated under the Plan.
C. Intercompany Balances - The Debtors have numerous and significant
intercompany balances amongst each other. Pursuant to section 553
of the Bankruptcy Code, the Debtor has offset all post-petition
and pre-petition intercompany balances such that a single
line-item remains as either an Administrative Claim in the case
of post-petition balances or a General Unsecured Claim in the
case of pre-petition balances.
D. Treatment of DIP Loan Claims and Secured Lender Claims - For the
purposes of this liquidation analysis, any outstanding DIP Loan
Claims and Secured Lender Claims are satisfied as of the
Effective Date.
E. Nature and Timing of the Liquidation Process - Under section 704
of the Bankruptcy Code, a Chapter 7 trustee must, among other
things, collect and convert the property of a debtor's estate to
cash and close the estate as expeditiously as is compatible with
the best interest of the parties in interest. Solely for purposes
of preparing this liquidation analysis, it is assumed that the
Chapter 11 case of each Debtor would be converted to a Chapter 7
liquidation on November 30, 2003. It is assumed that the Debtors'
assets will be sold during the following six-month period.
Management believes that it is unlikely that the actual sale
period would be shorter than those assumed, and there can be no
assurance that the actual sale period would not be longer than
assumed. It is likely that if the sale period was longer, net
sale proceeds would be diminished.
F. Estimated Liquidation Proceeds - All assets are assumed to be
sold in a straight liquidation to the highest bidder. Crossroads
LLC relied upon estimates of the potential proceeds from the
disposition of assets as provided by either the Debtors or the
financial advisors directly involved in the asset sales efforts
to date. The following list identifies factors considered by the
Debtors and its various financial advisors in estimating the
proceeds that might be received from the liquidation sales.
o Indications of interest from potential third-party acquirers
o The historical cost of the assets
o Asset location and local market demand
o Previously issued third-party appraisals
o Recently transacted sales of similar assets
o Management's experience and expertise in asset resale values
o Analysis of liabilities and obligations relating to particular
assets
o Current industry trends
o "Distress sale value", which differs from the price at which
assets would be sold to a willing buyer by a willing seller,
assuming that neither is under any compulsion to buy or
sell, and assuming both are informed of the relevant facts
G. Additional Liabilities and Reserves - The Debtors believe that in
addition to the expenses that would be incurred by the Debtors in
the Chapter 11 Case, there would be certain actual and contingent
liabilities and expenses for which provision would be required in
Chapter 7 liquidations before distributions could be made to
creditors, including: (i) certain liabilities that are not
dischargeable pursuant to the Bankruptcy Code; (ii)
Administrative Claims, including damages from rejected
post-petition contracts, the fees of a Chapter 7 trustee and of
counsel and other professionals (including financial advisors and
accountants), retention bonuses paid to employees to effectuate
the wind-down process and other liabilities (including
retirement, vacation pay and other employee-related
administrative costs and liabilities) that would be funded from
continuing operations if the Debtors were reorganized as a
going-concern; and (iii) certain other administrative costs.
Management believes that there is significant uncertainty as to
the reliability of the Debtors' estimates of the amounts related
to the foregoing that have been assumed in the liquidation
analysis.
H. Distributions: Absolute Priority - Under a Chapter 7 liquidation,
all secured claims are required to be satisfied from the proceeds
of the collateral securing such claims before any such proceeds
could be distributed to any other creditors. The following
analysis assumed the application of the rule of absolute priority
of distributions with respect to the remaining proceeds. Under
the rule of absolute priority, no junior creditor receives any
distribution until all senior creditors are paid in full. To the
extent that proceeds remain after satisfaction of all secured
claims, the proceeds would first be distributed to the holders of
Administrative Claims, then to Claims entitled to priority in
payment under the Bankruptcy Code, then to General Unsecured
Claims and finally (if at all) to equity holders of the Debtors.
Based upon the liquidation assumptions of the Debtors'
management, the proceeds generated from Chapter 7 liquidations of
the Debtors' assets would result in a substantial diminution in
the recovery percentage to holders of General Unsecured Claims.
I. Conclusion - The Debtors believe that the holders of Claims and
Interests will not receive recoveries under the Plan less than
that realized in Chapter 7 liquidation.
The following Specific Assumptions (as well as those set forth in the
footnotes to the table below) were used in formulating the liquidation
analysis.
c) Specific Assumptions
A. Gross Liquidation Proceeds for Industries - The gross liquidation
proceeds for Industries include Industries' existing cash
balances, proceeds from liquidation of retained working capital,
intercompany assets, estimated proceeds from the sale of the Beef
Interests, and excess distributions from the liquidation of the
Debtor Subsidiaries (which primarily includes excess proceeds
from the sale of the Pork Business), and the straight liquidation
sale of Industries' remaining assets. The Debtors have ascribed a
"low" value and a "high" value for these gross liquidation
proceeds as follows (in $millions):
Low Value High Value
--------- ----------
Cash and cash equivalent $ 25.1 $ 25.1
Accounts receivable 22.5 30.0
Inventory 51.2 68.3
Fixed assets 21.6 23.4
Debtor subsidiary intercompany assets 170.5 170.5
Non-Debtor intercompany assets 0.9 0.9
Beef sale 217.5 229.4
Excess distributions from Debtor subsidiaries 175.6 176.6
Other Industries assets 62.2 87.9
------ -------
Gross liquidation proceeds $747.2 $ 812.3
====== =======
B. Gross Liquidation Proceeds for Foods - The gross liquidation
proceeds for Foods include assumed gross proceeds from the sale
of Foods as a going concern as contemplated in the Pork Purchase
Agreement signed with Smithfield and intercompany balances due
Foods from Industries. The Debtors have ascribed a "low" value
and a "high" value for these gross liquidation proceeds as
follows (in $millions):
Low Value High Value
--------- ----------
Cash and cash equivalent $ - $ -
Accounts receivable - -
Inventory - -
Fixed assets 357.3 357.3
Debtor subsidiary intercompany assets 87.4 88.3
Other Foods assets - -
------ ------
Gross liquidation proceeds $444.6 $445.6
====== ======
C. Gross Liquidation Proceeds for Transportation - The gross
liquidation proceeds for Transportation include assumed gross
proceeds from the liquidation of Transportation's working capital
and from intercompany balances due primarily from Industries. The
Debtors have ascribed a "low" value and a "high" value for these
gross liquidation proceeds as follows (in $millions):
Low Value High Value
--------- ----------
Cash and cash equivalent $ - $ -
Accounts receivable 0.1 0.2
Debtor subsidiary intercompany assets 8.4 8.4
Other Transportation assets - -
--------- ----------
Gross liquidation proceeds $8.6 $8.7
========= ==========
D. Gross Liquidation Proceeds for SFA - The gross liquidation
proceeds for SFA include assumed gross proceeds from the straight
liquidation and/or sale of SFA's working capital and fixed
assets, existing cash balances, and intercompany balances due
from Industries. The Debtors have ascribed a "low" value and a
"high" value for these gross liquidation proceeds as follows (in
$millions):
Low Value High Value
--------- ----------
Cash and cash equivalent $ 0.2 $ 0.2
Accounts receivable - 0.0
Fixed assets - 0.0
Debtor subsidiary intercompany assets 10.9 10.9
Other SFA assets - -
--------- ----------
Gross liquidation proceeds $11.1 $11.2
========= ==========
E. Gross Liquidation Proceeds for Pipeline - The gross liquidation
proceeds for Pipeline include assumed gross proceeds from
intercompany balances due from Industries. The Debtors have
ascribed a "low" value and a "high" value for these gross
liquidation proceeds as follows (in $millions):
Low Value High Value
--------- ----------
Cash and cash equivalent $ - $ -
Accounts receivable - -
Fixed assets - -
Debtor subsidiary intercompany assets 7.4 7.4
Other Pipeline assets - -
--------- ----------
Gross liquidation proceeds $7.4 $7.4
========= ==========
2. FINANCIAL FEASIBILITY
Section 1129(a)(11) of the Bankruptcy Code requires the Confirmation
not be likely to be followed by the liquidation, or the need for further
financial reorganization, of the Debtors or any successor to the Debtors
(unless such liquidation or reorganization is proposed in the Plan). The
Plan is a liquidating plan of reorganization. Thus, the Plan satisfies
Section 1129(a)(11) of the Bankruptcy Code.
3. ACCEPTANCE BY IMPAIRED CLASSES
A class is impaired under a plan unless, with respect to each claim or
interest of such class, the plan (i) leaves unaltered the legal, equitable
and contractual rights to which the claim or interest entitles the holder
of such claim or interest; or (ii) notwithstanding a demand for accelerated
payment (a) cures any default and reinstates the maturity of the
obligation; (b) compensates the holder of such claim for damages incurred
on account of reasonable reliance on contractual provisions; and (c) does
not otherwise alter legal, equitable or contractual rights. A class that is
not impaired under a plan of reorganization is deemed to have accepted the
plan and, therefore, solicitation of acceptances with respect to such class
is not required.
With respect to the Plan, Classes 1, 2, 3, 6, 8 and 20 are Unimpaired
by the Plan and the Claim and Interest holders in such Classes deemed by
law to have accepted the Plan. Classes 13, 15, 17 and 18 are conclusively
presumed to accept the Plan because the Claim and Interest holders in such
Classes are the proponents of the Plan. The holders of Claims in the Voting
Classes are Impaired and entitled to vote on the Plan.
4. CRAM DOWN
THE DEBTORS RESERVE THE RIGHT TO CRAM DOWN THE PLAN ON NON-ACCEPTING
CLASSES OF CLAIMS AND INTERESTS.
The Bankruptcy Code contains provisions for confirmation of a plan
even if the plan is not accepted by all impaired classes, as long as at
least one impaired class of claims has accepted the Plan. The "cram down"
provisions of the Bankruptcy Code are set forth in section 1129(b) of the
Bankruptcy Code. Under the "cram down" provisions, upon the request of a
plan proponent a bankruptcy court will confirm a plan despite the lack of
acceptance by an impaired class or classes if the bankruptcy court finds
that (i) the plan does not discriminate unfairly with respect to each
non-accepting impaired class, (ii) the plan is fair and equitable with
respect to each non-accepting impaired class, and (iii) at least one
impaired class has accepted the plan. These standards ensure that holders
of junior interests, such as common stockholders, cannot retain any
interest in the debtor under a plan that has been rejected by a senior
class of impaired claims or interests unless such impaired claims or
interests are paid in full.
As used by the Bankruptcy Code, the phrases "discriminate unfairly"
and "fair and equitable" have narrow and specific meanings unique to
bankruptcy law. A plan does not discriminate unfairly if claims or
interests in different classes but with similar priorities and
characteristics receive or retain property of similar value under a plan.
The Bankruptcy Code sets forth different standards for establishing
that a plan is "fair and equitable" with respect to a non-accepting class,
depending on whether the class is comprised of secured or unsecured claims
or interests. In general, section 1129(b) of the Bankruptcy Code permits
confirmation notwithstanding non-acceptance by an impaired class if that
class and all junior classes are treated in accordance with the "absolute
priority" rule, which requires that the dissenting class be paid in full
before a junior class may receive anything under the plan. In addition,
case law surrounding section 1129(b) requires that no class senior to a
non-accepting Impaired class receives more than payment in full on its
claims.
With respect to a Voting Class that does not accept the Plan, the
Debtors must demonstrate to the Bankruptcy Court that either (i) each
holder of an unsecured Claim in the non-accepting Voting Class receives or
retains under such Plan property of a value equal to the allowed amount of
its Claim, or (ii) the holders of Claims or holders of Interests that are
junior to the Claims in such non-accepting Voting Class will not receive or
retain any property under the Plan. Additionally, the Debtors must
demonstrate that the holders of Claims that are senior to the Claims of the
non-accepting Voting Class receive no more than payment in full on their
Claims under the Plan.
If all the applicable requirements for confirmation of the Plan are
met as set forth in sections 1129(a)(1) through (13) of the Bankruptcy
Code, except that one or more of the Voting Classes have failed to accept
the Plan pursuant to section 1129(a)(8) of the Bankruptcy Code, the Debtors
reserve the right to request that the Bankruptcy Court confirm the Plan in
accordance with section 1129(b) of the Bankruptcy Code. The Debtors believe
that the Plan satisfies the "cram down" requirements of the Bankruptcy
Code. The Debtors may seek confirmation of the Plan over the objection of
non-accepting Voting Classes, as well as over the objection of individual
holders of Claims who are members of an accepting Voting Class. In
addition, the Debtors intend to seek "cram down" of the Plan on the Classes
deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy
Code by virtue of receiving no distributions thereunder. Nevertheless,
there can be no assurance that the Bankruptcy Court will determine that the
Plan meets the requirements of section 1129(b) of the Bankruptcy Code.
5. CLASSIFICATION OF CLAIMS AND INTERESTS
The Debtors believe that the Plan meets the classification
requirements of the Bankruptcy Code which require that a plan place each
claim or interest into a class with other claims or interests which are
"substantially similar."
E. EFFECT OF CONFIRMATION OF THE PLAN
1. NO DISCHARGE
The Confirmation Order shall not discharge any Debtor from any debt or
liability that arose before Confirmation, as provided in section
1141(d)(3)(A) of the Bankruptcy Code.
2. RELEASE OF ASSETS
Until the Effective Date, the Bankruptcy Court shall retain
jurisdiction over the Debtors, their assets and properties. Thereafter,
jurisdiction of the Bankruptcy Court shall be limited to the subject
matters set forth in Article X of the Plan, and Liquidating Trustee shall
perform its duties and obligations pursuant to the Liquidating Trust
Agreement and the Plan.
3. EXCULPATION AND LIMITATION OF LIABILITY
Subject to limitations required by applicable ethical rules and
standards of conduct, and except as limited in Section 11.9(b) below, none
of the Debtors, the Liquidating Trust, the Liquidating Trustee, the
Bankruptcy Committees, the Indenture Trustees, or the Lenders, nor any of
their respective present or former members, officers, directors, employees,
advisors, or attorneys shall have or incur any liability to any holder of a
Claim or an Interest, or any other party in interest, or any of their
respective agents, employees, representatives, financial advisors,
attorneys, or affiliates, or any of their successors or assigns, for any
act or omission from and after the Petition Date in connection with,
relating to, or arising out of, the Chapter 11 Case, the commencement of
the Chapter 11 Case, the administration of the Chapter 11 Case, the pursuit
of and the approval of the sales of the Debtors' assets (and the related
asset purchase agreement), the formulation, negotiation or implementation
of the Plan, the solicitation of acceptances of the Plan, the pursuit of
confirmation of the Plan, the confirmation of the Plan, the consummation of
the Plan, or the administration of the Plan or the property to be
distributed under the Plan, except for their gross negligence or willful
misconduct, and in all respects shall be entitled to reasonably rely upon
the advice of counsel with respect to their duties and responsibilities
under the Plan. In addition, the Indenture Trustees under the Demand
Certificates and the Subordinated Certificates shall not have or incur any
liability to any holder (registered or unregistered) of any Demand
Certificate or Subordinated Certificate or any Claim based on any Demand
Certificate or Subordinated Certificate as a result of any inaccuracy or
mistake in the books and records of Industries (in their capacities as
paying agents and registrars under the Trust Indentures for the Demand
Certificates and the Subordinated Certificates).
The exculpatory provisions contained in Section 11.9(a) of the Plan
(i) shall not limit the claims and rights, if any, of the United States,
and (ii) shall apply to any person or entity who was not the beneficiary of
a post-petition indemnification obligation of the Debtors only to the
extent provided in Section 11.9(c).
Any Claims that would otherwise be subject to the exculpatory
provisions contained in Section 11.9(a) but for the provisions of Section
11.9(b)(ii) may only be asserted in the Bankruptcy Court and only if filed
on or before sixty days after the Effective Date. In the event that any
such Claims are not filed timely in the Bankruptcy Court, the exemption
contained in Section 11.9(b)(ii) shall be terminated with respect to such
claims, and such claims shall be deemed subject to the exculpatory
provisions contained in Section 11.9(a).
Any non-exculpated Claims against the parties set forth in Section
11.9(a) arising from or related to the matters set forth in Section 11.9(a)
may only be asserted and filed in the Bankruptcy Court.
4. BINDING EFFECT
Except as otherwise provided in section 1141(d)(3) of the Bankruptcy
Code, on and after the Confirmation Date, the provisions of the Plan shall
be binding upon and inure to the benefit of the Debtors, all present and
former holders of Claims against and Interests in the Debtors, their
respective successors and assigns, including, but not limited to, the
Liquidating Trust, the Liquidating Trustee and all other
parties-in-interest in this Chapter 11 Case.
F. RETENTION OF JURISDICTION
Under sections 105(a) and 1142 of the Bankruptcy Code, and
notwithstanding entry of the Confirmation Order and occurrence of the
Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction
over all matters arising out of, and related to, the Chapter 11 Case and
the Plan to the fullest extent permitted by law.
VI. CERTAIN FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST OR INTERESTS IN THE DEBTORS SHOULD READ AND
CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER
INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS
DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR TO
VOTING TO ACCEPT OR TO REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT,
HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION
WITH THE PLAN AND ITS IMPLEMENTATION.
A. RISK THAT DISTRIBUTIONS MAY BE LESS THAN ESTIMATED BY DEBTORS
The distributions and recoveries set forth in this Disclosure
Statement are based on the Debtors' estimate of Allowed Claims as of July
23, 2003 and does not include Allowed Claims for rejected contracts and
leases that had not been formally asserted against the Debtors as of July
23, 2003. The Debtors project that the Claims asserted against them will be
resolved in and reduced to an amount that approximates their estimates and
may seek an order or orders from the Bankruptcy Court estimating the
maximum dollar amount of Allowed Claims and Disputed Claims or otherwise
determining and fixing the amount of the Disputed Claims Reserve. This
estimate will be used to calculate and fix distributions to holders of
Allowed Claims and the amount of the Disputed Claims Reserve. Such a
procedure may also be utilized, in the sole discretion of the Debtors, for
Administrative Claims, Other Priority Claims, Priority Tax Claims and/or
other Claims. There can be no assurance, however, that such estimates will
prove accurate.
In addition, there exists the potential that holders of certain Claims
(including, without limitation, Claims related to environmental matters)
that the Debtors contend constitute General Unsecured Claims will assert
that such Claims constitute Administrative Claims. To the extent that any
of such Claims are ultimately adjudicated to be Allowed Administrative
Claims, the distributions could significantly and materially differ from
the actual distributions made under the Plan. If and to the extent the
Debtors have underestimated the amount of any Allowed Claims or any
Disputed Claims Reserves for Administrative Claims, Other Priority Claims
or Priority Tax Claims, the Debtors could be required to redirect Available
Cash to such Disputed Claims Reserves, resulting in a potential dilution of
Available Cash. Therefore, the distributions discussed herein could
significantly and materially differ from the actual distributions made
under the Plan. Distributions will also be affected by the following: (i)
the amount of Available Cash the Debtors are able to realize from the
pursuit of Litigation Claims; (ii) the amount of Allowed Claims for
rejected contracts and leases that have not yet been formally asserted
against the Debtors; (iii) the amount of Allowed Administrative Claim that
have not yet been asserted against the Debtors; (iv) the amount of Allowed
Priority Tax Claims may be greater than estimated by the Debtors; and (v)
the costs of continuing to administer the Chapter 11 Cases and wind down
the Debtors' businesses.
The Debtors reserve the right to object to the amount or
classification of any Claim. Thus, the estimates set forth is this
Disclosure Statement cannot be relied upon by any holder of a Claim whose
Claim is subject to a successful objection. Any such holder may not receive
the estimated distributions set forth herein.
B. RISK OF NON-CONFIRMATION OF THE PLAN
If the Plan is not confirmed and consummated, there can be no
assurance that the Chapter 11 Case will continue rather than be converted
to a liquidation under chapter 7 of the Bankruptcy Code or that an
alternative plan would be on terms as favorable to the holders of Allowed
Claims and Allowed Interests as the terms of the Plan.
C. NON-CONSENSUAL CONFIRMATION OF THE PLAN
Pursuant to the "cram down" provisions of section 1129(b) of the
Bankruptcy Code, the Bankruptcy Court can confirm the Plan without the
acceptances of all Impaired Classes, so long as at least one Impaired Class
of Claims has accepted the Plan. For a description of the "cram down"
provisions of the Bankruptcy Code, see Section V.D.4, Cram Down.
D. CONDITIONS PRECEDENT TO THE OCCURRENCE OF THE EFFECTIVE DATE
Article IX of the Plan sets forth the conditions precedent to the
occurrence of the Effective Date, including the closing of the sales of the
Beef Interests and the Pork Business. There can be no assurance that these
conditions will be satisfied.
E. LIQUIDATION OF THE DEBTORS' ASSETS
Except to the extent that the Debtors' assets have already been
liquidated to Cash, the Liquidating Trustee's ability to make the
distributions described in the Plan depends on the liquidation of the
Debtors' assets. Although the Liquidating Trustee will endeavor to
liquidate these assets as expeditiously as possible and in such a matter as
to maximize the Cash realized from such liquidation, the Debtors cannot
warrant either the timing or the amount of distributions under the Plan.
F. LITIGATION RISKS
The Debtors have not completed their analysis of possible claims that
may ultimately be pursued by the Liquidating Trustee, including but not
limited to preference, fraudulent conveyance and other avoidance actions,
lender liability claims, fraud claims and breach of fiduciary duty claims.
The Liquidating Trustee will pursue all or certain of these or other claims
in accordance with the provisions of the Plan and the Confirmation Order.
The costs of pursuing such litigation will be paid out of Cash available to
the Estate and there can be no assurances that the Liquidating Trustee will
prevail in such litigation. In addition, objections to certain Claims may
require separate litigation. Accordingly, although recoveries on causes of
action may enhance distributions, the distributions currently projected by
the Debtors may be reduced by the costs of such litigation.
G. ALTERNATIVES TO THE PLAN
After careful review of the estimated recoveries in a chapter 7
liquidation scenario, the Debtors have concluded that the recovery to
holders of Claims and Interest will be maximized by the Plan. According to
the liquidation analysis prepared by the Debtors with the assistance of its
financial advisors, distributions to holders of Claims and Interests will
occur much sooner and have greater value to holders of Claims under the
Plan than under any other alternative. Should the Plan not be confirmed, it
is likely that the distributions to holders of Claims and Interests would
be delayed and would be materially reduced by the additional fees and other
costs associated with a chapter 7 liquidation. Accordingly, the Debtors
believe that the Plan offers the best prospect of recovery for the holders
of Claims and Interests against the Debtors and recommend that you vote to
accept the Plan.
VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the Plan to the Debtors and to the holders of the Demand
Certificates Claims, Subordinated Certificates Claims, General Unsecured
Claims against Industries, Industries Common Shares, Old Securities of
Foods, Old Securities of Transportation, Old Securities of SFA, Old
Securities of Pipeline, Intercompany Claims, and Subordinated Claims. This
summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations thereunder, and administrative and judicial
interpretations and practice, all as in effect on the date hereof and all
of which are subject to change, with possible retroactive effect. This
description is for informational purposes only, and due to the lack of
definitive judicial or administrative authority and interpretation in a
number of areas, substantial uncertainty may exist with respect to some of
the tax consequences described below. No opinion of counsel has been
obtained, and except with respect to the ability to use Member NOLs
(defined below) to offset tax benefit income generated from the
cancellation of Industries Common Shares that constitute Industries Member
Equity (defined below) and whether income is generated with respect to any
outstanding patronage equity in Industries absent formal cancellation,
Debtors have not obtained and do not intend to seek a ruling from the
Internal Revenue Service (the "Service") as to any of such tax
consequences. There can be no assurance that the Service will not challenge
one or more of the tax consequences of the Plan described below.
The following discussion is limited to holders of Demand Certificates
Claims, Subordinated Certificates Claims, General Unsecured Claims against
Industries, Industries Common Shares, Old Securities of Foods, Old
Securities of Transportation, Old Securities of SFA, Old Securities of
Pipeline, Intercompany Claims, and Subordinated Claims that hold their
Claims or Interests as capital assets or whose Claims or Interests
otherwise arose in the ordinary course of business, and does not address
all matters that may be relevant to particular classes of holders that are
subject to special rules under the Code, including, without limitation,
financial institutions, securities dealers, broker-dealers, tax-exempt
entities, insurance companies, foreign persons, or holders that hold their
Securities as part of a "straddle" or a "conversion transaction" (as
defined in the Code). Consequently, such holders may be subject to special
rules not discussed below. In addition, estate and gift tax issues are not
addressed herein.
THIS DISCUSSION DOES NOT ADDRESS ANY TAX LAWS OTHER THAN UNITED STATES
FEDERAL INCOME TAX LAWS. THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE PLAN ARE COMPLEX. ALL HOLDERS OF ALLOWED CLAIMS AND PLAN SECURITIES
SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE PLAN AND THE OWNERSHIP AND DISPOSITION OF PLAN
SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL ESTATE,
STATE, LOCAL, OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE TAX
LAWS.
A. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS
1. TRANSFER OF ASSETS TO THE LIQUIDATING TRUST
On the Effective Date, Debtors will transfer all right, title and
interest in all of the Debtors' property and assets (excluding the Retained
Assets), including without limitation, all rights and causes of action,
whether arising by contract, under the Bankruptcy Code, under the Plan or
under other applicable law, including, without limitation, all rights the
Debtors have under the Plan (the "Transferred Assets") and after the
Effective Date, promptly following receipt, Debtors will transfer all net
proceeds from the Retained Assets (the Transferred Assets and the Retained
Assets shall be collectively referred to herein as, the "Remaining Assets")
to the Liquidating Trust on behalf of holders of Allowed Claims and
Interests to the extent they are Beneficiaries. The Debtors thereafter will
not have any beneficial interest, contingent or otherwise, in the
Liquidating Trust. See "Tax Treatment of the Liquidating Trust and
Ownership of Beneficial Interests in the Liquidating Trust" below. Such
transfers will constitute a taxable disposition of the Remaining Assets,
resulting in the recognition of gain or loss by the Debtors equal to the
difference between the sum of the fair market value of the assets at the
time of such transfers and the amount of any liabilities assumed by the
Liquidating Trust and the Debtors' adjusted tax basis in such assets.
The Debtors believe they will recognize a net gain for tax purposes as
a result of the transfer to the Liquidating Trust and the already completed
and further anticipated asset sales, including the sales of the Pork
Business and the Beef Interests. However, a significant portion, if not
all, of such gain should be offset for United States federal income tax
purposes by available net operating losses and Debtors do not believe they
will incur a material net tax liability with respect to the transfer and
other asset sales. Any gain realized on the disposition of the Retained
Assets may result in a material tax liability with respect to the
disposition.
2. MERGER OF FOODS INTO INDUSTRIES
Under the Plan, Foods will be merged into Industries with Industries
surviving. If, as the Debtors expect, the merger of Foods into Industries
complies with the provisions of Section 368(a)(1)(A) of the Code, the
merger contemplated by the Plan will qualify as an "A reorganization" for
United States federal income tax purposes, in which case Industries will
not recognize either gain or loss for United States federal income tax
purposes upon the merger.
3. CANCELLATION OF INDUSTRIES COMMON SHARES
a) Tax Benefit Income
Under the Plan, a portion of the Industries Common Shares will be
cancelled and offset against appropriate losses and available Member NOLs
and Non Member NOLs (defined below). Any remaining Industries Common Shares
will be reinstated on the Effective Date and shall not be cancelled or
extinguished. Such Industries Common Shares however are expected to be
worthless on the Effective Date.
Cancellation of Industries Common Shares that constitute patronage
dividends issued to members, associate members and patrons of Industries in
the form of member common stock, associate member common stock or capital
credits (the "Industries Member Equity") may result in income to Industries
under the tax benefit rule. It is the position of the Service that
cooperatives recognize tax benefit income upon the cancellation or
redemption of patronage equity at a discount because (i) at the time the
patronage equity was issued the cooperative claimed a deduction for United
States federal income tax purposes and the patrons receiving the patronage
equity reported a like amount of income; and (ii) upon the cancellation or
redemption of the patronage equity, the cooperative is relieved of its
obligation to redeem the patronage equity in the future at its stated
value. Under the Service's approach, the amount of tax benefit income which
would be realized by Industries upon cancellation of Industries Common
Shares that constitute Industries Member Equity is equal to the difference
between the face amount of Industries Common Shares that constitute
Industries Member Equity outstanding and the sum of any cash and the fair
market value of any other property received in exchange for the Industries
Common Shares that constitute Industries Member Equity.
Contrary to the Service's position, the Eleventh Circuit Court of
Appeals has held that no tax benefit income is realized when patronage
equity is cancelled or otherwise redeemed for less than its face value.
Under the view of the Eleventh Circuit, when a cooperative pays a patronage
dividend through the issuance of a qualified written notice based on
consent, the dividend is deemed for tax purposes to have been paid in cash,
with the patron then using the cash to acquire the qualified written
notice. Gold Kist, Inc. v. Comm'r, 110 F.3d 769 (11th Cir. 1997).
The Service disagrees with the decision in Gold Kist and has stated
that it fully intends to litigate any taxpayer claim that tax benefit
income is not recognized based on the decision in Gold Kist. To the extent
that tax benefit income may be realized with respect to the portion of the
Industries Common Shares that constitute Industries Member Equity that are
cancelled pursuant to the Plan, Debtors believe that there will be
sufficient losses and NOLs (defined below) to offset this tax benefit
income. See, "Cancellation of Industries Common Shares-Net Operating
Losses," below.
Based on current projections it is estimated that approximately
$150,000,000 Industries Common Shares that constitute Industries Member
Equity will not be cancelled. These outstanding Industries Common Shares
are believed to be worthless as it is unlikely that there will be any
remaining proceeds from the liquidation after Creditors' Claims are paid.
Industries believes that it will not recognize tax benefit income merely as
a result of the Industries Common Shares that constitute Industries Member
Equity becoming worthless. Industries is considering requesting a private
letter ruling from the Service to the affect that income is not generated
with respect to any outstanding patronage equity in Industries absent
formal cancellation. If the Service does not grant such a ruling and treats
the patronage equity as cancelled and not otherwise excluded from taxation,
Industries will be subject to tax on the amount of outstanding patronage
equity unless Industries were to successfully contest the issue in court.
b) Net Operating Losses
As a cooperative, Industries' net operating losses ("NOLs") are
classified as either NOLs resulting from activities with patrons ("Member
NOLs") or NOLs resulting from activities with non patrons ("NonMember
NOLs"). Member NOLs may only be used to offset member sourced income,
whereas NonMember NOLs may be used to offset both member sourced income and
non-member sourced income. Industries believes that both Member NOLs and
NonMember NOLs, may be used to offset tax benefit income to the extent
generated as a result of the cancellation of Industries Member Equity and
the Service has granted Industries' private letter ruling request providing
that Industries will be able to use current patronage sourced losses and
available Member NOLs to offset tax benefit income generated by
cancellation of the Industries Common Shares that constitute Industries
Member Equity. Industries will cancel Industries Common Shares that
constitute Industries Member Equity only to the extent it has available
losses, NonMember NOLs and Member NOLs to offset all potential tax benefit
income it may be required to recognize as a result of the cancellation of
the Industries Common Shares that constitute Industries Member Equity. All
remaining Industries Common Shares that constitute Industries Member Equity
will remain outstanding under the Plan.
Industries has approximately $481,000,000 of Industries Common Shares
that constitute Industries Member Equity outstanding. Based on current
projections, following the transfer of the Remaining Assets to the
Liquidating Trust and consummation of the proposed asset sales, Industries
believes it will have losses, NonMember NOLS and Member NOLs of
approximately $331,000,000 available to offset any tax benefit income
resulting from cancellation of Industries Common Shares that constitute
Industries Member Equity. Therefore, it is anticipated that Industries will
cancel approximately $331,000,000 of the Industries Member Equity and leave
approximately $150,000,000 Industries Common Shares that constitute
Industries Member Equity outstanding on the Effective Date.
Thus, after the offset against tax benefit income and gains from asset
sales, Industries expects to have no NOLs remaining prior to any
cancellation of indebtedness attribute reduction. See, "Cancellation of
Indebtedness and Reduction of Tax Attributes," below.
In the event Industries cancels an amount of Industries Common Shares
that constitute Industries Member Equity that exceeds its available losses
and NOLs, or Industries Common Shares that constitute Industries Member
Equity that remain outstanding are deemed to generate tax benefit income by
virtue of being worthless, the Debtors will be subject to tax on the amount
of tax benefit income that is not offset by the available losses and NOLs,
unless the Debtors prevails on a Gold Kist or similar type argument wherein
tax benefit income is not recognized.
4. CANCELLATION OF INDEBTEDNESS AND REDUCTION OF TAX ATTRIBUTES
In connection with the Plan, the amount of Industries' aggregate
outstanding indebtedness will be substantially reduced. A taxpayer
generally realizes cancellation of debt ("COD") income for United States
federal income tax purposes equal to the amount of any indebtedness that is
discharged or canceled during the taxable year. Whether a debt is
considered discharged is dependent upon the substance of the transaction.
Generally a debt is considered discharged at the point when it becomes
clear that the debt will never have to be paid. In the case of an exchange,
such as that contemplated by the Plan, where outstanding indebtedness is
exchanged for other property (such as Cash and the Remaining Assets), the
amount of such COD income is, in general, equal to the excess of the
adjusted issue price (including accrued but unpaid interest) of the
indebtedness over the fair market value of the other property issued
therefor. However, Section 108(a) of the Code provides that if the
discharge is granted by a court in a Chapter 11 proceeding or is pursuant
to a plan approved by such court, such income is excluded from the
taxpayer's taxable income. Consequently, any COD income attributable to the
Plan will be excluded from Debtors' taxable income and Debtors' will not
incur any tax liability with respect to such COD income.
However, Section 108(b) of the Code provides, in general, that certain
tax attributes of a debtor, including any NOLs and certain tax credits,
must be reduced by the amount of the debtor's COD income that is excluded
under Section 108(a) of the Code. To the extent that the amount excluded
exceeds these tax attributes, the debtor's tax basis in its property is
reduced by the amount of such excluded COD income, except that such
reduction is limited to the excess of the aggregate tax basis of the
property held by the debtor over the aggregate liabilities of the debtor
immediately after the transaction. The Service recently has taken the
position that consolidated NOLs must be reduced irrespective of the source
of those losses. It is unclear how the Service's current position with
respect to reduction of consolidated NOL applies to other tax attributes of
consolidated group members. There is currently legislation in the United
States Senate that, if passed in its current form, will require that all
tax attributes be netted at the consolidated level. S. 1331 108th Cong.
(2003). Absent passage of the currently proposed legislation, Debtors
believe and intend to take the position that any attribute reduction under
Section 108(b) of the Code (other than NOLs) is to be applied on a separate
company basis (i.e., COD income of a debtor company can be applied only
against attributes of that company), even though Debtors may be a part of
an affiliated group that files a consolidated income tax return.
As a result of the Plan, and assuming the aggregate issue price for
each of the debt instruments issued in the Plan is equal to its aggregate
principal amount, Industries estimates that the attribute reduction
required under Section 108(b) will completely eliminate the NOLs of
Industries and its subsidiaries as of the end of the taxable year in which
the Plan is confirmed. However, because the attribute reduction occurs
after the determination of the Debtors' normal tax liability for a taxable
year, such attribute reduction is not expected to impact Debtors' use of
NOLs to offset tax benefit income or gain with respect to asset sales.
5. ALTERNATIVE MINIMUM TAX
In general, an "alternative minimum tax" ("AMT") is imposed on a
corporation's "alternative minimum taxable income" at a rate of 20% to the
extent such tax exceeds the corporation's regular United States federal
income tax. In computing taxable income for AMT purposes, certain tax
deductions and other beneficial allowances are modified or eliminated. In
particular, even though a corporation might be able to offset all of its
taxable income for regular United States federal income tax purposes by
available NOLs, only 90% of a corporation's taxable income for AMT purposes
may be offset by available NOLs (as recomputed for AMT purposes), resulting
in an effective AMT rate of 2%.
Any AMT that a corporation pays generally will be allowed as a
nonrefundable credit against its regular United States federal income tax
liability in future taxable years when the corporation is no longer subject
to the AMT. Debtors believe that they may be subject to an AMT liability as
a result of their use of NOLs to offset tax benefit income or gain on asset
sales.
B. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CLAIMS
AND INTERESTS
The United States federal income tax consequences of the Plan to
holders of Claims and Interests and the character, amount and timing of
income, gain or loss recognized as a consequence of the Plan and the
distributions provided for or by the Plan will depend upon, among other
things, (i) the manner in which a holder acquired a Claim or Interest; (ii)
the length of time a Claim or Interest has been held; (iii) whether the
Claim or Interest was acquired at a discount; (iv) whether the holder has
taken a bad debt deduction in the current or prior years; (v) whether the
holder has previously included accrued but unpaid interest with respect to
a Claim or Interest; (vi) the method of tax accounting of the holder; (vii)
whether a Claim or Interest is an installment obligation for United States
federal income tax purposes; (viii) whether the holder's present Claim or
Interest constitutes a security for United States federal income tax
purposes; and (ix) the type of consideration received or deemed received by
the holder in exchange for its Claim or Interest. Therefore, holders of
Claims and Interests should consult their tax advisors for information that
may be relevant to their particular situations and circumstances and the
particular tax consequences to such holders as a result thereof.
1. HOLDERS OF ALLOWED CLAIMS AND INTERESTS RECEIVING
CONSIDERATION
a) Unimpaired Claims and Interests
Under the Plan, Allowed Claims and Interests in Class 1 (Other
Priority Claims), Class 2 (Secured Lender Claims), Class 3 (Other Secured
Claims), Class 6 (Convenience Claims against Industries), Class 8
(Industries Preferred Shares) and Class 20 (PBGC Claims) (collectively, the
"Unimpaired Claims") are Unimpaired by the Plan. The satisfaction of the
Unimpaired Claims will have the same United States federal income tax
consequences to the holders that it would have had if the Plan were not
confirmed. To the extent that the fair market value of the Remaining Assets
on the Effective Date equals or exceeds the amount of such Claims on the
Effective Date, such Claims shall be deemed satisfied for tax purposes on
the Effective Date when the Remaining Assets are transferred to the
Liquidating Trust.
b) Priority Impaired Claims
Under the Plan, holders of Claims in Class 10 (General Unsecured
Claims against Foods), Class 12 (General Unsecured Claims against
Transportation), Class 14 (General Unsecured Claims against SFA), Class 16
(General Unsecured Claims against Pipeline) and Class 18 (Intercompany
Claims) (collectively, the "Priority Impaired Claims") will be fully
satisfied provided that the fair market value of the Remaining Assets on
the Effective Date equals or exceeds the amount of the Unimpaired Claims
and Priority Impaired Claims on the Effective Date. The satisfaction of the
Priority Impaired Claims will have the same United States federal income
tax consequences to the holders that it would have had if the Plan were not
confirmed.
c) Impaired Claims
Under the Plan, holders of claims in Class 4 (Demand Certificates
Claims), Class 5 (Subordinated Certificates Claims), and Class 7 (General
Unsecured Claims against Industries) will receive, as consideration in
satisfaction of their Allowed Claim, a pro rata share of the Class 4
Distribution Pool and/or the Industries Distribution Pool. Holders of
Demand Certificates Claims, Subordinated Certificates Claims, and General
Unsecured Claims against Industries will recognize ordinary interest income
to the extent that any portion of such consideration is allocable to
accrued but untaxed interest. See "Distributions in Discharge of Accrued
Interest," below. The following discussion addresses only that portion of
the consideration received by a such holders which is not allocable to
accrued but untaxed interest.
Holders of Demand Certificates Claims, Subordinated Certificates
Claims, and General Unsecured Claims against Industries will be deemed to
have received a share of the Remaining Assets transferred to the
Liquidating Trust in exchange for their Claims to the extent the fair
market value of such assets on the Effective Date exceeds the aggregate
amount of Administrative Claims against Industries, Priority Tax Claims
against Industries, Unimpaired Claims and Priority Impaired Claims. Such
transfer will constitute a taxable transaction and such holders will
recognize gain or loss in an amount equal to the difference between (i) the
"amount realized" by the holder in respect of its Allowed Claim (other than
any claim for accrued but unpaid interest) and (ii) the holder's adjusted
tax basis in its Allowed Claim (other than any claim for accrued but unpaid
interest).
To the extent the proceeds of the Retained Assets are subsequently
transferred to the Liquidating Trust, such transfer will increase the
amount of gain previously recognized or reduce the amount of loss
previously recognized by holders of Demand Certificates Claims,
Subordinated Certificates Claims and General Unsecured Claims against
Industries to the extent such proceeds are allocable to such holders. Such
transfer to the Beneficiaries will constitute a taxable transaction to the
Beneficiaries. Beneficiaries will determine the gain or loss on the
transfer by comparing the value of the Liquidating Trust interest received
in the exchange to the tax basis, if any, in their claims. As a result of
such treatment, such holders of Allowed Claims will have to take into
account the fair market value of their pro rata share, if any, of the
Remaining Assets transferred on their behalf to the Liquidating Trust in
determining the amount of gain or loss realized and required to be
recognized upon consummation of the Plan on the Effective Date. In
addition, since such a Beneficiary's share of the assets held in the
Liquidating Trust may change depending upon the resolution of Disputed
Claims and the Retained Assets, the holder may be prevented from
recognizing any loss in connection with consummation of the Plan until the
time that all such issues with respect to the Disputed Claims and the
Retained Assets have been resolved. The Liquidating Trustee will provide
the holders of Allowed Claims with valuations of the Remaining Assets on
behalf of and for the benefit of such holders and such valuations should be
used consistently by the Liquidating Trust and such holders for all United
States federal income tax purposes.
Where gain or loss is recognized by a holder of Subordinated
Certificates Claims or General Unsecured Claims against Industries, the
character of such gain or loss as long-term or short-term capital gain or
loss, or as ordinary income or loss will be determined by a number of
factors, including the tax status of the holder, whether the obligation
from which the Claim arose constitutes a capital asset in the hands of the
holder and how long it has been held, and whether and to what extent the
holder has previously claimed a bad debt deduction. A holder which
purchased its Claim from a prior holder at a market discount may be subject
to the market discount rules of the Code which could characterize a portion
of the gain recognized as ordinary income. In addition, Section 582(c) of
the Code provides that the sale or exchange of a bond, debenture, note or
certificate or other evidence of indebtedness by certain financial
institutions shall be considered the sale or exchange of a non-capital
asset. Accordingly, any gain or loss recognized by such financial
institutions as a result of the implementation of the Plan will be ordinary
gain or loss, regardless of the nature of their Claims.
The transfer of the Remaining Assets to the Liquidating Trust by the
Debtors as well as any subsequent transfers to the Liquidating Trust should
be treated for tax purposes as a deemed transfer to the holders of Allowed
Claims, to the extent they are Beneficiaries, followed by a deemed transfer
by the Beneficiaries to the Liquidating Trust. See "Tax Treatment of the
Liquidating Trust," below.
2. HOLDERS OF INDUSTRIES COMMON SHARES
Under the Plan, a portion of the Industries Common Shares will be
cancelled. The United States federal income tax consequences to the holders
of claims in Class 9 (Industries Common Shares) will depend on whether or
not the Industries Common Shares are Industries Member Equity in the hands
of the holder.
a) Industries Common Shares That Do Not Constitute
Industries Member Equity
If a holder of Industries Common Shares that are not Industries Member
Equity receives no consideration in exchange for its Industries Common
Shares, and such Industries Common Shares are cancelled, such holder will
generally recognize a loss equal to the holder's tax basis in its
Industries Common Shares. Any such loss will generally be a capital loss
and will be a long-term capital loss if the Industries Common Shares were
held for more than one year.
b) Industries Common Shares That Constitute Industries
Member Equity
If a holder of Industries Common Shares that represent Industries
Member Equity receives no consideration in exchange for its Industries
Common Shares that represent Industries Member Equity and such Industries
Common Shares that represent Industries Member Equity are cancelled, such
holder will generally recognize a loss equal to the holder's tax basis in
its Industries Common Shares that represent Industries Member Equity. Two
Revenue Rulings issued by the Service in 1970 provide that an association's
members and patrons will be allowed an ordinary loss deduction as a result
of the cancellation. Although the Service suspended these two Revenue
Rulings in 1987, Debtors' believe that it is still the position of the
Service that such loss is considered an ordinary loss. If the loss is not
treated as an ordinary loss as described above, the loss will be classified
as a capital loss.
3. HOLDERS OF OLD SECURITIES OF FOODS
Under the Plan, the Old Securities of Foods will be deemed cancelled
as of the Effective Date and holders of Old Securities of Foods that
constitute Minority Foods Shares will receive a pro-rata share of the Class
11 Distribution Pool. Such holders of Old Securities of Foods will
recognize taxable loss (or gain) to the extent that the fair market value
of their share of the Class 11 Distribution Pool is less (or greater) than
the holder's tax basis in their Old Securities of Foods. The gain or loss
should be a capital gain or loss provided the shareholder held the Old
Securities of Foods as a capital asset within the meaning of Code Section
1221. If, however, a holder claimed a loss for tax purposes in a prior
period on the ground that the Old Securities of Foods had become worthless,
the holder would be required to recognize income equal to the fair market
value of their share of the Class 11 Distribution Pool.
4. HOLDERS OF OLD SECURITIES OF TRANSPORTATION, SFA AND PIPELINE
Under the Plan all Class 13 Interests (Old Securities of
Transportation), Class 15 Interests (Old Securities of SFA), and Class 17
Interests (Old Securities of Pipeline) will be deemed cancelled as of the
Effective Date and no consideration will be paid to the holders of such
Interests. Such holders will generally recognize a loss equal to the
holder's tax basis in its Old Securities of Transportation, Old Securities
of SFA, or Old Securities of Pipeline. Any such loss will generally be a
capital loss and will be a long-term capital loss if the Old Securities of
Transportation, Old Securities of SFA, or Old Securities of Pipeline were
held for more than one year.
5. HOLDERS OF SUBORDINATED CLAIMS
Under the Plan, claims in Class 19 (Subordinated Claims) will not
receive or retain any property until all Administrative Claims against
Industries, all Priority Tax Claims against Industries, all Class 1 Claims
against Industries, all Class 3 Claims against Industries, all Class 4
Claims, all Class 5 Claims, all Class 7 Claims, all Interests in Class 8,
all Class 18 Claims against Industries, all Class 20 Claims against
Industries have been (i) Allowed and paid in full (including, with respect
to Classes 4, 5, 7 and 18, payment of interest at the Plan Rate), (ii)
disallowed or (iii) withdrawn, and all Intercompany Advances payable by
Industries have been repaid.
In general, loss will be recognized by a holder of a Subordinated
Claim in an amount equal to the holder's adjusted tax basis in its
Subordinated Claim (other than any claim for accrued but unpaid interest).
See "Distributions in Discharge of Accrued Interest," below.
Where loss is recognized by a holder of a Subordinated Claim, the
character of such loss as long-term or short-term capital loss, or as
ordinary loss will be determined by a number of factors, including the tax
status of the holder, whether the obligation from which the Claim arose
constitutes a capital asset in the hands of the holder and how long it has
been held, and whether and to what extent the holder has previously claimed
a bad debt deduction. A holder which purchased its Claim from a prior
holder at a market discount may be subject to the market discount rules of
the Code which could characterize a portion of the gain recognized as
ordinary income. In addition, Section 582(c) of the Code provides that the
sale or exchange of a bond, debenture, note or certificate or other
evidence of indebtedness by certain financial institutions shall be
considered the sale or exchange of a non-capital asset. Accordingly, any
gain or loss recognized by such financial institutions as a result of the
implementation of the Plan will be ordinary gain or loss, regardless of the
nature of their Claims.
6. DISTRIBUTIONS IN DISCHARGE OF ACCRUED INTEREST
To the extent the amount received by a holder is received in discharge
of interest accrued on its Claim during its holding period, such amount
will be taxable to the holder as interest income (if, under the holder's
applicable accounting method, such interest was not previously included in
the holder's gross income). Conversely, a holder will recognize a
deductible loss (or, possibly, a write-off against a reserve for bad debts)
to the extent any accrued interest claimed was previously included in its
gross income and is not paid in full.
Pursuant to the Plan, any distributions received by a holder in
respect of an Allowed Claim shall be allocated first to the principal
portion of the Claim to the extent thereof and thereafter to any Claim
representing accrued interest through the Effective Date. There is no
assurance, however, that such allocation will be respected for United
States federal income tax purposes. Accordingly, all holders are advised to
consult their own tax advisors to determine the amount of consideration
received under the Plan that may be allocable to accrued interest.
7. INFORMATION REPORTING AND BACKUP WITHHOLDING
Certain payments, including the payments of Claims pursuant to the
Plan, are generally subject to information reporting by the Debtors to the
Service. Moreover, such reportable payments are subject to backup
withholding under certain circumstances. Under the Code's backup
withholding rules, a holder of a Claim may be subject to backup withholding
with respect to distributions or payments made pursuant to the Plan, unless
the holder: (i) comes within certain exempt categories (which generally
include corporations) and, when required, demonstrates this fact or (ii)
provides a correct taxpayer identification number and certifies under
penalty of perjury that the taxpayer identification number is correct and
that the taxpayer is not subject to backup withholding because of a failure
to report all dividend and interest income.
C. TAX TREATMENT OF THE LIQUIDATING TRUST
1. CLASSIFICATION OF THE LIQUIDATING TRUST AND OWNERSHIP OF
BENEFICIAL INTERESTS IN LIQUIDATING TRUST
Pursuant to the Plan, the Debtors will transfer the Remaining Assets
to the Liquidating Trust and the Liquidating Trust will become obligated to
make distributions in accordance with the Plan. The Liquidating Trust is
intended to qualify as a liquidating trust for United States federal income
tax purposes. In general, a liquidating trust is not a separate taxable
entity but rather is treated for United States federal income tax purposes
as a "grantor" trust (i.e., a pass-through entity). The Service, in Revenue
Procedure 94-45, set forth the general criteria for obtaining a Service
ruling as to the grantor trust status of a liquidating trust under a
chapter 11 plan. Although no such ruling will be requested, the Liquidating
Trust has been structured with the intention of complying with such general
criteria. Pursuant to the Plan, and in conformity with Revenue Procedure
94-45, all parties (including the Debtors, the Liquidating Trustee and the
Beneficiaries) are required to treat, for United States federal income tax
purposes, the Liquidating Trust as a grantor trust of which the
Beneficiaries are the owners and grantors, and the following discussion
assumes that the Liquidating Trust will be respected as a liquidating
trust. However, no ruling has been requested from the Service concerning
the tax status of the Liquidating Trust as a grantor trust. Accordingly,
there can be no assurance that the Service would not take a contrary
position. If the Service were to challenge successfully such
classification, the United States federal income tax consequences to the
Liquidating Trust and the Beneficiaries could vary from those discussed
herein (including the potential for an entity level tax).
2. TAX REPORTING
For all United States federal income tax purposes, all parties
(including the Debtors, the Liquidating Trustee and holders of beneficial
interests in the Liquidating Trust) shall treat the transfer of the
Remaining Assets to the Liquidating Trust, in accordance with the terms of
the Plan, as a transfer of the Remaining Assets directly to the
Beneficiaries, followed by the transfer of the Remaining Assets by such
holders to the Liquidating Trust. Consistent therewith, all parties shall
treat the Liquidating Trust as a grantor trust of which such holders are
the owners and grantors. Thus, such holders (and any subsequent holders of
interests in the Liquidating Trust) shall be treated as the direct owners
of an undivided beneficial interest in the assets and liabilities of the
Liquidating Trust for all United States federal income tax purposes. The
Liquidating Trustee will determine the fair market value of the Remaining
Assets and all parties, including the Beneficiaries, must consistently use
such valuation for all United States federal income tax purposes.
Each of the Beneficiaries will be required to report on its United
States federal income tax return(s) the holder's allocable share of any
income, gain, loss, deduction or credit recognized or incurred by the
Liquidating Trust. The character of items of income, deduction and credit
to any holder and the ability of such holder to benefit from any deduction
or losses may depend on the particular situation of the holder.
The United States federal income tax reporting obligation of the
Beneficiaries is not dependent upon the Liquidating Trust distributing cash
or other proceeds. Therefore, Beneficiaries may receive net taxable income
or gain in a taxable year regardless of the fact that the Liquidating Trust
has not made, or will not make, any concurrent or subsequent distributions
to the holder. If a holder does not receive distributions commensurate with
the net taxable income or gain allocated to it in respect of any beneficial
interests it holds in the Liquidating Trust, the holder may be entitled to
a subsequent loss or deduction. In general, a distribution of cash by the
Liquidating Trust to the Beneficiaries will not be subject to tax since
such Beneficiaries are already regarded for United States federal income
tax purposes as owning the underlying assets.
The Liquidating Trustee will file with the Service returns for the
Liquidating Trust as a grantor trust pursuant to Treasury Regulations
Section 1.671-4(a). The Liquidating Trustee will also send to each holder
of a beneficial interest in the Liquidating Trust a separate statement
setting forth the holder's share of items of income, gain, loss, deduction
or credit and will instruct the holder to report such items on its United
States federal income tax return.
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE RESTRUCTURING
ARE COMPLEX. THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF UNITED
STATES FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER
IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. ALL HOLDERS OF CLAIMS AND INTERESTS SHOULD CONSULT WITH THEIR
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
TRANSACTIONS CONTEMPLATED HEREIN AND THE OWNERSHIP AND DISPOSITION OF THE
PLAN SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE TAX LAWS.
[Remainder of Page Blank]
VIII. CONCLUSION
The Debtors urge holders of Claims and Interests in the Voting Classes
to vote to accept the Plan and to evidence such acceptance by returning
their completed and signed Ballots so they will be received by the
Balloting Agent not later than the Balloting Deadline.
Dated: July 31, 2003
FARMLAND INDUSTRIES, INC.
FARMLAND FOODS, INC.
SFA, INC.
FARMLAND TRANSPORTATION, INC.
FARMLAND PIPE LINE COMPANY
By: /s/ Robert B. Terry
-------------------------
Name: Robert B. Terry
Title: Authorized Signatory
Laurence M. Frazen, Esq.
Cynthia Dillard Parres, Esq.
Robert M. Thompson, Esq.
BRYAN CAVE LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Gregory D. Willard, Esq.
David M. Unseth, Esq.
Cullen K. Kuhn, Esq.
BRYAN CAVE LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2750
Attorneys for the Debtors and Debtors-in-Possession
APPENDIX A
First Amended Joint Plan of Reorganization
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF MISSOURI
In re: ) In Proceedings under Chapter 11
)
FARMLAND INDUSTRIES, INC., ) Case No. 02-50557
FARMLAND FOODS, INC., ) Case No. 02-50561
SFA, INC., ) Case No. 02-50562
FARMLAND TRANSPORTATION, INC., ) Case No. 02-50564
FARMLAND PIPE LINE COMPANY, ) Case No. 02-50565
)
Debtors. ) Joint Administration
DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION
---------------------------------------------------
Gregory D. Willard, Esq. Laurence M. Frazen, Esq.
David M. Unseth, Esq. Cynthia Dillard Parres, Esq.
Cullen K. Kuhn, Esq. Robert M. Thompson, Esq.
BRYAN CAVE LLP BRYAN CAVE LLP
211 North Broadway, Suite 3600 1200 Main Street, Suite 3500
St. Louis, Missouri 63102-2750 Kansas City, Missouri 64105
Attorneys for Debtors and Debtors-in-Possession
Dated: July 31, 2003
THE UNITED STATES BANKRUPTCY COURT HAS NOT APPROVED THE PLAN OR THE MERITS
OF THE PLAN AND THE PLAN REMAINS SUBJECT TO FURTHER REVIEW BY THE
BANKRUPTCY COMMITTEES. THE PLAN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE PLAN OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THE PLAN. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO SOLICITATIONS OF
ACCEPTANCES TO THE PLAN HAVE BEEN AUTHORIZED BY THE BANKRUPTCY COURT. ANY
PERSON OR ENTITY PURPORTING TO SOLICIT SUCH ACCEPTANCE BY OR ON BEHALF OF
ANY PERSON OR ENTITY, INCLUDING THE DEBTORS, IS NOT AUTHORIZED TO DO SO.
THE PLAN, INCLUDING ARTICLES V AND XI OF THE PLAN, REMAIN SUBJECT TO REVIEW
AND MODIFICATION.
TABLE OF CONTENTS
PAGE
Article I DEFINITIONS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND
GOVERNING LAW.....................................................1
1.1 "Administrative Claim"..............................................1
1.2 "Allowed"...........................................................1
1.3 "Allowed Class . . . Claim".........................................2
1.4 "Allowed Class . . . Interest"......................................2
1.5 "Allowed Interest"..................................................2
1.6 "Available Cash"....................................................2
1.7 "Ballot"............................................................2
1.8 "Bankruptcy Code"...................................................2
1.9 "Bankruptcy Committees".............................................2
1.10 "Bankruptcy Court"................................................2
1.11 "Bankruptcy Rules"................................................2
1.12 "Bar Date(s)".....................................................3
1.13 "Beef Interests"..................................................3
1.14 "Beneficiaries"...................................................3
1.15 "Benefited Debtors"...............................................3
1.16 "Bondholders' Committee"..........................................3
1.17 "Business Day"....................................................3
1.18 "Cash"............................................................3
1.19 "Chapter 11 Case".................................................3
1.20 "Claim"...........................................................3
1.21 "Class"...........................................................3
1.22 "Class 11 Distribution Pool"......................................3
1.23 "Collateral"......................................................3
1.24 "Committee Members"...............................................3
1.25 "Confirmation"....................................................3
1.26 "Confirmation Date"...............................................3
1.27 "Confirmation Hearing"............................................3
1.28 "Confirmation Order"..............................................3
1.29 "Convenience Claim"...............................................4
1.30 "Creditor"........................................................4
1.31 "Creditors' Committee"............................................4
1.32 "Cure"............................................................4
1.33 "Debtor"..........................................................4
1.34 "Debtors".........................................................4
1.35 "Demand Certificates".............................................4
1.36 "Demand Certificates Claim".......................................4
1.37 "DIP Credit Agreement"............................................4
1.38 "DIP Loan Claims".................................................4
1.39 "Disclosure Statement"............................................4
1.40 "Disputed"........................................................4
1.41 "Disputed Claim Amount"...........................................5
1.42 "Disputed Claims Reserve".........................................5
1.43 "Disputed Interest"...............................................5
1.44 "Disputed Interest Amount"........................................5
1.45 "Distribution Record Date"........................................5
1.46 "Effective Date"..................................................5
1.47 "Entity"..........................................................5
1.48 "Estate(s)".......................................................6
1.49 "Face Amount".....................................................6
1.50 "Final Distribution Date".........................................6
1.51 "Final Order".....................................................6
1.52 "Foods"...........................................................6
1.53 "General Unsecured Claim".........................................6
1.54 "Impaired"........................................................6
1.55 "Indemnification Obligation"......................................6
1.56 "Indenture Trustees"..............................................6
1.57 "Industrial Revenue Bonds"........................................6
1.58 "Industries"......................................................7
1.59 "Industries Common Shares"........................................7
1.60 "Industries Distribution Pool"....................................7
1.61 "Industries Preferred Shares".....................................7
1.62 "Initial Distribution Date".......................................7
1.63 "Insurance Claim".................................................7
1.64 "Intercompany Advances"...........................................7
1.65 "Intercompany Claim"..............................................7
1.66 "Interest"........................................................7
1.67 "Lender"..........................................................7
1.68 "Lien"............................................................7
1.69 "Liquidating Trust"...............................................7
1.70 "Liquidating Trust Administrative Reserve"........................7
1.71 "Liquidating Trust Agreement".....................................7
1.72 "Liquidating Trust Assets"........................................8
1.73 "Liquidating Trustee".............................................8
1.74 "Litigation Claims"...............................................8
1.75 "Loan Documents"..................................................8
1.76 "Management Agreement"............................................8
1.77 "Minority Foods Shares"...........................................8
1.78 "Non-Debtor Subsidiaries".........................................8
1.79 "Objection Deadline"..............................................8
1.80 "Old Common Shares"...............................................8
1.81 "Old Preferred Shares"............................................8
1.82 "Old Securities"..................................................8
1.83 "Old Stock Options"...............................................8
1.84 "Old Warrants"....................................................8
1.85 "Other Priority Claim"............................................9
1.86 "Other Secured Claim".............................................9
1.87 "PBGC"............................................................9
1.88 "PBGC Claims".....................................................9
1.89 "Person"..........................................................9
1.90 "Petition Date"...................................................9
1.91 "Pipeline"........................................................9
1.92 "Plan"............................................................9
1.93 "Plan Exhibit"....................................................9
1.94 "Plan Rate".......................................................9
1.95 "Pork Business"...................................................9
1.96 "Post-Confirmation Committee".....................................9
1.97 "Pre-Petition Credit Agreement"...................................9
1.98 "Priority Tax Claim"..............................................9
1.99 "Pro Rata".......................................................10
1.100 "Professional"...................................................10
1.101 "Professional Fee Claim".........................................10
1.102 "Register".......................................................10
1.103 "Reimbursement Right"............................................10
1.104 "Reinstated" or "Reinstatement"..................................10
1.105 "Reorganized Industries".........................................10
1.106 "Retained Assets"................................................10
1.107 "Schedules"......................................................11
1.108 "Secured Claim"..................................................11
1.109 "Secured Lender Claims"..........................................11
1.110 "SF Phosphates Interest".........................................11
1.111 "SFA"............................................................11
1.112 "Subordinated Certificates"......................................11
1.113 "Subordinated Certificates Claim"................................11
1.114 "Subordinated Claims"............................................11
1.115 "Subsequent Distribution Date"...................................12
1.116 "Subsidiaries"...................................................12
1.117 "Subsidiary Debtors".............................................12
1.118 "Subsidiary Interests"...........................................12
1.119 "Substantial Contribution Claim".................................12
1.120 "Transportation".................................................12
1.121 "Trust Indentures"...............................................12
1.122 "Unimpaired".....................................................12
1.123 "Voting Record Date".............................................12
Article II CLASSIFICATION OF CLAIMS AND INTERESTS..........................13
2.1 Class 1 (Other Priority Claims)....................................14
2.2 Class 2 (Secured Lender Claims)....................................14
2.3 Class 3 (Other Secured Claims).....................................14
2.4 Class 4 (Demand Certificates Claims)...............................14
2.5 Class 5 (Subordinated Certificates Claims).........................14
2.6 Class 6 (Convenience Claims against Industries)....................14
2.7 Class 7 (General Unsecured Claims against Industries)..............14
2.8 Class 8 (Industries Preferred Shares)..............................14
2.9 Class 9 (Industries Common Shares).................................14
2.10 Class 10 (General Unsecured Claims against Foods)................14
2.11 Class 11 (Old Securities of Foods)...............................14
2.12 Class 12 (General Unsecured Claims against Transportation).......14
2.13 Class 13 (Old Securities of Transportation)......................15
2.14 Class 14 (General Unsecured Claims against SFA)..................15
2.15 Class 15 (Old Securities of SFA).................................15
2.16 Class 16 (General Unsecured Claims against Pipeline).............15
2.17 Class 17 (Old Securities of Pipeline)............................15
2.18 Class 18 (Intercompany Claims)...................................15
2.19 Class 19 (Subordinated Claims)...................................15
2.20 Class 20 (PBGC Claims)...........................................15
Article III TREATMENT OF CLAIMS AND INTERESTS..............................15
3.1 Unclassified Claims................................................15
3.2 Class 1 (Other Priority Claims)....................................16
3.3 Class 2 (Secured Lender Claims)....................................16
3.4 Class 3 (Other Secured Claims).....................................17
3.5 Class 4 (Demand Certificates Claims)...............................17
3.6 Class 5 (Subordinated Certificates Claims).........................17
3.7 Class 6 (Convenience Claims against Industries)....................18
3.8 Class 7 (General Unsecured Claims against Industries)..............18
3.9 Class 8 (Industries Preferred Shares)..............................18
3.10 Class 9 (Industries Common Shares)...............................18
3.11 Class 10 (General Unsecured Claims against Foods)................18
3.12 Class 11 (Old Securities of Foods)...............................19
3.13 Class 12 (General Unsecured Claims against Transportation).......19
3.14 Class 13 (Old Securities of Transportation)......................19
3.15 Class 14 (General Unsecured Claims against SFA)..................19
3.16 Class 15 (Old Securities of SFA).................................19
3.17 Class 16 (General Unsecured Claims against Pipeline).............20
3.18 Class 17 (Old Securities of Pipeline)............................20
3.19 Class 18 (Intercompany Claims)...................................20
3.20 Class 19 (Subordinated Claims)...................................20
3.21 Class 20 (PBGC Claims)...........................................20
3.22 Reservation Of Rights Regarding Claims...........................20
Article IV ACCEPTANCE OR REJECTION OF THE PLAN.............................21
4.1 Impaired Classes Of Claims And Interests Entitled To Vote..........21
4.2 Acceptance By An Impaired Class....................................21
4.3 Presumed Acceptances...............................................21
4.4 Summary of Classes Voting On The Plan..............................21
4.5 Confirmation Pursuant To Section 1129(b) Of The Bankruptcy Code....21
Article V MEANS FOR IMPLEMENTATION OF THE PLAN.............................21
5.1 Continued Existence Of The Debtors; Vesting Of Assets..............21
5.2 Funding For The Plan...............................................22
5.3 Accounts...........................................................23
5.4 Liquidating Trust; Liquidating Trustee.............................23
5.5 Post-Confirmation Committee........................................24
5.6 Effectuating Documents; Further Transactions.......................25
5.7 Exemption From Certain Transfer Taxes..............................25
5.8 Releases And Related Matters.......................................25
5.9 Closing Of The Chapter 11 Case.....................................26
5.10 Rights of Action.................................................26
5.11 Retiree Benefits.................................................27
5.12 Establishment of Class 11 Distribution Pool......................27
Article VI TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES...........27
6.1 Rejected Executory Contracts And Unexpired Leases..................27
6.2 Rejection Damages Bar Date.........................................27
6.3 Assumed Executory Contracts And Unexpired Leases...................28
6.4 Payments Related To Assumed Executory Contracts And Unexpired
Leases.............................................................28
Article VII PROVISIONS GOVERNING DISTRIBUTIONS.............................28
7.1 Distributions......................................................28
7.2 Interest On Claims.................................................29
7.3 Means Of Cash Payment..............................................29
7.4 Distributions on the Initial Distribution Date.....................29
7.5 Distributions on a Subsequent Distribution Date....................29
7.6 Distributions on the Final Distribution Date.......................30
7.7 Delivery Of Distributions; Undeliverable Distributions.............30
7.8 Tender Of Securities And Instruments...............................31
7.9 Withholding And Reporting Requirements.............................32
7.10 Setoffs..........................................................32
7.11 No Recourse......................................................32
7.12 Transactions On Business Days....................................32
7.13 No Distribution In Excess Of Allowed Amount Of Claim.............32
7.14 Intercompany Advances............................................32
Article VIII PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND UNLIQUIDATED
CLAIMS AND DISTRIBUTIONS WITH RESPECT THERETO......................33
8.1 Prosecution Of Objections To Claims................................33
8.2 Treatment Of Disputed Claims.......................................33
8.3 Estimation.........................................................34
Article IX CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE
PLAN...............................................................34
9.1 Conditions To Effective Date.......................................34
9.2 Waiver Of Conditions...............................................35
9.3 Notice Of Effective Date...........................................35
Article X RETENTION OF JURISDICTION........................................35
Article XI MISCELLANEOUS PROVISIONS........................................37
11.1 Deadline For Filing Professional Fee Claims; Objections To
Professional Fee Claims..........................................37
11.2 Deadline For Filing Administrative Claims; Objections To
Administrative Claims............................................37
11.3 Payment Of Statutory Fees........................................37
11.4 Modifications And Amendments.....................................37
11.5 Severability Of Plan Provisions..................................38
11.6 Successors And Assigns...........................................38
11.7 No Discharge.....................................................38
11.8 Release Of Assets................................................38
11.9 Exculpation And Limitation Of Liability..........................39
11.10 Binding Effect...................................................39
11.11 Revocation, Withdrawal, Or Non-Consummation......................40
11.12 Plan Exhibits....................................................40
11.13 Notices..........................................................40
11.14 Indemnification And Related Matters..............................42
11.15 Dissolution Of The Bankruptcy Committees.........................42
11.16 Term Of Injunctions Or Stays.....................................42
11.17 Headings.........................................................42
INTRODUCTION
Farmland Industries, Inc., Farmland Foods, Inc., Farmland
Transportation, Inc., SFA, Inc. and Farmland Pipe Line Company
(collectively, the "Debtors") hereby propose the following first amended
joint plan of reorganization (the "Plan") for the resolution of their
outstanding creditor Claims (as defined herein) and equity Interests (as
defined herein). Reference is made to the Disclosure Statement (as defined
herein) distributed contemporaneously herewith for a discussion of the
Debtors' history, businesses, properties, results of operations, risk
factors, a summary and analysis of the Plan, and certain related matters.
The Debtors are the proponents of the Plan within the meaning of section
1129 of the Bankruptcy Code.
All holders of Claims and Interests are encouraged to read the Plan
and the Disclosure Statement in their entirety before voting to accept or
reject the Plan. Subject to certain restrictions and requirements set forth
in section 1127 of the Bankruptcy Code, Fed. R. Bankr. P. 3019 and Article
XI, including Section 11.4 of the Plan, the Debtors reserve the right to
alter, amend, modify, revoke or withdraw the Plan prior to its substantial
consummation.
ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
A. SCOPE OF DEFINITIONS; RULES OF CONSTRUCTION
-------------------------------------------
For purposes of the Plan, except as expressly provided or unless the
context otherwise requires, all capitalized terms not otherwise defined
shall have the meanings ascribed to them in Article I of the Plan. Any term
used in the Plan that is not defined herein, but is defined in the
Bankruptcy Code or the Bankruptcy Rules, shall have the meaning ascribed to
that term in the Bankruptcy Code or the Bankruptcy Rules. Whenever the
context requires, such terms shall include the plural as well as the
singular number, the masculine gender shall include the feminine, and the
feminine gender shall include the masculine.
B. DEFINITIONS
-----------
1.1 "ADMINISTRATIVE CLAIM" means a Claim for payment of an
administrative expense of a kind specified in section 503(b) or 1114(e)(2)
of the Bankruptcy Code and entitled to priority pursuant to section
507(a)(1) of the Bankruptcy Code, including, but not limited to, (a) the
actual, necessary costs and expenses, incurred after the Petition Date, of
preserving the Estates and operating the businesses of the Debtors,
including wages, salaries, commissions, severance payments or other
compensation for services rendered after the commencement of the Chapter 11
Case, (b) Professional Fee Claims, (c) all fees and charges assessed
against the Estates under 28 U.S.C. ss. 1930 and (d) all Allowed Claims
that are entitled to be treated as Administrative Claims pursuant to a
Final Order of the Bankruptcy Court under section 546(c)(2)(A) of the
Bankruptcy Code.
1.2 "ALLOWED" means, with regard to any Claim other than an
Administrative Claim, a Claim or any portion thereof (a) that has been
allowed by a Final Order, or (b) as to which, on or by the Effective Date,
(i) no proof of Claim has been filed with the Bankruptcy Court and (ii) the
liquidated and noncontingent amount of which is listed on the Schedules,
other than a Claim that is listed on the Schedules as zero, in an unknown
amount, or as disputed, or (c) for which a proof of Claim in a liquidated
amount has been timely filed with the Bankruptcy Court pursuant to the
Bankruptcy Code, any Final Order of the Bankruptcy Court or other
applicable bankruptcy law, and as to which either (i) no objection to its
allowance has been filed by the Objection Deadline or by such other
applicable period of limitation fixed by the Plan, the Bankruptcy Code or
by any order of the Bankruptcy Court or (ii) any and all objections to its
allowance have been settled or withdrawn or have been denied by a Final
Order, or (d) that is expressly allowed in a liquidated amount in the Plan.
With regard to an Administrative Claim, "Allowed" means an Administrative
Claim, or any portion thereof, (a) incurred or arising after the Petition
Date and prior to the Effective Date, (b) as to which a request for payment
has been timely filed with the Bankruptcy Court in a liquidated amount, and
as to which either (i) no objection to its allowance has been filed by the
Objection Deadline or by such other applicable period of limitation fixed
by the Plan, the Bankruptcy Code or by any order of the Bankruptcy Court or
(ii) any and all objections to its allowance have been settled or withdrawn
or have been denied by a Final Order.
1.3 "ALLOWED CLASS . . . CLAIM" means an Allowed Claim in the
particular Class described.
1.4 "ALLOWED CLASS . . . INTEREST" means an Allowed Interest in the
particular Class described.
1.5 "ALLOWED INTEREST" means an Interest that (a) is registered as of
the Distribution Record Date in a stock register maintained by or on behalf
of the Debtors and (b) is not a Disputed Interest.
1.6 "AVAILABLE CASH" means all Cash of each separate Estate (other
than the proceeds of Collateral securing any Allowed Secured Claim) that is
not subject to any Reimbursement Right, less the amount of Cash deposited
or to be deposited into (i) the Liquidating Trust Administrative Reserve,
and (ii) the Disputed Claims Reserve, which Cash shall be maintained
separately with respect to each Estate.
1.7 "BALLOT" means each of the ballot forms distributed with the
Disclosure Statement to holders of Impaired Claims entitled to vote as
specified in Article IV of the Plan, in connection with the solicitation of
acceptances of the Plan.
1.8 "BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as
codified in title 11 of the United States Code, 11 U.S.C. ss.ss. 101-1330,
as now in effect or hereafter amended.
1.9 "BANKRUPTCY COMMITTEES" means, collectively, the Bondholders'
Committee and the Creditors' Committee.
1.10 "BANKRUPTCY COURT" means the United States Bankruptcy Court for
the Western District of Missouri or such other court as may have
jurisdiction over the Chapter 11 Case.
1.11 "BANKRUPTCY RULES" means, collectively, the Federal Rules of
Bankruptcy Procedure and the Official Bankruptcy Forms, as amended, the
Federal Rules of Civil Procedure, as amended, as applicable to the Chapter
11 Case or proceedings therein, and the Local Rules of the Bankruptcy
Court, as applicable to the Chapter 11 Case or proceedings therein, as the
case may be.
1.12 "BAR DATE(S)" means the date(s) designated by the Bankruptcy
Court as the last date(s) for filing proofs of Claim or Interest against
the Debtors.
1.13 "BEEF INTERESTS" means, collectively, (a) 68.71% of the
partnership interests of Farmland National Beef Packing Company, L.P. owned
by Industries as a limited partner, and (b) approximately 2.5% of the
partnership interests of Farmland National Beef Packing Company, L.P. owned
by NBPCo, L.L.C., a subsidiary wholly-owned by Industries and Foods, as a
general partner.
1.14 "BENEFICIARIES" means the holders of Allowed Claims that are
beneficiaries of the Liquidating Trust.
1.15 "BENEFITED DEBTORS" has the meaning set forth in Section 7.14 of
the Plan.
1.16 "BONDHOLDERS' COMMITTEE" means the official committee of
bondholders appointed pursuant to section 1102(a) of the Bankruptcy Code in
the Chapter 11 Case.
1.17 "BUSINESS DAY" means any day except for Saturday, Sunday or a
"legal holiday" (as defined in Fed. R. Bankr. P. 9006(a)).
1.18 "CASH" means legal tender of the United States or equivalents
thereof.
1.19 "CHAPTER 11 CASE" means the jointly administered Chapter 11 cases
of the Debtors.
1.20 "CLAIM" means a "claim" against the Debtors, or any of them,
whether or not asserted, as defined in section 101 of the Bankruptcy Code.
1.21 "CLASS" means a category of holders of Claims or Interests, as
described in Article II of the Plan.
1.22 "CLASS 11 DISTRIBUTION POOL" has the meaning set forth in Section
5.12 of the Plan.
1.23 "COLLATERAL" means any property or interest in the property of an
Estate subject to a Lien to secure the payment or performance of a Claim,
which Lien is not subject to avoidance under the Bankruptcy Code or
otherwise invalid under the Bankruptcy Code or applicable state law.
1.24 "COMMITTEE MEMBERS" has the meaning set forth in Section 5.5 of
the Plan.
1.25 "CONFIRMATION" means entry by the Bankruptcy Court of the
Confirmation Order.
1.26 "CONFIRMATION DATE" means the date of entry by the clerk of the
Bankruptcy Court of the Confirmation Order.
1.27 "CONFIRMATION HEARING" means the hearing to consider confirmation
of the Plan under section 1128 of the Bankruptcy Code.
1.28 "CONFIRMATION ORDER" means the order entered by the Bankruptcy
Court confirming the Plan.
1.29 "CONVENIENCE CLAIM" means any Claim that otherwise would be an
Allowed Class 7 Claim in an amount equal to or less than $1,000. A holder
of one or more Allowed Class 7 Claims totaling in excess of $1,000 may, by
an irrevocable written election made on a validly executed and timely
delivered Ballot, reduce all such holder's Allowed Class 7 Claims to
$1,000, and thus have a single reduced Claim classified in Class 6.
1.30 "CREDITOR" means any Entity who holds a Claim against any of the
Debtors.
1.31 "CREDITORS' COMMITTEE" means the official committee of unsecured
creditors appointed pursuant to section 1102(a) of the Bankruptcy Code in
the Chapter 11 Case.
1.32 "CURE" means the distribution of Cash, or such other property as
maybe agreed upon by the parties or ordered by the Bankruptcy Court, with
respect to the assumption of an executory contract or unexpired lease,
pursuant to section 365(b) of the Bankruptcy Code, in an amount equal to
all unpaid monetary obligations, without interest, or such other amount as
may be agreed upon by the parties, under such executory contract or
unexpired lease, to the extent such obligations are enforceable under the
Bankruptcy Code and applicable nonbankruptcy law.
1.33 "DEBTOR" means any of the Debtors.
1.34 "DEBTORS" means Farmland Industries, Inc., Farmland Foods, Inc.,
Farmland Transportation, Inc., SFA Inc. and Farmland Pipe Line Company,
including in their capacity as debtors-in-possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
1.35 "DEMAND CERTIFICATES" means: (a) Demand Loan Certificates dated
November 20, 1981 with an original authorized principal amount of
$500,000,000.00; and (b) Demand Loan Certificates dated December 4, 1997
issuable in Series with an unlimited authorized aggregate principal amount.
1.36 "DEMAND CERTIFICATES CLAIM" means a Claim arising out of or
related to the Demand Certificates.
1.37 "DIP CREDIT AGREEMENT" means the First Amended and Restated
Debtor-In-Possession Credit Agreement and Adequate Protection Stipulation
dated as of June 5, 2002, together with any amendments, by and among
Industries and Foods, as borrowers, the financial institutions party
thereto, as lenders, and Deutsche Bank Trust Company Americas, as
administrative agent.
1.38 "DIP LOAN CLAIMS" means the Allowed Claims held by those certain
financial institutions participating under the DIP Credit Agreement, which
Claims constitute superpriority Administrative Claims senior to all other
Claims and are secured by Liens on substantially all of the assets of the
Debtors.
1.39 "DISCLOSURE STATEMENT" means the written disclosure statement
that relates to the Plan, as amended, supplemented, or modified from time
to time, and that is prepared and distributed in accordance with section
1125 of the Bankruptcy Code and Fed. R. Bankr. P. 3017.
1.40 "DISPUTED" means, with respect to a Claim, such Claim or any
portion thereof that is not an Allowed Claim, and includes, without
limitation, Claims (other than Allowed Claims) that (a) have not been
listed on the Schedules or have been listed on the Schedules at zero, or as
contingent, unliquidated or disputed, or (b) are the subject to an
objection filed in the Bankruptcy Court and which objection has not been
withdrawn or overruled by a Final Order of the Bankruptcy Court.
1.41 "DISPUTED CLAIM AMOUNT" means (a) if a liquidated amount is set
forth in a timely filed proof of Claim relating to a Disputed Claim, (i)
the liquidated amount set forth in the proof of Claim relating to the
Disputed Claim; (ii) an amount agreed to by the Debtors and the holder of
such Disputed Claim; or (iii) if a request for estimation is filed by the
Debtors or the Liquidating Trustee, as the case may be, the amount at which
such Claim is estimated by the Bankruptcy Court; (b) if no liquidated
amount is set forth in the proof of Claim relating to a Disputed Claim, (i)
an amount agreed to by the Debtors or the Liquidating Trustee, as the case
may be, and the holder of such Disputed Claim or (ii) the amount estimated
by the Bankruptcy Court with respect to such Disputed Claim; (c) if the
Claim was listed on the Schedules as unliquidated, contingent or disputed
and no proof of Claim was filed, or deemed to have been filed, by the
applicable Bar Date and the Claim has not been resolved by written
agreement of the parties or an order of the Bankruptcy Court, zero; or (d),
with respect to a Disputed Administrative Claim, the liquidated amount set
forth in any request for payment relating to the Disputed Administrative
Claim.
1.42 "DISPUTED CLAIMS RESERVE" means, in the event there exists any
Disputed Claims on or after the Effective Date, Cash reserved by the
Liquidating Trustee in separate interest-bearing accounts for the
following: (i) Disputed Administrative Claims asserted against each Debtor;
(ii) Disputed Priority Tax Claims asserted against each Debtor; and (iii)
Disputed Claims in each Class for which distributions are contemplated by
the Plan; all in accordance with the provisions of the Plan and the
Liquidating Trust Agreement and to be maintained under the Plan and the
Liquidating Trust Agreement.
1.43 "DISPUTED INTEREST" means an Interest, or any portion thereof,
that is not an Allowed Interest and includes, without limitation, Interests
(other than Allowed Interests) that (a) are not listed in the Schedules or
are listed in the Schedules as contingent, unliquidated or disputed, or (b)
are the subject of an objection filed in the Bankruptcy Court and which
objection has not been withdrawn or overruled by a Final Order of the
Bankruptcy Court.
1.44 "DISPUTED INTEREST AMOUNT" means, with respect to a Disputed
Interest, the number of shares set forth in a timely filed proof of
Interest.
1.45 "DISTRIBUTION RECORD DATE" means the record date for purposes of
making distributions under the Plan on account of Allowed Claims and
Allowed Interests, which date shall be the Confirmation Date or such other
date designated in the Confirmation Order.
1.46 "EFFECTIVE DATE" means the Business Day on which all conditions
to the consummation of the Plan as set forth in Section 9.1 of the Plan
have been satisfied or waived as provided in Article IX of the Plan and is
the effective date of the Plan; provided, however, that if the DIP Loan
Claims have not be paid in full by November 30, 2003, the Effective Date
shall in no event be later than November 30, 2003.
1.47 "ENTITY" has the meaning set forth in section 101 of the
Bankruptcy Code and also means, without limitation, a Person, joint
venture, trust, estate, unincorporated association or organization, limited
liability company, governmental entity or political subdivision, agency or
representative thereof, or any other entity.
1.48 "ESTATE(S)" means, individually, the estate of each Debtor in the
Chapter 11 Case, and, collectively, the estates of all Debtors in the
Chapter 11 Case, created pursuant to section 541 of the Bankruptcy Code.
1.49 "FACE AMOUNT" means (a) when used in reference to a Disputed
Claim, the Disputed Claim Amount, and (b) when used in reference to an
Allowed Claim, the Allowed amount of such Claim.
1.50 "FINAL DISTRIBUTION DATE" has the meaning set forth in Section
7.6 of the Plan.
1.51 "FINAL ORDER" means an order or judgment of the Bankruptcy Court,
or other court of competent jurisdiction, as entered on the docket in the
Chapter 11 Case, the operation or effect of which has not been stayed,
reversed, or amended and (unless the Debtors, in compliance with Section
9.2 of the Plan, or the Liquidating Trustee, in its sole discretion, shall
have waived the requirement therefor) as to which order or judgment (or any
revision, modification, or amendment thereof) the time to appeal or seek
review or rehearing has expired and as to which no appeal or petition for
review or rehearing was filed or, if filed, remains pending.
1.52 "FOODS" means Farmland Foods, Inc.
1.53 "GENERAL UNSECURED CLAIM" means a Claim against any of the
Debtors that is not an Administrative Claim, Priority Tax Claim, Other
Priority Claim, Secured Lender Claim, Other Secured Claim, Convenience
Claim, Intercompany Claim, Subordinated Claim or PBGC Claims, and does not
include any Reimbursement Right.
1.54 "IMPAIRED" means, when used with reference to a Claim or
Interest, a Claim or Interest that is "impaired" within the meaning of
section 1124 of the Bankruptcy Code.
1.55 "INDEMNIFICATION OBLIGATION" means any obligation of any of the
Debtors to indemnify, reimburse or provide contribution to any present or
former officers, directors, employees, professionals, advisors or
representatives of the Debtors, pursuant to by-laws, articles of
incorporation, contract or otherwise as may be in existence immediately
prior to the Petition Date.
1.56 "INDENTURE TRUSTEES" means each of the trustees under the Trust
Indentures.
1.57 "INDUSTRIAL REVENUE BONDS" means: (a) County of Saline, Nebraska
Solid Waste Disposal Revenue Bonds, Series 1997A, dated November 4, 1997 in
the original principal amount of $1,500,000.00; (b) County of Saline,
Nebraska Solid Waste Disposal Revenue Bonds, Series 1997B, dated November
19, 1997 in the original principal amount of $1,000,000.00; (c) Kansas
Development Finance Authority Variable Rate Industrial Development Revenue
Bonds, Series 1998, dated December 30, 1998 in the original principal
amount of $1,000,000.00; (d) Taxable Industrial Revenue Bond, Series 1999
of Kansas City, Missouri dated August 1, 1999 in the original principal
amount of $40,000,000.00; (e) City of Galveston, Texas, Special Contract
Revenue Bonds, Series 1977, in the original principal amount of
$26,000,000; and (f) City of Galveston, Texas, Special Contract Refunding
Revenue Bonds (Farmland Industries, Inc. Project), Series 1998, in the
original principal amount of $8,500,000.
1.58 "INDUSTRIES" means Farmland Industries, Inc.
1.59 "INDUSTRIES COMMON SHARES" means the Old Common Shares of
Industries (including, without limitation, common stock, associate member
common stock and capital credits of Industries), the Old Stock Options of
Industries and the Old Warrants.
1.60 "INDUSTRIES DISTRIBUTION POOL" means all Available Cash in the
Estate of Industries after all Administrative Claims against Industries,
all Priority Tax Claims against Industries, all Class 1 Claims against
Industries, all Class 2 Claims, all Class 3 Claims against Industries, all
Class 6 Claims, all Class 20 Claims against Industries and all Intercompany
Advances payable by Industries have been (i) Allowed and paid, (ii)
disallowed or (iii) withdrawn.
1.61 "INDUSTRIES PREFERRED SHARES" means the Old Preferred Shares of
Industries.
1.62 "INITIAL DISTRIBUTION DATE" has the meaning set forth in Section
7.5 of the Plan.
1.63 "INSURANCE CLAIM" means the insurance claim arising under a $500
million blanket insurance policy that relates to the damage and/or
destruction of buildings, equipment and inventory located at Foods' Albert
Lea, Minnesota meat processing facility.
1.64 "INTERCOMPANY ADVANCES" has the meaning set forth in Section 7.14
of the Plan.
1.65 "INTERCOMPANY CLAIM" means any Claim by a Debtor against another
Debtor that was incurred or arose prior to the Petition Date.
1.66 "INTEREST" means (a) the legal, equitable, contractual and other
rights of any Entity (including any 401(k) plan or plan participant) with
respect to Old Securities of the Debtors, and (b) the legal, equitable,
contractual or other rights of any Entity to acquire or receive any of the
foregoing.
1.67 "LENDER" means a "Lender" as defined in the Pre-Petition Credit
Agreement.
1.68 "LIEN" means a charge against or interest in property to secure
payment of a debt or performance of an obligation.
1.69 "LIQUIDATING TRUST" means the trust created pursuant to Section
5.4 of the Plan and evidenced by the Liquidating Trust Agreement.
1.70 "LIQUIDATING TRUST ADMINISTRATIVE RESERVE" has the meaning set
forth in the Liquidating Trust Agreement.
1.71 "LIQUIDATING TRUST AGREEMENT" means the trust agreement
establishing the Liquidating Trust, substantially in the form attached
hereto as Plan Exhibit A, which shall be approved in the Confirmation Order
and entered into by the Debtors and the Liquidating Trustee on the
Effective Date pursuant to the terms of the Plan. All of the terms and
conditions of the Liquidating Trust Agreement are incorporated into the
Plan and are subject to the terms and provisions of the Plan.
1.72 "LIQUIDATING TRUST ASSETS" has the meaning set forth in the
Liquidating Trust Agreement.
1.73 "LIQUIDATING TRUSTEE" has the meaning set forth in the
Liquidating Trust Agreement.
1.74 "LITIGATION CLAIMS" means the claims, rights, causes of action,
defenses, counterclaims, suits or proceedings, whether in law or in equity,
whether known or unknown, that the Debtors, the Estates or the Bankruptcy
Committees may hold or assert against any Entity, which are to be retained
by the Liquidation Trust pursuant to Section 5.10 of the Plan, including,
without limitation, all claims, rights of action, suits and proceedings
under Chapter 5 of the Bankruptcy Code; provided, however, that "Litigation
Claims" shall not include any Retained Assets.
1.75 "LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Pre-Petition Credit Agreement.
1.76 "MANAGEMENT AGREEMENT" means the agreement entered into by the
Liquidating Trustee and Reorganized Industries on the Effective Date
pursuant to the terms of the Plan and the Liquidating Trust Agreement,
substantially in the form attached hereto as Plan Exhibit B. All of the
terms and conditions of the Management Agreement are incorporated into the
Plan and are subject to the terms and provisions of the Plan.
1.77 "MINORITY FOODS SHARES" means the Old Securities of Foods held by
an Entity other than Industries.
1.78 "NON-DEBTOR SUBSIDIARIES" means, collectively, the direct and
indirect subsidiaries of Industries which have not commenced Chapter 11
cases and thus are not Debtors.
1.79 "OBJECTION DEADLINE" means the last day for filing objections to
Disputed Claims (other than Disputed Professional Fee Claims) or Disputed
Interests, which day shall be 180 days after the Effective Date, unless
such date is extended by the Bankruptcy Court upon request by the
Liquidating Trustee.
1.80 "OLD COMMON SHARES" means the common shares of any of the Debtors
issued and outstanding as of the Petition Date, including, without
limitation, any patronage dividends issued to members, associate members
and/or patrons of any Debtor in the form of common stock, associate member
common stock or capital credits.
1.81 "OLD PREFERRED SHARES" means the preferred shares of any of the
Debtors issued and outstanding as of the Petition Date.
1.82 "OLD SECURITIES" means, collectively, the Old Common Shares, the
Old Preferred Shares, the Old Warrants and the Old Stock Options of any of
the Debtors.
1.83 "OLD STOCK OPTIONS" means the outstanding options to purchase Old
Common Shares or Old Preferred Shares of any of the Debtors issued and
outstanding as of the Petition Date.
1.84 "OLD WARRANTS" means the warrants issued to former patrons of SF
Services, Inc. in conjunction with the merger of Industries and SF
Services, Inc. that entitled the holder to convert such warrants to Old
Common Shares of Industries if certain product purchases were made by such
patron from Industries during the seven year period following such merger.
1.85 "OTHER PRIORITY CLAIM" means a Claim entitled to priority
pursuant to section 507(a) of the Bankruptcy Code other than a Priority Tax
Claim or an Administrative Claim.
1.86 "OTHER SECURED CLAIM" means a Secured Claim against any of the
Debtors, as the case may be, other than the Secured Lender Claims,
including, without limitation, Secured Claims arising under or in
connection with any Industrial Revenue Bonds that are secured by Collateral
and that remain unpaid obligations of the Debtors as of the Effective Date.
1.87 "PBGC" means Pension Benefit Guaranty Corporation.
1.88 "PBGC CLAIMS" means any and all Claims of the PBGC against the
Debtors arising from or related to pension plan termination, unfunded
benefit liability and/or unpaid premiums and any and all Claims of the PBGC
on behalf of any pension plans administered by the Debtors for due and
unpaid minimum funding contributions under Title IV of the Employee
Retirement Income Security Act of 1974, 29 U.S.C. ss.ss. 1301-1461.
1.89 "PERSON" means a "person" as defined in section 101 of the
Bankruptcy Code.
1.90 "PETITION DATE" means the date on which the Debtors filed their
petitions for relief commencing the Chapter 11 Case.
1.91 "PIPELINE" means Farmland Pipe Line Company.
1.92 "PLAN" means this Chapter 11 reorganization plan and all exhibits
and schedules attached hereto or referenced herein, as the same may be
amended, modified or supplemented from time to time.
1.93 "PLAN EXHIBIT" means any exhibit or schedule attached hereto.
1.94 "PLAN RATE" means the applicable legal rate of interest, which
rate shall be established at the Confirmation Hearing.
1.95 "PORK BUSINESS" means the Debtors' pork processing operations,
including, without limitation, substantially all of the assets of Foods.
1.96 "POST-CONFIRMATION COMMITTEE" has the meaning set forth in
Section 5.5 of the Plan.
1.97 "PRE-PETITION CREDIT AGREEMENT" means the Credit Agreement, dated
as of February 7, 2002, by and among Industries and Foods, as borrowers,
the financial institutions party thereto, as lenders, CoBank ACB and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., as co-syndication
agents, Harris Trust & Savings Bank and U.S. Bank National Association, as
co-documentation agents, and Deutsche Bank Trust Company Americas, as
administrative agent.
1.98 "PRIORITY TAX CLAIM" means a Claim that is entitled to priority
pursuant to section 507(a)(8) of the Bankruptcy Code.
1.99 "PRO RATA" means, at any time, the proportion that the Face
Amount of a Claim (or the number of shares representing an Interest) in a
particular Class bears to the aggregate Face Amount of all Claims
(including Disputed Claims) in such Class (or the aggregate number of
shares (including Disputed Interests) representing such Class of
Interests), unless the Plan provides otherwise; provided, however, that
with respect to the Industries Distribution Pool, "Pro Rata" means with
respect to a Claim in Class 4, Class 5 or Class 7, the proportion that the
Face Amount of a Claim in Class 4, Class 5 or Class 7 bears to the
aggregate Face Amount of all Claims (including Disputed Claims) in Classes
4, 5 and 7.
1.100 "PROFESSIONAL" means any professional employed in the Chapter 11
Case pursuant to sections 327 or 1103 of the Bankruptcy Code or otherwise
and any professionals seeking compensation or reimbursement of expenses in
connection with the Chapter 11 Case pursuant to section 503(b)(4) of the
Bankruptcy Code.
1.101 "PROFESSIONAL FEE CLAIM" means a Claim of a Professional for
compensation or reimbursement of costs and expenses relating to services
incurred after the Petition Date and prior to and including the Effective
Date.
1.102 "REGISTER" has the meaning set forth in the Liquidating Trust
Agreement.
1.103 "REIMBURSEMENT RIGHT" has the meaning set forth in Section 7.14
of the Plan.
1.104 "REINSTATED" OR "REINSTATEMENT" means (i) leaving unaltered the
legal, equitable, and contractual rights to which a Claim or Interest
entitles the holder of such Claim or Interest so as to leave such Claim or
Interest unimpaired in accordance with section 1124 of the Bankruptcy Code
or (ii) notwithstanding any contractual provision or applicable law that
entitles the holder of such Claim or Interest to demand or receive
accelerated payment of such Claim or Interest after the occurrence of a
default (a) curing any such default that occurred before or after the
Petition Date, other than a default of a kind specified in section
365(b)(2) of the Bankruptcy Code; (b) reinstating the maturity of such
Claim or Interest as such maturity existed before such default; (c)
compensating the holder of such Claim or Interest for any damages incurred
as a result of any reasonable reliance by such holder on such contractual
provision or such applicable law; and (d) not otherwise altering the legal,
equitable, or contractual rights to which such Claim or Interest entitles
the holder of such Claim or Interest; provided, however, that any
contractual right that does not pertain to the payment when due of
principal and interest on the obligation on which such Claim or Interest is
based, including, but not limited to, financial covenant ratios, negative
pledge covenants, covenants or restrictions on merger or consolidation, and
affirmative covenants regarding corporate existence prohibiting certain
transactions or actions contemplated by the Plan, or conditioning such
transactions or actions on certain factors, shall not be required to be
reinstated in order to accomplish Reinstatement.
1.105 "REORGANIZED INDUSTRIES" means Industries, as reorganized on and
after the Effective Date.
1.106 "RETAINED ASSETS" means those assets of Industries identified on
Plan Exhibit D, which assets shall be retained by and vested in Reorganized
Industries on the Effective Date.
1.107 "SCHEDULES" means the schedules of assets and liabilities and
the statements of financial affairs, if any, filed in the Bankruptcy Court
by the Debtors as such schedules or statements may be amended or
supplemented from time to time in accordance with Fed. R. Bankr. P. 1009 or
orders of the Bankruptcy Court.
1.108 "SECURED CLAIM" means a Claim that is secured by a Lien on
property in which an Estate has an interest or that is subject to setoff
under section 553 of the Bankruptcy Code, to the extent of the value of the
Claim holder's interest in the Estate's interest in such property or to the
extent of the amount subject to setoff, as applicable, as determined
pursuant to section 506(a) of the Bankruptcy Code.
1.109 "SECURED LENDER CLAIMS" means the Claims of the Lenders arising
under or as a result of the Pre-Petition Credit Agreement and the Loan
Documents.
1.110 "SF PHOSPHATES INTEREST" means Industries' ownership interest in
SF Phosphates, Limited Company.
1.111 "SFA" means SFA, Inc.
1.112 "SUBORDINATED CERTIFICATES" means: (a) 5 Year Subordinated
Capital Investment Certificates issued under the Indenture dated November
8, 1984, as amended by Amendment No. 1 dated January 3, 1985, as further
amended by Amendment No. 2 dated December 3, 1991, with an original
authorized principal amount of $500,000,000.00; (b) 10 Year Subordinated
Capital Investment Certificates issued under the Indenture dated November
8, 1984, as amended by Amendment No. 1 dated January 3, 1985, as further
amended by Amendment No. 2 dated December 3, 1991, with an original
authorized principal amount of $500,000,000.00; (c) 20 Year Subordinated
Capital Investment Certificates issued under the Indenture dated November
8, 1984, as amended by Amendment No. 1 dated January 3, 1985, as further
amended by Amendment No. 2 dated December 3, 1991, with an original
authorized principal amount of $500,000,000.00; (d) 10 Year Subordinated
Monthly Income Capital Investment Certificates issued under the Indenture
dated November 8, 1984, as amended by Amendment No. 1 dated January 3,
1985, as further amended by Amendment No. 2 dated December 3, 1991, with an
original authorized principal amount of $500,000,000.00; (e) 10 Year
Subordinated Individual Retirement Account Certificates issued under the
Indenture dated November 8, 1984, as amended by Amendment No. 1 dated
January 3, 1985, as further amended by Amendment No. 2 dated December 3,
1991, with an original authorized principal amount of $500,000,000.00; (f)
5 Year Subordinated Monthly Income Capital Investment Certificates issued
under the Indenture dated November 11, 1985, with an original authorized
principal amount of $500,000,000.00; and (g) Series A through Series H
Subordinated Debenture Bonds issued under a Subordinated Indenture dated
December 4, 1997, with an unlimited authorized aggregate principal amount.
1.113 "SUBORDINATED CERTIFICATES CLAIM" means a Claim arising out of
or related to the Subordinated Certificates.
1.114 "SUBORDINATED CLAIMS" means any Claim arising from, related to
or on account of any Old Security of Industries that is subordinated
pursuant to sections 510(b) or (c) of the Bankruptcy Code, which shall
include any Claim arising from the rescission of a purchase or sale of any
Old Security of Industries, any Claim for damages arising from the purchase
or sale of an Old Security of Industries, any Claim for reimbursement,
contribution or indemnification on account of any such Claim, or any Claim
arising out of or related to the rejection of Old Warrants.
1.115 "SUBSEQUENT DISTRIBUTION DATE" has the meaning set forth in
Section 7.5 of the Plan.
1.116 "SUBSIDIARIES" mean, collectively, the Subsidiary Debtors and
the Non-Debtor Subsidiaries.
1.117 "SUBSIDIARY DEBTORS" means, collectively, Farmland Foods, Inc.,
Farmland Transportation, Inc., SFA, Inc. and Farmland Pipe Line Company.
1.118 "SUBSIDIARY INTERESTS" means, collectively, the issued and
outstanding shares of common stock of the Subsidiary Debtors directly or
indirectly owned by Industries, as of the Petition Date.
1.119 "SUBSTANTIAL CONTRIBUTION CLAIM" means a claim for compensation
or reimbursement of expenses incurred in making a substantial contribution
in the Chapter 11 Case pursuant to section 503(b)(3),(4), or (5) of the
Bankruptcy Code.
1.120 "TRANSPORTATION" means Farmland Transportation, Inc.
1.121 "TRUST INDENTURES" means: (a) Indenture dated November 20, 1981,
as amended January 4, 1982, providing for the issuance of demand loan
certificates; (b) Indenture dated November 8, 1984, as amended by Amendment
No. 1 dated January 3, 1985, as further amended by Amendment No. 2 dated
December 3, 1991, providing for the issuance of 5 Year Subordinated Capital
Investment Certificates; (c) Indenture dated November 8, 1984, as amended
by Amendment No. 1 dated January 3, 1985, as further amended by Amendment
No. 2 dated December 3, 1991, providing for the issuance of 10 Year
Subordinated Capital Investment Certificates; (d) Indenture dated November
8, 1984, as amended by Amendment No. 1 dated January 3, 1985, as further
amended by Amendment No. 2 dated December 3, 1991, providing for the
issuance of 20 Year Subordinated Monthly Income Capital Investment
Certificates; (e) Indenture dated November 8, 1984, as amended by Amendment
No. 1 dated January 3, 1985, as further amended by Amendment No. 2 dated
December 3, 1991, providing for the issuance of 10 Year Subordinated
Monthly Income Capital Investment Certificates; (f) Indenture dated
November 8, 1984, as amended by Amendment No. 1 dated January 3, 1985, as
further amended by Amendment No. 2 dated December 3, 1991, providing for
the issuance of 10 Year Subordinated Individual Retirement Account
Certificates; (g) Indenture dated November 11, 1985, providing for the
issuance of 5 Year Subordinated Monthly Income Capital Investment
Certificates; (h) Indenture dated December 4, 1997, providing for the
issuance of unsubordinated debt securities, including demand loan
certificates; (i) Subordinated Indenture dated December 4, 1997, providing
for the issuance of subordinated debt securities in series; and (j) the
trust indentures for each issue of Industrial Revenue Bonds.
1.122 "UNIMPAIRED" means, when used with reference to a Claim or
Interest, a Claim or Interest that is not Impaired. 1.123 "VOTING RECORD
DATE" means the voting record date for voting to accept or reject the Plan,
as determined by the Bankruptcy Court.
C. RULES OF INTERPRETATION
-----------------------
For purposes of the Plan (a) any reference in the Plan to a contract,
instrument, release, indenture, or other agreement or documents being in a
particular form or on particular terms and conditions means that such
document shall be substantially in such form or substantially on such terms
and conditions, (b) any reference in the Plan to an existing document or
exhibit filed or to be filed means such document or exhibit as it may have
been or may be amended, modified, or supplemented, (c) unless otherwise
specified, all references in the Plan to sections, articles, schedules, and
exhibits are references to sections, articles, schedules, and exhibits of
or to the Plan, (d) the words "herein", "hereof", "hereunder", "hereto" and
other words of similar import refer to the Plan in its entirety rather than
to a particular portion of the Plan, (e) captions and headings to articles
and sections are inserted for convenience of reference only and are not
intended to be a part of or to affect the interpretation of the Plan, and
(f) the rules of construction set forth in section 102 of the Bankruptcy
Code and in the Bankruptcy Rules shall apply.
D. COMPUTATION OF TIME
-------------------
In computing any period of time prescribed or allowed by the Plan, the
provisions of Fed. R. Bankr. P. 9006(a) shall apply.
E. GOVERNING LAW
-------------
Unless a rule of law or procedure is supplied by federal law
(including the Bankruptcy Code and Bankruptcy Rules), the laws of (i) the
State of Delaware shall govern the construction and implementation of the
Plan and any agreements, documents, and instruments executed in connection
with the Plan and (ii) the laws of the state of incorporation of each
Debtor shall govern corporate governance matters with respect to such
Debtor, in either case without giving effect to the principles of conflicts
of law thereof. Nothing contained in this Section I.E is intended to, or
shall, affect the substantive law otherwise applicable to the allowance or
disallowance of a Claim or Interest or the rights granted to the
Liquidating Trustee, including, without limitation, those rights granted
pursuant to Section 5.10 of the Plan.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims, Priority Tax Claims and DIP Loan Claims have not
been classified, and the respective treatment of such unclassified claims
is set forth in Section 3.1 of the Plan.
A Claim or Interest is placed in a particular Class only to the extent
that the Claim or Interest falls within the description of that Class. A
Claim or Interest may be and is classified in other Classes to the extent
that any portion of the Claim or Interest falls within the description of
such other Classes. A Claim or Interest is also placed in a particular
Class for the purpose of receiving distributions pursuant to the Plan only
to the extent that such Claim or Interest is an Allowed Claim or Allowed
Interest in that Class and such Claim or Interest has not been paid,
released, or otherwise settled prior to the Effective Date.
The Plan, though proposed jointly, constitutes a separate plan
proposed by each Debtor. Therefore, the classifications set forth below
shall be deemed to apply separately (as appropriate) with respect to each
such plan.
2.1 CLASS 1 (OTHER PRIORITY CLAIMS)
Class 1 consists of all Other Priority Claims.
2.2 CLASS 2 (SECURED LENDER CLAIMS)
Class 2 consists of all Secured Lender Claims.
2.3 CLASS 3 (OTHER SECURED CLAIMS)
Class 3 consists of all Other Secured Claims.
2.4 CLASS 4 (DEMAND CERTIFICATES CLAIMS)
Class 4 consists of all Demand Certificates Claims.
2.5 CLASS 5 (SUBORDINATED CERTIFICATES CLAIMS)
Class 5 consists of all Subordinated Certificates Claims.
2.6 CLASS 6 (CONVENIENCE CLAIMS AGAINST INDUSTRIES)
Class 6 consists of all Convenience Claims against Industries.
2.7 CLASS 7 (GENERAL UNSECURED CLAIMS AGAINST INDUSTRIES)
Class 7 consists of all General Unsecured Claims against
Industries.
2.8 CLASS 8 (INDUSTRIES PREFERRED SHARES)
Class 8 consists of all Industries Preferred Shares.
2.9 CLASS 9 (INDUSTRIES COMMON SHARES)
Class 9 consists of all Industries Common Shares.
2.10 CLASS 10 (GENERAL UNSECURED CLAIMS AGAINST FOODS)
Class 10 consists of all General Unsecured Claims against Foods.
2.11 CLASS 11 (OLD SECURITIES OF FOODS)
Class 11 consists of all Old Securities of Foods.
2.12 CLASS 12 (GENERAL UNSECURED CLAIMS AGAINST TRANSPORTATION)
Class 12 consists of all General Unsecured Claims against
Transportation.
2.13 CLASS 13 (OLD SECURITIES OF TRANSPORTATION)
Class 13 consists of all Old Securities of Transportation.
2.14 CLASS 14 (GENERAL UNSECURED CLAIMS AGAINST SFA)
Class 14 consists of all General Unsecured Claims against SFA.
2.15 CLASS 15 (OLD SECURITIES OF SFA)
Class 15 consists of all Old Securities of SFA.
2.16 CLASS 16 (GENERAL UNSECURED CLAIMS AGAINST PIPELINE)
Class 16 consists of all General Unsecured Claims against
Pipeline.
2.17 CLASS 17 (OLD SECURITIES OF PIPELINE)
Class 17 consists of all Old Securities of Pipeline.
2.18 CLASS 18 (INTERCOMPANY CLAIMS)
Class 18 consists of all Intercompany Claims.
2.19 CLASS 19 (SUBORDINATED CLAIMS)
Class 19 consists of all Subordinated Claims.
2.20 CLASS 20 (PBGC CLAIMS)
Class 20 consists of the PBGC Claims.
ARTICLE III
TREATMENT OF CLAIMS AND INTERESTS
3.1 UNCLASSIFIED CLAIMS
(a) Administrative Claims
Except as otherwise provided for herein, and subject to the
requirements of Sections 11.1-11.3 of the Plan, on, or as soon as
reasonably practicable after, the latest of (i) the Initial Distribution
Date, (ii) the date such Administrative Claim becomes an Allowed
Administrative Claim, or (iii) the date such Administrative Claim becomes
payable pursuant to any agreement between a Debtor (with the consent of the
Bankruptcy Committees) or the Liquidating Trustee, as the case may be, and
the holder of such Administrative Claim, each holder of an Allowed
Administrative Claim shall receive in full satisfaction, settlement,
release, and discharge of and in exchange for such Allowed Administrative
Claim (x) Cash equal to the unpaid portion of such Allowed Administrative
Claim or (y) such other treatment as to which a Debtor (with the consent of
the Bankruptcy Committees) or the Liquidating Trustee, as the case may be,
and such holder shall have agreed upon in writing; provided, however, that
Allowed Administrative Claims with respect to liabilities incurred by a
Debtor in the ordinary course of business during the Chapter 11 Case shall
be paid in the ordinary course of business in accordance with the terms and
conditions of any agreements relating thereto.
(b) Priority Tax Claims
Except as otherwise provided for herein, on, or as soon as reasonably
practicable after, the latest of (i) the Initial Distribution Date, (ii)
the date such Priority Tax Claim becomes an Allowed Priority Tax Claim, or
(iii) the date such Priority Tax Claim becomes payable pursuant to any
agreement between a Debtor (with the consent of the Bankruptcy Committees)
or the Liquidating Trustee, as the case may be, and the holder of such
Priority Tax Claim, each holder of an Allowed Priority Tax Claim shall
receive in full satisfaction, settlement, release, and discharge of and in
exchange for such Allowed Priority Tax Claim (x) Cash equal to the unpaid
portion of such Allowed Priority Tax Claim or (y) such other treatment as
to which a Debtor (with the consent of the Bankruptcy Committees) or the
Liquidating Trustee, as the case may be, and such holder shall have agreed
upon in writing.
(c) DIP Loan Claims
If then outstanding on the Effective Date, the DIP Loan Claims shall
be paid in full on the Effective Date according to the terms of the DIP
Credit Agreement. Notwithstanding anything in the Plan to the contrary, the
DIP Loan Claims shall have the superpriority status set forth in the orders
authorizing and evidencing the DIP Loan Claims.
(d) Fees and Expenses of the Indenture Trustees
The Indenture Trustees must file all requests for compensation or
reimbursement of unpaid fees and expenses for services rendered prior to
the Effective Date with the Bankruptcy Court and must serve such requests
no later than 45 days after the Effective Date. Objections to such requests
must be filed and served no later than 30 days (or such longer period as
may be allowed by order of the Bankruptcy Court) after the date on which
the applicable request was served.
3.2 CLASS 1 (OTHER PRIORITY CLAIMS)
On, or as soon as reasonably practicable after, the latest of (i) the
Initial Distribution Date, (ii) the date such Claim becomes an Allowed
Class 1 Claim, or (iii) the date such Class 1 Claim becomes payable
pursuant to any agreement between a Debtor (with the consent of the
Bankruptcy Committees) or the Liquidating Trustee, as the case may be, and
the holder of such Class 1 Claim, each holder of an Allowed Class 1 Claim
shall receive, in full satisfaction, settlement release, and discharge of
and in exchange for such Allowed Class 1 Claim (x) Cash equal to the unpaid
portion of such Allowed Class 1 Claim or (y) such other treatment as to
which a Debtor (with the consent of the Bankruptcy Committees) or the
Liquidating Trustee, as the case may be, and such holder shall have agreed
upon in writing. The legal, equitable and contractual rights of the holders
of Allowed Class 1 Claims are Unimpaired by the Plan.
3.3 CLASS 2 (SECURED LENDER CLAIMS)
On the Effective Date, the Allowed Secured Lender Claims, if any,
shall be satisfied and paid in full in the amount of said Claims then
outstanding. Net cash proceeds from Section 363 asset sales prior to the
Confirmation Date shall be remitted for application against the Secured
Lender Claims. The Secured Lender Claims, if any, outstanding on the
Effective Date shall be paid in full in Cash from net cash proceeds from
Section 363 asset sales that occur after the Confirmation Date and prior to
the Effective Date. Nothing in the Plan shall alter or affect any
intermediate payments made by the Debtors to the Secured Lenders prior to
the Effective Date. Class 2 is Unimpaired by the Plan.
3.4 CLASS 3 (OTHER SECURED CLAIMS)
On or as soon as reasonably practicable after the Effective Date, each
holder of an Allowed Class 3 Claim shall receive one of the following
distributions: (a) payment of such holder's Allowed Other Secured Claim in
full in Cash; (b) the sale or disposition proceeds of the Collateral
securing such Allowed Other Secured Claim to the extent of the value of the
Debtors' interest in such Collateral; (c) the surrender of the Collateral
securing such Allowed Other Secured Claim to the holder of such Allowed
Other Secured Claim; (d) the Reinstatement of such Allowed Other Secured
Claim; or (e) such other distribution or treatment as shall be necessary to
satisfy the requirements of the Bankruptcy Code. The manner and treatment
of each Allowed Other Secured Claim shall be determined by the Liquidating
Trustee in his sole and absolute discretion. Nothing in this Section 3.4 or
elsewhere in the Plan shall preclude the Liquidating Trustee from
challenging the validity of any alleged Lien on any asset of a Debtor or
the value of such Collateral. The legal, equitable and contractual rights
of the holders of Allowed Class 3 Claims are Unimpaired by the Plan.
3.5 CLASS 4 (DEMAND CERTIFICATES CLAIMS)
As of the Effective Date, all notes, instruments and other document
evidencing the Demand Certificates shall be deemed canceled without further
act or action under any applicable agreement, law, regulation, order or
rule, and the Demand Certificates evidenced thereby shall be extinguished.
In accordance with the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 4 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 4 Claim, (i) its Pro Rata share of the
Industries Distribution Pool plus (ii) its Pro Rata share of any funds that
would otherwise be payable to holders of Allowed Class 5 Claims, in an
amount necessary to pay its Allowed Claim 4 Claim in full in accordance
with any relevant agreement or applicable law, including the Bankruptcy
Code. Class 4 is Impaired by the Plan.
3.6 CLASS 5 (SUBORDINATED CERTIFICATES CLAIMS)
As of the Effective Date, all notes, instruments and other document
evidencing the Subordinated Certificates shall be deemed canceled without
further act or action under any applicable agreement, law, regulation,
order or rule, and the Subordinated Certificates evidenced thereby shall be
extinguished. In accordance with provisions of Article VII of the Plan and
the Liquidating Trust Agreement, each holder of an Allowed Class 5 Claim
shall receive, in full satisfaction, settlement, release and discharge of
and in exchange for such Allowed Class 5 Claim, (i) its Pro Rata share of
the Industries Distribution Pool less (ii) those funds payable to holders
of Allowed Class 4 Claims in accordance with Section 3.5 of the Plan. Class
5 is Impaired by the Plan.
3.7 CLASS 6 (CONVENIENCE CLAIMS AGAINST INDUSTRIES)
Subject to the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 6 Claim shall
receive, in full satisfaction, settlement, release, and discharge of and in
exchange for such Allowed Class 6 Claim, Cash equal to the amount of such
Allowed Claim. Class 6 is Unimpaired by the Plan.
3.8 CLASS 7 (GENERAL UNSECURED CLAIMS AGAINST INDUSTRIES)
Subject to the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 7 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 7 Claim, its Pro Rata share of the
Industries Distribution Pool. Class 7 is Impaired by the Plan.
3.9 CLASS 8 (INDUSTRIES PREFERRED SHARES)
The Industries Preferred Shares shall be Reinstated on the Effective
Date. Notwithstanding such Reinstatement and in accordance with applicable
law, no distribution shall be made on account of the Industries Preferred
Shares until all Administrative Claims against Industries, all Priority Tax
Claims against Industries, all Class 1 Claims against Industries, all Class
3 Claims against Industries, all Class 4 Claims, all Class 5 Claims, all
Class 7 Claims, all Class 18 Claims against Industries and all Class 20
Claims against Industries have been (i) Allowed and paid in full
(including, with respect to Classes 4, 5, and 7, payment of interest at the
Plan Rate), (ii) disallowed or (iii) withdrawn, and all Intercompany
Advances payable by Industries have been repaid. Class 8 is Unimpaired by
the Plan.
3.10 CLASS 9 (INDUSTRIES COMMON SHARES)
On the Effective Date (or such later date(s) as may be determined by
the Liquidating Trustee), (i) that amount of Industries Common Shares whose
cancellation, in the Debtors' reasonable judgment, can be offset in full
against appropriate losses and net operating losses shall be deemed
canceled on a Pro Rata basis without further act or action under any
applicable agreement, law, regulation, order or rule, and the Industries
Common Shares evidenced thereby shall be extinguished, and (ii) any
remaining Industries Common Shares shall be Reinstated. Notwithstanding
such Reinstatement and in accordance with applicable law, no distribution
shall be made on account of any remaining Industries Common Shares until
all Administrative Claims against Industries, all Priority Tax Claims
against Industries, all Class 1 Claims against Industries, all Class 3
Claims against Industries, all Class 4 Claims, all Class 5 Claims, all
Class 7 Claims, all Interests in Class 8, all Class 18 Claims against
Industries, all Class 20 Claims against Industries have been (i) Allowed
and paid in full (including, with respect to Classes 4, 5 and 7, payment of
interest at the Plan Rate), (ii) disallowed or (iii) withdrawn, and all
Intercompany Advances payable by Industries have been repaid. In accordance
with and as provided by the Plan, any remaining Industries Common Shares
shall be deemed to continue in effect and shall not be deemed canceled or
extinguished under any other law or regulation. Class 9 is Impaired by the
Plan.
3.11 CLASS 10 (GENERAL UNSECURED CLAIMS AGAINST FOODS)
Subject to the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 10 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 10 Claim, Cash equal to the amount of its
Allowed Class 10 Claim plus interest at the Plan Rate from the Petition
Date through the Effective Date. Class 10 is Impaired by the Plan.
3.12 CLASS 11 (OLD SECURITIES OF FOODS)
As of the Effective Date, the stock certificates and other instruments
evidencing the Old Securities of Foods shall be deemed canceled without
further act or action under any applicable agreement, law, regulation,
order or rule, the Old Securities of Foods evidenced thereby shall be
extinguished, and Foods shall be merged into Industries. The holders of
Allowed Class 11 Interests that constitute Minority Foods Shares shall
receive their Pro Rata share of the Class 11 Distribution Pool. Class 11 is
Impaired by the Plan.
3.13 CLASS 12 (GENERAL UNSECURED CLAIMS AGAINST TRANSPORTATION)
Subject to the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 12 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 12 Claim, Cash equal to the amount of its
Allowed Class 12 Claim. Class 12 is Impaired by the Plan.
3.14 CLASS 13 (OLD SECURITIES OF TRANSPORTATION)
As of the Effective Date, the stock certificates and other instruments
evidencing the Old Securities of Transportation shall be deemed canceled
without further act or action under any applicable agreement, law,
regulation, order or rule, and the Old Securities of Transportation
evidenced thereby shall be extinguished. Any Cash remaining in the Estate
of Transportation after all Administrative Claims against Transportation,
all Priority Tax Claims against Transportation, all Class 1 Claims against
Transportation, all Class 3 Claims against Transportation, all Class 12
Claims, all Class 18 Claims against Transportation and all Class 20 Claims
against Transportation have been (i) Allowed and paid, (ii) disallowed or
(iii) withdrawn, and all Intercompany Advances payable by Transportation
have been repaid, shall vest in the Liquidating Trust. Class 13 is Impaired
by the Plan.
3.15 CLASS 14 (GENERAL UNSECURED CLAIMS AGAINST SFA)
Subject to the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 14 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 14 Claim, Cash equal to the amount of its
Allowed Class 14 Claim. Class 14 is Impaired by the Plan.
3.16 CLASS 15 (OLD SECURITIES OF SFA)
As of the Effective Date, the stock certificates and other instruments
evidencing the Old Securities of SFA shall be deemed canceled without
further act or action under any applicable agreement, law, regulation,
order or rule, and the Old Securities of SFA evidenced thereby shall be
extinguished. Any Cash remaining in the Estate of SFA after all
Administrative Claims against SFA, all Priority Tax Claims against SFA, all
Class 1 Claims against SFA, all Class 3 Claims against SFA, all Class 14
Claims, all Class 18 Claims against SFA and all Class 20 Claims against SFA
have been (i) Allowed and paid, (ii) disallowed or (iii) withdrawn, and all
Intercompany Advances payable by SFA have been repaid, shall vest in the
Liquidating Trust. Class 15 is Impaired by the Plan.
3.17 CLASS 16 (GENERAL UNSECURED CLAIMS AGAINST PIPELINE)
Subject to the provisions of Article VII of the Plan and the
Liquidating Trust Agreement, each holder of an Allowed Class 16 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 16 Claim, Cash equal to the amount of its
Allowed Class 16 Claim. Class 16 is Impaired by the Plan.
3.18 CLASS 17 (OLD SECURITIES OF PIPELINE)
As of the Effective Date, the stock certificates and other instruments
evidencing the Old Securities of Pipeline shall be deemed canceled without
further act or action under any applicable agreement, law, regulation,
order or rule, and the Old Securities of Pipeline evidenced thereby shall
be extinguished. Any Cash remaining in the Estate of Pipeline after all
Administrative Claims against Pipeline, all Priority Tax Claims against
Pipeline, all Class 1 Claims against Pipeline, all Class 3 Claims against
Pipeline, all Class 16 Claims, all Class 18 Claims against Pipeline and all
Class 20 Claims against Pipeline have been (i) Allowed and paid, (ii)
disallowed or (iii) withdrawn, and all Intercompany Advances payable by
Pipeline have been repaid, shall vest in the Liquidating Trust. Class 17 is
Impaired by the Plan.
3.19 CLASS 18 (INTERCOMPANY CLAIMS)
On or as soon as reasonably practicable after the Effective Date, each
holder of an Allowed Class 18 Claim shall receive, in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed Class
18 Claim, (x) Cash equal to the unpaid portion of such Allowed Class 18
Claim or (y) such other treatment as to which the Debtors or the
Liquidating Trustee, as the case may be, and such holder shall have agreed
upon in writing. Class 18 is Impaired by the Plan.
3.20 CLASS 19 (SUBORDINATED CLAIMS)
In accordance with section 510(b) and (c) of the Bankruptcy Code, no
distribution shall be made on account of the Subordinated Claims until all
Administrative Claims against Industries, all Priority Tax Claims against
Industries, all Class 1 Claims against Industries, all Class 3 Claims
against Industries, all Class 4 Claims, all Class 5 Claims, all Class 7
Claims, all Interests in Class 8, all Class 18 Claims against Industries,
all Class 20 Claims against Industries have been (i) Allowed and paid in
full (including, with respect to Classes 4, 5 and 7, payment of interest at
the Plan Rate), (ii) disallowed or (iii) withdrawn, and all Intercompany
Advances payable by Industries have been repaid. Class 19 is Impaired by
the Plan.
3.21 CLASS 20 (PBGC CLAIMS)
The Allowed Class 20 Claims shall be satisfied by either (i) Cash
payments equal to the amount of such Allowed Class 20 Claims (as such
amount may be adjudicated, estimated by the Bankruptcy Court or mutually
agreed by the Debtors and the PBGC), or (ii) the underlying pension plans,
as may be modified prior to the Effective Date, remaining in full force and
effect. Class 20 is Unimpaired by the Plan.
3.22 RESERVATION OF RIGHTS REGARDING CLAIMS
Except as otherwise explicitly provided in the Plan, nothing shall
affect the Debtors' or the Liquidating Trustee's rights and defenses, both
legal and equitable, with respect to any Claims, including, but not limited
to, all rights with respect to legal and equitable defenses to alleged
rights of setoff or recoupment.
ARTICLE IV
ACCEPTANCE OR REJECTION OF THE PLAN
4.1 IMPAIRED CLASSES OF CLAIMS AND INTERESTS ENTITLED TO VOTE
Subject to Section 4.3 of the Plan, Claim and Interest holders in each
Impaired Class of Claims or Interests are entitled to vote as a class to
accept or reject the Plan.
4.2 ACCEPTANCE BY AN IMPAIRED CLASS
In accordance with section 1126(c) of the Bankruptcy Code and except
as provided in section 1126(e) of the Bankruptcy Code, an Impaired Class of
Claims shall have accepted the Plan if the Plan is accepted by the holders
of at least two-thirds in dollar amount and more than one-half in number of
the Allowed Claims of such Class that have timely and properly voted to
accept or reject the Plan.
4.3 PRESUMED ACCEPTANCES
Classes 1, 2, 3, 6, 8 and 20 are Unimpaired by the Plan. Under section
1126(f) of the Bankruptcy Code, such Claim and Interest holders are
conclusively presumed to accept the Plan, and the votes of such Claim and
Interest holders will not be solicited. Classes 13, 15, 17 and 18 are
conclusively presumed to accept the Plan because the Claim and Interest
holders in such Classes are the proponents of the Plan.
4.4 SUMMARY OF CLASSES VOTING ON THE PLAN
As a result of the provisions of Sections 4.1, 4.3 and 4.4 of the
Plan, the votes of holders of Claims in Classes 4, 5, 7, 9, 10, 11, 12, 14,
16 and 19 will be solicited with respect to the Plan.
4.5 CONFIRMATION PURSUANT TO SECTION 1129(b) OF THE BANKRUPTCY CODE
To the extent that any Impaired Class rejects the Plan or is deemed to
have rejected the Plan, the Debtors will request confirmation of the Plan,
as it may be modified from time to time, under section 1129(b) of the
Bankruptcy Code.
ARTICLE V
MEANS FOR IMPLEMENTATION OF THE PLAN
5.1 CONTINUED EXISTENCE OF THE DEBTORS; VESTING OF ASSETS
(a) From and after the Confirmation Date and through the
Effective Date, the Debtors shall continue in existence solely for the
purpose of (subject to approval of the Bankruptcy Committees) (i)
winding up their affairs as expeditiously as reasonably possible, (ii)
liquidating, by conversion to Cash or other methods, any remaining
assets of their Estates, as expeditiously as reasonably possible,
including liquidating the assets of the Non-Debtor Subsidiaries, (iii)
in accordance with section 1123(b)(3)(B) of the Bankruptcy Code,
retaining, enforcing and prosecuting claims, interests, rights and
privileges of the Debtors, including, without limitation, the
prosecution of Litigation Claims in conjunction with the marshaling of
assets of the Debtors, (iv) resolving Disputed Claims, and (v) taking
all prudent actions to comply with tax laws and minimize tax costs to
their Estates, including filing all appropriate tax returns and
eliminating the Intercompany Claims between the Debtors.
(b) From and after the Confirmation Date and through the
Effective Date, each then current officer of the Debtors shall
continue to serve in his or her respective capacity through the
earlier of the Effective Date and the date such officer resigns, is
replaced or is terminated.
(c) On the Effective Date, all right, title and interest in
all of the Debtors' property and assets (excluding the Retained
Assets), including without limitation, all rights and causes of
action, whether arising by contract, under the Bankruptcy Code
(including, without limitation pursuant to Section 1123(b)(3)(B) of
the Bankruptcy Code), under the Plan or under other applicable law,
including, without limitation, all rights the Debtors have under the
Plan, shall vest in the Liquidating Trust.
(d) On the Effective Date, Foods shall be merged into
Industries, after which Industries shall continue to exist as
Reorganized Industries. Reorganized Industries shall be governed and
managed in accordance with the Management Agreement. Reorganized
Industries shall be authorized to effectuate the Plan and the
transactions contemplated by the Plan and to take any proceedings or
actions provided for or contemplated by the Plan, including, without
limitation, such proceedings or actions related to the Retained Assets
as may be necessary and appropriate, all without further action by the
stockholders of Reorganized Industries, and with like effect as if
such actions had been taken by unanimous action of the stockholders of
Reorganized Industries. The operations of Reorganized Industries shall
be funded from the Liquidating Trust Administrative Reserve. All
recoveries received by Reorganized Industries on account of the
Retained Assets or any other assets of the Debtors shall be remitted
to the Liquidating Trust and held by the Liquidating Trustee on
account of the Estate to which such recoveries are allocable. Forms of
the amended certificate of incorporation and bylaws of Reorganized
Industries shall be filed with the Bankruptcy Court prior to the
Confirmation Hearing.
(e) On the Effective Date, SFA, Transportation and Pipeline
shall be deemed dissolved for all purposes without the necessity for
any other or further actions to be taken by or on behalf of the
Debtors or payments to be made in connection therewith; provided,
however, that the Debtors shall file with the appropriate public
office certificates of dissolution.
(f) From and after the Effective Date, the Debtors shall not
be required to file any document, or take any other action, to
withdraw their business operation from any state in which the Debtors
were previously conducting their business operation.
5.2 FUNDING FOR THE PLAN
The Plan shall be funded in accordance with the provisions of the Plan
from (a) Available Cash on the Effective Date and (b) Cash available after
the Effective Date from, among other things, the liquidation of the
Debtors' remaining assets, the prosecution and enforcement of Litigation
Claims, and any release of funds from the Disputed Claims Reserve after the
Effective Date. All Available Cash realized from the liquidation of the
Debtors' remaining assets that is not Collateral for the Secured Lender
Claims or DIP Loan Claims, the prosecution and enforcement of Litigation
Claims, and the release of funds from the Disputed Claims Reserve (to the
extent not otherwise payable to the Pre-Petition Lenders or the DIP
Lenders) shall be allocated to the appropriate Estate(s) and shall be
maintained by the Liquidating Trustee for distribution to the holders of
Allowed Claims as provided in the Plan and the Liquidating Trust Agreement.
5.3 ACCOUNTS
The Debtors (subject to approval of the Bankruptcy Committees, which
approval shall not be unreasonably withheld) and, from and after the
Effective Date, the Liquidating Trustee may establish or maintain one or
more interest-bearing accounts as they determine may be necessary or
appropriate to effectuate the provisions of the Plan consistent with
section 345 of the Bankruptcy Code and any orders of the Bankruptcy Court.
5.4 LIQUIDATING TRUST; LIQUIDATING TRUSTEE
(a) Prior to the Effective Date, the Debtors shall establish
the Liquidating Trust in accordance with Sections 5.1(c) herein and
subject to the terms of the Liquidating Trust Agreement and the Plan.
The Bankruptcy Committees shall establish the Post-Confirmation
Committee and appoint the Committee Members in accordance with the
Liquidating Trust Agreement and the Plan. By Confirmation of the Plan,
the Bankruptcy Court specifically approves and designates the
Liquidating Trust and the Liquidating Trustee as a representative of
each Estate and finds that the Liquidating Trust and the Liquidating
Trustee are acting on behalf of and for the benefit of the
Beneficiaries in accordance with the distribution scheme set forth in
the Plan. The establishment of the Liquidating Trust shall not give a
holder of a Claim against any Debtor or any Estate any rights as
against any other Debtor or any other Estate, except as provided for
in Section 7.11 of the Plan. The Liquidating Trust is an intended
third-party beneficiary of the Plan to the fullest extent allowable
under the laws of the State of Delaware, the laws of the United States
or any other applicable law.
(b) The Liquidating Trust and the Liquidating Trustee, as
the representative of each Estate, except as otherwise limited in the
Liquidating Trust Agreement, Plan or the Confirmation Order, shall be
vested with all property, rights, interests, and powers of the
Debtors. Subject to the provisions of the Liquidating Trust Agreement,
the Liquidating Trustee's rights and authority include, without
limitation, all of the following:
(i) control, management and disposal of all Liquidating
Trust Assets for the benefit of the holders of Allowed Claims who
may receive distributions under the Plan;
(ii) prosecution of Litigation Claims on behalf of the
Debtors and/or the Estates and/or the Liquidating Trust,
including preference, fraudulent conveyance, avoidance and other
actions whether against insiders or any other third parties;
(iii) filing of objections to Claims or actions to
subordinate Claims or recharacterize debt as equity and the
filing and pursuit of any other pleading, motion, stipulation or
other item in connection with any matter arising under, in or in
connection with the Chapter 11 Case;
(iv) filing of tax returns;
(v) transfer (subject to Bankruptcy Court approval) of
right, title and interest in and to any Liquidating Trust Assets;
and
(vi) undertake any other action in the best interests
of the Trust and/or its beneficiaries and not inconsistent with
the provisions of the Liquidating Trust Agreement, the Plan, and
the Confirmation Order.
(c) The funding of the Liquidating Trust pursuant to Section
5.1(c) hereof shall be treated for all purposes of the Tax Code as a
deemed transfer to the Beneficiaries, followed by a deemed transfer by
the Beneficiaries to the Liquidating Trust. The Beneficiaries shall be
treated as the grantors and deemed owners of the Liquidating Trust.
The valuation of the property and assets transferred to the
Liquidating Trust shall be consistent and shall be used for all
federal income tax purposes.
(d) Neither the Liquidating Trust nor the Liquidating
Trustee shall have any successor or transferee liability for
liabilities of the Debtors or shall be deemed a joint employer,
co-employer or successor employer with the Debtors and shall have no
obligation to pay wages, severance pay, WARN Act claims, benefits
(including, without limitation, benefits under the Consolidated
Omnibus Budget Reconciliation Act of 1985) or any other payment to
employees of the Debtors, except to the extent that such payments are
payable in respect of Allowed Claims against the Debtors.
(e) From and after the Effective Date, the Liquidating Trust
shall be subject to all terms and conditions contained in the
Liquidating Trust Agreement and the Plan.
5.5 POST-CONFIRMATION COMMITTEE
(a) On the Effective Date, there shall be constituted a
committee (the "Post-Confirmation Committee") consisting of members
(the "Committee Members"), the number and method for selection of
which shall be agreed to by the Bankruptcy Committees prior to the
Confirmation Hearing or otherwise ordered by the Bankruptcy Court. The
identities of the Committee Members shall be disclosed to the
Bankruptcy Court on the Confirmation Date. In the event that (a) no
one is willing to serve on the Post-Confirmation Committee or (b)
there shall have been fewer than one-half of the original number of
Committee Members serving for a period of 30 consecutive days, then
the Liquidating Trustee may, during such vacancy, ignore any reference
in the Plan, the Liquidating Trust Agreement, or the Confirmation
Order to a Post-Confirmation Committee, and all references to the
Post-Confirmation Committee's ongoing duties and rights in the Plan,
the Liquidating Trust Agreement, and the Confirmation Order shall be
null and void during such time period.
(b) The Post-Confirmation Committee shall have the rights
and responsibilities set forth in this Plan and the Liquidating Trust
Agreement. The Committee Members shall be entitled to reimbursement of
their reasonable expenses. The Committee Members shall receive such
compensation as shall be disclosed to the Bankruptcy Court, upon
consent of the Debtors and the Bankruptcy Committees, not less than
five days prior to the Confirmation Hearing.
(c) Neither the Post-Confirmation Committee nor any of the
Committee Members shall be liable for the acts or omissions of any
other member of the Post-Confirmation Committee, nor shall any
Committee Member be liable for any act or omission taken in its
capacity as a Committee Member, other than acts or omissions resulting
from such Committee Member's willful misconduct or gross negligence.
(d) The Post-Confirmation Committee shall adopt by-laws
which shall provide for the governance of the Post-Confirmation
Committee.
(e) A Committee Member shall recuse himself or herself from
any decisions or deliberations regarding actions taken or proposed to
be taken by the Liquidating Trustee or the Estates with respect to the
Claims, Interests, or rights of such Committee Member, the entity
appointing such Committee Member, or any affiliate of the foregoing.
5.6 EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS
Prior to the Effective Date, the chief executive officer, chief
financial officer, or any other appropriate officer of Industries or any
other applicable Debtor, as the case may be, shall be authorized to
execute, deliver, file, or record such contracts, instruments, releases,
indentures, and other agreements or documents, and take such actions as may
be necessary or appropriate to effectuate and further evidence the terms
and conditions of the Plan. The secretary or assistant secretary of
Industries or any other applicable Debtor, as the case may be, shall be
authorized to certify or attest to any of the foregoing actions.
5.7 EXEMPTION FROM CERTAIN TRANSFER TAXES
Pursuant to section 1146(c) of the Bankruptcy Code, any transfers in
the United States from a Debtor to the Liquidating Trust or any other
Entity pursuant to the Plan shall not be subject to any document recording
tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax,
stamp act, real estate transfer tax, mortgage recording tax or other
similar tax or governmental assessment, and the Confirmation Order shall
direct the appropriate state or local governmental officials or agents to
forego the collection of any such tax or governmental assessment and to
accept for filing and recordation any of the foregoing instruments or other
documents without the payment of any such tax or governmental assessment.
5.8 RELEASES AND RELATED MATTERS
(a) Releases by Debtors
As of the Effective Date, for good and valuable consideration, the
adequacy of which is hereby confirmed, the Debtors and the Liquidating
Trustee, on behalf of the Liquidating Trust, will be deemed to forever
release, waive and discharge all claims, obligations, suits, judgments,
damages, demands, debts, rights, causes of action and liabilities
whatsoever in connection with or related to the Debtors, the Liquidating
Trust, the Liquidating Trustee, the Non-Debtor Subsidiaries, the Chapter 11
Case or the Plan (other than the rights of the Debtor, the Liquidating
Trust or the Liquidating Trustee to enforce the Plan and the contracts,
instruments, releases, indentures, and other agreements or documents
delivered thereunder) whether liquidated or unliquidated, fixed or
contingent, matured or unmatured, known or unknown, foreseen or unforeseen,
then existing or thereafter arising, in law, equity or otherwise that are
based in whole or part on any act, omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way
relating to the Debtors, the Liquidating Trust, the Liquidating Trustee,
the Non-Debtor Subsidiaries, the Chapter 11 Case or the Plan, and that may
be asserted by or on behalf of the Debtors or their Estates or the
Liquidating Trust against (i) the Debtors' and the Non-Debtor Subsidiaries'
present and former directors, officers, employees, agents and professionals
as of the Petition Date or thereafter, (ii) the Bankruptcy Committees and
their members, agents and professionals, and (iii) the Lenders, the agents
under the Pre-Petition Credit Agreement, and their respective agents and
professionals.
(b) Injunction Related to Releases
As further provided in Article XI of the Plan, the Confirmation Order
will enjoin the prosecution, whether directly, derivatively or otherwise,
of any claim, obligation, suit, judgment, damage, demand, debt, right,
cause of action, liability or interest released, discharged or terminated
pursuant to the Plan.
5.9 CLOSING OF THE CHAPTER 11 CASE
When all remaining assets of the Debtors, Reorganized Industries or
the Liquidating Trust, as the case may be, have been liquidated and
converted into Cash (other than those assets abandoned by Debtors or the
Liquidating Trust, as the case may be), and such Cash has been distributed
in accordance with the Plan, the Liquidating Trustee shall seek authority
from the Bankruptcy Court to close the Chapter 11 Case in accordance with
the Bankruptcy Code and the Bankruptcy Rules.
5.10 RIGHTS OF ACTION
(a) On and after the Effective Date, except as provided in
Section 11.9 of the Plan, the Liquidating Trustee, on behalf of and as
a court-appointed representative of each Debtor and for the benefit of
each Estate (as vested in the Liquidating Trust pursuant to the Plan),
will, pursuant to section 1123(b)(3)(B) of the Bankruptcy Code, retain
and become the holder of, and have the exclusive right to enforce any
and all present or future Litigation Claims and any and all rights of
any and all of the Debtors that arose before or after the Commencement
Date, including, but not limited to, rights, claims, causes of action,
avoiding powers, suits and proceedings arising under Sections 544,
545, 547, 548, 549, 550 and 553 of the Bankruptcy Code, including,
without limitation, any and all potential rights, claims and causes of
action related to payments made by the Debtors prior to the Petition
Date and disclosed in the Schedules. The Liquidating Trustee may
pursue, abandon, settle or release any or all such Litigation Claims
and rights of action, as it deems appropriate, without the need to
obtain approval or any other or further relief from the Bankruptcy
Court.
(b) On and after the Effective Date, all Entities are
permanently enjoined from commencing or continuing in any manner any
action or proceeding (whether directly, indirectly, derivatively or
otherwise) on account of or respecting any Claim, Litigation Claim,
debt, right or cause of action of Debtors, which the Liquidating
Trustee retains sole and exclusive authority to pursue in accordance
with this Section 5.10.
5.11 RETIREE BENEFITS
Any "retiree benefits" (as that term is defined in section 1114 of the
Bankruptcy Code) of the Debtors not terminated during the Chapter 11 Case
shall continue after the Effective Date to the extent required by section
1129(a)(13) of the Bankruptcy Code, without prejudice to the Debtor's right
under applicable non-bankruptcy law to modify, amend or terminate the such
benefits. To the extent that any "retiree benefits" continue after the
Effective Date, the Liquidating Trustee and/or Reorganized Industries
expressly reserve the right to terminate such benefits in accordance with
applicable non-bankruptcy law.
5.12 ESTABLISHMENT OF CLASS 11 DISTRIBUTION POOL
On or prior to the Effective Date, and subject to approval of the
Bankruptcy Court, the Debtors, in consultation with the Bankruptcy
Committees, shall determine the amount of Cash to be reserved by the
Liquidating Trustee in a separate account (the "Class 11 Distribution
Pool") for distribution to holders of Allowed Class 11 Interests that
constitute Minority Foods Shares in accordance with the Plan and the
Liquidating Trust Agreement, which amount shall represent the Available
Cash estimated to be available for distribution to Allowed Class 11
Interests constituting Minority Foods Shares after all Administrative
Claims against Foods, all Priority Tax Claims against Foods, all Class 1
Claims against Foods, all Class 3 Claims against Foods, all Class 10
Claims, all Class 18 Claims against Foods and all Class 20 Claims against
Foods have been (i) Allowed and paid in full (including, with respect to
Class 10, payment of interest at the Plan Rate) (ii) disallowed or (iii)
withdrawn, and all Intercompany Advances payable by Foods have been repaid.
ARTICLE VI
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
6.1 REJECTED EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Except as otherwise provided in Section 6.3 of the Plan, on the
Effective Date, all executory contracts and unexpired leases that exist
between a Debtor and any Entity (including, without limitation, the Trust
Indentures) shall be deemed rejected as of the Confirmation Date, except
for any executory contract or unexpired lease (a) which has been assumed or
rejected pursuant to an order of the Bankruptcy Court entered prior to the
Confirmation Date or pursuant to the Confirmation Order, or (b) as to which
a motion for approval of the assumption or such executory contract or
unexpired lease has been filed and served prior to the Confirmation Date.
Entry of the Confirmation Order shall constitute the approval, pursuant to
section 365(a) of the Bankruptcy Code, of the rejection of the executory
contracts and unexpired leases pursuant to the Plan.
6.2 REJECTION DAMAGES BAR DATE
If the rejection of an executory contract or unexpired lease during
the Chapter 11 Case (including any rejection of an executory contract or
unexpired lease pursuant to Section 6.1 of the Plan) results in a Claim,
then such Claim shall be forever barred and shall not be enforceable
against any Debtor, the Liquidating Trust, the Liquidating Trustee or the
properties of any of them unless a proof of Claim is filed with the clerk
of the Bankruptcy Court and served upon counsel to the Debtors, and counsel
to the Bankruptcy Committees, within 30 days after (i) the Confirmation
Date, or (ii) if such rejection is pursuant to Section 6.1 of the Plan,
notice of the Confirmation Order.
6.3 ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED LEASES
On the Effective Date, Reorganized Industries shall be deemed to have
assumed or assumed and assigned, as the case may be, each executory
contract and unexpired lease listed on Plan Exhibit C, provided, however,
that the Debtors reserve their right, at any time prior to the Confirmation
Date, to amend Plan Exhibit C to delete an unexpired lease or executory
contract therefrom or add any unexpired lease or executory contract
thereto. The Confirmation Order shall constitute an order of the Bankruptcy
Court under section 365 of the Bankruptcy Code approving the contract and
lease assumptions or assumptions and assignments, as the case may be,
described above, as of the Effective Date.
6.4 PAYMENTS RELATED TO ASSUMED EXECUTORY CONTRACTS AND UNEXPIRED
LEASES
Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default shall be satisfied,
under section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor
party to the contract or lease or the assignee of such Debtor party
assuming such contract or lease, by Cure. If there is a dispute regarding
(a) the nature or amount of any Cure, (b) the ability of Reorganized
Industries or any assignee to provide "adequate assurance of future
performance" (within the meaning of section 365 of the Bankruptcy Code)
under the contract or lease to be assumed, or (c) any other matter
pertaining to assumption, Cure shall occur following the entry of a Final
Order resolving the dispute and approving the assumption or assumption and
assignment, as the case may be; provided, however, that if there is a
dispute as to the amount of Cure or any requirement for adequate assurance
of future performance that cannot be resolved consensually among the
parties, the Debtors or the Liquidating Trustee, as the case may be, shall
have the right to reject the contract or lease for a period of five days
after entry of a Final Order establishing a Cure amount in excess of that
provided by the Debtors or any requirement for adequate assurance of future
performance that is not acceptable to the Debtors or the Liquidating
Trustee, as the case may be. The Confirmation Order shall contain
provisions providing for notices of proposed assumptions and proposed cure
amounts to be sent to applicable third parties and for procedures for
objecting thereto (which shall provide not less than twenty days notice of
such procedures and any deadlines pursuant thereto) and resolution of
disputes by the Bankruptcy Court.
ARTICLE VII
PROVISIONS GOVERNING DISTRIBUTIONS
7.1 DISTRIBUTIONS
Subject to Bankruptcy Rule 9010, all distributions under the Plan
shall be made by the Liquidating Trustee pursuant to the terms and
conditions contained in the Plan and the Liquidating Trust Agreement;
provided, however, that no distribution shall be made on behalf of any
Claim which may be subject to disallowance under section 502(d) of the
Bankruptcy Code. At the close of business on the Effective Date, the Claims
and Interest register shall be closed, and there shall be no further
changes in the record holders of any Claims or Interests. The Liquidating
Trustee shall have no obligation to recognize any transfer of any Claims or
Interest occurring after the Effective Date. The Liquidating Trustee shall
instead be entitled to recognize and deal for all purposes under the Plan
(except as to voting to accept or reject the Plan pursuant to Article 4 of
the Plan) with only those record holders stated on the Claims register as
of the close of business on the Effective Date.
7.2 INTEREST ON CLAIMS
Unless otherwise specifically provided for in the Plan or the
Confirmation Order, or required by applicable law, including section
1129(a) of the Bankruptcy Code, post-petition interest shall not accrue or
be paid on Claims, and no holder of a Claim shall be entitled to interest
accruing on or after the Petition Date on any Claim; provided, however,
that any interest determined to be payable in respect of any Claim shall be
calculated at the Plan Rate. Interest shall not accrue or be paid upon any
Disputed Claim in respect of the period from the Petition Date to the date
a final distribution is made thereon if and after such Disputed Claim
becomes an Allowed Claim. This provision shall not apply to Allowed Secured
Lender Claims and DIP Loan Claims.
7.3 MEANS OF CASH PAYMENT
Any payment to be made by the Liquidating Trustee pursuant to the Plan
will be in U.S. dollars and may be made, at the sole discretion of the
Liquidating Trustee, by draft, check, electronic funds transfer, or as
otherwise required or provided in any relevant agreement or applicable law.
7.4 DISTRIBUTIONS ON THE INITIAL DISTRIBUTION DATE
As soon as is practicable after the Effective Date, subject to the
reservation of adequate funds in the Liquidating Trust Administrative
Reserve and each Disputed Claims Reserve as and when appropriate, the
Liquidating Trustee shall deliver proceeds of Collateral and/or Available
Cash to holders of Claims entitled to distributions under the Plan that
were Allowed as of the Effective Date. All payments shall be made in
accordance with the priorities established by the Plan and in accordance
with the terms and conditions of the Plan and the Confirmation Order.
7.5 DISTRIBUTIONS ON A SUBSEQUENT DISTRIBUTION DATE
Unless otherwise provided in the Plan, to the extent that proceeds of
Collateral and/or Available Cash or other reasonably distributable assets
are available subsequent to the date of making the distributions required
by Section 7.4 of the Plan (the "Initial Distribution Date"), the
Liquidating Trustee shall, on a subsequent date (each, a "Subsequent
Distribution Date"), which date shall be whenever the aggregate amount
distributable to holders of Allowed Claims equals or exceeds $1,000,000
(but in no event shall such date be less than three months, or more than
one year, after the next previous distribution date), distribute such
proceeds of Collateral and/or Available Cash or other reasonably
distributable assets to the holders of Claims entitled to distributions
under the Plan that were Allowed as of the Effective Date or subsequently
have become Allowed Claims on or before the Subsequent Distribution Date in
amounts necessary to cause such holders to have received aggregate
distributions of Cash in respect of such Allowed Claims on the Initial
Distribution Date if (a) such proceeds of Collateral and/or Available Cash
had been available for distribution on the Initial Distribution Date, (b)
such Allowed Claims had been Allowed on the Initial Distribution Date in
the amounts in which they are Allowed on the Subsequent Distribution Date,
and (c) Claims or portions thereof that have become disallowed subsequent
to the Initial Distribution Date and on or before the Subsequent
Distribution Date had been disallowed on the Initial Distribution Date;
provided, however, that the Liquidating Trustee shall not be required to
make any distribution on a Subsequent Distribution Date on account of an
Allowed Claim or Interest in an amount less than $100; provided further,
however, that in no event shall the foregoing impair the right of the
Liquidating Trustee to use funds in any Disputed Claims Reserve to satisfy
the costs of administering the Plan and the Liquidating Trustee. All
payments shall be made in accordance with the priorities established by the
Plan and in accordance with the terms and conditions of the Plan and the
Confirmation Order.
7.6 DISTRIBUTIONS ON THE FINAL DISTRIBUTION DATE
Unless otherwise provided in the Plan, to the extent that proceeds of
Collateral and/or Available Cash or other reasonably distributable assets
are available subsequent to the Initial Distribution Date, any Subsequent
Distribution Date and after the liquidation of any and all assets of the
Debtors, the Liquidating Trustee shall establish a final distribution date
(the "Final Distribution Date") upon which the Liquidating Trustee shall
distribute such proceeds of Collateral and/or Available Cash or other
assets to the holders of Claims entitled to distributions under the Plan
that were Allowed as of the Effective Date or subsequently have become
Allowed Claims on or before the Final Distribution Date in amounts
necessary to cause such holders to have received aggregate distributions of
Cash in respect of such Allowed Claims on the Initial Distribution Date if
(a) such proceeds of Collateral and/or Available Cash had been available
for distribution on the Initial Distribution Date, (b) such Allowed Claims
had been Allowed on the Initial Distribution Date in the amounts in which
they are Allowed on the Final Distribution Date, and (c) Claims or portions
thereof that have become disallowed subsequent to the Initial Distribution
Date and on or before the Final Distribution Date had been disallowed on
the Initial Distribution Date, taking into account all previous
distributions; provided, however, that in no event shall the foregoing
impair the right of the Liquidating Trustee to use funds in any Disputed
Claims Reserve to satisfy the costs of administering the Plan and the
Liquidating Trust. Within 20 Business Days prior to making the final
distribution, the Liquidating Trustee shall notify the Post-Confirmation
Committee that the Liquidating Trustee deems all assets to be liquidated
and that the Liquidating Trustee intends to establish the Final
Distribution Date.
7.7 DELIVERY OF DISTRIBUTIONS; UNDELIVERABLE DISTRIBUTIONS
Distributions to holders of Allowed Claims and Allowed Interests shall
be made by the Liquidating Trustee (a) at the addresses set forth on the
proofs of Claim or Interest filed by such holders (or at the last known
addresses of such holders if no proof of Claim or Interest is filed or if
the Debtors have been notified of a change of address), (b) at the
addresses set forth in any written notices of address changes delivered to
the Liquidating Trustee after the date of any related proof of Claim or
Interest, (c) at the addresses reflected in the Schedules if no proof of
Claim or Interest has been filed and the Liquidating Trustee has not
received a written notice of a change of address, or (d) at the addresses
contained in the official records of the applicable Indenture Trustee, or
(e) at the addresses set forth in a properly completed letter of
transmittal accompanying securities properly remitted to the Debtors. If
any holder's distribution is returned as undeliverable, no further
distributions to such holder shall be made unless and until the Liquidating
Trustee is notified, in accordance with the Liquidating Trust Agreement, of
such holder's then current address. Claims or Interests held by holders
whose distributions are returned as undeliverable and who fail to notify
the Liquidating Trustee of their respective correct addresses within one
year after such distributions are returned to the Liquidating Trustee as
undeliverable shall be expunged, after which date all unclaimed property
(including, without limitation, all unclaimed property held in the Class 11
Distribution Pool) shall revert to the Liquidating Trust free of any
restrictions thereon and the Claims or Interests of any holder or successor
to such holder with respect to such property shall be discharged and
forever barred, notwithstanding any federal or state escheat laws to the
contrary. All undeliverable distributions that revert to the Liquidating
Trust shall be used to satisfy the costs of administering the Plan and the
Liquidating Trust and/or distributed to other holders of Allowed Claims or
Allowed Interests of the same Class on the Final Distribution Date. Nothing
contained in the Plan shall require the Liquidating Trustee to attempt to
locate any holder of an Allowed Claim or Allowed Interest.
7.8 TENDER OF SECURITIES AND INSTRUMENTS
(a) Except as otherwise required by the Liquidating Trustee,
as a condition precedent to receiving any distribution pursuant to the
Plan on account of an Allowed Claim or Allowed Interest, each holder
of Industrial Revenue Bonds not Reinstated on the Effective Date,
Demand Certificates, Subordinated Certificates or Old Securities of
Foods shall tender the applicable instruments, securities or other
documentation evidencing such Claim or Interest to the Liquidating
Trustee in accordance with written instructions to be provided to such
holders by the Liquidating Trustee as promptly as practicable
following the Effective Date. All tendered instruments and
documentation relating to Industrial Revenue Bonds, Demand
Certificates and Subordinated Certificates shall be marked as
cancelled. All tendered securities and documentation relating to Old
Securities of Foods shall be held by the Liquidating Trustee.
(b) In addition to any requirements under the applicable
certificate or articles of incorporation or by-laws of the applicable
Debtor, any holder of Industrial Revenue Bonds not Reinstated on the
Effective Date, Demand Certificates, Subordinated Certificates or Old
Securities of Foods that has been lost, stolen, mutilated or destroyed
shall, in lieu of tendering such instrument, security or
documentation, deliver to the Liquidating Trustee (i) evidence
satisfactory to the Liquidating Trustee or Indenture Trustee of the
loss, theft, mutilation or destruction; and (ii) such indemnity or
security as may be required by the Liquidating Trustee to hold the
Liquidating Trustee and the Liquidating Trust harmless from any
damages, liabilities or costs incurred in treating such individual as
a holder of Industrial Revenue Bonds, Demand Certificates,
Subordinated Certificates or Old Securities of Foods that has been
lost, stolen, mutilated or destroyed. Upon compliance with this
Section 7.8(b) by a holder of a Claim or Interest evidenced by
Industrial Revenue Bonds, Demand Certificates, Subordinated
Certificates or Old Securities of Foods, such holder shall, for all
purposes under the Plan, be deemed to have tendered its Industrial
Revenue Bonds, Demand Certificates, Subordinated Certificates or Old
Securities of Foods.
(c) Except as otherwise required by the Liquidating Trustee,
any holder of Industrial Revenue Bonds not Reinstated on the Effective
Date, Demand Certificates, Subordinated Certificates or Old Securities
of Foods that fails to tender or is deemed to have failed to tender
the applicable instruments, securities and documentation required to
be tendered hereunder within one year after the Effective Date shall
have its Claim or Interest discharged and shall be forever barred from
asserting such Claim or Interest against the Liquidating Trust or its
property and any distribution to have been made on account of such
Claim or Interest shall be treated as an undeliverable distribution in
accordance with Section 7.7 of the Plan.
(d) The notice of the Confirmation Order shall contain a
description of the requirements contained in this Section 7.8.
7.9 WITHHOLDING AND REPORTING REQUIREMENTS
In connection with the Plan and all distributions hereunder, the
Liquidating Trustee shall, to the extent applicable, comply with all tax
withholding and reporting requirements imposed by any federal, state,
provincial, local, or foreign taxing authority, and all distributions
hereunder shall be subject to any such withholding and reporting
requirements. The Liquidating Trustee shall be authorized to take any and
all actions that may be necessary or appropriate to comply with such
withholding and reporting requirements.
7.10 SETOFFS
The Liquidating Trustee may, but shall not be required to, set off
against any Allowed Claim, and the payments or other distributions to be
made pursuant to the Plan in respect of such Allowed Claim, claims, right
and causes of action of any nature whatsoever that the Liquidating Trustee
may have against the holder of such Allowed Claim; provided, however, that
neither the failure to do so nor the allowance of any Claim hereunder shall
constitute a waiver or release by the Liquidating Trustee of any such claim
that the Liquidating Trustee may have against such holder.
7.11 NO RECOURSE
Notwithstanding that the Allowed amount of any particular Claim may be
reconsidered under the applicable provisions of the Bankruptcy Code and
Bankruptcy Rules or Allowed in an amount for which there is insufficient
Cash in the relevant account to provide a recovery equal to that received
by other holders of Allowed Claims in the relevant Class, no such holder
shall have recourse to the Estates, the Bankruptcy Committees, the
Liquidating Trust, the Liquidating Trustee, the Post-Confirmation
Committee, Reorganized Industries or any of their respective professionals,
or their successors or assigns, or the holder of any other Claim, or any of
their respective property. Nothing in the Plan, however, shall modify any
right of a holder of a Claim under section 502(j) of the Bankruptcy Code.
7.12 TRANSACTIONS ON BUSINESS DAYS
If the Effective Date or any other date on which a transaction may
occur under the Plan shall occur on a day that is not a Business Date, the
transactions contemplated by the Plan to occur on such day shall instead
occur on the next succeeding Business Day and shall be deemed to have been
completed as of the required date.
7.13 NO DISTRIBUTION IN EXCESS OF ALLOWED AMOUNT OF CLAIM
Notwithstanding anything to the contrary herein, no holder of an
Allowed Claim shall receive in respect of such Claim any distribution in
excess of the Allowed amount of such Claim plus interest at the Plan Rate
from the Petition Date through the Effective Date.
7.14 INTERCOMPANY ADVANCES
In the event that the Liquidating Trustee determines that there does
not exist sufficient Cash in the Estate of any Debtor (a "Benefited
Debtor") to make payments to all holders of Allowed Administrative Claims,
Allowed Priority Tax Claims and Allowed Class 1 Claims asserted against
such Benefited Debtor and all holders of Allowed Class 16 Claims (or to
deposit sufficient funds in Disputed Claims Reserves for all Disputed
Administrative Claims, Disputed Priority Tax Claims and Disputed Class 1
Claims asserted against such Benefited Debtor and all Disputed Class 16
Claims), then the Liquidating Trustee shall utilize Cash in the one or more
of the other Estates to make such payments or deposit such funds on behalf
of the Estate of such Benefited Debtor (such payments and deposits, the
"Intercompany Advances") and the Estate(s) of such Debtor(s) shall
thereupon have a direct right of reimbursement from the Estate of such
Benefited Debtor to the extent of the Intercompany Advances extended to
such Benefited Debtor (a "Reimbursement Right"). Except as otherwise
provided herein, the Liquidating Trustee shall ensure that all Intercompany
Advances are repaid prior to making any distributions to holders of Allowed
General Unsecured Claims asserted against such Benefited Debtor.
ARTICLE VIII
PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND
UNLIQUIDATED CLAIMS AND DISTRIBUTIONS WITH RESPECT THERETO
8.1 PROSECUTION OF OBJECTIONS TO CLAIMS
(a) Objections to Claims
All objections to Claims (other than Professional Fee Claims) and
Interests must be filed and served on the holders of such Claims and
Interests by the Objection Deadline.
(b) Authority to Prosecute Objections
From and after the Effective Date, the Liquidating Trustee shall have
the exclusive right to make and file objections to the allowance,
classification and/or amount of any Claim or Interest with the Bankruptcy
Court, and shall serve such objections upon holders of each of the Claims
and Interests to which objections are made by the Objection Deadline. The
Liquidating Trustee is authorized and empowered, but not required, to
resolve consensually any disputes regarding the allowance, classification
and/or amount of any Claim or Interest. All objections by the Liquidating
Trustee shall be litigated to a Final Order except to the extent the
Liquidating Trustee, in his discretion, elects to withdraw any such
objection, or compromise, settle or otherwise resolve any such objection,
in which event the Liquidating Trustee may settle, compromise or otherwise
resolve any Disputed Claim or Interest without approval of the Bankruptcy
Court. The Liquidating Trustee and the Post-Confirmation Committee shall
establish appropriate protocol for the prosecution, settlement, compromise,
withdrawal or litigation to judgment of all objections to Claims and
Interests.
8.2 TREATMENT OF DISPUTED CLAIMS
Subject to the provisions of Section 7.1 of the Plan and
notwithstanding any other provisions of the Plan or the Liquidating Trust
Agreement to the contrary, no payments or distributions will be made on
account of a Disputed Claim or Disputed Interest, or, if less than the
entire Claim or Interest is a Disputed Claim or Disputed Interest, the
portion of a Claim or Interest that is Disputed, until such Claim or
Interest becomes an Allowed Claim or Allowed Interest.
8.3 ESTIMATION
The Debtors or the Liquidating Trustee, as the case may be, may, at
any time, request that the Bankruptcy Court estimate any Disputed Claim
pursuant to section 502(c) of the Bankruptcy Code regardless of whether the
Debtors or the Liquidating Trustee, as the case may be, have previously
objected to such Claim, and the Bankruptcy Court will retain jurisdiction
to estimate any Claim at any time, including during litigation concerning
any objection to such Claim. In the event that the Bankruptcy Court
estimates any Disputed Claim, that estimated amount may constitute either
the Allowed amount of such Claim or a maximum limitation on such Claim, as
determined by the Bankruptcy Court. If the estimated amount constitutes a
maximum limitation on such Claim, the Debtors or the Liquidating Trustee,
as the case may be, may elect to pursue any supplemental proceedings to
object to any ultimate payment of such Claim. All of the aforementioned
Claims objection, estimation and resolution procedures are cumulative and
not necessarily exclusive of one another. On and after the Effective Date,
Claims which have been estimated subsequently may be compromised, settled,
withdrawn or otherwise resolved without further order of the Bankruptcy
Court as provided in Section 8.1(b) of the Plan.
ARTICLE IX
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
9.1 CONDITIONS TO EFFECTIVE DATE
The following are conditions precedent to the occurrence of the
Effective Date, each of which must be satisfied or waived in accordance
with this Section:
(a) The Confirmation Order shall have been entered and
become a Final Order in form and substance reasonably satisfactory to
the Debtors and the Bankruptcy Committees and shall provide that the
Debtors and the Liquidating Trustee are authorized and directed to
take all actions necessary or appropriate to enter into, implement and
consummate the contracts, instruments, releases, leases, indentures
and other agreements or documents created in connection with the Plan.
(b) All Plan Exhibits shall be in form and substance
reasonably acceptable to the Debtors and the Bankruptcy Committees and
shall have been executed and delivered.
(c) All actions, documents and agreements necessary to
implement the Plan shall have been effected or executed.
(d) The Debtors shall have paid the then outstanding
balances of the Secured Lender Claims and the DIP Loan Claims in full.
(e) The closing of the sales of the Beef Interests and the
Pork Business.
(f) The Debtors shall have determined, in consultation with
the Bankruptcy Committees, that the occurrence of the Effective Date
is in the best interest of creditors and parties in interest.
9.2 WAIVER OF CONDITIONS
The requirement that the Confirmation Order must be a Final Order may
be waived by the Debtors, with the consent of the Bankruptcy Committees,
which consent shall not be unreasonably withheld.
9.3 NOTICE OF EFFECTIVE DATE
The Liquidating Trustee shall file and serve an appropriate notice of
the Effective Date within seven Business Days of the Effective Date.
ARTICLE X
RETENTION OF JURISDICTION
Under sections 105(a) and 1142 of the Bankruptcy Code, and
notwithstanding entry of the Confirmation Order and occurrence of the
Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction
over all matters arising out of, and related to, the Chapter 11 Case and
the Plan to the fullest extent permitted by law, including, among other
things, jurisdiction to:
(a) Allow, disallow, determine, liquidate, classify,
estimate or establish the priority or secured or unsecured status of
any Claim or Interest not otherwise allowed under the Plan, including
the resolution of any request for payment of any Administrative Claim
and the resolution of any objections to the allowance or priority of
Claims or Interests;
(b) Hear and determine all applications for compensation and
reimbursement of expenses of Professionals under the Plan or under
sections 330, 331, 503(b), 1103 and 1129(a)(4) of the Bankruptcy Code;
provided, however, that from and after the Effective Date, the payment
of the fees and expenses of the retained Professionals of the
Liquidating Trustee shall be made in the ordinary course of business
and shall not be subject to the approval of the Bankruptcy Court;
(c) Hear and determine all matters with respect to the
assumption or rejection of any executory contract or unexpired lease
to which a Debtor is a party or with respect to which a Debtor may be
liable, including, if necessary, the nature or amount of any required
Cure or the liquidation or allowance of any Claims arising therefrom;
(d) Effectuate performance of and payments under the
provisions of the Plan;
(e) Hear and determine any and all adversary proceedings,
motions, applications, and contested or litigated matters arising out
of, under, or related to, the Chapter 11 Case;
(f) Enter such orders as may be necessary or appropriate to
execute, implement, or consummate the provisions of the Plan and all
contracts, instruments, releases, and other agreements or documents
created in connection with the Plan, the Disclosure Statement or the
Confirmation Order;
(g) Hear and determine disputes arising in connection with
the interpretation, implementation, consummation, or enforcement of
the Plan, including disputes arising under agreements, documents or
instruments executed in connection with the Plan;
(h) Consider any modifications of the Plan, cure any defect
or omission, or reconcile any inconsistency in any order of the
Bankruptcy Court, including, without limitation, the Confirmation
Order;
(i) Issue injunctions, enter and implement other orders, or
take such other actions as may be necessary or appropriate to restrain
interference by any Entity with implementation, consummation, or
enforcement of the Plan or the Confirmation Order;
(j) Enter and implement such orders as may be necessary or
appropriate if the Confirmation Order is for any reason reversed,
stayed, revoked, modified, or vacated;
(k) Hear and determine any matters arising in connection
with or relating to the Plan, the Disclosure Statement, the
Confirmation Order, or any contract, instrument, release, or other
agreement or document created in connection with the Plan, the
Disclosure Statement or the Confirmation Order;
(l) Enforce all orders, judgments, injunctions, releases,
exculpations, indemnifications and rulings entered in connection with
the Chapter 11 Case;
(m) Except as otherwise limited herein, recover all assets
of the Debtors and property of the Estates, wherever located;
(n) Hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code;
(o) Hear and determine all disputes involving the existence,
nature, or scope of the Debtors' discharge;
(p) Hear and determine such other matters as may be provided
in the Confirmation Order or as may be authorized under, or not
inconsistent with, provisions of the Bankruptcy Code; and
(q) Enter a final decree closing the Chapter 11 Case.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 DEADLINE FOR FILING PROFESSIONAL FEE CLAIMS; OBJECTIONS TO
PROFESSIONAL FEE CLAIMS
All final requests for compensation or reimbursement for Professionals
pursuant to sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy
Code for services rendered prior to the Effective Date and Substantial
Contribution Claims under section 503(b)(4) of the Bankruptcy Code must be
filed with the Bankruptcy Court and served on the Liquidating Trustee and
its counsel no later than 45 days after the Effective Date, unless
otherwise ordered by the Bankruptcy Court. Objections to applications of
such Professionals or other Entities for compensation or reimbursement of
expenses must be filed and served on the Liquidating Trustee and its
counsel and the requesting Professional or other Entity no later than 30
days (or such longer period as may be allowed by order of the Bankruptcy
Court) after the date on which the applicable application for compensation
or reimbursement was served.
11.2 DEADLINE FOR FILING ADMINISTRATIVE CLAIMS; OBJECTIONS TO
ADMINISTRATIVE CLAIMS
All requests for payment of an Administrative Claim (other than as set
forth in Section 11.1 of the Plan) must be filed with the Bankruptcy Court
and served on counsel for the Liquidating Trust and, if prior to the
Effective Date, counsel for the Debtors and each Bankruptcy Committee no
later than 30 days after the Effective Date. In the event that the Debtors
or the Liquidating Trustee, as the case may be, object to an Administrative
Claim, the Bankruptcy Court shall determine the Allowed amount of such
Administrative Claim.
11.3 PAYMENT OF STATUTORY FEES
All fees payable pursuant to section 1930 of Title 28 of the United
States Code, as determined by the Bankruptcy Court at the Confirmation
shall be paid on or before the Effective Date.
11.4 MODIFICATIONS AND AMENDMENTS
(a) The Debtors reserve the right (with the consent of the
Bankruptcy Committees in the case of material modifications or
amendments), and in accordance with the Bankruptcy Code and the
Bankruptcy Rules, to amend or modify the Plan and the Liquidating
Trust Agreement at any time prior to the entry of the Confirmation
Order. After the entry of the Confirmation Order, the Debtors (subject
to consent of the Bankruptcy Committees and the administrative agent
under the Pre-Petition Credit Agreement, which consent shall not be
unreasonably withheld) may amend or modify the Plan and the
Liquidating Trust Agreement, in accordance with Section 1127 of the
Bankruptcy Code, or remedy any defect or omission or reconcile any
inconsistency in the Plan in such manner as may be necessary to carry
out the purpose and intent of the Plan. A holder of an Allowed Claim
or Allowed Interest that is deemed to have accepted the Plan shall be
deemed to have accepted the Plan as modified if the proposed
modification does not materially and adversely change the treatment of
the Claim or Interest of such holder. In addition, the Plan shall be
deemed automatically amended and modified to the extent determined
necessary by the Bankruptcy Court to comply with the DIP Credit
Agreement.
(b) In the event that any Impaired Class shall not accept
the Plan, at the written election of the Debtors filed with the
Bankruptcy Court with respect to any one or more of said nonaccepting
Classes and any Classes junior to such nonaccepting Classes, the Plan
shall be modified and amended automatically and without further notice
to provide such treatment, as determined necessary by the Bankruptcy
Court, sufficient to assure that the Plan does not discriminate
unfairly, and is fair and equitable, with respect to the Classes
rejecting the Plan, and, in particular, the treatment necessary to
meet the requirements of Sections 1129(a) and (b) of the Bankruptcy
Code with respect to (i) the rejecting Classes and (ii) any other
Classes adversely affected by such modifications. In particular, the
treatment of any nonaccepting Classes or adversely affected Classes
shall be modified and amended from that set forth in Article III, even
if less favorable, to the minimum treatment necessary to meet the
requirements of sections 1129(a) and (b) of the Bankruptcy Code.
11.5 SEVERABILITY OF PLAN PROVISIONS
If, prior to Confirmation, any term or provision of the Plan is held
by the Bankruptcy Court to be invalid, void or unenforceable, the
Bankruptcy Court, at the request of any Debtor, shall have the power to
alter and interpret such term or provision to make it valid or enforceable
to the maximum extent practicable, consistent with the original purpose of
the term or provision held to be invalid, void or unenforceable, and such
term or provision shall then be applicable as altered or interpreted.
Notwithstanding any such holding, alteration or interpretation, the
remainder of the terms and provisions of the Plan shall remain in full
force and effect and shall in no way be affected, impaired or invalidated
by such holding, alteration or interpretation. The Confirmation Order shall
constitute a judicial determination and shall provide that each term and
provision of the Plan, as it may have been altered or interpreted in
accordance with the foregoing, is valid and enforceable pursuant to its
terms.
11.6 SUCCESSORS AND ASSIGNS
The rights, benefits and obligations of any Entity named or referred
to in the Plan shall be binding on, and shall inure to the benefit of, any
heir, executor, administrator, successor or assign of such Entity.
11.7 NO DISCHARGE
The Confirmation Order shall not discharge any Debtor from any debt or
liability that arose before Confirmation, as provided in section
1141(d)(3)(A) of the Bankruptcy Code.
11.8 RELEASE OF ASSETS
Until the Effective Date, the Bankruptcy Court shall retain
jurisdiction over the Debtors, their assets and properties. Thereafter,
jurisdiction of the Bankruptcy Court shall be limited to the subject
matters set forth in Article X of the Plan, and Liquidating Trustee shall
perform its duties and obligations pursuant to the Liquidating Trust
Agreement and the Plan.
11.9 EXCULPATION AND LIMITATION OF LIABILITY
(a) Subject to limitations required by applicable ethical
rules and standards of conduct, and except as limited in Section
11.9(b) below, none of the Debtors, the Liquidating Trust, the
Liquidating Trustee, the Bankruptcy Committees, the Indenture
Trustees, or the Lenders, nor any of their respective present or
former members, officers, directors, employees, advisors, or attorneys
shall have or incur any liability to any holder of a Claim or an
Interest, or any other party in interest, or any of their respective
agents, employees, representatives, financial advisors, attorneys, or
affiliates, or any of their successors or assigns, for any act or
omission from and after the Petition Date in connection with, relating
to, or arising out of, the Chapter 11 Case, the commencement of the
Chapter 11 Case, the administration of the Chapter 11 Case, the
pursuit of and the approval of the sales of the Debtors' assets (and
the related asset purchase agreement), the formulation, negotiation or
implementation of the Plan, the solicitation of acceptances of the
Plan, the pursuit of confirmation of the Plan, the confirmation of the
Plan, the consummation of the Plan, or the administration of the Plan
or the property to be distributed under the Plan, except for their
gross negligence or willful misconduct, and in all respects shall be
entitled to reasonably rely upon the advice of counsel with respect to
their duties and responsibilities under the Plan. In addition, the
Indenture Trustees under the Demand Certificates and the Subordinated
Certificates shall not have or incur any liability to any holder
(registered or unregistered) of any Demand Certificate or Subordinated
Certificate or any Claim based on any Demand Certificate or
Subordinated Certificate as a result of any inaccuracy or mistake in
the books and records of Industries (in their capacities as paying
agents and registrars under the Trust Indentures for the Demand
Certificates and the Subordinated Certificates).
(b) The exculpatory provisions contained in Section 11.9(a)
of the Plan (i) shall not limit the claims and rights, if any, of the
United States, and (ii) shall apply to any person or entity who was
not the beneficiary of a post-petition indemnification obligation of
the Debtors only to the extent provided in Section 11.9(c).
(c) Any Claims that would otherwise be subject to the
exculpatory provisions contained in Section 11.9(a) but for the
provisions of Section 11.9(b)(ii) may only be asserted in the
Bankruptcy Court and only if filed on or before sixty days after the
Effective Date. In the event that any such Claims are not filed timely
in the Bankruptcy Court, the exemption contained in Section
11.9(b)(ii) shall be terminated with respect to such claims, and such
claims shall be deemed subject to the exculpatory provisions contained
in Section 11.9(a).
(d) Any non-exculpated Claims against the parties set forth
in Section 11.9(a) arising from or related to the matters set forth in
Section 11.9(a) may only be asserted and filed in the Bankruptcy
Court.
11.10 BINDING EFFECT
Except as otherwise provided in section 1141(d)(3) of the Bankruptcy
Code, on and after the Confirmation Date, the provisions of the Plan shall
be binding upon and inure to the benefit of the Debtors, all present and
former holders of Claims against and Interests in the Debtors, their
respective successors and assigns, including, but not limited to, the
Liquidating Trust, the Liquidating Trustee and all other
parties-in-interest in this Chapter 11 Case.
11.11 REVOCATION, WITHDRAWAL, OR NON-CONSUMMATION
The Debtors reserve the right to revoke or withdraw the Plan at any
time prior to the Effective Date and to file subsequent plans of
reorganization; provided, however, that any revocation or withdrawal of the
Plan after the Confirmation Date shall be with the consent of the
Bankruptcy Committees and the administrative agent under the Pre-Petition
Credit Agreement, which consent shall not be unreasonably withheld. If the
Debtors revoke or withdraw the Plan, or if Confirmation or consummation
does not occur, then (a) the Plan shall be null and void in all respects,
(b) any settlement or compromise embodied in the Plan (including the fixing
or limiting to an amount certain any Claim or Class of Claims), assumption
or rejection of executory contracts or leases effected by the Plan, and any
document or agreement executed pursuant to the Plan shall be deemed null
and void, and (c) nothing contained in the Plan, and no acts taken in
preparation for consummation of the Plan, shall (x) constitute or be deemed
to constitute a waiver or release of any Claims by or against, or any
Interests in, any Debtor or any other Entity, (y) prejudice in any manner
the rights of any Debtor or any Entity in any further proceedings involving
a Debtor, or (z) constitute an admission of any sort by any Debtor or any
other Entity.
11.12 PLAN EXHIBITS
Any and all Plan Exhibits, or other lists or schedules not filed with
the Plan, shall be filed with the Clerk of the Bankruptcy Court at least
five Business Days prior to the date of the commencement of the hearing on
the approval of the Disclosure Statement and shall be actually provided to
all parties identified in Section 11.13 at the addresses provided in such
Section at least five Business Days prior to the date of the commencement
of the hearing on the approval of the Disclosure Statement. Upon such
filing, such documents may be inspected in the office of the Clerk of the
Bankruptcy Court during normal court hours. Holders of Claims or Interests
may obtain a copy of any such document upon written request to the Debtors
in accordance with Section 11.13 of the Plan.
11.13 NOTICES
Any notice, request, or demand required or permitted to be made or
provided to or upon a Debtor or the Liquidating Trustee under the Plan
shall be (a) in writing, (b) served by (i) certified mail, return receipt
requested, (ii) hand delivery, (iii) overnight delivery service, (iv) first
class mail, or (v) facsimile transmission, and (b) deemed to have been duly
given or made when actually delivered or, in the case of notice by
facsimile transmission, when received and telephonically confirmed,
addressed as follows:
FARMLAND INDUSTRIES, INC., et al.
12200 North Ambassador Drive
Kansas City, Missouri 64163-1244
Attn: Chief Executive Officer
Telephone: (816) 713-7000
Facsimile: (816) 713-6397
with a copy to:
BRYAN CAVE LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Attn: Laurence M. Frazen
Telephone: (816) 374-3200
Facsimile: (816) 374-3300
and
O'MELVENY & MYERS LLP
400 South Hope Street
Los Angeles, California 90071-2899
Attn: Evan M. Jones, Esq.
Telephone: (213) 430-6236
Facsimile: (213) 430-6407
and
AKIN GUMP STRAUSS HAUER & FELD LLP
1900 Pennzoil Place - South Tower
711 Louisiana
Houston, Texas 77002
Attn: S. Margie Venus, Esq.
Telephone: (713) 220-5800
Facsimile: (713) 236-0822
and
HUSCH & EPPENBERGER
1200 Main Street, Suite 1700
Kansas City, Missouri 64105
Attn: Christopher Redmond, Esq.
Telephone: (816) 421-4800
Facsimile: (816) 421-0596
and
FOLEY & LARDNER
321 North Clark Street
Suite 2800
Chicago, Illinois 60610-4764
Attn: Michael Small, Esq.
Telephone: (312) 832-4500
Facsimile: (312) 832-4700
and
POLSINELLI SHALTON & WELTE
700 W. 47th Street, Suite 1000
Kansas City, Missouri 64112-1808
Attn: Daniel J. Flanigan, Esq.
James E. Bird, Esq.
Telephone: (816) 753-1000
Facsimile: (816) 753-1536
11.14 INDEMNIFICATION AND RELATED MATTERS
Indemnification Obligations owed to any present or former officers,
directors, employees, professionals, advisors or representatives of the
Debtors arising out of acts that occurred prior to the Petition Date,
including, without limitation, accountants, auditors, financial
consultants, underwriters, or attorneys, shall be deemed to be, and shall
be treated as though they are, executory contracts that are assumed
pursuant to section 365 of the Bankruptcy Code under the Plan. The
Liquidating Trust shall provide standard and customary indemnification for
all officers and directors of the Debtors and the Liquidating Trust (as of
the Petition Date and thereafter) for all actions or events occurring after
the Petition Date.
11.15 DISSOLUTION OF THE BANKRUPTCY COMMITTEES
On the Effective Date, the Bankruptcy Committees will dissolve and
their respective members (only in their capacity as members of the
Bankruptcy Committees) will be released and discharged from all further
authority, duties, responsibilities and obligations arising from or related
to the Chapter 11 Case. The members of the Bankruptcy Committees and the
Professionals retained by the Bankruptcy Committees will not be entitled to
compensation or reimbursement of expenses for any services rendered after
the Effective Date.
11.16 TERM OF INJUNCTIONS OR STAYS
Unless expressly modified or lifted by the Bankruptcy Court, all
injunctions or stays provided for in the Chapter 11 Case, including in the
Confirmation Order, under sections 105 or 362 of the Bankruptcy Code or
otherwise, and extant on the Confirmation Date (excluding any injunctions
or stays contained in the Plan or the Confirmation Order), shall remain in
full force and effect until the Final Distribution Date.
11.17 HEADINGS
Headings are used in the Plan for convenience and reference only, and
shall not constitute a part of the Plan for any other purpose
[Remainder of Page Blank]
Dated: July 31, 2003
FARMLAND INDUSTRIES, INC.
FARMLAND FOODS, INC.
SFA, INC.
FARMLAND TRANSPORTATION, INC.
FARMLAND PIPE LINE COMPANY
By: /s/ Robert B. Terry
----------------------
Name: Robert B. Terry
Title: Authorized Signatory
Laurence M. Frazen, Esq.
Cynthia Dillard Parres, Esq.
Robert M. Thompson, Esq.
BRYAN CAVE LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Gregory D. Willard, Esq.
David M. Unseth, Esq.
Cullen K. Kuhn, Esq.
BRYAN CAVE LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2750
Attorneys for the Debtors and Debtors-in-Possession
PLAN EXHIBIT A
Liquidating Trust Agreement
[TO BE PROVIDED IN ACCORDANCE WITH SECTION 11.12 OF THE PLAN]
PLAN EXHIBIT B
Management Agreement
[TO BE PROVIDED IN ACCORDANCE WITH SECTION 11.12 OF THE PLAN]
PLAN EXHIBIT C
Assumed Executory Contracts and Unexpired Leases
[TO BE PROVIDED IN ACCORDANCE WITH SECTION 11.12 OF THE PLAN]
PLAN EXHIBIT D
Retained Assets
[TO BE PROVIDED IN ACCORDANCE WITH SECTION 11.12 OF THE PLAN]
APPENDIX B
Historical Statements
FARMLAND INDUSTRIES, INC.
(PRE-PETITION)
BALANCE SHEET
August 31 May 31
-------------------------------------- ------------
1999 2000 2001 2002
---------- ----------- ----------- ------------
(Amounts in Thousands)
ASSETS
Current Assets:
Accounts receivable - trade 261,271 139,781 123,862 78,385
Accounts receivable - inter-company 55,107 45,667 45,429 25,227
Inventories 646,588 548,749 342,498 189,091
Deferred income taxes 48,817 44,794 62,358 57,806
Other current assets 111,545 154,830 76,426 50,676
Other current assets - inter-company 101,493 117,194 165,581 92,941
--------- --------- --------- ---------
Total Current Assets 1,224,821 1,051,015 816,154 494,126
--------- --------- --------- ---------
Investments and Long-Term Receivables:
Investments and LT receivables - 3rd
party 326,317 396,712 369,881 333,081
Investments and LT receivables -
inter-company 291,128 308,025 248,343 227,813
--------- --------- --------- ---------
Total Investments and Long-Term
Receivables 617,445 704,737 618,224 560,894
--------- --------- --------- ---------
Property, Plant and Equipment:
Property, plant and equipment, at cost 1,186,563 1,187,417 1,067,708 1,208,737
Less accumulated depreciation and
amortization (680,857) (704,085) (660,244) (587,839)
--------- --------- --------- ---------
Net Property, Plant and Equipment 505,706 483,332 407,464 620,898
--------- --------- --------- ---------
Other Assets 214,248 190,486 214,482 198,515
--------- --------- --------- ---------
Total Assets 2,562,220 2,429,570 2,056,324 1,874,433
========= ========= ========= =========
LIABILITIES AND EQUITIES
Current Liabilities:
Demand loan certificates 25,054 25,731 17,696 0
Short-term notes payable 416,477 430,839 238,125 12,035
Current maturities of long-term debt 25,040 38,876 43,119 82,739
Accounts payable - trade 271,477 122,938 174,870 181,691
Other current liabilities - 3rd Party 195,785 347,845 197,554 157,505
Other current liabilities -
inter-company 1,690 11,902 (2,377) 19,093
--------- --------- --------- ---------
Total Current Liabilities 935,523 978,131 668,987 453,063
--------- --------- --------- ---------
Long-Term Liabilities:
L-T borrowings(excluding current
maturities) 712,160 583,993 529,636 798,837
Other long-term liabilities 37,413 37,370 36,453 43,657
--------- --------- --------- ---------
Total Long-Term Liabilities 749,573 621,363 566,089 842,494
--------- --------- --------- ---------
Deferred Income Taxes 57,075 48,514 70,909 74,364
--------- --------- --------- ---------
Minority Owners' Equity in Subsidiaries (322) 0 0 0
--------- --------- --------- ---------
Loss to surplus (4,113) (32,321) (1,975) (269,367)
--------- --------- --------- ---------
Income to patrons (30,269) (8,002) 0 0
--------- --------- --------- ---------
Capital Shares and Equities:
Common shares 508,022 522,876 527,562 527,419
Earned surplus and other equities 346,731 299,009 224,752 246,460
--------- --------- --------- ---------
Total Capital Shares and Equities 854,753 821,885 752,314 773,879
--------- --------- --------- ---------
Total Liabilities and Equities 2,562,220 2,429,570 2,056,324 1,874,433
--------- --------- --------- ---------
FARMLAND INDUSTRIES, INC.
(POST-PETITION)
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
May 31
---------
2003
---------
ASSETS
Current Assets:
Accounts receivable - trade 47,980
Accounts receivable - inter-company 31,876
Inventories 116,309
Other current assets 47,895
Other current assets - inter-company 112,519
---------
Total Current Assets 356,579
---------
Investments and Long-Term Receivables:
Investments and LT receivables - 3rd Party 213,028
Investments and LT receivables - inter-company 236,950
---------
Total Investments and Long-Term Receivables 449,978
---------
Property, Plant and Equipment:
Property, plant and equipment, at cost 524,580
Less accumulated depreciation and amortization (426,980)
---------
Net Property, Plant and Equipment 97,600
---------
Other Assets 84,124
---------
Total Assets 988,281
=========
LIABILITIES AND EQUITIES
Current Liabilities:
Current maturities of long-term debt 22,603
Accounts payable - trade 21,607
Other current liabilities - 3rd party 24,350
Other current liabilities - inter-company 133,170
---------
Total Current Liabilities 201,730
---------
Liabilities Subject to Compromise 810,464
---------
Long-Term Liabilities:
L-T borrowings(excluding current maturities) 15,200
Other long-term liabilities 39,015
---------
Total Long-Term Liabilities 54,215
---------
Deferred Income Taxes 9,998
---------
Net loss (472,718)
---------
Capital Shares and Equities:
Preferred shares 100,000
Common shares 526,075
Accumulated other comprehensive income 3
Earned surplus and other equities (241,486)
---------
Total Capital Shares and Equities 384,592
---------
Total Liabilities and Equities 988,281
---------
FARMLAND INDUSTRIES, INC.
(PRE-PETITION)
STATEMENT OF OPERATIONS
Nine Months
Year Ended August 31 Ended May 31
-------------------------------------- ------------
1999 2000 2001 2002
---------- ---------- --------- ------------
(Amount in Thousands)
Sales 7,152,018 7,541,956 5,795,724 2,957,617
Cost of sales 7,035,820 7,425,309 5,741,286 3,033,896
--------- --------- --------- ---------
Gross income 116,198 116,647 54,438 (76,279)
Selling, general and administrative expense (230,048) (223,460) (130,585) (99,727)
Restructuring and other charges 0 0 (42,478) (55,577)
Interest Expense (82,801) (101,582) (115,415) (62,612)
Interest Income 23,781 20,504 28,118 13,119
Other income (expense) 85,605 76,581 130,185 (15,974)
Equity in net income of investees 65,495 56,904 27,460 23,291
Minority owners' interest in net income of subsidiaries (340) 504 0 0
Reorganization expense 0 0 0 (51,419)
--------- --------- --------- ---------
Loss from continuing operations before income tax benefit
and cumulative effect of changes in accounting principles (22,110) (53,902) (48,277) (325,178)
Income tax benefit 17,997 21,580 26,371 55,811
--------- --------- --------- ---------
Loss from continuing operations before cumulative effect
of changes in accounting principles (4,113) (32,321) (21,906) (269,367)
Cumulative effect of changes in accounting for derivative
financial instruments and planned major maintenance costs,
net of applicable income tax expense 0 0 19,931 0
--------- --------- --------- ---------
Net loss (4,113) (32,321) (1,975) (269,367)
--------- --------- --------- ---------
FARMLAND INDUSTRIES, INC.
(POST-PETITION)
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
Three Months Ended Nine Months Ended
August 31 May 31
------------------ -----------------
2002 2003
------------------ -----------------
Sales 514,827 1,740,409
Cost of sales 528,123 1,711,752
------------------ -----------------
Gross income (13,296) 28,657
Selling, general & administrative expense (18,008) (37,345)
Restructuring and other (charges) credits (2,639) 2,311
Interest expense (13,021) (17,774)
Interest income (155) 4,124
Other income (expense) (63,773) 44,677
Equity in net income of investees 11,776 18,388
Reorganization (expense) income (16,953) (515,756)
------------------ -----------------
Loss from continuing operations
before income tax benefit (expense) (116,069) (472,718)
Income tax benefit (expense) (7,943) 0
------------------ -----------------
Net loss (124,012) (472,718)
------------------ -----------------
FARMLAND FOODS, INC.
(PRE-PETITION)
BALANCE SHEET
August 31 May 31
---------------------------------- -----------
1999 2000 2001 2002
--------- --------- ---------- -----------
(Amounts in Thousands)
ASSETS
Current Assets:
Accounts receivable - trade 72,510 71,134 72,922 73,625
Accounts receivable - inter-company 7,388 618 1,719 2,901
Inventories 106,150 108,825 117,491 98,082
Other current assets 7,018 10,666 13,287 3,768
-------- ------- ------- -------
Total Current Assets 193,066 191,243 205,419 178,376
-------- ------- ------- -------
Investments and Long-Term Receivables:
Investments and LT receivables - 3rd Party 670 699 508 221
Investments and LT receivables - inter-company 61 61 61 61
-------- ------- ------- -------
Total Investments and Long-Term Receivables 731 760 569 282
-------- ------- ------- -------
Property, Plant and Equipment:
Property, plant and equipment, at cost 255,429 303,694 318,487 331,968
Less accumulated depreciation and amortz. (126,589) (152,086) (164,895) (177,862)
-------- ------- ------- -------
Net Property, Plant and Equipment 128,840 151,608 153,592 154,106
-------- ------- ------- -------
Other Assets 10,406 10,476 15,997 10,361
-------- ------- ------- -------
Total Assets 333,043 354,087 375,577 343,125
======== ======= ======= =======
LIABILITIES AND EQUITIES
Current Liabilities:
Short-term notes payable - inter-company 80,651 94,400 140,021 79,452
Current maturities of long-term debt 287 156 294 96
Accounts payable - trade 28,556 33,308 39,387 44,431
Other current liabilities - 3rd party 24,606 15,938 30,678 43,262
Other current liabilities - inter-company 18,816 17,907 20,355 20,562
-------- ------- ------- -------
Total Current Liabilities 152,916 161,709 230,735 187,803
-------- ------- ------- -------
Long-Term Liabilities:
L-T borrowings(excluding current maturities) 6,064 5,994 5,802 5,530
L-T borrowings - inter-company 56,800 56,800 56,800 56,800
-------- ------- ------- -------
Total Long-Term Liabilities 62,864 62,794 62,602 62,330
-------- ------- ------- -------
Deferred Income Taxes 3,338 3,338 0 0
-------- ------- ------- -------
Distribution of current year income (loss)
Net income (loss) 27,453 12,703 (43,048) 10,758
(Income) loss allocated to Farmland Industries, Inc. (26,574) 0 39,515 0
-------- ------- ------- -------
Net income (loss) to surplus 879 12,703 (3,533) 10,758
-------- ------- ------- -------
Capital Shares and Equities:
Common shares 20,865 20,484 20,480 17,153
Earned surplus and other equities 92,181 93,059 65,293 65,081
-------- ------- ------- -------
Total Capital Shares and Equities 113,046 113,543 85,773 82,234
-------- ------- ------- -------
Total Liabilities and Equities 333,043 354,087 375,577 343,125
-------- ------- ------- -------
FARMLAND FOODS, INC.
(POST-PETITION)
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
May 31
-----------
2003
-----------
ASSETS
Current Assets:
Accounts receivable - trade 70,971
Accounts receivable - inter-company 11,849
Inventories 87,177
Other current assets (1,003)
Other current assets - inter-company 98,568
---------
Total Current Assets 267,562
---------
Investments and Long-Term Receivables:
Investments and LT receivables - 3rd Party 207
Investments and LT receivables - inter-company 105
---------
Total Investments and Long-Term Receivables 312
---------
Property, Plant and Equipment:
Property, plant and equipment, at cost 346,050
Less accumulated depreciation and amortz. (199,993)
---------
Net Property, Plant and Equipment 146,057
---------
Other Assets (1,335)
---------
Total Assets 412,596
=========
LIABILITIES AND EQUITIES
Current Liabilities:
Short-term notes payable - inter-company 89,970
Current maturities of long-term debt 94
Accounts payable - trade 13,419
Other current liabilities - 3rd party 43,526
Other current liabilities - inter-company 40,196
---------
Total Current Liabilities 187,205
---------
Liabilities Subject to Compromise 53,930
---------
Long-Term Liabilities:
L-T borrowings(excluding current maturities) 3,939
L-T borrowings - inter-company 56,800
---------
Total Long-Term Liabilities 60,739
---------
Deferred Income Taxes (9,053)
---------
Net income 21,906
---------
Capital Shares and Equities:
Common shares 17,153
Earned surplus and other equities 80,716
---------
Total Capital Shares and Equities 97,869
---------
Total Liabilities and Equities 412,596
---------
FARMLAND FOODS, INC.
(PRE-PETITION)
STATEMENT OF OPERATIONS
Nine Months
Year Ended August 31 Ended May 31
------------------------------------------ ---------------
1999 2000 2001 2002
----------- ------------ ----------- ---------------
(Amount in Thousands)
Sales 1,448,970 1,659,570 1,649,657 1,258,838
Cost of sales 1,247,332 1,472,172 1,499,086 1,118,899
----------- ------------ ----------- ---------------
Gross income 201,638 187,398 150,571 139,939
Selling, general & administrative expense (157,419) (160,003) (159,293) (114,947)
Restructuring expense 0 0 (17,396) 0
Interest expense (18,249) (11,790) (14,784) (11,818)
Interest income 9 (0) 14 0
Other income (expense) 2,237 (2,889) (4,212) (2,416)
Equity in net income (loss) of investees 15 (13) (3) 0
----------- ------------ ----------- ---------------
Income (loss) from continuing operations before income tax
benefit (expense) and cumulative effect of changes in
accounting principles 28,231 12,703 (45,103) 10,758
Income tax benefit (expense) (778) 0 2,210 0
----------- ------------ ----------- ---------------
Income (loss) from continuing operations before cumulative
effect of changes in accounting principles 27,453 12,703 (42,893) 10,758
Cumulative effect of changes in accounting for derivative
financial instruments, net of applicable income tax expense 0 0 (155) 0
----------- ------------ ----------- ---------------
Net income (loss) 27,453 12,703 (43,048) 10,758
----------- ------------ ----------- ---------------
FARMLAND FOODS, INC.
(POST-PETITION)
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
Three Months Ended Nine Months Ended
August 31 May 31
------------------ ------------------
2002 2003
------------------
Sales 386,672 1,230,322
Cost of Sales 325,787 1,080,951
------------------ ------------------
Gross income 60,885 149,371
Selling, general & administrative expense (42,876) (107,905)
Interest expense (827) (3,591)
Interest income 0 1
Other income (expense) (11,284) 2,038
Reorganization (expense) income 752 (18,008)
------------------ ------------------
Income (loss) from continuing operations
before income tax benefit (expense) 6,650 21,906
Income tax benefit (expense) (1,772) 0
------------------ ------------------
Net income 4,878 21,906
------------------ ------------------
FARMLAND PIPE LINE COMPANY
(PRE-PETITION)
BALANCE SHEET
August 31 May 31
--------------------------------------- -----------
1999 2000 2001 2002
----------- ----------- ----------- -----------
(Amounts in Thousands)
ASSETS
Current Assets:
Accounts receivable - trade 179 139 262 146
Accounts receivable - inter-company 0 6,443 5,904 0
Other current assets - inter-company 0 0 1,276 7,494
----------- ----------- ----------- -----------
Total Current Assets 179 6,582 7,442 7,640
----------- ----------- ----------- -----------
Total Assets 179 6,582 7,442 7,640
=========== =========== =========== ===========
LIABILITIES AND EQUITIES
Current Liabilities:
Accounts payable - trade (391) 0 0 81
Other current liabilities - 3rd party 750 799 1,626 928
Other current liabilities - inter-company (4,018) 1,463 0 0
----------- ----------- ----------- -----------
Total Current Liabilities (3,659) 2,262 1,626 1,009
----------- ----------- ----------- -----------
Income to surplus 884 482 1,495 815
----------- ----------- ----------- -----------
Capital Shares and Equities:
Common shares 0 0 0 0
Earned surplus and other equities 2,954 3,838 4,321 5,816
----------- ----------- ----------- -----------
Total Capital Shares and Equities 2,954 3,838 4,321 5,816
----------- ----------- ----------- -----------
Total Liabilities and Equities 179 6,582 7,442 7,640
----------- ----------- ----------- -----------
FARMLAND PIPE LINE COMPANY
(POST-PETITION)
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
May 31
------------
2003
------------
ASSETS
Current Assets:
Accounts receivable - trade 300
Other current assets - inter-company 7,825
------------
Total Current Assets 8,125
------------
Total Assets 8,125
============
LIABILITIES AND EQUITIES
Current Liabilities:
Accounts payable - trade 196
Other current liabilities - 3rd party 416
Other current liabilities - inter-company 523
------------
Total Current Liabilities 1,135
------------
Liabilities Subject to Compromise 120
------------
Net income 176
------------
Capital Shares and Equities:
Common shares 0
Earned surplus and other equities 6,694
------------
Total Capital Shares and Equities 6,694
------------
Total Liabilities and Equities 8,125
------------
FARMLAND PIPE LINE COMPANY
(PRE-PETITION)
STATEMENTS OF OPERATIONS
Nine Months
Year Ended August 31 Ended May 31
------------------------------------------- -------------
1999 2000 2001 2002
----------- ------------ ------------ -------------
(Amounts in Thousands)
Sales 0 0 0 0
Cost of sales (1,612) (1,555) (1,883) (590)
----------- ------------ ------------ -------------
Gross income 1,612 1,555 1,883 590
Selling, general & administrative expense (3) (3) (3) (3)
Interest income 261 442 443 228
----------- ------------ ------------ -------------
Income from continuing operations before
income tax expense 1,870 1,994 2,323 815
Income tax expense (986) (1,512) (828) 0
----------- ------------ ------------ -------------
Net income 884 482 1,495 815
----------- ------------ ------------ -------------
FARMLAND PIPE LINE COMPANY
(POST-PETITION)
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
Three Months Ended Nine Months Ended
August 31 May 31
------------------ -----------------
2002 2003
------------------ -----------------
Sales 0 0
Cost of sales (71) (190)
------------------ -----------------
Gross income 71 190
Selling, general and administrative
expenses 0 (5)
Interest income 5 0
Reorganization (expense) income (1) (9)
------------------ -----------------
Income from continuing operations
before income tax benefit (expense) 75 176
Income tax benefit (expense) (11) 0
------------------ -----------------
Net income 64 176
------------------ -----------------
FARMLAND TRANSPORTATION, INC.
(PRE-PETITION)
BALANCE SHEET
August 31 May 31
------------------------------------------- -----------
1999 2000 2001 2002
----------- ----------- ----------- -----------
(Amounts in Thousands)
ASSETS
Current Assets:
Accounts receivable - trade 3,765 3,879 6,958 6,894
Accounts receivable - inter-company 3,920 1,872 916 776
Other current assets - 3rd party 17 (4) (1) 27
Other current assets - inter-company 6,426 4,384 2,577 2,903
----------- ----------- ----------- -----------
Total Current Assets 14,128 10,131 10,450 10,600
----------- ----------- ----------- -----------
Property, Plant and Equipment:
Property, plant and equipment, at cost 166 143 143 143
Less accumulated depreciation and amortz. (148) (140) (143) (143)
----------- ----------- ----------- -----------
Net Property, Plant and Equipment 18 3 0 0
----------- ----------- ----------- -----------
Other Assets 106 89 25 188
----------- ----------- ----------- -----------
Total Assets 14,252 10,223 10,475 10,788
=========== =========== =========== ===========
LIABILITIES AND EQUITIES
Current Liabilities:
Accounts payable - trade 3,205 925 557 1,042
Other current liabilities - 3rd party 3,549 1,514 1,471 1,127
Oher current liabilities - inter-company 419 7 443 202
----------- ----------- ----------- -----------
Total Current Liabilities 7,173 2,446 2,471 2,371
----------- ----------- ----------- -----------
Long-Term Liabilities
Long-term borrowings (excluding current
maturities) 32 0 0 0
----------- ----------- ----------- -----------
Total Long-term Liabilities 32 0 0 0
----------- ----------- ----------- -----------
Deferred Income Taxes (63) (63) 0 0
----------- ----------- ----------- -----------
Income to surplus 749 730 164 413
----------- ----------- ----------- -----------
Capital Shares and Equities:
Common shares 0 0 0 0
Earned surplus and other equities 6,361 7,110 7,840 8,004
----------- ----------- ----------- -----------
Total Capital Shares and Equities 6,361 7,110 7,840 8,004
----------- ----------- ----------- -----------
Total Liabilities and Equities 14,252 10,223 10,475 10,788
----------- ----------- ----------- -----------
FARMLAND TRANSPORTATION, INC.
(POST-PETITION)
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
May 31
------------
2003
------------
ASSETS
Current Assets:
Accounts receivable - trade 1,101
Accounts receivable - inter-company 642
Other current assets (11)
Other current assets - inter-company 8,561
------------
Total Current Assets 10,293
------------
Property, Plant and Equipment:
Property, plant and equipment, at cost 143
Less accumulated depreciation and amortz. (143)
------------
Net Property, Plant and Equipment 0
------------
Other Assets 310
------------
Total Assets 10,603
============
LIABILITIES AND EQUITIES
Current Liabilities:
Accounts payable - trade 0
Other current liabilities - 3rd party 665
Other current liabilities - inter-company 500
------------
Total Current Liabilities 1,165
------------
Liabilities Subject to Compromise 3,383
------------
Net loss (1,155)
------------
Capital Shares and Equities:
Common shares 0
Earned surplus and other equities 7,210
------------
Total Capital Shares and Equities 7,210
------------
Total Liabilities and Equities 10,603
------------
FARMLAND TRANSPORTATION, INC.
(PRE-PETITION)
STATEMENT OF OPERATIONS
Nine Months
Year Ended August 31 Ended May 31
----------------------------------------------- ------------
1999 2000 2001 2002
------------ ------------ ------------ ------------
(Amounts in Thousands)
Sales 86,131 52,483 42,602 39,938
Cost of sales 81,416 48,228 38,044 36,555
------------ ------------ ------------ ------------
Gross income 4,715 4,255 4,558 3,383
Selling, general and administrative expense (4,027) (3,760) (4,631) (3,092)
Interest expense 561 565 0 0
Interest income 0 0 336 121
Other income 0 13 10 1
------------ ------------ ------------ ------------
Income from continuing operations before
income tax expense 1,249 1,073 273 413
Income tax expense (500) (343) (109) 0
------------ ------------ ------------ ------------
Net income 749 730 164 413
------------ ------------ ------------ ------------
FARMLAND TRANSPORTATION, INC.
(POST-PETITION)
STATEMENT OF OEPRATIONS
(AMOUNT IN THOUSANDS)
Three Months Ended Nine Months Ended
August 31 May 31
------------------ -----------------
2002 2003
------------------ -----------------
Sales 10,721 17,304
Cost of sales 9,919 15,902
------------------ -----------------
Gross income 802 1,402
Selling, general & administrative
expense (1,849) (2,187)
Other income (expense) 14 (195)
Reorganization expense 0 (175)
------------------ -----------------
Loss from continuing operations
before income tax benefit
(expense) (1,033) (1,155)
Income tax benefit (expense) (173) 0
------------------ -----------------
Net loss (1,206) (1,155)
------------------ -----------------
SFA, INC.
(PRE-PETITION)
BALANCE SHEET
August 31 May 31
---------------------------------------- -----------
1999 2000 2001 2002
----------- ----------- ----------- -----------
(Amounts in Thousands)
ASSETS
Current Assets:
Accounts receivable - trade 3,005 4,212 3,095 2,408
Accounts receivable - inter-company (154) 29 29 32
Inventories 4,058 3,161 3,436 2,588
Other current assets - 3rd party 328 277 756 180
Other current assets - inter-company 0 0 696 6,077
----------- ----------- ----------- -----------
Total Current Assets 7,237 7,679 8,012 11,285
----------- ----------- ----------- -----------
Investments and Long-Term Receivables 0 0 110 378
----------- ----------- ----------- -----------
Property, Plant and Equipment:
Property, plant and equipment, at cost 3,068 4,495 4,542 2,203
Less accumulated depreciation and amortz. (266) (1,705) (1,946) (1,324)
----------- ----------- ----------- -----------
Net Property, Plant and Equipment 2,802 2,790 2,596 879
----------- ----------- ----------- -----------
Other Assets 471 447 385 35
----------- ----------- ----------- -----------
Total Assets 10,510 10,916 11,103 12,577
=========== =========== =========== ===========
LIABILITIES AND EQUITIES
Current Liabilities:
Accounts payable - trade 102 1,053 1,157 3,110
Other current liabilities - 3rd party 1,649 (29) 363 (77)
Other current liabilities - inter-company 40 296 0 0
----------- ----------- ----------- -----------
Total Current Liabilities 1,791 1,378 1,520 3,033
----------- ----------- ----------- -----------
Long-Term Liabilities
Long-term borrowings (excluding current maturities) (865) 0 0 0
----------- ----------- ----------- -----------
Total Long-Term Liabilities (865) 0 0 0
----------- ----------- ----------- -----------
Income (loss) to surplus 321 256 45 (40)
----------- ----------- ----------- -----------
Capital Shares and Equities:
Common shares 1 1 1 1
Earned surplus and other equities 9,262 9,281 9,537 9,583
----------- ----------- ----------- -----------
Total Capital Shares and Equities 9,263 9,282 9,538 9,584
----------- ----------- ----------- -----------
Total Liabilities and Equities 10,510 10,916 11,103 12,577
----------- ----------- ----------- -----------
SFA, INC.
(POST-PETITION)
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
May 31
-----------
2003
-----------
ASSETS
Current Assets:
Accounts receivable - trade 165
Other current assets 14
Other current assets - inter-company 11,229
-----------
Total Current Assets 11,408
-----------
Investments and Long-Term Receivables 437
-----------
Property, Plant and Equipment:
Property, plant and equipment, at cost 441
Less accumulated depreciation and amortization (351)
-----------
Net Property, Plant and Equipment 90
-----------
Other Assets 0
-----------
Total Assets 11,935
===========
LIABILITIES AND EQUITIES
Current Liabilities:
Accounts payable - trade (62)
Other current liabilities - 3rd party 23
Other current liabilities - inter-company 89
-----------
Total Current Liabilities 50
-----------
Liabilities Subject to Compromise 3,846
-----------
Net loss (688)
-----------
Capital Shares and Equities:
Common shares 1
Earned surplus and other equities 8,726
-----------
Total Capital Shares and Equities 8,727
-----------
Total Liabilities and Equities 11,935
-----------
SFA, INC.
(PRE-PETITION)
STATEMENT OF OPERATIONS
Nine Months
Year Ended August 31 Ended May 31
----------------------------------------- ------------
1999 2000 2001 2002
----------- ----------- ----------- ------------
(Amounts in Thousands)
Sales 34,332 35,389 34,599 16,944
Cost of sales 29,069 30,284 29,272 13,922
----------- ----------- ----------- ------------
Gross income 5,263 5,105 5,327 3,022
Selling, general & administrative expense (7,322) (6,945) (7,259) (5,120)
Interest expense 0 (33) (17) 62
Interest income 10 247 11 0
Other income 2,370 1,726 2,007 1,996
----------- ----------- ----------- ------------
Income (loss) from continuing operations before
income tax (expense) benefit 321 100 69 (40)
Income tax (expense) benefit 0 156 (24) 0
----------- ----------- ----------- ------------
Net income (loss) 321 256 45 (40)
----------- ----------- ----------- ------------
SFA, INC.
(POST-PETITION)
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
Three Months Ended Nine Months Ended
August 31 May 31
---------------- ----------------
2002 2003
---------------- ----------------
Sales 3,450 1,313
Cost of sales 2,998 1,062
---------------- ----------------
Gross income 452 251
Selling, general & administrative expense (1,216) (1,125)
Other income (expense) 38 245
Reorganization (expense) income (337) (59)
---------------- ----------------
Loss from continuing operations
before income tax benefit (expense) (1,063) (688)
Income tax benefit (expense) 247 0
---------------- ----------------
Net loss (816) (688)
---------------- ----------------
APPENDIX C
----------
Organization Structure of the Debtors
[Graphic Omitted - Organizational Chart showing
Farmland Industries, Inc. as parent, SFA, Inc.,
Farmland Transportation, Inc. and Farmland Pipe Line
Company as 100% owned subsidiaries, and Farmland Foods,
Inc. as an approximately 97.2% owned subsidiary]
Appendix D
----------
Liquidation Analyses for the Debtors
Estimated Amount Estimated Amount Estimated Estimated
of Claims of Claims Recovery Recovery
Class of Claims ($millions) ($millions) Percentage Percentage
(Low/High) (Low/High) (Low/High) (Low/High)
---------------------------------------------------------------------------------------------------------------
Chapter 11 Chapter 7 Chapter 11 Chapter 7
---------------------------------------------------------------------------------------------------------------
Administrative Claims (1) $263.1 $290.4 / $292.3 100% 100% / 100%
---------------------------------------------------------------------------------------------------------------
Priority Tax Claims $10.7 $10.7 100% 100%
---------------------------------------------------------------------------------------------------------------
DIP Loan Claims $14.5 $14.5 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 1 - Other Priority Claims $0.1 $0.1 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 2 - Secured Lender Claims $10.4 $10.4 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 3 - Other Secured Claims $44.2 $44.2 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 4 - Demand Certificates Claims $17.9 $17.9 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 5 - Subordinated Certificates Claims $557.3 $557.3 50%/65% 35% / 41%
---------------------------------------------------------------------------------------------------------------
Class 6 - Convenience Claims against
Industries $2.0 $2.0 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 7 - General Unsecured Claims
against Industries $308.5/$535.3 $535.3 50%/65% 37% / 43%
---------------------------------------------------------------------------------------------------------------
Class 8 - Industries Preferred Shares $100.0 $100.0 0% 0%
---------------------------------------------------------------------------------------------------------------
Class 9 - Industries Common Shares $596.7 $596.7 0% 0%
---------------------------------------------------------------------------------------------------------------
Class 10 - General Unsecured Claims
against Foods $35.4 $35.4 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 11 - Old Securities of Foods n/a n/a See note 2 below See note 2 below
---------------------------------------------------------------------------------------------------------------
Class 12 - General Unsecured Claims
against Transportation $3.3 $3.3 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 13 - Old Securities of Transportation n/a n/a 0% 0%
---------------------------------------------------------------------------------------------------------------
Class 14 - General Unsecured Claims
against SFA $4.3 $4.3 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 15 - Old Securities of SFA n/a n/a 0% 0%
---------------------------------------------------------------------------------------------------------------
Class 16 - General Unsecured Claims
against Pipeline $1.0 $1.0 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 17 - Old Securities of Pipeline n/a n/a 0% 0%
---------------------------------------------------------------------------------------------------------------
Class 18 - Intercompany Claims $170.5 $170.5 100% 100%
---------------------------------------------------------------------------------------------------------------
Class 19 - Subordinated Claims $0.0 $0.0 0% 0%
---------------------------------------------------------------------------------------------------------------
Class 20 - PBGC $0.0/$141.7 $0.0/$141.7 100% 100%
---------------------------------------------------------------------------------------------------------------
(1) In the context of a Chapter 7 liquidation, "Administrative Claims"
include both the Administrative Claims incurred in the Chapter 11
cases as well as the Chapter 7 administrative and wind-down expenses,
including, without limitation, Chapter 7 trustee fee
(2) The Class 11 distribution pool is not less than the estimated
distributions that the holders of the Minority Foods shares would
receive in a Chapter 7 liquidation.