Exhibit 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
IN RE: ) CHAPTER 11
)
INTERMET CORPORATION, ET AL., ) CASE NO. 04-67597
) (JOINTLY ADMINISTERED)
DEBTORS. )
) HONORABLE MARCI B. MCIVOR
AMENDED DISCLOSURE STATEMENT OF INTERMET CORPORATION
AND CERTAIN OF ITS DOMESTIC SUBSIDIARIES DATED AUGUST 5, 2005
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS 4:00 P.M., NEW YORK CITY
TIME, ON _____ (THE "VOTING DEADLINE"), UNLESS EXTENDED BY INTERMET CORPORATION
("INTERMET") OR THE APPLICABLE DEBTOR. IN ORDER TO BE COUNTED, BALLOTS MUST BE
RECEIVED BY SUCH TIME.
FOLEY & LARDNER LLP
Judy A. O'Neill (P32142)
Daljit S. Doogal (P57181)
Frank W. DiCastri
500 Woodward Avenue
Detroit, Michigan 48226
(313) 234-7100
Counsel to the Debtors and
Debtors in Possession
DISCLAIMER
NO PERSON (AS DEFINED IN THE PLAN) IS AUTHORIZED IN CONNECTION WITH THE PLAN, OR
THE SOLICITATION OF BALLOTS WITH RESPECT TO THE PLAN, TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE
STATEMENT, ITS EXHIBITS AND ANY OTHER BANKRUPTCY COURT-APPROVED SOLICITATION
MATERIALS. IF ANY SUCH REPRESENTATIONS OR INFORMATION ARE GIVEN OR MADE, THEY
SHOULD NOT BE RELIED UPON. THE DELIVERY OF THIS DISCLOSURE STATEMENT WILL NOT
UNDER ANY CIRCUMSTANCES IMPLY THAT ALL THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THIS DISCLOSURE STATEMENT DESCRIBES VARIOUS TRANSACTIONS CONTEMPLATED UNDER THE
PLAN BUT IS NOT A SUBSTITUTE FOR THE PLAN. THE TERMS OF THE PLAN WILL GOVERN IN
CASE OF ANY INCONSISTENCY BETWEEN THE PLAN AND THIS DISCLOSURE STATEMENT. A COPY
OF THE PLAN ACCOMPANIES THIS DISCLOSURE STATEMENT. THE DEFINITIONS IN THE PLAN
ARE INCORPORATED BY REFERENCE IN THIS DISCLOSURE STATEMENT. CAPITALIZED TERMS
USED IN THIS DISCLOSURE STATEMENT, WITHOUT DEFINITION, HAVE THE RESPECTIVE
MEANINGS ASCRIBED TO SUCH TERMS IN THE PLAN.
THE DEBTORS RESERVE THE RIGHT TO FILE AN AMENDED PLAN AND AN AMENDED DISCLOSURE
STATEMENT AT ANY TIME SUBJECT TO THE LIMITATIONS IN THE PLAN AND THE BANKRUPTCY
CODE. YOU ARE URGED TO STUDY THE PLAN IN FULL AND TO CONSULT WITH YOUR LEGAL
COUNSEL AND TAX ADVISORS ABOUT THE PLAN AND ITS IMPACT UPON YOUR LEGAL RIGHTS,
INCLUDING POSSIBLE TAX CONSEQUENCES. PLEASE READ THIS DISCLOSURE STATEMENT AND
ITS EXHIBITS CAREFULLY AND CONSIDER FULLY THE "CERTAIN FACTORS TO BE CONSIDERED"
SECTION HEREOF BEFORE VOTING FOR OR AGAINST THE PLAN. SEE SECTION XII - "CERTAIN
FACTORS TO BE CONSIDERED."
THE PLAN AND THIS DISCLOSURE STATEMENT ARE NOT REQUIRED TO BE PREPARED IN
ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER APPLICABLE
NON-BANKRUPTCY LAW. THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE
BANKRUPTCY COURT AS CONTAINING "ADEQUATE INFORMATION"; HOWEVER, SUCH APPROVAL
DOES NOT CONSTITUTE ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR
DISCLOSURE STATEMENT AND NONE OF THE SECURITIES AND EXCHANGE COMMISSION ("SEC"),
ANY STATE SECURITIES COMMISSION OR ANY SIMILAR PUBLIC, GOVERNMENTAL OR
REGULATORY AUTHORITIES HAS APPROVED THIS DISCLOSURE STATEMENT, THE PLAN, THE NEW
COMMON STOCK (AS DEFINED IN THE
PLAN) OR THE RIGHTS (AS DEFINED IN THE PLAN) OFFERED UNDER THE PLAN, OR HAS
PASSED ON THE ACCURACY OR ADEQUACY OF THE STATEMENTS IN THIS DISCLOSURE
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PERSONS
TRADING IN OR OTHERWISE PURCHASING, SELLING OR TRANSFERRING SECURITIES OF THE
DEBTORS SHOULD EVALUATE THE PLAN IN LIGHT OF THE PURPOSES FOR WHICH IT WAS
PREPARED.
NO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER FEDERAL OR STATE SECURITIES OR "BLUE SKY" LAWS
HAS BEEN FILED WITH THE SEC OR ANY OTHER AGENCY BY THE DEBTORS WITH RESPECT TO
THE RIGHTS OR THE NEW COMMON STOCK THAT WILL BE ISSUED ON THE EFFECTIVE DATE OF
THE PLAN AND THAT MAY BE DEEMED TO BE OFFERED BY VIRTUE OF THIS SOLICITATION.
THE DEBTORS ARE RELYING ON THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION
1145 OF THE BANKRUPTCY CODE TO EXEMPT FROM REGISTRATION UNDER THE SECURITIES
LAWS ANY OFFER OF THE NEW COMMON STOCK (EXCEPT ANY OFFER TO THE INITIAL
COMMITTED PURCHASERS (AS DEFINED IN THE PLAN)) THAT MAY BE DEEMED TO BE MADE
PURSUANT TO THE PLAN.
EXCEPT WITH RESPECT TO THE PROJECTIONS SHOWN IN EXHIBIT G TO THIS DISCLOSURE
STATEMENT (THE "PROJECTIONS"), AND EXCEPT AS OTHERWISE SPECIFICALLY AND
EXPRESSLY STATED HEREIN, THIS DISCLOSURE STATEMENT DOES NOT REFLECT ANY EVENTS
THAT MAY OCCUR SUBSEQUENT TO THE DATE HEREOF. SUCH EVENTS MAY HAVE A MATERIAL
IMPACT ON THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT. THE DEBTORS DO
NOT INTEND TO UPDATE THE PROJECTIONS. THE PROJECTIONS ARE QUALIFIED BY, AND ARE
SUBJECT TO, THE ASSUMPTIONS SET FORTH HEREIN AND THE OTHER INFORMATION CONTAINED
IN THIS DISCLOSURE STATEMENT. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW
TOWARD COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC, THE AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS OR ANY OTHER REGULATORY OR PROFESSIONAL AGENCY
OR BODY, GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") OR CONSISTENCY WITH
THE AUDITED FINANCIAL STATEMENTS INCLUDED IN THIS DISCLOSURE STATEMENT. IN
ADDITION, NONE OF THE AUDITORS OR OTHER ADVISORS FOR THE DEBTORS HAS COMPILED OR
EXAMINED THE PROJECTIONS AND, ACCORDINGLY, NONE OF SUCH PARTIES EXPRESSES ANY
OPINION OR PROVIDES ANY OTHER FORM OF ASSURANCE WITH RESPECT TO, OR ASSUMES ANY
RESPONSIBILITY FOR, AND EACH SUCH PARTY EXPRESSLY DISCLAIMS ANY RESPONSIBILITY
FOR, THE PROJECTIONS. THE PROJECTIONS SHOULD BE READ TOGETHER WITH THE
INFORMATION CONTAINED IN THE PLAN AND THIS DISCLOSURE STATEMENT INCLUDING UNDER
SECTION IV - "OPERATIONS OF THE
DEBTORS," SECTION VI - "CAUSES OF ACTION," AND SECTION XII - "CERTAIN FACTORS TO
BE CONSIDERED."
THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO
DETERMINE WHETHER TO VOTE IN FAVOR OF OR AGAINST THE PLAN. NOTHING CONTAINED
HEREIN WILL CONSTITUTE AN ADMISSION OF ANY FACT OR OF LIABILITY BY ANY PARTY
WITH REGARD TO ANY CLAIM OR LITIGATION. NO STATEMENT OF FACT WILL BE ADMISSIBLE
IN ANY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR IN ANY PROCEEDING
WITH RESPECT TO ANY LEGAL EFFECT OF THE REORGANIZATION OF THE DEBTORS OR THE
TRANSACTIONS CONTEMPLATED BY THE PLAN AND THIS DISCLOSURE STATEMENT.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, BY ITS
NATURE, IS IN THE MANNER OF PROJECTIONS, WHICH MAY PROVE TO BE DIFFERENT FROM
ACTUAL RESULTS AND MAY BE SUBJECT TO CHANGE FROM TIME TO TIME.
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN SUBMITTED BY
MANAGEMENT OF THE DEBTORS, EXCEPT WHERE OTHER SOURCES ARE IDENTIFIED. THE
DEBTORS AUTHORIZE NO REPRESENTATIONS CONCERNING THE DEBTORS OR THE PLAN OTHER
THAN THOSE IN THIS DISCLOSURE STATEMENT AND ACCOMPANYING DOCUMENTS. YOU SHOULD
NOT RELY ON ANY REPRESENTATIONS OR INDUCEMENTS MADE BY ANY PARTY TO SECURE YOUR
VOTE OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE STATEMENT. NO ONE IS
AUTHORIZED TO MAKE ANY REPRESENTATIONS ON BEHALF OF THE DEBTORS. THE DEBTORS
HAVE BEEN CAREFUL TO BE ACCURATE IN THIS DISCLOSURE STATEMENT IN ALL MATERIAL
RESPECTS, AND THEY BELIEVE THAT THE CONTENTS OF THIS DISCLOSURE STATEMENT ARE
COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS. HOWEVER, THE DEBTORS CANNOT AND
DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT
INACCURACY. IN PARTICULAR, EVENTS AND FORCES BEYOND THE CONTROL OF THE DEBTORS
MAY ALTER THE ASSUMPTIONS UPON WHICH THE FEASIBILITY OF THE PLAN ARE SUBJECT.
THIS DISCLOSURE STATEMENT MAY CONTAIN STATEMENTS THAT ARE, OR MAY BE DEEMED TO
BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD LOOKING STATEMENTS INCLUDE THOSE
REGARDING CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN. ALTHOUGH
THE DEBTORS BELIEVE THAT SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, NO
ASSURANCE CAN BE GIVEN THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND
OTHER FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE DISCUSSED IN SECTION XII,
"CERTAIN FACTORS TO BE CONSIDERED," THAT MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE DEBTORS TO BE DIFFERENT FROM ANY FUTURE
RESULTS, PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE STATEMENTS.
YOU SHOULD ALSO REVIEW PART II, ITEM 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONTAINED IN INTERMET'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005, FOR ADDITIONAL
INFORMATION REGARDING FACTORS THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS OF THE DEBTORS TO BE DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY ANY FORWARD-LOOKING
STATEMENTS.
TABLE OF CONTENTS
I. INTRODUCTION............................................................... 1
A. GENERAL............................................................... 1
B. SUMMARY OF DEBTORS' CORPORATE STRUCTURE............................... 2
C. JOINTLY PROPOSED PLANS OF REORGANIZATION.............................. 3
D. INTERCOMPANY CLAIMS................................................... 20
E. PRESERVATION OF CERTAIN CAUSES OF ACTION.............................. 20
II. PLAN VOTING PROCEDURES; ACCEPTANCE; CONFIRMATION........................... 20
A. VOTING PROCEDURES..................................................... 20
B. ELECTIONS ON THE BALLOT TO RECEIVE NEW COMMON STOCK................... 21
C. SPECIFIC INSTRUCTIONS FOR HOLDERS OF IMPAIRED CLAIMS OTHER THAN
NOTEHOLDER CLAIMS..................................................... 22
D. SPECIFIC INSTRUCTIONS FOR HOLDERS OF NOTEHOLDER CLAIMS................ 22
E. INQUIRIES............................................................. 24
F. ACCEPTANCE............................................................ 25
G. CONDITIONS TO CONFIRMATION OF THE PLAN AND EFFECTIVENESS OF THE PLAN.. 25
H. MODIFICATION OF THE PLAN AND AMENDMENTS............................... 27
I. EFFECT OF CONFIRMATION................................................ 27
J. REVOCATION OF THE PLAN................................................ 27
III. BACKGROUND OF THE RESTRUCTURING AND EVENTS LEADING TO COMMENCEMENT OF
BANKRUPTCY PROCEEDINGS..................................................... 27
IV. OPERATIONS OF THE DEBTORS.................................................. 29
A. CORPORATE STRUCTURE................................................... 29
B. INTERMET'S BUSINESS OPERATIONS........................................ 30
C. PROPERTIES............................................................ 38
D. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEBTORS....................... 39
E. THE PRINCIPALS OF THE DEBTORS......................................... 42
F. ENVIRONMENTAL RELATED LIABILITIES..................................... 47
i
V. THE DEBTORS' DEBT OBLIGATIONS.............................................. 50
A. THE PRE-PETITION CREDIT FACILITY...................................... 50
B. LETTERS OF CREDIT AGREEMENT........................................... 50
C. SENIOR NOTES.......................................................... 51
D. INDUSTRIAL REVENUE BONDS.............................................. 52
E. TRADE DEBT............................................................ 53
VI. CAUSES OF ACTION........................................................... 54
A. CHAPTER 5 CLAIMS...................................................... 54
B. OTHER CLAIMS.......................................................... 54
C. PENDING LITIGATION.................................................... 54
VII. SIGNIFICANT POST-PETITION ACTIONS.......................................... 54
A. FIRST DAY MOTIONS..................................................... 55
B. RETENTION OF PROFESSIONALS............................................ 55
C. CASE ADMINISTRATION................................................... 56
D. OPERATIONAL DEVELOPMENTS.............................................. 56
E. DEBTOR-IN-POSSESSION FINANCING........................................ 64
F. FORMATION OF THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS........ 66
G. APPROVAL OF THE KEY EMPLOYEE RETENTION PLAN........................... 66
H. GOODWILL AND ASSET IMPAIRMENT......................................... 68
VIII. SUMMARY OF THE PLAN........................................................ 69
A. EIGHTEEN (18) DIFFERENT PLANS OF REORGANIZATION....................... 69
B. TREATMENT OF UNCLASSIFIED CLAIMS...................................... 71
C. TREATMENT OF CLASSES THAT ARE UNIMPAIRED UNDER THE PLAN............... 76
D. TREATMENT OF CLASSES THAT ARE IMPAIRED UNDER THE PLAN................. 78
E. INTERCOMPANY CLAIMS................................................... 84
IX. EFFECT OF CONFIRMATION AND IMPLEMENTATION OF THE PLAN...................... 84
A. CONFIRMATION.......................................................... 84
B. EFFECTS OF PLAN CONFIRMATION.......................................... 85
ii
C. EXIT FINANCING........................................................ 92
D. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.............................. 93
E. DISTRIBUTIONS......................................................... 95
F. RETIREE BENEFITS...................................................... 98
G. CORPORATE GOVERNANCE.................................................. 99
H. REORGANIZED DEBTORS................................................... 99
I. CORPORATE ACTION...................................................... 99
J. NON-DEBTOR AFFILIATES................................................. 101
K. STOCKHOLDERS' AGREEMENT............................................... 101
L. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS.................... 101
M. REGISTRATION RIGHTS AGREEMENT......................................... 104
N. CANCELLATION OF EXISTING COMMON STOCK AND EXISTING PREFERRED STOCK.... 104
O. MANAGEMENT INCENTIVE PLAN............................................. 105
P. KEY EMPLOYEE RIGHTS OFFERING.......................................... 105
Q. CONTINUATION OF BUSINESS.............................................. 106
R. EMPLOYMENT AGREEMENTS................................................. 106
S. DISBANDMENT OF OFFICIAL COMMITTEES.................................... 106
T. DISBURSING AGENT...................................................... 106
U. POST-CONFIRMATION EFFECT OF INDENTURE................................. 107
V. PRESERVATION OF CERTAIN CAUSES OF ACTION.............................. 107
X. THE RESTRUCTURING COMMITMENT LETTER AND THE RIGHTS OFFERING................ 107
A. INITIAL COMMITTED PURCHASERS.......................................... 107
B. TERMS AND CONDITIONS OF THE RESTRUCTURING COMMITMENT LETTER........... 110
C. ABILITY TO PARTICIPATE IN THE RIGHTS OFFERING......................... 111
D. ISSUANCE OF RIGHTS.................................................... 111
E. SUBSCRIPTION PERIOD................................................... 111
F. SUBSCRIPTION PRICE.................................................... 112
G. SUBSCRIPTION RECORD DATE.............................................. 112
iii
H. SUBSCRIPTION AGENT.................................................... 112
I. EXERCISE OF RIGHTS.................................................... 112
J. TRANSFER RESTRICTION; REVOCATION...................................... 113
K. DISTRIBUTION OF RIGHTS OFFERING SHARES................................ 113
L. SUBSEQUENT ADJUSTMENTS TO THE RIGHTS PARTICIPATION CLAIM AMOUNT....... 113
M. NO INTEREST........................................................... 114
N. VALIDITY OF EXERCISE OF RIGHTS........................................ 114
O. USE OF PROCEEDS....................................................... 114
P. MARKETING TO OTHER POTENTIAL INVESTORS AND ALTERNATIVES............... 114
Q. JURISDICTION.......................................................... 115
XI. VALUATION ANALYSIS......................................................... 115
A. VALUATION OF THE REORGANIZED DEBTORS.................................. 115
XII. CERTAIN FACTORS TO BE CONSIDERED........................................... 124
A. CERTAIN BANKRUPTCY CONSIDERATIONS..................................... 125
B. RISKS RELATING TO THE NEW COMMON STOCK................................ 125
C. RISKS ASSOCIATED WITH THE BUSINESSES.................................. 126
XIII. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IF THE PLAN IS CONFIRMED..... 127
A. U.S. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS................... 128
B. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS..... 132
C. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF NEW COMMON STOCK... 135
XIV. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS TEST........... 139
A. FEASIBILITY OF THE PLAN............................................... 139
B. BEST INTERESTS TEST................................................... 140
C. CHAPTER 7 LIQUIDATION ANALYSIS........................................ 142
XV. SOLICITATION OF THE PLAN................................................... 144
A. PARTIES IN INTEREST ENTITLED TO VOTE.................................. 144
B. CLASSES IMPAIRED UNDER THE PLAN....................................... 145
iv
C. WAIVERS OF DEFECTS, IRREGULARITIES, ETC............................... 145
D. WITHDRAWAL OF BALLOTS; REVOCATION..................................... 145
E. FURTHER INFORMATION; ADDITIONAL COPIES................................ 146
XVI. CONCLUSION................................................................. 146
v
List of Exhibits
Exhibit A - Debtors' Amended Plans of Reorganization
Exhibit B - Corporate Structure Chart
Exhibit B1 - Post-Emergence Corporate Structure Chart
Exhibit C - List Of Debtors' Properties
Exhibit D - List Of Pending Litigation
Exhibit E - List Of First Day Motions
Exhibit F - Liquidation Analysis
Exhibit G - Projected Financial Information For The Reorganized Debtors
Exhibit H - Selected Historical Financial Information
Exhibit I - Distribution Schedule
Exhibit J - Stockholders' Agreement
vi
I. INTRODUCTION
A. GENERAL
The purpose of this Amended Disclosure Statement (the "Disclosure Statement") is
to provide Holders of all Claims and Interests in the Debtors with adequate
information, within the meaning of Section 1125(a) and 1126 of the Bankruptcy
Code, of a kind, and in sufficient detail, to make an informed judgment about
the amended plans of reorganization submitted to the Bankruptcy Court on August
5, 2005 (collectively, the "Plan") by Intermet Corporation, a Georgia
corporation ("Intermet"), and certain of its domestic subsidiaries, Alexander
City Casting Company, Inc., Cast-Matic Corporation, Columbus Foundry, L.P.,
Diversified Diemakers, Inc., Ganton Technologies, Inc., Intermet Holding
Company, Intermet Illinois, Inc., Intermet International, Inc., Intermet U.S.
Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company, Northern Castings
Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc., Wagner Castings
Company, and Wagner Havana, Inc. (collectively, the "Domestic Subsidiaries")
(Intermet and the Domestic Subsidiaries are each individually referred to as a
"Debtor" and collectively, as the "Debtors"). A copy of the Plan is attached
hereto as Exhibit A.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A SEPARATE
PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED,
SUBSTANTIVELY OR OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE DEBTORS WILL BE
SATISFIED SOLELY FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY
SET FORTH IN THE PLAN, NOTHING IN THE PLAN OR THIS DISCLOSURE STATEMENT WILL
CONSTITUTE OR BE DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF THE DEBTORS IS
SUBJECT TO OR LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE CLAIMS OF
CREDITORS THAT HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS SEPARATE
CLAIMS WITH RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT
LIMITED TO, DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS
PROVIDED IN THE PLAN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED IN THE PLAN, THE
CLASSIFICATIONS OF CLAIMS AND INTERESTS SET FORTH IN THE PLAN WILL BE DEEMED TO
APPLY SEPARATELY WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
The Debtors are debtors and debtors-in-possession in jointly administered Cases
under Chapter 11 of the Bankruptcy Code. The Debtors are reorganizing and
continuing to conduct their businesses as debtors-in-possession pursuant to
Sections 1107 and 1108 of the Bankruptcy Code and are soliciting votes to accept
or reject the Plan. The Debtors [and the Creditors' Committee] believe that
acceptance of the Plan is in the best interests of any Person who holds a Claim
against the Debtors.
None of the non-Debtor Affiliates incorporated outside of the United States have
commenced, or are subject to, a case under Chapter 11 of the Bankruptcy Code or
similar insolvency proceeding in any other jurisdiction. These foreign
non-Debtor Affiliates,
1
which are identified in the corporate structure chart attached hereto as Exhibit
B, continue to operate their businesses in the ordinary course of business. In
addition, there are two domestic non-Debtor Affiliates: Western Capital
Corporation and Transnational Indemnity Company. These subsidiaries have ceased
operations and will be dissolved pursuant to state law prior to, or soon after,
the Effective Date.
Debtors Alexander City Casting Company, Inc., Ironton Iron, Inc., Wagner Havana,
Inc. and Intermet Illinois, Inc. are non-operating entities which currently own
Assets. It is each such Debtor's intention to sell such Assets after the
Effective Date. The proceeds of such sales will be paid to the Exit Lenders.
HOLDERS OF CLAIMS AGAINST ANY OF THE DEBTORS SHOULD READ THIS DISCLOSURE
STATEMENT AND THE PLAN, TOGETHER WITH THE EXHIBITS, IN THEIR ENTIRETY BEFORE
VOTING ON THE PLAN.
B. SUMMARY OF DEBTORS' CORPORATE STRUCTURE
Attached as Exhibit B hereto is a chart illustrating the current corporate
structure of the Debtors and the non-Debtor Affiliates.
Immediately after the Effective Date, the Debtors intend to restructure their
domestic operations in order to realign the legal structure with the management
reporting system, streamline and simplify the corporate structure to reduce the
administrative burden of managing the current structure, and the Debtors believe
the new corporate structure will allow them to more effectively manage the tax
consequences associated with cancellation of indebtedness income. Attached as
Exhibit B1 is a chart illustrating the post-Effective Date corporate structure
of the Debtors that is currently contemplated. The Debtors currently contemplate
the following changes to their domestic corporate structure:(1)
- Reorganized Intermet will form a new corporation named "Light Metals
Group, Inc."
- "Light Metals Group, Inc." will form "Tool Products, LLC," "Ganton
Technologies, LLC," "Diversified Diemakers, LLC" and "Alexander City,
LLC"
- Reorganized Tool Products, Inc. will merge with "Tool Products, LLC"
- Reorganized Ganton Technologies, Inc. will merge with "Ganton
Technologies, LLC"
- Reorganized Alexander City Casting Company, Inc. will merge with
"Alexander City, LLC"
- Reorganized Diversified Diemakers, Inc. will merge with "Diversified
Diemakers, LLC"
- ----------
(1) The post-emergence corporate structure chart attached as Exhibit B1 and the
transactions contemplated therein (including all corporate name changes)
are preliminary and subject to change as the Debtors (and the Reorganized
Debtors) continue to evaluate the reorganization of their businesses.
2
- Reorganized Sudbury, Inc. will be renamed "Ferrous Metals Group, Inc."
- Reorganized Intermet will contribute the stock of Reorganized
Lynchburg Foundry Company, Reorganized Ironton Iron, Inc., and
Reorganized Northern Castings Corporation to "Ferrous Metals Group,
Inc."
- "Ferrous Metals Group, Inc." will form "Lynchburg, LLC," "Northern,
LLC," and "Ironton, LLC"
- Reorganized Lynchburg Foundry Company will merge with "Lynchburg, LLC"
- Reorganized Northern Castings Corporation will merge with "Northern,
LLC"
- Reorganized Ironton Iron, Inc. will merge with "Ironton, LLC"
- "Ferrous Metals Group, Inc." will contribute the stock of Reorganized
Western Capital Corporation to Reorganized Wagner Castings Company
- Reorganized Wagner Havana, Inc. will merge with Reorganized Western
Capital Corporation
C. JOINTLY PROPOSED PLANS OF REORGANIZATION
THE PLAN IS THE PRODUCT OF INTENSIVE NEGOTIATIONS AMONG THE DEBTORS, THE
CREDITORS' COMMITTEE, THE PRE-PETITION AGENT, AND THE INITIAL COMMITTED
PURCHASERS. THE DEBTORS [AND THE CREDITORS' COMMITTEE] BELIEVE THAT THE PLAN
PROVIDES THE BEST RECOVERIES POSSIBLE FOR HOLDERS OF CLAIMS AGAINST THE DEBTORS
AND THEY STRONGLY RECOMMEND THAT YOU VOTE TO ACCEPT THE PLAN.
The following is a brief summary of certain material provisions of the Plan. For
a more detailed description of the terms of the Plan, see SECTION VIII "SUMMARY
OF PLAN." The Plan was the result of a term sheet negotiated among the Debtors,
the Creditors' Committee, the Pre-Petition Agent, and the Initial Committed
Purchasers which is attached to the Restructuring Commitment Letter attached to
the Plan as Exhibit A. The following summary is qualified in its entirety by the
provisions of the Plan.
The Plan provides for the treatment of both classified and unclassified Claims
against and Interests in each of the Debtors. SEE SECTION VIII - "SUMMARY OF THE
PLAN" and Exhibit A to this Disclosure Statement for more details.
1. Unclassified Claims Against Each Debtor
In accordance with Section 1123(a)(1) of the Bankruptcy Code, the Plan provides
that Administrative Claims, Tax Claims, DIP Facility Claims, U.S. Trustee Fees,
Workers' Compensation Claims (to the extent such Workers' Compensation Claims
are not General Unsecured Claims as described in Article 3.06 of the Plan),
Pension Claims, and
3
Consignment Claims are not classified. The respective treatment of such
unclassified Claims is set forth below.
A. Administrative Claims Against Any Debtor
Except for Holders of DIP Facility Claims, each Holder of an Allowed
Administrative Claim against any Debtor will receive, in full satisfaction of
such Allowed Administrative Claim, Cash equal to the amount of such Claim on the
later of (i) the Effective Date and (ii) the date that is ten (10) days after
the Allowance Date, unless such Holder agrees to different treatment of such
Allowed Claim; provided, however, that Allowed Administrative Claims
representing obligations incurred in the ordinary course of business by a Debtor
will be paid or performed in accordance with the terms and conditions of the
particular transactions and any agreements relating thereto. Nothing in the Plan
will be deemed to accelerate a Debtor's obligation to make payment on account of
any Administrative Claim that is not due and owing as of the Confirmation Date,
is not Allowed, or is subject to ongoing objections in the Bankruptcy Court or
another court of competent jurisdiction.
B. Tax Claims Against Any Debtor
Each Holder of an Allowed Tax Claim against any Debtor will receive, in full
satisfaction of such Allowed Tax Claim, at the election of the relevant Debtor,
in its sole discretion, either (i) Cash equal to the amount of such Claim on the
later of (1) the Effective Date and (2) the date that is ten (10) days after the
Allowance Date, unless such Holder will have agreed to different treatment of
such Allowed Tax Claim, or (ii) in accordance with Section 1129(a)(9)(C) of the
Bankruptcy Code, Cash payments in equal monthly installments commencing on the
first Business Day of the month succeeding the month in which the Effective Date
occurs and continuing on the first Business Day of each month thereafter, until
the month which is six (6) years after the date of assessment of such Claim,
totaling the principal amount of such Claim plus interest on any outstanding
balance from the Effective Date calculated at the interest rate equal to the
applicable federal rate as determined in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "IRC"), and the regulations
promulgated thereunder, or (iii) such other treatment as to which the Holder of
such Allowed Tax Claim will have agreed in writing; provided that any Claim or
demand for payment of a penalty (other than a penalty of the type specified in
Section 507(a)(8)(G) of the Bankruptcy Code) will be disallowed pursuant to the
Plan and the Holder of an Allowed Tax Claim will not assess or attempt to
collect such penalty from the Debtors, their Estates, the Reorganized Debtors,
or their property.
C. DIP Facility Claims Against Any Debtor
On the Effective Date, in full satisfaction of the DIP Facility Claims against
each Debtor, the DIP Agents (for the benefit of the DIP Lenders, as applicable)
will receive Cash in an amount equal to the then outstanding amount of the DIP
Facility Claims (including, without limitation, all accrued and unpaid interest,
fees and expenses and any other amounts that may then be due and payable under
the DIP Facility) and any undrawn
4
letters of credit issued pursuant to the DIP Facility will be returned and
marked cancelled and will be replaced by letters of credit issued under the Exit
Financing Facility. On the Effective Date, the DIP Agents' and the DIP Lenders'
commitments and obligations under the DIP Facility will be irrevocably
terminated and the Debtors will be deemed to have unconditionally and
irrevocably released the DIP Lenders and the DIP Agents from all obligations,
claims and liabilities arising thereunder or relating thereto.
D. U.S. Trustee Fees Owed By Any Debtor
The U.S. Trustee's quarterly fees owed by any Debtor will be paid in full
without prior approval pursuant to 28 U.S.C. Section 1930 on or before the
Effective Date. All fees payable pursuant to 28 U.S.C. Section 1930 will be paid
by each of the Reorganized Debtors in accordance therewith until the closing of
its respective Case pursuant to Section 350(a) of the Bankruptcy Code.
E. Workers' Compensation Claims Against Any Debtor
Upon the Effective Date of the Plan, with the exception of the Workers'
Compensation Program for the State of Ohio, which relates to Ironton Iron, Inc.
and Sudbury, Inc., the Reorganized Debtors will continue the Workers'
Compensation Programs for all states in which they operate. Nothing in the Plan
will be deemed to discharge, release, or relieve the Debtors or Reorganized
Debtors from any current or future liability with respect to any of its/their
obligations under the Workers' Compensation Programs, provided that in the case
of the Workers' Compensation Program for the State of Ohio, which relates to
Ironton Iron, Inc. and Sudbury, Inc., Claims arising thereunder will be General
Unsecured Claims. The Reorganized Debtors will be responsible for all valid
Claims for benefits and liabilities under the applicable Workers' Compensation
Programs, provided that, in the case of the Workers' Compensation Program for
the State of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., such
Claims arising thereunder will be General Unsecured Claims under the Plan,
regardless of when the applicable injuries occurred. All obligations under the
applicable Workers' Compensation Programs will be paid in accordance with the
terms and conditions of applicable Workers' Compensation Programs and all other
applicable laws other than the Workers' Compensation Program for the State of
Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., which Claims will
be General Unsecured Claims under the Plan, regardless of when the applicable
injuries occurred. For all states in which the Debtors currently operate or have
operated, with the exception of the State of Ohio, the Workers Compensation
Programs are either (i) self-insured, or (ii) insured with a third party
insurance carrier, and are in all cases secured by letters of credit.
Accordingly, Claims resulting from the Workers' Compensation Program for the
State of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., will be
Class 4 General Unsecured Claims or Class 5 Unsecured Convenience Claims as
applicable.
F. Pension Claims Against Any Debtor
Upon Confirmation and substantial consummation of the Plan, the Reorganized
Debtors will continue all Pension Plans in accordance with applicable law, and
the Debtors'
5
obligations under applicable law with respect to continued funding of the
Pension Plans will remain unaltered. Nothing in the Plan will be deemed to
discharge, release, or relieve the Debtors, the Reorganized Debtors, or their
control group of or from any current or future liability under applicable law
with respect to the Pension Plans. On the Effective Date, the Debtors will pay
into each Pension Plan the amount then due for the 2004 Pension Plan years,
unless such payments have already been made by the Debtors in the ordinary
course. On the Effective Date, the Debtors will pay into each Pension Plan the
remaining amounts then due under applicable minimum funding standards and the
PBGC will be deemed to have withdrawn its Claims with respect to the Pension
Plans. The PBGC will be enjoined from seeking relief against the Reorganized
Debtors under 29 U.S.C. Section 1362(e) as a consequence of the closure of the
Debtors' Racine, Wisconsin or Decatur, Illinois facilities.
G. Consignment Claims Against Any Debtor
Notwithstanding Section 1141(c) or any other provision of the Bankruptcy Code,
all Liens, if any, of Persons who provided goods to the Debtors on consignment
(i) prior to the Petition Date and who hold valid, enforceable, and perfected
Liens in such goods (a) pursuant to a written agreement with the Debtors and (b)
in accordance with applicable law, or (ii) after the Petition Date pursuant to
any order of the Bankruptcy Court will, in each case, survive the Effective Date
and continue in accordance with the contractual terms of the underlying
agreements between the Debtors and such Persons and will remain enforceable as
of the Effective Date with the same extent, validity and priority as existed as
of the Petition Date or pursuant to such order, as the case may be. All other
Persons who provided goods to the Debtors on consignment will be deemed to hold
General Unsecured Claims under the Plan.
2. Classified Claims Against Each Debtor
Classes 1, 2, and 3 are Unimpaired for all Debtors. Holders of Unimpaired Equity
Interests in the Unimpaired Equity Debtors are Unimpaired. Therefore, pursuant
to Section 1126(f) of the Bankruptcy Code, the Holders of Allowed Claims or
Unimpaired Equity Interests in such Classes are conclusively presumed to have
accepted the Plan. Classes 3a, 3b, 4, 4a, 4b, 4c, 5 and Class 6b Impaired Equity
Interests are Impaired. Holders of Allowed Claims in Classes 3a, 3b, 4, 4a, 4b,
4c and 5 are, to the extent that such Claims are Allowed, not Disputed, or
Temporarily Allowed for voting purposes pursuant to Bankruptcy Rule 3018(a),
allowed to vote as a Class to accept or reject the Plan. Holders of Class 6b
Impaired Equity Interests in the Impaired Equity Debtors are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
The tables below provide summaries of the classification and treatment of
classified Claims and Equity Interests for each Debtor. The treatment of Claims
shown below is more fully explained in the distribution schedule attached as
Exhibit I to this Disclosure Statement.
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A SEPARATE
PLAN FOR EACH DEBTOR. THE ESTATES OF
6
THE DEBTORS HAVE NOT BEEN CONSOLIDATED, SUBSTANTIVELY OR OTHERWISE. ANY CLAIMS
HELD AGAINST ONE OF THE DEBTORS WILL BE SATISFIED SOLELY FROM THE CASH AND
ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY SET FORTH IN THE PLAN, NOTHING IN
THE PLAN OR THIS DISCLOSURE STATEMENT WILL CONSTITUTE OR BE DEEMED TO CONSTITUTE
AN ADMISSION THAT ONE OF THE DEBTORS IS SUBJECT TO OR LIABLE FOR ANY CLAIM
AGAINST THE OTHER DEBTORS. THE CLAIMS OF CREDITORS THAT HOLD CLAIMS AGAINST
MULTIPLE DEBTORS WILL BE TREATED AS SEPARATE CLAIMS WITH RESPECT TO EACH
DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT LIMITED TO, DISTRIBUTIONS
AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS PROVIDED IN THE PLAN.
THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED IN THE PLAN, THE CLASSIFICATIONS OF
CLAIMS AND INTERESTS SET FORTH IN THE PLAN WILL BE DEEMED TO APPLY SEPARATELY
WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Class 1 Unimpaired for each Debtor - deemed to have Intermet 100%
(Priority accepted the Plan and not entitled to vote on Corporation: ~ $1,337,882
Claims) the Plan; each Holder paid in full in Cash
from the Assets of each particular Debtor Alexander City Casting 100%
against whom the Holder holds its Claim on Company, Inc.: $0
the latest of the (i) Effective Date, (ii)
the date that is 10 days after the Allowance Cast-Matic 100%
Date of such Claim and (iii) the date when Corporation: ~ $123,878
such Claim becomes due and payable according
to its terms. Columbus 100%
Foundry, L.P.: ~ $95,175
Diversified 100%
Diemakers, Inc.: ~ $33,135
Ganton 100%
Technologies, Inc.: ~ $146,574
Intermet Holding Company: $0 100%
Intermet Illinois, Inc.: $0 100%
Intermet International, Inc.: $0 100%
Intermet U.S. 100%
Holding, Inc.: ~ $10,186
Ironton Iron, Inc.: $0 100%
Lynchburg Foundry 100%
Company: ~ $26,431
Northern Castings 100%
Corporation: ~ $27,871
Sudbury, Inc.: $0 100%
SUDM, Inc.: $0 100%
Tool Products, Inc.: ~ $70,048 100%
Wagner Castings 100%
Company: ~ $14,983
Wagner Havana, Inc.: $0 100%
7
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Class 2 Unimpaired for each Debtor - deemed to have Intermet 100%
(Pre- accepted the Plan and not entitled to vote on Corporation: ~ $171 million
Petition Plan; Pre-Petition Agent paid Cash in full
Lender amount of principal and interest due, plus Alexander City Casting 100%
Claims) all un-reimbursed fees and expenses incurred Company, Inc.: ~ $171 million
by the Pre-Petition Agent through the
Effective Date, plus all interest and fees Cast-Matic 100%
(if any) to which the Pre-Petition Lenders Corporation: ~ $171 million
are entitled under Section 506(b) of the
Bankruptcy Code, and any other amounts owed Columbus 100%
by the Debtors under the DIP Order. Foundry, L.P.: ~ $171 million
Diversified 100%
Diemakers, Inc.: ~ $171 million
Ganton 100%
Technologies, Inc.: ~ $171
million
Intermet 100%
Holding Company: ~ $171 million
Intermet Illinois, Inc.: ~ $171 100%
million
Intermet 100%
International, Inc.: ~ $171
million
Intermet U.S. 100%
Holding, Inc.: ~ $171 million
Ironton Iron, Inc.: ~ $171 100%
million
Lynchburg Foundry 100%
Company: ~ $171 million
Northern Castings 100%
Corporation: ~ $171 million
Sudbury, Inc.: ~ $171 million 100%
SUDM, Inc.: ~ $171 million 100%
Tool Products, Inc.: ~ $171 100%
million
Wagner Castings 100%
Company: ~ $171 million
Wagner Havana, Inc.: ~ $171 100%
million
Class 3 Unimpaired - legal, equitable and contractual Intermet Corporation: ~ $322,248 100%
(Secured rights reinstated on the Effective Date, or
Claims otherwise satisfied in accordance with the Alexander City Casting 100%
Against Plan. Company, Inc.: $0
Any Debtor
Except Cast-Matic Corporation: ~ $6,983 100%
Claims In
Class 3a As Columbus 100%
To Wagner Foundry, L.P.: ~ 201,595
Castings
Company) Diversified 100%
Diemakers, Inc.: ~ $50,787
Ganton 100%
Technologies, Inc.: ~ $2,841,476
Intermet Holding Company: $0 100%
Intermet Illinois, Inc.: $0 100%
Intermet International, Inc.: $0 100%
8
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Intermet U.S. 100%
Holding, Inc.: ~ $22,763
Ironton Iron, Inc.: $0 100%
Lynchburg Foundry 100%
Company: ~ $157,687
Northern Castings 100%
Corporation: ~ $798
Sudbury, Inc.: $0 100%
SUDM, Inc.: $0 100%
Tool Products, Inc.: ~ $617,655 100%
Wagner Castings 100%
Company: ~ $330,712
Wagner Havana, Inc.: $0 100%
Class 3a Impaired. On the Effective Date, Dana Wagner Castings 100%
(Secured Corporation will be allowed to setoff such Company: ~ $5,300
Claims Held Claim from amounts owed to Wagner Castings,
By Dana Columbus Foundry, L.P., Lynchburg Foundry
Corporation Company, and Intermet, on the condition that
Against Dana provides the amendments to its purchase
Wagner orders with the aforementioned Debtors set
Castings forth in an agreement by and among such
Company) Debtors and Dana dated April, 2005.
*Class 4 Impaired - each Holder paid: Intermet Cash-Out Amount for
(General Corporation: ~ $189,197,093 non-Noteholder
Unsecured (a) the Cash-Out Amount; OR (includes Noteholder Claims) Claims: 3.77%
Claims Other
Than Those (b) at the option of each such Holder of a Cash-Out Amount for
In Classes General Unsecured Claim and only to the Noteholder Claims:
4a, 4b, or extent that such Holder of General Unsecured 13.38%
4c) Claims so elects on the Ballot:
If New Common Stock
(i) a Pro Rata portion of shares of New and Rights elected
Common Stock allocated to the applicable (non-Noteholder
Debtor as indicated in Exhibit B to the Plan, Claims): 14.2%
and
If New Common Stock
(ii) its Pro Rata share of the Rights and Rights elected
allocated to the applicable Debtor as (Noteholder Claims):
indicated on Exhibit B to the Plan; OR 50.6%
(c) at the option of each such Holder of a If Inducement Cash
General Unsecured Claim and only to elected: 15.0%, or
Pro Rata share of
$1,389,878
Alexander City Casting Cash-Out Amount for
Company, Inc.: ~ $179,931,240 non-Noteholder
(consists only of Noteholder Claims: 0.14%
Claims)
Cash-Out Amount for
Noteholder Claims:
13.38%
9
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
the extent that such Holder of General If New Common Stock
Unsecured Claims so elects on the Ballot, the and Rights elected
Inducement Cash Amount. (non-Noteholder
Claims): 0.5%
For the avoidance of doubt, in the event a
Holder of a General Unsecured Claim fails to If New Common Stock
elect the options set forth in subsections and Rights elected
(b) or (c) above, such Holder will receive (Noteholder Claims):
Cash equal to the Cash-Out Amount. 50.6%
If Inducement Cash
elected: N/A
Cast-Matic Cash-Out Amount for
Corporation: ~ $183,197,759 non-Noteholder
(includes Noteholder Claims) Claims: 0.83%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 3.1%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$163,326
Columbus Cash-Out Amount for
Foundry, L.P.: ~ $189,397,046 non-Noteholder
(includes Noteholder Claims) Claims: 3.54%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 13.3%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 14.0%, or
Pro Rata share of
$1,325,213
Diversified Cash-Out Amount for
Diemakers, Inc.: ~ $183,291,005 non-Noteholder
(includes Noteholder Claims) Claims: 1.4%
Cash-Out Amount for
Noteholder Claims:
13.38%
10
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 5.3%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 6.0%, or
Pro Rata share of
$201,586
Ganton Technologies, Cash-Out Amount for
Inc.: ~ $187,016,248 non-Noteholder
(includes Noteholder Claims) Claims: 0.26%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 1.0%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$354,250
Intermet Holding Company: $0 N/A
(not a guarantor of Senior Notes
and therefore, no Noteholder
Claims)
Intermet Cash-Out Amount for
Illinois, Inc.: ~ $181,331,240 non-Noteholder
(includes Noteholder Claims) Claims: 0.14%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 0.5%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$70,000
11
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Intermet Cash-Out Amount for
International, Inc.: ~ $14,000 non-Noteholder
(not a guarantor of Senior Claims: N/A
Notes, and therefore, no
Noteholder Claims) Cash-Out Amount for
Noteholder Claims:
N/A
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 100%
If New Common Stock
and Rights elected
(Noteholder Claims):
N/A
If Inducement Cash
elected: 100%
Intermet U.S. Cash-Out Amount for
Holding, Inc.: ~ $185,889,247 non-Noteholder
(includes Noteholder Claims) Claims: 0.45%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 1.7%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$297,900
Ironton Iron, Inc.: ~ Cash-Out Amount for
$182,736,103 (includes non-Noteholder
Noteholder Claims) Claims: 0.13%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 0.5%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$140,243
Lynchburg Foundry Cash-Out Amount for
Company: ~ $189,342,671 non-Noteholder
(includes Noteholder Claims) Claims: 0.17%
Cash-Out Amount for
12
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 0.6%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$470,572
Northern Castings Cash-Out Amount for
Corporation: ~ $181,482,233 non-Noteholder
(includes Noteholder Claims) Claims: 0.94%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 3.5%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$77,550
Sudbury, Inc.: ~ $182,804,825 Cash-Out Amount for
(includes Noteholder Claims) non-Noteholder
Claims: 0.13%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 0.5%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$143,679
Tool Cash-Out Amount for
Products, Inc.: ~ $186,138,827 non-Noteholder
(includes Noteholder Claims) Claims: 1.08%
Cash-Out Amount for
13
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 4.1%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$310,379
Wagner Castings Company Cash-Out Amount for
Company: ~ $184,580,140 non-Noteholder
(includes Noteholder Claims). Claims: 0.13%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 0.5%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$232,445
Wagner Cash-Out Amount for
Havana, Inc.: ~ $181,369,667 non-Noteholder
(includes Noteholder Claims). Claims: 0.14%
Cash-Out Amount for
Noteholder Claims:
13.38%
If New Common Stock
and Rights elected
(non-Noteholder
Claims): 0.5%
If New Common Stock
and Rights elected
(Noteholder Claims):
50.6%
If Inducement Cash
elected: 5.0%, or
Pro Rata share of
$71,921
14
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Class 4a Impaired. If the Liquidating Plan Condition Wagner Castings Company Company: 0%
(General is satisfied, each Holder paid: ~ $184,580,140 General Unsecured
Unsecured Claims (includes Noteholder
Claims and On or as soon as reasonably practicable after Claims).
Unsecured the Effective Date, in full satisfaction of
Convenience the Allowed General Unsecured Claims in such
Claims Class, the Indenture Trustee, on behalf of
Against each of the Noteholders, or each Holder of
Wagner the Allowed General Unsecured Claims,
Castings respectively, will receive in full
Company but satisfaction of their Claims against Wagner
only if the Castings:
Liquidating
Plan
Condition is Cash equal to each Holder's Pro Rata share of
satisfied) all proceeds remaining after liquidation of
all assets of Wagner Castings and the
satisfaction of all Liens thereon, including
those arising after the Effective Date, such
as the Liens arising under the Exit Financing
Facility.
Class 4b Impaired. On or as soon as reasonably SUDM, Inc.: ~ $179,931,240 Cash-Out Amount for
(General practicable after the Effective Date, in full (consists only of Noteholder non-Noteholder
Unsecured satisfaction of its Allowed General Unsecured Claims) Claims: N/A
Claims Claims in such Class, the Indenture Trustee,
Against on behalf of each of the Noteholders, or each Cash-Out Amount for
SUDM, Inc.) Holder of the Allowed General Unsecured Noteholder Claims:
Claims, respectively, will receive: 13.38%
(a) the Indenture Trustee Fee Amount, and If New Common Stock
and Rights elected
(b) the Cash-Out Amount allocated to SUDM as (non-Noteholder
indicated at right and in Exhibit B to the Claims): 0.8%
Plan; OR
If New Common Stock
(c) at the option of each such Holder of a and Rights elected
General Unsecured Claim and only to the (Noteholder Claims):
extent that such Holder of General Unsecured 50.6%
Claims so elects on the Ballot:
If Inducement Cash
(i) a Pro Rata portion of shares of New elected: N/A
Common Stock allocated to SUDM as indicated
in Exhibit B to the Plan, and
15
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
(ii) its Pro Rata share of the Rights
allocated to SUDM as indicated on Exhibit B
to the Plan; OR
(d) at the option of each such Holder of a
General Unsecured Claim against SUDM and only
to the extent that such Holder so elects on
the Ballot, the Inducement Cash Amount with
respect to SUDM.
For the avoidance of doubt, in the event a
Holder of a General Unsecured Claim fails to
elect the options set forth in subsections
(c) or (d) above, such Holder will receive
Cash equal to the Cash-Out Amount.
Class 4c Impaired. If the Liquidating Plan Condition Wagner Havana, Inc.: ~ Cash-Out Amount for
(General is satisfied: $181,369,667 (includes non-Noteholder
Unsecured Noteholder Claims) Claims: 0.14%
Claims And On the Effective Date, the Indenture Trustee,
Unsecured on behalf of each of the Noteholders, or a Cash-Out Amount for
Convenience Holder of Allowed General Unsecured Claims Noteholder Claims:
Claims against Wagner Havana, Inc., will receive in 13.38%
Against full satisfaction of their Claims:
Wagner If New Common
Havana, (a) the Cash-Out Amount allocated to Wagner Stock and Rights
Inc., but Havana as indicated in Exhibit B to the Plan; elected
only if the OR (non-Noteholder
Liquidating Claims): 0.5%
Plan (b) at the option of each such Holder of a
Condition is General Unsecured Claim and only to the If New
satisfied) extent that such Holder of General Unsecured Common Stock and
Claims so elects on the Ballot: Rights elected
(Noteholder Claims):
(i) a Pro Rata portion of shares of the 50.6%
New Common Stock allocated to Wagner Havana
as indicated in Exhibit B to the Plan, If Inducement
Cash elected: 5.0%,
(ii) its Pro Rata share of the Rights or Pro Rata share of
allocated to Wagner Havana and indicated on $71,921
Exhibit B to the Plan; and
(iii) its Pro Rata share of the
16
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Reorganized Wagner Havana New Common Stock
which will be conveyed immediately to
Reorganized Intermet upon the Effective Date;
OR
(c) at the option of each such Holder of a
General Unsecured Claim against Wagner Havana
and only to the extent that such Holder so
elects on the Ballot, the Inducement Cash
Amount with respect to Wagner Havana as
indicated in Exhibit B to the Plan.
In the event a Holder of a General Unsecured
Claim fails to elect the options set forth in
subsections (b) or (c) above, such Holder
will receive the Cash-Out Amount allocated to
Wagner Havana.
**Class 5 Impaired - each Holder paid as soon as Intermet Corporation: ~ 22.5%
(Unsecured practicable after the Effective Date, the $3,014,877
Convenience fixed percentage of each Holder's Allowed
Claims) Claim shown at right and in Exhibit B to the Alexander City Casting Company, N/A
Plan. Inc.: $0
Cast-Matic Corporation: ~ 7.5%
$1,169,873
Columbus Foundry, L.P.: ~ 21.0%
$3,749,449
Diversified Diemakers, Inc.: ~ 9.0%
$2,826,606
Ganton Technologies, Inc.: ~ 7.5%
$4,438,257
Intermet Holding Company: $0 N/A
Intermet Illinois, Inc.: ~ $348 7.5%
Intermet International, Inc.: $0 100%
Intermet U.S. Holding, Inc.: ~ 7.5%
$2,363,306
Ironton Iron, Inc.: ~ $2,517 7.5%
Lynchburg Foundry Company: ~ 7.5%
$2,965,232
Northern Castings Corporation: ~ 7.5%
$1,117,590
Sudbury, Inc.: ~ $6,853 7.5%
SUDM, Inc.: $0 N/A
Tool Products, Inc.: ~ 7.5%
$3,096,229
Wagner Castings Company: ~ 7.5%
$2,950,382
17
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
Wagner Havana, Inc.: ~ $252,977 7.5%
Class 6a Unimpaired as to the Unimpaired Equity Alexander City Casting Company, 100%; Allowed and
(Unimpaired Interests in the Unimpaired Equity Debtors, Inc.: 500 shares retained by
Equity in which cases the Holders are deemed to have Reorganized Intermet
Interests) accepted the Plan and are not entitled to
vote. As to such Unimpaired Equity Debtors, Cast-Matic Corporation: 47,805 100%; Allowed and
the Class 6 Unimpaired Equity Interests will shares retained by
be Allowed and retained by the applicable Reorganized Sudbury,
Reorganized Debtor shown at right. Inc.
Columbus Foundry, L.P.: 95% 100%; Allowed and
General Partner Interest, and 5% retained by
Limited Partner Interest Reorganized Intermet
U.S. Holding, Inc.
(95% General Partner
Interest) and SUDM,
Inc. (5% Limited
Partner Interest)
Diversified Diemakers, Inc.: 100%; Allowed and
10,000 shares retained by
Reorganized Intermet
Ganton Technologies, Inc.: 100%; Allowed and
1,000,000 shares retained by
Reorganized Intermet
Intermet Holding Company: 1,000 100%; Allowed and
shares retained by
Reorganized Intermet
International, Inc.
Intermet Illinois, Inc.: 1,000 100%; Allowed and
shares retained by
Reorganized Sudbury,
Inc.
Intermet International, Inc.: 100%; Allowed and
500 shares retained by
Reorganized Intermet
Intermet U.S. Holding, Inc.: 100%; Allowed and
1,000 shares retained by Intermet
International, Inc.
Ironton Iron, Inc., but only as Existing Common
to the Existing Common Stock: Stock: 100%; Allowed
23,000 shares. See Class 6b for and retained by
treatment of the Existing Reorganized Intermet
Preferred Stock.
Lynchburg Foundry Company: 100 100%; Allowed and
shares retained by
Reorganized Intermet
Northern Castings Corporation: 100%; Allowed and
500 shares retained by
Reorganized Intermet
Sudbury, Inc.: 1,000 shares 100%; Allowed and
retained by
Reorganized Intermet
SUDM, Inc.: 1,000 shares 100%; Allowed and
18
CLASS AND
TYPE OF
CLAIM OR ESTIMATED AMOUNT OF ALLOWED ESTIMATED RECOVERY
EQUITY CLAIMS OR EQUITY INTERESTS BY OF ALLOWED CLAIMS OR
INTEREST FOR DEBTOR ON THE EFFECTIVE DATE, EQUITY INTERESTS BY
EACH DEBTOR TREATMENT BY EACH DEBTOR SUBJECT TO OBJECTIONS DEBTOR
- ------------ --------------------------------------------- -------------------------------- --------------------
retained by Intermet
International, Inc.
Tool Products, Inc.: 100 shares 100%; Allowed and
retained by
Reorganized Intermet
***Wagner Castings Company: If Liquidating Plan
296,550 shares if the Condition is not
Liquidating Plan Condition is satisfied: 100%;
not satisfied. See Class 6b if Allowed and retained
the Liquidating Plan Condition by Reorganized
is satisfied. Sudbury, Inc.
***Wagner Havana, Inc.: 100 If Liquidating Plan
shares if the Liquidating Plan Condition is not
Condition is not satisfied. See satisfied: 100%;
Class 6b if the Liquidating Plan Allowed and retained
Condition is satisfied. by Reorganized
Wagner Castings
Company
Class 6b Impaired as to the Impaired Equity Interests Intermet Corporation: 0 shares 0%; Cancelled.
(Impaired in the Impaired Equity Debtors, in which
Equity cases the Holders are not entitled to vote on ***Wagner Castings Company, but If the Liquidating
Interests) the Plan and are deemed to have rejected it. only if the Liquidating Plan Plan Condition is
On the Effective Date, all of the Class 6b Condition is satisfied: 0 shares satisfied: For
Impaired Equity Interests of such Impaired liquidation purposes
Equity Debtors will be cancelled. only, 1 share of
Reorganized Wagner
Castings Common
Stock issued and
transferred to a
third-party
liquidating trustee.
***Wagner Havana, Inc., but only If Liquidating Plan
if the Liquidating Plan Condition is
Condition is satisfied: 0 satisfied: 0%;
shares. Cancelled. 1000
shares of New Wagner
Havana Common Stock
issued to Holders of
General Unsecured
Claims and
transferred to
Reorganized
Intermet.
Ironton Iron, Inc., but only as Existing Preferred
to the Existing Preferred Stock: Stock: 0%;
0 shares. Cancelled.
Note: The Claims estimates set forth above reflect current estimates of Claims
at each Debtor. Actual distributions may be higher or lower based on the
resolution of Disputed Claims and actual Allowed Claims at each Debtor.
* See "Explanation of Creditor Treatment in Class 4" in Section VIII.D.2.a,
below.
** Allowed unsecured Claims that are less than or equal to $125,000 and for
which only one Debtor is liable according to the Debtors' books and
records, or for which the Holder makes a Convenience Class Election.
*** See "Explanation of Impaired Equity Interest Treatment in Class 6b for
Wagner Castings Company and Wagner Havana, Inc." in Section VIII.D.7.a,
below.
19
For a more detailed description of the foregoing Classes of Claims and Equity
Interests and the proposed Distributions thereto, SEE SECTION VIII - "SUMMARY OF
THE PLAN."
D. INTERCOMPANY CLAIMS
All Intercompany Claims will be released, waived and discharged as of the
Effective Date. Claims held by Non-Debtor Affiliates against the Debtors will,
with the consent of the Initial Committed Purchasers, to the maximum extent
practicable, be (a) released, waived, and discharged as of the Effective Date,
(b) offset against claims held by Debtors against Non-Debtor Affiliates, or (c)
converted to equity with respect to the obligee Debtor.
E. PRESERVATION OF CERTAIN CAUSES OF ACTION
In accordance with Section 1123(b)(3) of the Bankruptcy Code, and except as
otherwise provided in the Plan and/or the Confirmation Order, the Reorganized
Debtors will retain and may (but are not required to) enforce all Retained
Actions, including Avoidance Actions and other similar claims arising under
applicable state laws, including, without limitation, fraudulent transfer
claims, if any, and all other Causes of Action of a trustee and debtor-in
possession under the Bankruptcy Code. The Debtors or the Reorganized Debtors, in
their sole discretion, will determine whether to bring, settle, release,
compromise, or enforce any rights (or decline to do any of the foregoing) with
respect to the Retained Actions, other than the Avoidance Actions. The
Reorganized Debtors or any successor may pursue such litigation claims in
accordance with the best interests of the Reorganized Debtors or any successors
holding such rights of action. The failure of the Debtors to specifically list
any Claim, Causes of Action, right of action, suit or proceeding in the
Schedules or on Exhibit J to the Plan does not, and will not be deemed to,
constitute a waiver or release by the Debtors of such Claim, Causes of Action,
right of action, suit or proceedings, and the Reorganized Debtors will retain
the right to pursue such Claims, Causes of Action, rights of action, suits or
proceedings in their sole discretion and, therefore, no preclusion doctrine,
collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial,
equitable or otherwise) or laches will apply to such claim, right of action,
suit or proceeding upon or after the Confirmation or consummation of the Plan.
Further, recovery of any proceeds of Causes of Action will be deemed "for the
benefit of the Estates" as set forth in Section 550(a) of the Bankruptcy Code.
II. PLAN VOTING PROCEDURES; ACCEPTANCE; CONFIRMATION
A. VOTING PROCEDURES
Under the Bankruptcy Code, the only Classes that are entitled to vote to accept
or reject the Plan are Classes of Claims that are Impaired under the Plan.
Accordingly, Classes of Claims or Interests that are Unimpaired under the Plan
as to all Debtors, Classes 1 (Priority Claims Against Any Debtor), 2
(Pre-Petition Lender Claims Against Any Debtor), 3 (Class 3 Against Any Debtor
Except As To Wagner Castings Company), and
20
6a (Unimpaired Equity Interests) are presumed to have accepted the Plan as to
all Debtors and are not entitled to vote on the Plan. Holders of Secured Claims
held by Dana Corporation Against Wagner Castings Company (Class 3a), General
Unsecured Claims against any Debtor (Classes 4, 4a, 4b, and 4c), and Unsecured
Convenience Claims (Class 5), as to all Debtors, are Impaired and will be
entitled to vote to accept or reject the Plan. Holders of Impaired Equity
Interests (Class 6b) will not vote because such Impaired Equity Interests will
not receive any Distribution and, accordingly, such Holders are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
Creditors that hold Claims in more than one Impaired Class are entitled to vote
separately in each Class. To the extent that such multiple claims can be
identified by J.P. Morgan Trust Company N.A. ("JP Morgan" or the "Balloting
Agent"), such a Creditor will receive a separate Ballot for each of its Claims
in each Class (in accordance with the records of the Clerk of the Court) and
should complete and sign each Ballot separately.
Votes on the Plan will be counted only with respect to Claims: (a) that are
listed on the Schedules other than as disputed, contingent or unliquidated; or
(b) for which a Proof of Claim was filed on or before the applicable Claims
Filing Bar Date. Any vote by a Holder of a Claim will not be counted if such
Claim has been disallowed or is the subject of an unresolved objection, or is
otherwise not entitled to a vote pursuant to the Bankruptcy Code or Bankruptcy
Rules absent an order of the Bankruptcy Court allowing such Claim for voting
purposes pursuant to Section 502 of the Bankruptcy Code and Rule 3018 of the
Bankruptcy Rules.
Voting on the Plan by each Holder of a Claim in an Impaired Class entitled to
vote is important. After carefully reviewing the Plan and this Disclosure
Statement, each Holder of such a Claim should use the enclosed Ballot or Ballots
to vote to either accept or reject the Plan, and then return the Ballot or
Ballots by mail to the appropriate address.
B. ELECTIONS ON THE BALLOT TO RECEIVE NEW COMMON STOCK
The Ballots will give Creditors the option of electing to receive New Common
Stock together with the option of participating in the Rights Offering. All
holders of New Common Stock will be subject to the Stockholders' Agreement which
will, among other things, govern each holder of New Common Stock's access to
information with respect to the Reorganized Debtors, and each holder's ability
to transfer such holder's New Common Stock. ACCORDINGLY, A PERSON'S ELECTION ON
THE BALLOT TO RECEIVE NEW COMMON STOCK WILL CONSTITUTE SUCH PERSON'S AGREEMENT
TO BE BOUND BY THE STOCKHOLDERS' AGREEMENT, WHICH IS ATTACHED TO THE PLAN AS
EXHIBIT F AND AS EXHIBIT J TO THIS DISCLOSURE STATEMENT.
21
C. SPECIFIC INSTRUCTIONS FOR HOLDERS OF IMPAIRED CLAIMS OTHER THAN
NOTEHOLDER CLAIMS
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AS
SET FORTH ABOVE AND IN ACCORDANCE WITH THE BALLOT AND THE VOTING INSTRUCTIONS ON
THE BALLOT AND RECEIVED BY THE BALLOTING AGENT NO LATER THAN THE VOTING
DEADLINE.
If a Ballot is damaged, lost, or missing, a replacement Ballot may be obtained
by sending a written request to the Balloting Agent. If you have any questions
about (1) the procedure for voting your Claim or with respect to the packet of
materials that you have received or (2) or if you wish to obtain an additional
copy of the Plan, this Disclosure Statement or any appendices or exhibits to
such documents, please contact the Balloting Agent at WWW.ADMINISTAR.NET or by
telephone at (904) 807-3023.
D. SPECIFIC INSTRUCTIONS FOR HOLDERS OF NOTEHOLDER CLAIMS
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AS
SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING INSTRUCTIONS ON THE BALLOT.
If a Ballot is damaged, lost, or missing, a replacement Ballot may be obtained
by sending a written request to the Balloting Agent. If you have any questions
about (1) the procedure for voting your Claim or with respect to the packet of
materials that you have received or (2) if you wish to obtain an additional copy
of the Plan, this Disclosure Statement or any appendices or exhibits to such
documents, please contact the Balloting Agent at WWW.ADMINISTAR.NET or by
telephone at (904) 807-3023.
The Record Date for determining which Holders of Noteholder Claims are entitled
to vote on the Plan is __________. THE INDENTURE TRUSTEE WILL NOT VOTE ON BEHALF
OF THE HOLDERS OF SUCH NOTEHOLDER CLAIMS. HOLDERS MUST SUBMIT THEIR OWN BALLOTS
IN ACCORDANCE WITH THE BALLOT AND THE INSTRUCTIONS ON THE BALLOT.
1. Beneficial Owners
A beneficial owner holding Senior Notes as record Holder in its own name should
vote on the Plan by completing and signing the enclosed Ballot and returning it
directly to the Balloting Agent on or before the Voting Deadline using the
enclosed self-addressed, postage-paid envelope.
A beneficial owner holding Senior Notes in "street name" through a designated
representative of such Holder (a "Nominee") may vote on the Plan by one of the
following two methods (as selected by such beneficial owner's Nominee):
22
(i) Complete and sign the enclosed beneficial owner Ballot. Return the
Ballot to your Nominee as promptly as possible and in sufficient time to allow
such Nominee to process the Ballot and return it to the Balloting Agent by the
Voting Deadline. If no self-addressed, postage-paid envelope was enclosed for
this purpose, contact the Balloting Agent or your Nominee for instructions; or
(ii) Complete and sign the pre-validated Ballot (as described below)
provided to you by your Nominee. Return the pre-validated Ballot to the
Balloting Agent by the Voting Deadline using the return envelope provided.
Any Ballot returned to a Nominee by a beneficial owner will not be counted for
purposes of acceptance or rejection of the Plan until such Nominee properly
completes and timely delivers to the Balloting Agent that Ballot or a master
Ballot that reflects the vote of such beneficial owner.
If any beneficial owner owns Senior Notes through more than one Nominee, such
beneficial owner may receive multiple mailings containing the Ballots. The
beneficial owner should execute a separate Ballot for each block of Senior Notes
that it holds through any particular Nominee and return each Ballot to the
respective Nominee in the return envelope provided therewith. Beneficial owners
who execute multiple Ballots with respect to Senior Notes held through more than
one Nominee must indicate on each Ballot the names of ALL such other Nominees
and the additional amounts of such Senior Notes so held and voted. If a
beneficial owner holds a portion of the Senior Notes through a Nominee and
another portion as a record holder, the beneficial owner should follow the
procedures described in the first paragraph above to vote the portion held of
record and the procedures described in the second paragraph above to vote the
portion held through a Nominee or Nominees.
2. Nominees
A Nominee that on the Record Date is the registered holder of Senior Notes for a
beneficial owner can obtain the votes of the beneficial owners of such Senior
Notes, consistent with customary practices for obtaining the votes of securities
held in "street name," in one of the following two ways:
(i) Pre-Validated Ballots. The Nominee may "pre-validate" a Ballot by
(1) signing the Ballot; (2) indicating on the Ballot the name of the registered
Holder, the amount of Senior Notes held by the Nominee for the beneficial owner,
and the account numbers for the accounts in which such Senior Notes are held by
the Nominee; and (3) forwarding such Ballot, together with the Disclosure
Statement, return envelope and other materials requested to be forwarded, to the
beneficial owner for voting. The beneficial owner must then complete the
information requested in the Ballot; review the certifications contained in the
Ballot, and return the Ballot directly to the Balloting Agent in the
pre-addressed, postage-paid envelope so that it is RECEIVED by the Balloting
Agent before the Voting Deadline. A list of the beneficial owners to whom
"pre-validated" Ballots were delivered should be maintained by Nominees for
inspection for at least one year from the Voting Deadline; or
23
(ii) Master Ballots. If the Nominee elects not to pre-validate
Ballots, the Nominee may obtain the votes of beneficial owners by forwarding to
the beneficial owners the unsigned Ballots, together with the Disclosure
Statement, a return envelope provided by, and addressed to, the Nominee, and
other materials requested to be forwarded, no later than five (5) business days
after receipt by such Nominee of such materials. Each such beneficial owner must
then indicate his/her or its vote on the Ballot, complete the information
requested in the Ballot, review the certifications contained in the Ballot,
execute the Ballot, and return the Ballot to the Nominee. After collecting the
Ballots, the Nominee will, in turn, complete a master Ballot compiling the votes
and other information from the Ballot, execute the master Ballot, and deliver
the master Ballot to the Balloting Agent so that it is RECEIVED by the Balloting
Agent before the Voting Deadline. All Ballots returned by beneficial owners
should either be forwarded to the Balloting Agent (along with the master ballot)
or retained by Nominees for inspection for at least one year from the Voting
Deadline. EACH NOMINEE SHOULD ADVISE ITS BENEFICIAL OWNERS TO RETURN THEIR
BALLOTS TO THE NOMINEE BY A DATE CALCULATED BY THE NOMINEE TO ALLOW IT TO
PREPARE AND RETURN THE MASTER BALLOT TO THE BALLOTING AGENT SO THAT IT IS
RECEIVED BY THE BALLOTING AGENT BEFORE THE VOTING DEADLINE.
3. Miscellaneous
For purposes of voting to accept or reject the Plan, the beneficial owners of
Senior Notes will be deemed to be the "Holders" of the Claims represented by
such Senior Notes. The Debtors, in their sole discretion, may request that the
Balloting Agent attempt to contact voters who have submitted defective Ballots
to cure any such defects in the Ballots or master Ballots.
Except as provided below, unless the Ballot or master Ballot is timely submitted
to the Balloting Agent before the Voting Deadline together with any other
documents required by such Ballot or master Ballot, the Debtors may, in their
sole discretion, reject such Ballot or master Ballot as invalid, and therefore
decline to utilize it in connection with seeking Confirmation of the Plan.
In the event that any Noteholder Claim is Disputed, any vote to accept or reject
the Plan cast with respect to such Disputed Claim will not be counted for
purposes of determining whether the Plan has been accepted or rejected, unless
the Bankruptcy Court orders otherwise.
E. INQUIRIES
If you have questions about the procedures for voting your Claim, or the packet
of materials that you received, please contact the Balloting Agent as set forth
above.
If you wish to obtain additional copies of the Plan, this Disclosure Statement,
or the Exhibits to those documents at your own expense, unless otherwise
specifically required by Bankruptcy Rule 3017(d), please contact the Balloting
Agent.
24
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT THE PLAN,
SEE SECTION XV OF THIS DISCLOSURE STATEMENT.
F. ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by an impaired class of claims
as acceptance by the holders of at least two-thirds (2/3) in dollar amount and
more than one-half (1/2) in number of the allowed claims of that class which
actually timely and properly cast ballots.
In the event that any of the Impaired Classes of Claims do not accept the Plan
with respect to any Debtor, the Debtors reserve the right to (a) modify the Plan
in accordance with its terms, and (b) request that the Court confirm the Plan in
accordance with Section 1129(b) of the Bankruptcy Code, notwithstanding such
lack of acceptance, by a finding that the Plan provides fair and equitable
treatment to any Impaired Class of Claims voting to reject the Plan.
G. CONDITIONS TO CONFIRMATION OF THE PLAN AND EFFECTIVENESS OF THE PLAN
1. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN
The following must occur on or before Confirmation, unless and until each of the
following conditions has been satisfied or waived, in accordance with Article
9.04 of the Plan, in writing by the Debtors and each of the Initial Committed
Purchasers:
A. The Bankruptcy Court will have entered the Confirmation
Order;
B. The following documents will be executed and delivered to
the Initial Committed Purchasers, each in form and substance
satisfactory to the Initial Committed Purchasers:
(i) a commitment letter related to the Exit Financing
Facility;
(ii) the Private Placement Purchase Agreement; and
(iii) the Cash-Out Purchase Agreement.
C. The Restructuring Commitment Letter will have been approved
by the Bankruptcy Court pursuant to a Final Order.
D. The Restructuring Commitment Letter will not have been
terminated, and all conditions precedent thereunder will
25
have been satisfied or waived, unless such conditions
precedent relate to post-Confirmation events.
2. Conditions Precedent To Effectiveness Of The Plan
Notwithstanding any other provision of the Plan or the Confirmation Order, the
Effective Date of the Plan will not occur, and the Plan will not be binding on
any party, unless and until each of the following conditions has been satisfied
or waived, in accordance with Article 9.04 of the Plan, in writing by the
Debtors and each of the Initial Committed Purchasers:
(i) The Confirmation Order, in form and substance reasonably
satisfactory to the Initial Committed Purchasers, will have become a Final
Order;
(ii) The closing and an initial funding will have occurred under
the Exit Financing Facility and all conditions precedent to the consummation
thereof (other than the occurrence of the Effective Date of the Plan) will have
been waived or satisfied in accordance with the terms thereof;
(iii) The closing and funding will have occurred under the Rights
Offering and/or Private Placement Purchase Agreement and the Cash-Out Purchase
Agreement and all conditions precedent to the consummation thereof (other than
the occurrence of the Effective Date of the Plan) will have been waived or
satisfied in accordance with the terms thereof;
(iv) The certificate of incorporation for Reorganized Intermet,
and the bylaws of Reorganized Intermet (and similar corporate governance
documents), the Registration Rights Agreement, the Stockholders' Agreement, and
the Exit Financing Facility will each be in form and substance acceptable to the
Initial Committed Purchasers and will be effective on the Effective Date.
(v) The New Common Stock will have been issued in accordance with
the Plan;
(vi) The Restructuring Commitment Letter will not have been
terminated and all conditions precedent thereunder will have been satisfied or
waived;
(vii) All other actions, documents and agreements necessary to
implement the Plan as of the Effective Date will have been delivered and all
conditions precedent thereto will have been satisfied or waived; and
(viii) Reorganized Intermet and the Initial Committed Purchasers
will have approved the terms of the Employment Agreements.
26
H. MODIFICATION OF THE PLAN AND AMENDMENTS
The Debtors may alter, amend, or modify the Plan or any Exhibits thereto under
Section 1127(a) of the Bankruptcy Code at any time prior to the Confirmation
Hearing Date with the consent of the Initial Committed Purchasers which consent
will not be reasonably withheld. The Debtors may, under Section 1127(b) of the
Bankruptcy Code, institute proceedings in the Bankruptcy Court to remedy any
defect or omission or reconcile any inconsistencies in the Plan, the Disclosure
Statement or the Confirmation Order, and such matters as may be necessary to
carry out the purposes and effects of the Plan.
I. EFFECT OF CONFIRMATION
If the Plan is Confirmed by the Bankruptcy Court:
- The terms of the Plan will be binding on the Debtors, all Creditors,
Holders of Equity Interests, and other parties in interest, regardless
of whether they have accepted the Plan.
- Except as provided in the Plan, all Claims and Equity Interests will
be discharged; and Creditors and Holders of Equity Interests will be
prohibited from asserting their Claims against or Equity Interests in
the Debtors or their Assets, or against Reorganized Intermet or any of
the Reorganized Debtors.
J. REVOCATION OF THE PLAN
The Debtors reserve the right to revoke or withdraw the Plan prior to the
Confirmation Date. If the Debtors so revoke or withdraw the Plan, then the Plan
will be null and void and, in such event, nothing contained therein will be
deemed to constitute a waiver or release of any Claims by or against, or any
Equity Interests in, any Debtor or any other Person or to prejudice in any
manner the rights of any Debtor or any Person in any further proceedings
involving any Debtor.
III. BACKGROUND OF THE RESTRUCTURING AND EVENTS LEADING TO COMMENCEMENT OF
BANKRUPTCY PROCEEDINGS(2)
The Debtors' Cases were initiated primarily in response to substantial and
unprecedented increases in the cost of raw materials, especially scrap steel.
The price of scrap steel, which is the Debtors' primary raw material for ferrous
casting operations, increased from approximately $160 per net ton at the
beginning of 2003 to approximately $210 per net ton at the end of 2003 and to
approximately $400 per net ton by the end of 2004. The price of scrap steel
reached a peak of $440 per net ton in November, 2004.
- ----------
(2) This information is intended as a summary only. No single factor, but
rather a combination of the events described below, led to these Chapter 11
Cases.
27
Industry commentators attribute this unprecedented rise in scrap steel prices
to, among other things:
- An assessment of an export tariff by Russia and the Ukraine, which
decreased the supply available to countries such as China, South Korea
and Turkey.
- High oil prices and war which contributed to a worldwide rise in
freight prices.
- China's rapid macroeconomic and intensive manufacturing growth, which
fueled China's purchase of more than 3.3 million tons of U.S. scrap in
2003 alone (accounting for approximately 30% of all U.S. exported
scrap for the year).
- South Korea's increased purchases of scrap steel from the U.S.
(approximately 2.5 million tons in 2003).
- The economic rebound of the U.S. economy which resulted in increased
domestic demand for scrap.(3)
Because of pre-existing contractual pricing terms with most of the Debtors'
customers, the Debtors' were limited in their ability to pass these and other
raw material cost increases to customers. At the same time, some of the Debtors'
largest trade creditors began to tighten or eliminate credit terms, which
increased working capital requirements. The Debtors also experienced operational
difficulties at the Pulaski, Tennessee and Racine, Wisconsin light-metals
plants.
These financial and operational difficulties impaired the Debtors' ability to
continue to draw on the Pre-Petition Credit Facility. In an effort to avoid
anticipated defaults under loan covenants, which would have occurred as of
September 30, 2004, the Debtors entered into discussions with the Pre-Petition
Agent, seeking waivers of certain conditions contained in the Pre-Petition
Credit Facility. The Debtors were unable to obtain waivers on acceptable terms
and, consequently, the Cases were filed on September 29, 2004.
The Debtors have continued to operate their U.S. businesses as
debtors-in-possession under Bankruptcy Court protection from Creditors. The
Debtors continue to review all aspects of their business for opportunities to
improve performance, while seeking to restructure their secured and unsecured
debt, rationalize their facilities and cost structure, and effect a customer
strategy focused on scrap steel cost recovery and other commercial and financial
issues.
- ----------
(3) Spada, Alfred T., "Ferrous Scrap Pricing: A Case of Supply and Demand,"
Modern Casting, April 2004 at 18.
28
IV. OPERATIONS OF THE DEBTORS
A. CORPORATE STRUCTURE
Intermet, a Georgia corporation, has been publicly held since 1985. Intermet
directly or indirectly owns all of the issued and outstanding ownership
interests of each of the Domestic Subsidiaries listed below. Each of the
Domestic Subsidiaries listed below is an entity organized under the laws of the
respective states identified below and each is a Debtor in the Cases:
ALEXANDER CITY CASTING COMPANY, INC., INTERMET U.S. HOLDING, INC., a/k/a
a/k/a Intermet Alexander City Intermet New River Foundry, a/k/a
Foundry, an Alabama corporation Intermet Columbus Machining, a Delaware
corporation
CAST-MATIC CORPORATION, a/k/a LYNCHBURG FOUNDRY COMPANY, a/k/a
Intermet Stevensville Plant, a Intermet Archer Creek Foundry, a/k/a
Michigan corporation Intermet Radford Foundry, a Virginia
corporation
COLUMBUS FOUNDRY, L.P., a/k/a NORTHERN CASTINGS CORPORATION, a/k/a
Intermet Columbus Foundry, a Delaware Intermet Hibbing Foundry, a Georgia
limited partnership corporation
DIVERSIFIED DIEMAKERS, INC., a/k/a SUDBURY, INC., a Delaware corporation
Intermet Hannibal Plant, a/k/a
Intermet Palmyra Plant, a/k/a
Intermet Monroe City Plant, a
Delaware corporation
GANTON TECHNOLOGIES, INC., a/k/a SUDM, INC., a Michigan corporation
Intermet Racine Plant, a/k/a Intermet
Racine Machining, a/k/a Intermet
Pulaski Plant, an Illinois
corporation
INTERMET HOLDING COMPANY, a Delaware TOOL PRODUCTS, INC., a/k/a Intermet
corporation Minneapolis Plant, a/k/a Intermet
Jackson Plant, a Delaware corporation
INTERMET ILLINOIS, INC., f/k/a Frisby WAGNER CASTINGS COMPANY, a/k/a Intermet
P.M.C., Incorporated, an Illinois Decatur Foundry, a Delaware corporation
corporation
INTERMET INTERNATIONAL, INC., f/k/a WAGNER HAVANA, INC., a/k/a Intermet
Intermet New River Foundry, Havana Foundry, a Delaware corporation
f/k/a Intermet Columbus Machining,
a Georgia corporation
IRONTON IRON, INC., a/k/a Intermet
Ironton Foundry, an Ohio corporation
29
Intermet also conducts business through its foreign Non-Debtor Affiliates, as
listed in the organizational chart attached as Exhibit B hereto. None of the
foreign Non-Debtor Affiliates have commenced, or is subject to, cases under
Chapter 11 of the Bankruptcy Code or similar insolvency proceedings in any other
jurisdiction. These foreign Non-Debtor Affiliates continue to operate their
businesses in the ordinary course of business outside of any insolvency
proceeding.
In addition, there are two domestic Non-Debtor Affiliates: Western Capital
Corporation and Transnational Indemnity Company. These domestic Non-Debtor
Affiliates have ceased operations and will be dissolved pursuant to state law
prior to or shortly after the Effective Date.
B. INTERMET'S BUSINESS OPERATIONS
Intermet is one of the largest independent producers of ductile iron, aluminum,
magnesium and zinc castings in the world. In addition, the Debtors provide
machining and tooling related to their casting business along with a range of
other products and services to the automotive and industrial markets. The
Debtors specialize in the design and manufacture of highly engineered, cast
automotive components for the global light truck, passenger car, light vehicle
and heavy-duty vehicle markets. These products are primarily structural and
safety components and are used in vehicle powertrain, chassis, brake and
body/interior parts.
The Debtors supply cast products to a broad array of automotive and industrial
customers. Original equipment manufacturers ("OEMs") and Tier 1 and Tier 2
suppliers of automotive components increasingly rely on their suppliers to
design and engineer parts based on specific design parameters, including weight,
size, cost and performance criteria. In addition, OEMs, Tier 1 and Tier 2
suppliers look to their suppliers to solve problems arising in the design and
manufacturing process. The Debtors provide a broad range of full-service
capabilities, including advanced design and engineering, casting, machining and
sub-assembly.
The Debtors' ferrous metal products include ductile iron castings and related
machining operations. These castings include crankshafts, brackets, bearing
caps, steering knuckles, wheel spindles, differential carriers and cases, brake
anchors and calipers and suspension control arms. The Debtors' light metals
products include aluminum, magnesium and zinc castings and related machining
operations. These castings include engine covers, brackets, instrument panel
frames, connector housings, steering knuckles, airbag controller enclosures,
heat sinks, steering column components and windshield wiper motor enclosures.
The Debtors provide cast products used by automotive OEMs including, but not
limited to, DaimlerChrysler, Ford, General Motors, PSA Peugeot Citroen,
Volkswagen, BMW, Honda and Toyota, as well as their leading suppliers, such as
Delphi, Visteon, PBR Automotive, TRW, Continental Teves, Knorr, Denso, Metaldyne
and Dana.
30
As of December 31, 2004, the Debtors' Ferrous Metals segment had a total average
straight time casting capacity of 625,000 net tons, a decrease of 18,000 net
tons as compared to 643,000 net tons in 2003. The decrease was due to the
closure of the Debtors' Havana, Illinois plant in 2004. The Debtors' Light
Metals segment had a total average straight time available casting capacity of
75,600 net tons as of December 31, 2004, an increase of 4,000 net tons as
compared to 71,600 net tons in 2003.
The Debtors' casting facilities, including their European facilities, operated
at an average annual capacity utilization of 74% in 2004, 68% in 2003 and 70% in
2002.
1. Acquisitions And Closures
A. Columbus Machining Closure
In October 2004, the Debtors announced the closure of their Columbus Machining
Plant, located in Midland, Georgia, which occurred during the first quarter of
2005. As a result of this decision the Debtors recorded a $0.3 million
restructuring and impairment charge that was primarily comprised of the
write-down of inventory. See additional discussion in Intermet's Annual Report
on Form 10-K, December 31, 2004, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in Note 5 to the Consolidated
Financial Statements, Restructuring and Impairment Charges, included therewith.
See also Section VII.D.4 of this Disclosure Statement, "Columbus Machining
Closure," for additional details.
B. Racine Closure
In December 2004, the Debtors announced the closure of their Racine
(die-casting) Plant and Racine Machining Plant, both of which are located in
Sturtevant, Wisconsin. The Debtors closed these plants during the second quarter
of 2005. As a result of this decision, the Debtors recorded a $10.3 million
restructuring and impairment charge in 2004. This charge consisted of a
write-down of fixed assets of $6.5 million, write-down of inventory of $2.4
million, a pension plan curtailment of $1.2 million and an additional $0.1
million each for severance pay and other contractual benefits included in the
collective bargaining agreement that was in place at the plant. See additional
discussion in Intermet's Annual Report on Form 10-K, December 31, 2004,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in Note 5 to the Consolidated Financial Statements,
Restructuring and Impairment Charges included therewith. See also Section
VII.D.3 of this Disclosure Statement, "Racine Plant Closure," for additional
details.
C. Decatur Closure
On March 29, 2005, the Debtors announced their plan to close their Decatur
Foundry located in Decatur, Illinois during the fourth quarter of 2005. The
Debtors recognized asset impairment charges in 2004 of $10.9 million to reduce
the capital assets to their fair values. The Debtors are in the process of
determining reserves required for plant closing
31
costs. See Section VII.D.5 of this Disclosure Statement, "Decatur Plant
Closure," for more details.
D. Porto, Portugal
Pursuant to the Debtors' agreement dated June 25, 2003 with Melfina - Estudos,
Servicos e Participacoes, S.A., the Debtors made a final payment in December
2004 to acquire 100% ownership of the shares of Fundicao Nodular, S.A. ("Porto
Foundry"), which is located in Porto, Portugal. Under the terms of the
agreement, the Debtors acquired the final 25% of the shares for a cash
investment of Euro 4.9 million (approximately $6.2 million). The Porto Foundry
is a caster of various ductile-iron automotive components.
2. Financial Information About Segments
Sales and operating loss for the Debtors' Ferrous Metals segment in 2004 were
$562.6 million and $16.9 million, respectively, compared with sales and
operating income of $493.4 million and $13.2 million, respectively, in 2003.
Sales and operating loss in the Debtors' Light Metals segment in 2004 were
$274.6 million and $124.6 million, respectively, compared to sales and operating
loss of $237.8 million and $44.2 million, respectively, in 2003. See additional
discussion in Intermet's Annual Report on Form 10-K, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in Note 14 to
the Consolidated Financial Statements, Reporting for Business Segments included
therewith.
3. Products, Markets And Sales
The Debtors focus on value-added cast metal products, which they supply mainly
to the automotive market. In 2004, 2003 and 2002, approximately 95.4%, 94.1% and
95.2% of the Debtors' sales, respectively, were attributable to the automotive
market. Within the automotive market, the Debtors' products generally fall into
four major categories:
- Chassis and suspension components such as steering knuckles, control
arms, steering gear housings, torsion bar adjusters, spindle carriers
and spring seats;
- Powertrain components such as electronic control module housings,
engine crankshafts, bearing caps, front covers and cam covers;
transmission housings, retainers and bodies; and differential cases,
carriers and bearing caps;
- Brake components such as light vehicle and heavy vehicle calipers,
anchors and brackets; and
- Interior/body components such as steering column and lock housings,
electronic enclosures, mirror supports and brackets.
32
The Debtors also manufacture a variety of products for the industrial and
appliance markets. In 2004, 2003 and 2002, approximately 4.6%, 5.9% and 4.8% of
the Debtors' sales, respectively, were attributable to the industrial and
appliance markets.
Reportable segment sales for continuing operations by market for 2004 were as
follows:
MARKET
AUTOMOTIVE INDUSTRIAL AND OTHER TOTAL
---------- -------------------- -----
FERROUS METALS SEGMENT 65.8% 0.8% 66.6%
LIGHT METALS SEGMENT 29.6% 3.8% 33.4%
---- --- -----
TOTAL 95.4% 4.6% 100.0%
==== === =====
Reportable segment sales for continuing operations by market for 2003 were as
follows:
MARKET
AUTOMOTIVE INDUSTRIAL AND OTHER TOTAL
---------- -------------------- -----
FERROUS METALS SEGMENT 66.5% 1.0% 67.5%
LIGHT METALS SEGMENT 27.6% 4.9% 32.5%
---- --- -----
TOTAL 94.1% 5.9% 100.0%
==== === =====
Reportable segment sales for continuing operations by market for 2002 were as
follows:
MARKET
AUTOMOTIVE INDUSTRIAL AND OTHER TOTAL
---------- -------------------- -----
FERROUS METALS SEGMENT 63.3% 0.8% 64.1%
LIGHT METALS SEGMENT 31.9% 4.0% 35.9%
---- --- -----
TOTAL 95.2% 4.8% 100.0%
==== === =====
All of the Debtors' foundry facilities that supply the automotive industry have
QS-9000 and ISO-9001 or ISO-9002 certification. All of the Debtors' European and
many of their North American operations have been certified to the new TS-16949
quality standard.
The Debtors primarily market their products through their own sales and customer
service staff. To a limited degree, the Debtors use independent sales
representatives. The Debtors' principal sales offices are in Troy, Michigan and
Saarbrucken, Germany, but are also supported by a smaller sales office in Tokyo,
Japan. The Debtors primarily produce to customer orders and do not maintain any
significant inventory of finished goods not on order.
The Debtors' sales staff acts as a liaison between their customers and their
production personnel. Through the Debtors' applications and product engineering
groups, the Debtors offer engineering and design capabilities and customer
assistance at the design stage of customer programs. The Debtors utilize quality
assurance representatives and engineers to work with their customers'
manufacturing personnel to detect and avoid
33
potential problems as well as to evaluate new product opportunities. In addition
to working with their customers' design engineers and other technical staff, the
Debtors' product design engineers frequently work closely with customers'
purchasing personnel and the Debtors' own sales personnel to present their ideas
and secure production purchase orders.
The Debtors supply cast products to automotive OEMs directly and through Tier 1
and Tier 2 suppliers. During the past three years, net sales to significant
customers were as follows (as a percentage of consolidated net sales):
CUSTOMER 2004 2003 2002
- -------- ---- ---- ----
DAIMLERCHRYSLER 11% 10% 18%
DELPHI 11% 11% 11%
FORD 9% 11% 12%
METALDYNE 10% 8% 1%
TRW 7% 6% 2%
VISTEON 6% 6% 5%
PBR AUTOMOTIVE 5% 6% 5%
GENERAL MOTORS 3% 5% 5%
During the past three years, net sales by market were as follows (as a
percentage of consolidated net sales):
2004 2003 2002
---- ---- ----
NORTH AMERICAN LIGHT TRUCKS 46% 52% 53%
NORTH AMERICAN PASSENGER CARS 26% 25% 29%
NORTH AMERICAN HEAVY VEHICLES 2% 1% 1%
EUROPEAN LIGHT VEHICLES 17% 13% 9%
EUROPEAN HEAVY VEHICLES 4% 3% 3%
INDUSTRIAL AND OTHER 5% 6% 5%
--- --- ---
TOTAL 100% 100% 100%
=== === ===
Sales of ferrous metals castings for continuing operations were 478,000, 455,000
and 429,000 net tons in 2004, 2003 and 2002, respectively. The increase in net
tons sold in 2004 compared to 2003 is primarily because of increased European
sales, the full effect of the consolidation of the Porto Foundry in July 2003,
and the use of the Debtors' products for a new DaimlerChrysler program in North
America. The increase in net tons sold in 2003 compared to 2002 is primarily
because of the Debtors' consolidation of the Porto Foundry's operating results
beginning in July 2003.
Sales of light metals castings were 41,000, 34,000 and 41,000 net tons in 2004,
2003 and 2002, respectively. The increase in net tons sold in 2004 compared to
2003 is primarily because the Debtors are supplying products for new programs
for DaimlerChrysler and Ford. The decrease in net tons sold in 2003 compared to
2002 was due primarily to lower market demand and the conversion of one
high-volume magnesium program to plastic.
34
4. Design, Manufacturing And Machining
The Debtors have a technical center located in Lynchburg, Virginia, and
engineering capability in Troy, Michigan, Saarbrucken, Germany and Tokyo, Japan,
that provide development, engineering and design services to the Debtors'
customers. In addition, the Debtors provide technical support to all of their
plants. The Debtors furnish their customers with design support using the
customers' native computer-aided design and engineering languages as well as the
Debtors' cast metal process simulation software. The Debtors' design and
engineering teams also assist their customers in the initial stages of product
creation and development.
The Debtors' capabilities include computer-aided engineering analysis, design
optimization, prototyping, modeling enhancements and testing. The Debtors use
three-dimensional solid modeling software in conjunction with rapid prototype
development, among other computer-aided design techniques, to support their
customers in the initial stages of product design and prototype creation. The
Debtors' goal is to continually improve product quality and performance. The
Debtors also strive to reduce costs by offering new product solutions that
optimize designs, reduce weight, consider the use of alternative materials or
incorporate more efficient manufacturing processes. The Debtors believe that
their design and engineering capabilities serve as a competitive advantage as
their customers continue to outsource these critical activities to their own
suppliers.
The Debtors' Ferrous Metals segment produces ductile iron castings. The Debtors'
ferrous metal castings range from small parts weighing only a few ounces each to
products weighing up to 75 pounds each. The ferrous metals cast production
process involves melting scrap steel and pig iron in a cupola melter or an
electric furnace, adding various alloys and pouring the molten metal into molds
made primarily of sand. The molten metal cools and solidifies in the molds. The
molds are then broken apart and the castings are removed.
The Debtors' Light Metals segment produces castings of aluminum, magnesium and
zinc. The Debtors' light metal castings range from small products weighing only
a few ounces each to products weighing up to 50 pounds each. To produce light
metal castings, the Debtors use a process called die-casting, in which molten
aluminum, magnesium or zinc is introduced into a metal die and solidified. The
Debtors also produce light metal castings using pressure-counter-pressure
casting (PCPC (TM)), which is a casting method in which molten metal, usually
aluminum, is introduced into a permanent die cavity with low-pressure gas
applied to the metal in a sealed furnace.
Customers usually specify the properties that are required in their castings,
such as strength, ductility and hardness, and the Debtors then determine how
best to meet those specifications. Constant testing and monitoring of the
casting process is necessary to maintain both the quality and performance
consistency of the castings. Electronic analysis and monitoring equipment,
including x-ray, real-time radioscopy, ultrasonic and magnetic-particle testing
and chemical spectroscopy is used extensively in grading scrap metal, analyzing
molten metal and testing castings.
35
Most castings require machining before they can be put to their ultimate use.
This machining may include drilling, boring, milling, threading or cutting
operations. Many customers provide their own machining for castings or have them
machined by third parties. Most of the Debtors' light metals casting plants have
some machining operations integral in the casting operation. The Debtors also
contract with other companies to machine castings that the Debtors produce,
before the castings are shipped to customers.
5. Raw Materials
Scrap steel is the primary raw material that the Debtors use to manufacture
ferrous metals castings. The Debtors purchase scrap steel from numerous sources,
using a combination of spot market purchases and short-term contract
commitments. The Debtors have no material long-term contractual commitments with
any scrap steel supplier, nor is it generally possible to secure long-term
commitments in this market. Sharp increases in scrap steel cost have had a
significant negative impact on the Debtors' financial results and were the major
factor in our initiation of the Cases. As part of the Cases, the Debtors have
negotiated revised surcharge policies related to the products in which scrap
steel is a major input. These agreements provide for price adjustments that are
linked to the change in value of certain steel indices, which the Debtors
believe are representative of their true scrap costs. These new policies became
effective with a majority of the Debtors' customers on January 1, 2005. In
addition, lag times between scrap steel price movements and the Debtors' ability
to adjust prices have been reduced from between one and six months to
approximately one month with most of the Debtors' major customers. The Debtors'
customers have also agreed in some cases to additional surcharges intended to
cover price increases in other materials and transportation.
In the Debtors' light metals business, the Debtors' primary raw materials are
primary and secondary aluminum alloy and primary magnesium ingots. The Debtors
purchase aluminum using spot market purchases and short-term contract
commitments. The Debtors have no material long-term contractual commitments with
any aluminum suppliers. The Debtors have contractual arrangements with many of
their major customers that allow the Debtors to adjust their castings prices to
reflect fluctuations in the cost of aluminum ingot. Adjustments are typically
made after a time period specified by the customers and always lag the market.
See Item 7A of Intermet's Annual Report on Form 10-K, December 31, 2004,
"Quantitative and Qualitative Disclosures about Market Risks" for further
discussion of raw materials purchases.
The Debtors had contractual arrangements with some of their suppliers, which
expired at various times through 2004, for the purchase of various materials,
other than scrap steel, primary and secondary aluminum ingot and primary
magnesium ingot, used in the manufacturing process. These contracts provided
limited protection against price increases of raw materials. Many of these
contracts were renewed in 2004. Other than as noted above, the Debtors do not
have specific arrangements in place to adjust casting prices for fluctuations in
the prices of alloy and other materials.
36
6. Cyclicality And Seasonality
Although most of the Debtors' products are generally not affected by
year-to-year automotive style changes, model changes may have an impact on
sales. In addition, the inherent cyclicality of the automotive industry has
affected the Debtors' sales and earnings during periods of slow economic growth
or recession. The Debtors' third and fourth quarter sales are usually lower than
first and second quarter sales due to plant closings by automakers for holidays,
vacations and model changeovers.
7. Backlog
Most of the Debtors' business involves supplying all or a portion of the
customer's requirements under blanket purchase orders that are issued on an
annual basis. Customers typically issue firm releases and shipping schedules on
a periodic basis, typically monthly or weekly. Many of the Debtors' customers'
purchase orders permit cancellation of the orders at any time at the convenience
of the customer. The Debtors' backlog at any time generally consists only of the
orders that have not been released for shipment.
8. Competition
The Debtors compete with many other foundries domestically and internationally.
Some of these foundries are owned by major users of castings. For example, many
automobile manufacturers in North America and Europe, which are among the
Debtors' customer base, operate their own foundries. However, they also purchase
a significant number of castings from INTERMET and other companies. The Debtors'
castings also compete, to some degree, with other types of metal castings,
plastics, and steel and aluminum forgings and stampings.
The machining industry is highly fragmented and competitive. As in the foundry
industry, major purchasers of machined components often have significant
in-house capabilities to perform their own machining work. The Debtors compete
primarily on the basis of product quality, engineering, service and price. The
Debtors emphasize their ability to produce complex products in order to compete
for value-added castings.
9. Research And Development
The Debtors conduct process, material and product development programs for both
their ferrous metals and light metals products, principally at a technical
center and a research foundry in Lynchburg, Virginia. In addition, the Debtors
established an engineering center at their European headquarters in Saarbrucken,
Germany in 2003. This facility complements the capabilities of the Lynchburg
Technical Center and the Debtors' engineering capability in Troy, Michigan to
facilitate a global network of engineering research and development operations.
Current research and testing projects encompass both new manufacturing processes
and materials and product development. The Debtors' research foundry has a
self-contained melting and molding facility with extensive metallurgical,
physical and chemical testing capabilities. The Debtors' work on new
manufacturing processes focuses on ways to
37
lower costs and improve quality. The Debtors' product development work includes
projects to extend the performance range for existing materials such as with
austempering of ductile iron and special alloying for creep-resistant magnesium
alloys. In addition, the Debtors are currently working to develop new materials,
improve manufacturing processes and improve material properties. The Debtors
directly expensed $1.5 million, $1.2 million and $1.3 million in 2004, 2003 and
2002, respectively, for basic research and development.
10. Employees
At April 30, 2005, the Debtors had 5,311 employees, comprised of 3,880 and 1,431
employees in North America and Europe, respectively. The Debtors' workforce
included 3,183 and 1,190 hourly manufacturing workers in North America and
Europe, respectively, on such date. The remaining employees on such date were
management, engineering, sales and clerical personnel.
11. Financial Information About Geographic Areas
Long-lived and deferred tax assets were located as follows for 2004, 2003 and
2002 (in thousands of dollars):
For the year ended December 31:
2004 2003 2002
-------- -------- --------
IDENTIFIABLE ASSETS IN:
NORTH AMERICA $357,260 $560,117 $683,775
EUROPE $155,563 $126,567 $ 80,323
-------- -------- --------
Total $512,823 $686,684 $764,098
======== ======== ========
Sales by geographic locations for external customers for 2004, 2003 and 2002
were as follows (in thousands of dollars):
For the year ended December 31:
2004 2003 2002
-------- -------- --------
SALES TO EXTERNAL CUSTOMERS:
NORTH AMERICA $658,987 $604,218 $663,648
EUROPE $175,842 $117,096 $ 88,506
OTHER INTERNATIONAL $ 2,344 $ 9,853 $ 3,583
-------- -------- --------
TOTAL $837,173 $731,167 $755,737
======== ======== ========
C. PROPERTIES
Intermet's headquarters are located in Troy, Michigan, and Intermet operates 18
manufacturing facilities throughout the world. All of the Debtors' manufacturing
38
locations are owned, except the Jackson Plants and Columbus Foundry facilities,
which are leased pursuant to financing arrangements utilizing industrial revenue
bonds. All of the Debtors' U.S. owned properties are subject to liens securing
bank borrowings. For further information on debt, see Section V of this
Disclosure Statement, and the discussion in Intermet's Annual Report on Form
10-K, December 31, 2004, "Management's Discussion and Analysis of Financial
Condition and Results of Operation" and Note 8 to the Consolidated Financial
Statements, Debt, included therewith.
Intermet's operations in the United States occupy approximately 2,750,000 square
feet (approximately 419,000 square feet of which represents leased facilities)
in facilities located in Michigan, Virginia, Georgia, Illinois, Minnesota,
Missouri, Tennessee, Wisconsin. Its operations outside of the United States
occupy 596,000 square feet (8,000 square feet of which represents leased
facilities) in facilities located in Germany and Portugal. The utilization and
capacity of Intermet's facilities fluctuates based upon current economics,
customer demands and the mix of components it produces and the vehicle models
for which it is producing the components. Intermet believes that substantially
all of its property and equipment is in good condition and that it has
sufficient capacity to meet its current manufacturing needs.
A list of Intermet's facilities is set forth on Exhibit C attached hereto.
Intermet's current lease for its corporate headquarters will expire on October
31, 2005. On August 4, 2005, Intermet filed a motion for authority to enter into
a new corporate headquarters lease agreement with 700 Tower SPE, LLC, Intermet's
new proposed landlord for premises located in the building located at 700 Tower
Drive, Troy, Michigan. As soon as is reasonably practicable, Intermet will move
to the new corporate headquarters facility, which is described in more detail on
Exhibit C.
D. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEBTORS
The following table shows the current list of directors and executive officers
of each of the Debtors:
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- --------------------- ---------------------------- ----------------------------- ---------------------------------------
INTERMET DR. GARY F. RUFF (53) DR. GARY F. RUFF (53) CHAIRMAN OF THE BOARD AND CHIEF
CORPORATION EXECUTIVE OFFICER
DR. JOHN P. CRECINE (65) DIRECTOR
JULIA D. DARLOW (63) DIRECTOR
NORMAN F. EHLERS (67) DIRECTOR
JOHN R. HORNE (67) DIRECTOR
THOMAS H. JEFFS II (66) DIRECTOR
CHARLES G. MCCLURE (51) DIRECTOR
RICHARD A. NAWROCKI (56) DIRECTOR
MITSUNOBU TAKEUCHI (63) DIRECTOR
PAMELA E. RODGERS (46) DIRECTOR
ROBERT E. BELTS (55) VICE PRESIDENT--FINANCE AND CHIEF
FINANCIAL OFFICER
39
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- --------------------- ---------------------------- ----------------------------- ---------------------------------------
TIMOTHY R. GILLILAND (54) VICE PRESIDENT - LIGHT METALS
TODD A. HEAVIN (43) VICE PRESIDENT--FERROUS METALS
MARY JO KARJALA (60) CORPORATE SECRETARY
ALAN J. MILLER (56) VICE PRESIDENT, GENERAL COUNSEL AND
ASSISTANT SECRETARY
BYTHA MILLS (49) VICE PRESIDENT, ADMINISTRATION
THOMAS E. PRUCHA (55) VICE PRESIDENT--TECHNICAL SERVICES
JOHN D. RUTHERFORD (58) VICE PRESIDENT SALES AND MARKETING
MICHAEL S. SKRZYPCZAK (48) CORPORATE TREASURER
LAURENCE VINE-CHATTERTON (55) VICE PRESIDENT INTERMET CORPORATION AND
PRESIDENT--INTERMET EUROPE
ALEXANDER CITY ROBERT E. BELTS PRESIDENT
CASTING COMPANY, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
CAST-MATIC ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
CORPORATION ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
COLUMBUS INTERMET INTERNATIONAL, INC. GENERAL PARTNER
FOUNDRY, L.P. SUDM, INC. LIMITED PARTNER
DIVERSIFIED ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
DIEMAKERS, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
GANTON ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & President
TECHNOLOGIES, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
HOLDING COMPANY ALAN J. MILLER ALAN J. MILLER SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
ILLINOIS, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
40
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- --------------------- ---------------------------- ----------------------------- ---------------------------------------
INTERMET ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
INTERNATIONAL, INC. DR. GARY F. RUFF DIRECTOR
ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
GREGORY B. WAHOWIAK VICE PRESIDENT
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
INTERMET U.S. ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
HOLDING, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
IRONTON ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
IRON, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
LYNCHBURG ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
FOUNDRY COMPANY ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
NORTHERN ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
CASTINGS CORPORATION ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
SUDBURY, INC. ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
SUDM, INC. ROBERT E. BELTS ROBERT E. BELTS PRESIDENT
ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
TOOL ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
PRODUCTS, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
WAGNER ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
CASTINGS COMPANY ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
DR. GARY F. RUFF DIRECTOR
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
WAGNER ROBERT E. BELTS ROBERT E. BELTS CHAIRMAN & PRESIDENT
41
DEBTOR DIRECTORS (AGE) OFFICERS (AGE) POSITION
- --------------------- ---------------------------- ----------------------------- ---------------------------------------
HAVANA, INC. ALAN J. MILLER ALAN J. MILLER VICE PRESIDENT & SECRETARY
MICHAEL S. SKRZYPCZAK TREASURER
MARY JO KARJALA ASSISTANT SECRETARY
E. THE PRINCIPALS OF THE DEBTORS
1. Background Of Directors And Executive Officers
DIRECTORS
DR. RUFF became Chairman and Chief Executive Officer of Intermet in July 2004.
He served as President and Chief Executive Officer from July 2003 to July 2004
and as President and Chief Operating Officer from December 2002 to July 2003.
During July 2000, he was promoted to Executive Vice President -- Technical
Services. Before joining Intermet, Dr. Ruff served in a variety of positions at
CMI International and its successor company, Hayes Lemmerz International, Inc.,
automotive parts suppliers. He served as President of North American Aluminum
Wheels -- Hayes Lemmerz International and as Corporate Vice President of Hayes
Lemmerz International, Inc. from February 1999 to May 1999. He was Chief
Technical Officer, Executive Vice President and director of CMI International,
Inc. from February 1994 until Hayes-Lemmerz purchased CMI in January 1999.
DR. CRECINE has been a director of Intermet since 1993. He is Chief Executive
Officer of B.P.T., Inc. and Chief Financial Officer of Islandless Network, LLC,
and a private investor and consultant. He was president of the Georgia Institute
of Technology from 1987 to mid-1994. Previously he served as a professor at the
University of Michigan and founding director of the Institute of Public Policy
Studies from 1965 to 1975. He became dean of the College of Humanities and
Social Sciences at Carnegie Mellon University in 1975, a position he held until
1982 when he became the University's provost and senior vice president for
Academic Affairs. He held that position until his Georgia Tech appointment. He
is a director of Interland, Inc. and IT/IS Telecom, LLC.
MS. DARLOW has been a director of Intermet since 2001. Ms. Darlow became counsel
to the Grand Rapids based law firm of Varnum Riddering Schmidt & Howlett LLP in
January 2005. Ms. Darlow is a former partner of the Detroit-based law firm of
Dickinson Wright PLLC, having joined the firm in 1971, and most recently serving
as a consulting member and attorney from January 2002 until October 2004. Ms.
Darlow also serves on the Board of Trustees for Marygrove College and the
Michigan Opera Theatre. She is the past President of the State Bar of Michigan.
MR. EHLERS has been a director of Intermet since 1997. He served as Vice
President-Purchasing and Supply at Ford Motor Company from 1992 until his
retirement in 1996. Before 1992 he served as Vice President-Supply for Ford of
Europe, executive director of North American Automotive Operations production
purchasing and executive director of purchasing and transportation services.
42
MR. HORNE has been a director of Intermet since 1997. He retired as Chairman of
the Board of Navistar International Corporation in February 2004, a position he
held since February 2003. Prior to that he served as Chairman and CEO from April
2002. Mr. Horne served as Chairman, CEO and President of Navistar International
Corporation from 1995 until 2002. He serves as a director for the Corrections
Corporation of America and is a director and member of the executive committee
of Junior Achievement of Chicago.
MR. JEFFS has been a director of Intermet since 1997. He retired as vice
chairman of First Chicago NBD Corporation and First National Bank of Chicago,
and president and chief operating officer of its Michigan subsidiary, NBD Bank,
effective October 31, 1998. He is a governor of the Stratford Festival of
Canada.
MR. MCCLURE has been a director of Intermet since 2002. He was elected to the
position of Chairman of the Board, Chief Executive Officer and President and a
director of ArvinMeritor in August 2004. Prior to joining ArvinMeritor, he
served Federal-Mogul Corporation as Chief Executive Officer and a member of the
Board of Directors from July 2003 to July 2004, and as President and Chief
Operating Officer and a member of the Board from January 2001 to July 2003. He
served Detroit Diesel Corporation as President, Chief Executive Officer and a
member of the Board from 1997 to December 2000, and held a number of management
positions with Johnson Controls, Inc. from 1983 to 1997, including President of
the Americas Region; Vice President and Managing Director of European
Operations; and Vice President and General Manager of Joint Ventures. From 1983
to 1985 Mr. McClure was employed at Hoover Universal, acquired by Johnson
Controls in 1985. He began his career with Ford Motor Company as a heavy-duty
truck sales engineer and field service engineer. Mr. McClure is a director of
R.L. Polk & Company, and serves on the boards of various business and civic
organizations.
MR. NAWROCKI has been a director of Intermet since 2003. He is currently the
President, Chief Executive Officer and member of the Board of Directors of CMI -
Management Services, Inc., part owner and President of R.W. Ventures, LLC, a
venture capital entity, President of R.W. Real Estate, LLC, and President of
Plan B Consultants, LLC. Prior positions include President and CEO and Director,
and Executive Vice President and Chief Financial Officer of CMI International,
Inc. from November 1986 to February 1999. Prior to joining CMI International,
Inc., Mr. Nawrocki was a partner with CPA firm Cuilla, Smith and Dale. He became
a Certified Public Accountant in Michigan in 1974. Mr. Nawrocki is a mentor with
the Northville, Michigan Youth Association.
MR. TAKEUCHI has been a director of Intermet since 2004. He serves as Chairman
Emeritus of DENSO International America, Inc., North American headquarters for
Japan-based DENSO Corporation, and honorary advisor to the Board of Directors of
DENSO Corporation since June 2004 after a 40-year career with the company.
Previously, Mr. Takeuchi served as a member of DENSO Corporation's Board of
Directors and as Chair and Chief Executive Officer of DENSO International
America since July 2002, having served as President and Chief Executive Officer
since June 1997.
43
Mr. Takeuchi is a member and past president of the Japan Business Society of
Detroit and serves on boards of the National Association of Manufacturers,
Original Equipment Suppliers Association, Motor Equipment Manufacturers
Association, Economic Club of Detroit and the Greater Detroit Chamber of
Commerce.
MS. RODGERS has been a director of Intermet since 1999. She has been president
of Rodgers Chevrolet in Woodhaven, Michigan since November 1996. Previously, she
was president of Flat Rock Chevrolet-Oldsmobile from February 1993. Ms. Rodgers
serves on the boards of the Community Foundation for Southeastern Michigan, New
Detroit Inc., and the Detroit Black Chamber.
OFFICERS
DR. RUFF - see above.
MR. BELTS joined Intermet as Vice President - Finance and Chief Financial
Officer in August 2002 following 14 years with Detroit Diesel Corporation, most
recently serving as Senior Vice President and Chief Financial Officer. Prior to
this position, he was Vice President and Controller with Detroit Diesel
Corporation. He began his career in 1971 with General Motors Corporation, rising
to the position of Divisional Director of Budgets and General Accounting with
GM's Detroit-Diesel-Allison Division. Detroit-Diesel-Allison transitioned to an
independent company in 1988.
MR. GILLILAND joined Intermet in October 2003 as General Manager of the Intermet
Racine Operations. He was promoted in May 2004 to the position of Vice
President, Light Metals. Prior to joining Intermet, he was with J. L. French
Automotive Castings, Inc. where he served as Vice President of Quality, having
previously held various manufacturing positions with J.L. French. Before J.L.
French, Mr. Gilliland served as Vice President of Manufacturing for Nelson Metal
Products Corporation, acquired by J.L. French in October 1999. He has served as
Vice President and General Manager at various CMI International operations, was
a Plant Manager with Amcast Corporation, and began his career with General
Motors having held positions of increasing responsibility at the company's
casting operations.
MR. HEAVIN joined Intermet as a Group Vice President in June 2000. Prior to
joining Intermet, he held the position of Manufacturing Manager for Delphi's
energy and chassis division. Prior to Delphi, Mr. Heavin was with United
Technologies Automotive for six years as Plant Manager of the Holland, Michigan
plant and subsequently as a General Manager in the Interiors group.
MS. KARJALA joined Intermet as Executive Assistant to the Chairman and CEO in
September 1995. In December 2002 she was elected by the Board of Directors to
the position of Corporate Secretary, having served as Assistant Corporate
Secretary since January 1997. Prior to joining Intermet, Ms. Karjala was with
the Jervis B. Webb Company in the position of International Office Manager. She
began her career with the Ford Motor Company.
44
MR. MILLER joined Intermet in July 1998 as Corporate General Counsel and was
named Vice President and General Counsel in August 1999 and Secretary in 2000.
He served as Vice President, General Counsel and Secretary of Libbey-Owens-Ford
Co., an automotive parts supplier, from February 1987 to July 1998.
MS. MILLS joined Intermet in February 1997 as Manager of Investor Relations. In
December 2002, she was elected by the Board of Directors to the position of Vice
President of Administration, having been promoted from the Director of Corporate
Affairs, a position she held from March 1999. Prior to joining Intermet, Ms.
Mills served as Human Resources Manager, Accounting Supervisor and in other
positions with Dana Corporation.
MR. PRUCHA joined Intermet in October 1999 as Director, Process Research and
Development and was promoted to the position of Vice President, Technical
Services in December 2002. Prior to joining Intermet, Mr. Prucha served as Vice
President of Technology with CMI International for 10 years, having 30 years of
experience in the metal-casting industry, 20 of which at CMI.
MR. RUTHERFORD joined Intermet in June 2003 as Director of Sales responsible for
Light Metals sales and the activities of the company's independent
manufacturers' representatives. He was promoted to the position of Vice
President of Sales and Marketing in August 2004. Mr. Rutherford came to Intermet
from Eastern Alloys, Inc. located in New York, where he served as Vice President
Sales and Marketing. Prior to Eastern Alloys, he was Vice President of Business
Development at Dynacast /SPM, also of New York. Prior positions included Vice
President of Sales and Marketing at Magnesium Aluminum Corporation, and he began
his career in metals and casting at Aluminum Smelting and Refining Company, Inc.
ultimately becoming President and CEO.
MR. SKRZYPCZAK joined Intermet in 1995 as Director of Treasury Services. In
April 2000, the Board of Directors appointed Mr. Skrzypczak to the position of
Corporate Treasurer. Prior to joining Intermet, he was with the U.S. Department
of the Treasury, where he served as a national bank examiner for the Comptroller
of the Currency. Mr. Skrzypczak has also held treasury and financial positions
at Inacomp Computer Centers, Merrill Lynch and Wells Fargo Bank.
MR. VINE-CHATTERTON joined Intermet in January 1999 as a Vice President of
Intermet and President of Intermet Europe. Before coming to Intermet, he was a
divisional Finance Director of T&N PLC, UK, an automotive parts supplier, from
June 1996. Mr. Vine-Chatterton was a divisional Finance Director of Caradon PLC,
UK, an international supplier to building and home improvement industries, from
January 1994 until 1996.
45
2. Compensation Of The Principals Of The Debtors
A. ANNUAL COMPENSATION
The following chart sets forth the annual salaries for 2004 and 2005 of the
principals of the Debtors:
NAME 2004 ANNUAL COMPENSATION 2005 ANNUAL COMPENSATION
- ---- ------------------------ ------------------------
DR. GARY F. RUFF $500,000 (7/2004) SAME AS 2004
DR. JOHN P. CRECINE SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
JULIA D. DARLOW SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
NORMAN F. EHLERS SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
JOHN R. HORNE SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
THOMAS H. JEFFS II SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
CHARLES G. MCCLURE SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
RICHARD A. NAWROCKI SEE "DIRECTOR COMPENSATION" BELOW. SEE "DIRECTOR COMPENSATION" BELOW.
PAMELA E. RODGERS SEE "DIRECTOR COMPENSATION" BELOW. SAME AS 2004
ROBERT E. BELTS $260,000 SAME AS 2004
TIMOTHY R. GILLILAND $200,000 SAME AS 2004
TODD A. HEAVIN $210,000 SAME AS 2004
MARY JO KARJALA $ 72,000 $75,600 (4/05)
ALAN J. MILLER $225,000 SAME AS 2004
BYTHA MILLS $150,000 SAME AS 2004
THOMAS E. PRUCHA $175,000 SAME AS 2004
JOHN D. RUTHERFORD $200,000 SAME AS 2004
MICHAEL S. SKRZYPCZAK $130,000 SAME AS 2004
LAURENCE VINE-CHATTERTON $204,721 / E186,110 (1 E = $1.1) $249,260 / E206,000 (1 E=$1.21)
In addition, officers received a 401(k) match, ESOP contribution, term life
insurance benefits, other medical and health benefits, and certain other
personal benefits. See also the discussion of the Key Employee Retention Plan in
Section VII.G. of this Disclosure Statement.
46
B. DIRECTOR COMPENSATION
The Debtors do not pay board fees to their employee directors. The Debtors pay
Dr. Crecine, Ms. Darlow, Mr. Ehlers, Mr. Horne, Mr. Jeffs, Mr. McClure, Mr.
Nawrocki, Ms. Rodgers and Mr. Takeuchi, as non-employee directors, $8,500
quarterly, for regularly scheduled board or committee meetings and telephone
board and committee meetings. In addition, non-employee directors receive a fee
of $1,000 for special board or committee meetings other than the afternoon
before or day of a regularly scheduled board meeting. Committee chairpersons
receive a fee of $2,000 per year paid quarterly, and directors are reimbursed
for out-of-pocket expenses associated with attending meetings or conducting
board business.
Effective July 2004, the Debtors increased the compensation of their lead
director, Mr. Nawrocki, $3,750 per quarter in addition to the fees described
above. Effective April 2005, the Debtors further increased Mr. Nawrocki's
compensation to an aggregate increase of $12,500 per quarter in addition to the
fees described above.
F. ENVIRONMENTAL RELATED LIABILITIES
1. Description Of Environmental Liabilities
Various of the Debtors conduct and have conducted industrial operations at
numerous facilities in the United States. As a result, they have been involved
in matters relating to the discharge of materials into the environment. The
Debtors have participated and are participating in a number of on-site
investigation, monitoring and/or remediation projects at various owned and
non-owned sites, some of which are being managed or overseen by federal, state
and/or local regulatory agencies. The Debtors' operations are also regulated by
state and local environmental agencies that issue various permits covering the
Debtors' operations with respect to discharges to air, water and solid or
hazardous waste disposal. Various of the Debtors have been involved in some
proceedings with state or federal regulators alleging noncompliance with permit
limitations or other matters. Further information with respect to these matters
is set forth at Item 17 of the various Debtors' Statements of Financial Affairs.
Due to the technical and legal nature of potential environmental related
liabilities, the Debtors have utilized and continue to utilize the services of
counsel and environmental consultants to obtain the technical advice and
expertise necessary to ensure that the Debtors are in compliance with federal,
state and local laws and regulations and to insure that the Debtors' rights are
protected.
2. Future Activities At Owned Sites
The Debtors intend to satisfy all environmental claims by continuing with all
compliance and remediation activities currently underway, or as may be required
in the future, in connection with owned sites (except as specifically noted
herein).
3. Continuation Of Remediation Activities At Certain Non-Owned Sites
Debtor Lynchburg Foundry Company is the operator and permittee of the Falwell
Aviation landfill, which is located on property that is leased by Lynchburg
Foundry
47
Company in Lynchburg, Virginia. The site has been used as an industrial landfill
for non-hazardous waste materials from foundry operations. Pursuant to state and
federal requirements, Intermet has been required to issue a letter of credit in
the aggregate amount of $2.7 million order to provide financial assurance for
the operation and closure of three landfills in Virginia, including the Falwell
Aviation Landfill. The other two landfills are located on property owned by
Lynchburg Foundry Company in Campbell County, Virginia and Radford, Virginia.
Pursuant to federal and state requirement, Lynchburg Foundry Company is required
to undertake closure of the Falwell Aviation Landfill. If the closure work is
not undertaken in compliance with regulations, the Commonwealth of Virginia
would be entitled to draw on the letter of credit to perform such work. The
Debtors estimate that the work can be performed at a cost that is less than the
amount that could be drawn on the letter of credit. As a result, the Plan
provides that Lynchburg Foundry Company will continue to perform this work and
that the obligations of Lynchburg Foundry Company to perform closure and
post-closure work at the Falwell Aviation Landfill will not be discharged by the
Plan.
4. Discharge Of Environmental Claims Related To Non-Owned Sites
The Debtors intend to discharge any and all obligations and claims relating to
the following matters, all of which involve non-owned sites:
A. Any liability associated with pre-filing off-site exposure
to contaminants migrating from the property located at 227
Wagner Avenue, Havana, Illinois, including but not limited
to, off-site drinking water wells (Debtor: Wagner-Havana,
Inc.).
B. Any and all liability for any off-site contamination
emanating from the properties located at 1701 West Main
Street and 1605 West Main Street, Radford, Virginia,
including potential contamination in the New River (Debtors:
Intermet International, Inc., Intermet U.S. Holding, Inc.,
Lynchburg Foundry Company).
C. Any and all liability associated with pre-filing off-site
exposure to contaminants migrating from the property located
at 825 N. Lowber Street, Decatur, Illinois (Debtor: Wagner
Castings Company).
D. Any and all liability associated with pre-filing off-site
exposure to contaminants migrating from the property located
on Florida Avenue in Lynchburg, Virginia (Debtor: Lynchburg
Foundry Company).
E. Any and all liability for environmental investigation or
remediation activities at any property formerly owned by any
Debtor, or for which any Debtor may be responsible by
48
contract or otherwise, including but not limited to the
matters listed on the Schedules of any Debtor, and the
following: (i) General Products Corporation, 2400 East South
Street, Jackson, Michigan (Debtor: Sudbury, Inc., Intermet
Corporation); (ii) Property located at 506 Randolph Avenue,
St. Paul, Minnesota (Debtor: Intermet Corporation, Sudbury,
Inc.); (iii) Property located at 118-130 Reed Street,
Philadelphia, Pennsylvania (Debtor: Sudbury, Inc.); (iv)
Iowa Mold Tooling, 500 Highway 18 West, Garner, Iowa
(Debtor: Sudbury, Inc., Intermet Corporation); (v) Frisby
PMC, 1500 Chase Avenue, Elk Grove Village, Illinois (Debtor:
Intermet Illinois, Inc., Intermet Corporation); (vi) BWX
Technologies, Inc. property located at 1570 Mt. Athos Road,
Lynchburg, Virginia (Debtor: Lynchburg Foundry Company);
(vii) Property located adjacent to 1500 Chase Avenue, Elk
Grove Village, Illinois (Debtor: Intermet Illinois, Inc.,
Intermet Corporation)
F. Allegations of Pre-Petition Non-Compliance at the Archer
Creek Facility
As of the Petition Date, Lynchburg Foundry Company was involved in negotiations
with the Virginia Department of Environmental Quality regarding the resolution
of allegations that Lynchburg was not in compliance with the air emissions
permit issued to the Archer Creek facility. On July 19, 2004, the Virginia
Department of Environmental Quality issued a Notice of Violation to Lynchburg
alleging that the facility had violated air emissions limitations in the Title V
permit previously issued to the facility. Lynchburg has taken steps to remedy
the conditions that led to the alleged violations, including the replacement of
bags on the baghouse and installation of new gauges and valves. Lynchburg
believes that the facility is currently in compliance with the limitations in
the Title V permit.
Lynchburg has been negotiating a Consent Decree with the Virginia Department of
Environmental Quality that will also provide for (1) the implementation of a
Supplemental Environmental Project ("SEP") to install an additional baghouse at
a minimum cost of $11,377, and (2) the payment of $15,170 as a civil penalty for
the alleged violations. Although the alleged violations occurred prior to the
Petition Date, Lynchburg believes that the implementation of the SEP and payment
of the civil penalty will enhance the cooperation of the Virginia Department of
Environmental Quality with respect to Lynchburg's future operations which will
continue to be regulated closely by the Virginia Department of Environmental
Quality and therefore Lynchburg will seek permission from the Bankruptcy Court
to enter into the Consent Decree.
49
V. THE DEBTORS' DEBT OBLIGATIONS
A. THE PRE-PETITION CREDIT FACILITY
Prior to the Petition Date, the Debtors' operations were financed, in part, by
the Pre-Petition Credit Facility, in which approximately 20 Pre-Petition Lenders
participated (whether pursuant to direct agreements or instruments with the
Debtors, or through participation with the lenders in contractual privity with
the Debtors), and for which the Bank of Nova Scotia is the Pre-Petition Agent.
The Pre-Petition Credit Facility is memorialized by a January 8, 2004, credit
agreement (as amended by that First Amendment dated April 13, 2004) consisting
of a $90 million revolving credit facility and a $120 million term loan (the
"Pre-Petition Credit Agreement"). As of the Petition Date, the Debtors had
borrowed approximately $41 million, and had approximately $27 million of
outstanding standby letters of credits issued under the revolver. Intermet is
the principal obligor under the Pre-Petition Credit Facility, and the remaining
Debtors are joint and several guarantors of the obligations thereunder pursuant
to that certain Second Amended and Restated Guaranty Agreement dated as of
January 8, 2004.
Pursuant to a First Amended and Restated Borrower Pledge and Security Agreement
dated as of January 8, 2004, Intermet granted to the Pre-Petition Agent, for the
benefit of the Pre-Petition Lenders, valid and enforceable first priority liens
in substantially all of the personal and intangible properties of Intermet,
including all accounts, all the Debtors' United States domestic assets and
pledges of 65% of the stock of certain of the Debtors' foreign Non-Debtor
Affiliates.
The $90.0 million revolving credit portion has a maturity date of January 8,
2009, and the $120 million term loan has a maturity date of January 8, 2010.
During 2004, principal payments of $0.6 million had been made towards the term
loan before the filing of the Debtors' Cases. Due to the default created by the
filing of the Cases, effective September 30, 2004, pricing on the revolving loan
and term loan were modified to a floating rate. The annual interest rates as of
December 31, 2004 were 6.5% for the revolving credit line and 7.0% for the term
loan. Interest is payable monthly on both loans. In addition, and also effective
as of September 30, 2004, the Debtors are required to accrue additional interest
at an annual rate of 1.5%, which is added monthly to the outstanding loan
balances for both the revolver and term loan.
B. LETTERS OF CREDIT AGREEMENT
As of the Petition Date, the Debtors were also parties to a $35.6 million Letter
of Credit Facility Agreement dated January 8, 2004 (the "L/C Facility
Agreement"). In consideration for the L/C Facility Agreement, the Bank of Nova
Scotia issued a letter of credit in the amount of approximately $35.6 million
(the "Georgia Letter of Credit") to secure payment of the Georgia Revenue Bonds
(as defined below). The L/C Facility Agreement was secured solely by an account
(the "Cash Collateral Account") of the Debtors holding $35.6 million of the
Debtors' funds (the "L/C Cash Collateral").
50
C. SENIOR NOTES
The Debtors also used the capital markets to finance their operations and had
indebtedness under a series of unsecured Senior Notes issued on June 13, 2002,
in the aggregate outstanding principal amount of $175 million. The Senior Notes
bear a fixed rate of interest at 9.75%, and will mature on June 15, 2009.
Interest is due each June 15 and December 15.
U.S. Bank National Association is the Indenture Trustee for the Senior Notes.
The Debtors are obligated under the Senior Notes to pay the reasonable fees and
out-of-pocket expenses of the Indenture Trustee.
THE SENIOR NOTES ARE UNCONDITIONALLY GUARANTEED, JOINTLY AND SEVERALLY, BY ALL
OF THE DEBTORS EXCEPT INTERMET INTERNATIONAL, INC. AND INTERMET HOLDING COMPANY
(THE "SENIOR NOTE GUARANTORS"). THIS MEANS THAT HOLDERS OF THE SENIOR NOTES MAY
ASSERT THE ENTIRE AMOUNT OF THEIR CLAIMS AGAINST EACH AND EVERY SENIOR NOTE
GUARANTOR UNTIL THEIR CLAIMS ARE SATISFIED.
Restrictions contained in the indenture covering the Senior Notes include, but
are not limited to, restrictions on incurring additional secured debt,
repurchasing of Intermet's capital stock, disposal of assets, affiliate
transactions, and transfer of assets.
1. Benefit Of The Indenture To All Debtors(4)
As mentioned above, payment of the amounts due pursuant to the Indenture are
guaranteed by all of the Debtors except Intermet International, Inc. and
Intermet Holding Company. The proceeds of the Indenture were, in full, used to
pay down that certain First Amended and Restated Term Loan Agreement dated July
17, 2001, to which the Debtors were a party (the "2001 Term Loan Agreement").
The Indenture, along with any financing to which Intermet is a party, provides a
substantial benefit to all of the Debtors. Intermet is responsible for loaning
funds to its subsidiaries in order for them to operate in the ordinary course of
business. This is documented by inter-company accounts and notes between
Intermet and its subsidiaries. Without these inter-company loans from Intermet,
the subsidiaries would have no funds from which to operate on a daily basis or
to repay the 2001 Term Loan Agreement. Therefore, in exchange for any guaranty
of Intermet obligations, each subsidiary receives equivalent value. In the
specific context of the 2001 Term Loan Agreement, by guarantying the Indenture
and having the funds raised pursuant to the Indenture applied to the 2001 Term
Loan Agreement, the subsidiaries secured themselves of a release of their
secured guaranty obligations pursuant to the 2001 Term Loan Agreement.
- ----------
(4) This discussion is intended to provide an example of the benefits and is
not intended to be an exhaustive discussion of the issues. The Debtors
reserve their rights to respond to any arguments on this issue.
51
D. INDUSTRIAL REVENUE BONDS
1. Columbus Foundry
One of the Debtors, Columbus Foundry, L.P., had obligations relating to
indebtedness under variable rate limited obligation revenue bonds in the
approximate outstanding principal amount of $35 million (the "Georgia Revenue
Bonds"), which was secured by the Georgia Letter of Credit issued by the
Pre-Petition Agent in favor of Harris Trust & Savings Bank. Pursuant to the
Georgia Revenue Bonds, Columbus Foundry, L.P. was required to make monthly
interest-only payments at a variable rate. The interest rate reset weekly and at
September 30, 2004, was approximately 2%. The principal was due December 1,
2019.
On October 29, 2004, in light of the default created by the filing of the Cases,
the beneficiary of the Georgia Letter of Credit drew the amount of $35,050,051,
causing a reimbursement obligation on the part of Intermet to the Bank of Nova
Scotia in the same amount including accrued interest.
In order to satisfy such reimbursement obligation, on November 8, 2004, pursuant
to the terms and conditions of the DIP Financing Order, Intermet released to the
Bank of Nova Scotia all of the L/C Cash Collateral then on deposit in the Cash
Collateral Account, which was applied by the Bank of Nova Scotia in permanent
reduction and discharge of Intermet's obligations under the L/C Facility
Agreement and the balance remaining after such application (approximately
$770,000) was returned by the Bank of Nova Scotia to Intermet.
2. Lynchburg Foundry
Another of the Debtors, Lynchburg Foundry Company, had approximately $2 million
outstanding under industrial development revenue bonds in favor of SunTrust Bank
as trustee (the "Lynchburg Bond"). Lynchburg Foundry Company was required to
make partial redemption of its industrial development revenue bonds on an annual
basis through June 2006. The redemption amount was $350,000 per year, with a
final payment at maturity of $1,650,000. The bonds were subject to optional
redemption prior to maturity and bear an interest rate of 7.0%.
The Lynchburg Bond was unsecured but was guaranteed by Mead Corporation, a
former owner of the property. Since the default created by the commencement of
the Cases, Mead Corporation has made and continues to make payments that have
come due pursuant to the terms of its guaranty of the Lynchburg Bond.
3. Tool Products
As part of an asset purchase transaction, the Debtor now known as Tool Products,
Inc. assumed $4.5 million of industrial development revenue bond debt in favor
of U.S. Bank, National Association as trustee (the "Tool Products Bond"), of
which approximately $1.5
52
million in principal and interest was outstanding as of the Petition Date, which
amount was secured by a letter of credit issued pursuant to the revolver under
the Pre-Petition Credit Agreement. Tool Products, Inc. was required to make
annual principal payments of $500,000, with a final maturity date of January 1,
2007. The interest rate reset weekly and at September 30, 2004, was
approximately 2%.
On November 1, 2004, in light of the default created by the commencement of the
Cases, the beneficiary of the Tool Products Bond drew the entire face amount
thereof causing a reimbursement obligation on the part of Intermet to the
Pre-Petition Lenders in the amount of $1,530,821, which amount is reflected as
part of the amount owed to the Pre-Petition Lenders under the revolver pursuant
to the Pre-Petition Credit Agreement.
E. TRADE DEBT
The Debtors estimate that there are approximately $83.3 million of General
Unsecured Claims which may be Allowed against the Debtors in the aggregate (not
including Noteholder Claims, and subject to objections). These General Unsecured
Claims are allocated between each Debtor as follows:
Approximate Amount Of Non-Noteholder
Debtor General Unsecured Claims
- ------ ------------------------------------
Intermet Corporation, et al.* ~ $ 612,671
Alexander City Casting Company, Inc. $ 0
Cast-Matic Corporation ~ $ 3,436,392
Columbus Foundry, L.P. ~ $12,215,255
Diversified Diemakers, Inc. ~ $ 5,186,370
Ganton Technologies, Inc. ~ $10,523,266
Intermet Corporation ~ $11,280,731
Intermet Illinois, Inc. ~ $ 400,348
Intermet International, Inc. ~ $ 14,000
Intermet U.S. Holding, Inc. ~ $ 7,321,313
Ironton Iron, Inc. ~ $ 1,807,380
Lynchburg Foundry Company ~ $11,376,663
Northern Castings Corporation ~ $ 1,668,583
Sudbury, Inc. ~ $ 1,880,438
SUDM, Inc. $ 0
Tool Products, Inc. ~ $ 8,303,816
Wagner Castings Company ~ $ 6,599,283
Wagner Havana, Inc. ~ $ 691,404
-------------
TOTAL: ~ $83,317,913
=============
Note: The Claims estimates set forth above reflect current estimates of Claims
at each Debtor. Actual distributions may be higher or lower based on the
resolution of Disputed Claims and actual Allowed Claims at each Debtor.
53
* This entry represents Claims filed without identifying the particular
Debtor against which such Claim is asserted.
The Debtors anticipate that some of these General Unsecured Claims are subject
to disallowance or reduction.
VI. CAUSES OF ACTION
A. CHAPTER 5 CLAIMS
The Debtors are investigating whether they have Causes of Action against
Creditors or other Persons for preference liability and any other Causes of
Action contemplated by chapter 5 of the Bankruptcy Code, and reserve all of
their rights to bring any such Causes of Action. Payments to Creditors or other
Persons in the 90 days immediately preceding the Petition Date are listed in the
Debtors' Schedules and total $225,741,474. Payments to "insiders" (as that term
is defined in Section 101(31) of the Bankruptcy Code) in the one year
immediately preceding the Petition Date are also listed in the Debtors'
Schedules and total $2,438,966. A list of potential Avoidance Actions is
attached to the Plan as Exhibit I. The majority of these Causes of Actions are
against General Unsecured Creditors in Classes 4 and 5. These Causes of Action
are potential Causes of Action in that they have not been analyzed on the merits
and may be subject to valid defenses. All Causes of Action and Avoidance Actions
will be preserved and transferred to the Reorganized Debtors, and any recoveries
therefrom will inure to the benefit of the relevant Debtor and thereby enhance
the enterprise value of such Debtor.
B. OTHER CLAIMS
All other Causes of Action are preserved and will be transferred to the
Reorganized Debtors, including, but not limited to, Causes of Action arising
under commercial purchase orders, such as those relating to pricing issues,
rights of setoff, rights to recover wrongful setoffs and recoupments, and the
like. These Causes of Action include, but are not limited to, those listed on
Exhibit J to the Plan. Exhibit J to the Plan is not intended to be an exhaustive
list of the Causes of Action the Debtors and Reorganized Debtors intend to
preserve and bring following Confirmation.
C. PENDING LITIGATION
As of the Petition Date, the Debtors were not involved in any litigation that is
likely to have a material impact on the Debtors. Attached as Exhibit D is a list
of all pending litigation.
VII. SIGNIFICANT POST-PETITION ACTIONS
The Debtors commenced the Cases on the Petition Date, September 29, 2004, and
the following significant actions have been taken since the Petition Date.
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A. FIRST DAY MOTIONS
Together with their petitions for relief, the Debtors filed a number of "first
day" motions on or near the Petition Date as listed on Exhibit E. The first day
motions and orders were intended to facilitate the transition between the
Debtors' pre-Petition Date and post-Petition Date business operations by
approving certain regular business practices that may not have been 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 of orders entered in other substantial Chapter 11 cases around
the country. Among other things, such orders provided for:
- Joint administration of the Debtors' Cases;
- Interim use of cash collateral;
- Maintenance of the Debtors' bank accounts and operation of their cash
management systems substantially as such systems existed prior to the
Petition Date;
- Payment of certain pre-petition wages, salaries, payroll taxes, and
other compensation, employee benefits and reimburseable employee
expenses;
- A prohibition on utilities from altering, refusing or discontinuing
services on account of pre-petition Claims, deeming utilities
adequately assured of future performance, and establishing procedures
for determining requests for additional adequate assurance; and
- Payment of pre-petition use, employment, single business, property and
other taxes.
B. RETENTION OF PROFESSIONALS
Since the Petition Date, the Debtors have continued to operate their businesses
in the ordinary course as debtors-in-possession under Sections 1107 and 1108 of
the Bankruptcy Code.
Both before and after the Petition Date, the Debtors have taken actions to
stabilize their operations. The Debtors' management actively and regularly
contacts the Debtors' customers, vendors and other business partners to assure
them that the Cases will not adversely affect the Debtors' ability to operate
and honor trade terms. At the same time, management has addressed and will
continue to address the many emergencies and other matters that are incidental
to the commencement of complex chapter 11 cases, including responding to a
multitude of inquiries by employees, unsecured Creditors, the Creditors'
Committee, the Equity Committee, various Professionals and others.
To represent the Debtors in these Cases, the Debtors retained Professionals,
including, without limitation, (i) the law firm of Foley & Lardner LLP, Detroit,
Michigan, as general bankruptcy counsel; (ii) Carson Fischer, P.L.C.,
Birmingham, Michigan, as special counsel primarily to handle conflicts of
interest; (iii) Conway Mackenzie &
55
Dunleavy ("CMD"), Birmingham, Michigan, as their financial advisors and
investment bankers; (iv) Ernst & Young LLP, in Detroit, Michigan, as independent
auditors; (v) KPMG LLP, in Detroit, Michigan, as SOX 404 consultants; (vi) Stout
Risius Ross as independent valuation consultants ("SRR"); and (vii) Lazard
Freres & Co. LLC, in New York City, as investment bankers ("Lazard"). In
addition, the Debtors have certain Professionals to act as special counsel in
limited matters, and numerous others to assist the Debtors in the ordinary
course of their businesses.
C. CASE ADMINISTRATION
1. Bar Date And Voting
By Local Rule of the Bankruptcy Court, February 7, 2005 was established as the
Claims Filing Bar Date, subject to certain exceptions described in the notice of
commencement of these Cases. By separate order, the Bankruptcy Court established
a Supplemental Bar Date of April 29, 2005 for certain Creditors under the
limited circumstances described therein.
Pursuant to Bankruptcy Rule 3003(c)(2), any Creditor: (a) whose Claim (i) was
not listed in the Schedules, or (ii) was listed in the Schedules as disputed,
contingent or unliquidated, and (b) who failed to file a Proof of Claim on or
before the Claims Filing Bar Date, or the Supplemental Bar Date, as applicable
(and except as otherwise ordered by the Bankruptcy Court), will not be treated
as a Creditor with respect to that Claim for purposes of voting on the Plan or
receiving a Distribution under the Plan. Further, unless a Proof of Claim was
filed on or before the Claims Filing Bar Date, or the Supplemental Bar Date, as
applicable (and except as otherwise ordered by the Bankruptcy Court), the Claim
amount listed in the Debtors' Schedules is dispositive, subject to any
amendments made thereto. Creditors are instructed to read any Bankruptcy Court
orders establishing or dealing with procedures with respect to voting on the
Plan, which are anticipated to be entered in conjunction with the hearing on the
approval of the Disclosure Statement. Any such order will be provided to
constituencies along with the approved Disclosure Statement at the appropriate
time.
If the Plan is confirmed, the Debtors will have up to 180 days from the
Effective Date to file any Claim objections, provided that such date may be
extended from time to time.
D. OPERATIONAL DEVELOPMENTS
Since the Petition Date, the Debtors have made substantial improvements to their
operations and administration which have resulted in significant cost savings
and increased revenues. Among other things, the Debtors have met all customer
requirements and schedules, and have renegotiated various customer agreements
to: (i) establish new scrap steel and magnesium alloy indices; (ii) secure new
surcharge agreements with ten (10) major customers (constituting approximately
78% of their total revenues and approximately 80% of their ferrous revenues) and
a significant portion of their other customers; (iii) obtain price increases on
some of their parts; (iv) obtain accelerated payment terms with 10 major
customers and the majority of their other customers for
56
limited time periods; and (v) recover various 2004 fourth quarter surcharges
from certain customers.
The Debtors also announced the closure of: their (i) Columbus Machining, (ii)
Racine Machining, and (iii) Racine Casting plants, all of which were completed
in or before June 2005, and (iv) Decatur plant, which the Debtors anticipate
will be completed by December 31, 2005.
Further, the Debtors have increased employee contribution amounts to their
benefits plans, increased co-pays for medical benefits, made changes to their
life insurance plans, and renegotiated union agreements with their Hibbing,
Columbus, New River and Archer Creek plants. Several of these developments are
discussed in more detail below.
1. Negotiations With Major Customers
Intermet and the other Debtors directly and indirectly provides products and
services to every major North American OEM, several major European and Japanese
OEMs, and several leading suppliers to the OEMs (also known as "Tier 1" or "Tier
2" suppliers). These parties make up approximately 78% of the Debtors' North
American business (and approximately 80% of their ferrous business) and are
considered major customers (the "Customers"). As part of their business of
supplying their Customers, the Debtors were parties to numerous pre-Petition
Date contracts with their Customers (the "Contracts"). In connection with these
Cases, the Debtors began the lengthy process of reviewing all of their supply
contracts in order to analyze the benefits and burdens of each for various
periods during the Cases. Through this process, the Debtors originally
determined that, absent specific changes, certain of the Contracts were
burdensome to the Debtors' Estates because the terms did not permit the Debtors
to generate sufficient profit and cash flow from their main business source -
the manufacture and supply of component parts.
This determination was based, in large part, on the fact that (a) the price of
raw materials, including scrap steel, one of the Debtors' primary raw materials,
rose substantially since the Debtors began producing the component parts under
the existing Contracts, and such Contracts either did not allow, or were
inadequate or not timely in allowing, the Debtors to pass such cost increases
through to such Customer, (b) in some cases, pricing for certain of the
component parts under certain Contracts was well below market and/or the cost to
produce such parts did not provide adequate profit margin, (c) the timing of
payments under certain Contracts was too slow, in light of the cash flow needs
of the Debtors, and (d) certain Customers pursuant to certain of the Contracts
required pricing give-backs or reductions for 2005, which were onerous to the
Debtors under the circumstances.
Furthermore, given the Debtors' large losses, the DIP Lender was not willing to
provide debtor-in-possession financing absent a commitment by the Debtors to
obtain concessions from the Debtors' Customers on renegotiated contract terms
acceptable to the lenders. In fact, the failure to obtain agreements with the
Customers comprising at least 75% of the Debtors' gross sales by December 31,
2004 (the "Amended Contract Deadline"), in form and substance satisfactory to
the DIP Lenders, would have been a
57
default under the Debtors' DIP Credit Agreement, which default would have
prohibited further borrowings and permitted the acceleration of all indebtedness
due.(5)
In light of the foregoing, the Debtors began negotiations with their Customers
to modify the terms of the Contracts and thereby relieve the burden on the
Estates. Because negotiations were not complete and the Amended Contract
Deadline was approaching, on November 17, 2004, the Debtors filed a motion for
authority to reject only those executory customer supply contracts with
Customers (to be subsequently identified) which could not be re-negotiated in a
manner acceptable to the Debtors and the respective Customers (the "Rejection
Motion").
Contracts with Ford at the Debtors' Racine plant were ultimately rejected by
agreement of the parties. As to the remaining Contracts, the Debtors and the
Customers agreed to amend the Contracts in a manner that was acceptable to the
Debtors, the Customers, and the DIP Lenders (the "Amended Contracts"). (The
Debtors and the DIP Lenders agreed to amend the DIP Credit Agreement and the
Amended Contract Deadline to allow sufficient time for Bankruptcy Court approval
of the Amended Contracts.) Substantially all of the Amended Contracts required
assumption under Section 365 of the Bankruptcy Code. On December 28, 2004, the
Debtors filed a motion to assume the Amended Contracts, which was granted by
order of the Bankruptcy Court dated January 13, 2005.
The Debtors believe that performance under the Amended Contracts will enhance
the Debtors' profitability and generate positive cash flow. While each of the
Amended Contracts is different, many of Amended Contracts include terms such as:
(a) scrap steel surcharge adjustments that more accurately reflect the Debtors'
cost of scrap steel;(6) (b) accelerated payment terms for specified time
periods; (c) prompt payment of outstanding accounts receivable;(7) (d) waiver of
certain price reductions; and (e) adjustments of certain part pricing.
The steel surcharge adjustments contained in the Amended Contracts are designed
to allow the Debtors to more fully capture the rising cost of scrap steel for
the life of the Amended Contracts such that rising cost of scrap steel does not
erode the profitability of the Amended Contracts. The Amended Contracts were
critical to the Debtors' ability to continue producing under the Contracts with
the Customers which make up nearly 80% of the Debtors' business.
2. Secondary Customer Negotiations
- ----------
(5) The Debtors have satisfied this condition pursuant to the DIP Credit
Agreement, as amended. See below.
(6) This term was included in all but one of the Amended Contracts, which had
an existing steel surcharge arrangement.
(7) Only one of the Amended Contracts holds the Customer to its original
payment terms and does not accelerate such terms.
58
The Debtors supply component parts to certain other customers who make up the
remaining business of the Debtors (the "Secondary Customers"). The Debtors were
parties to numerous pre-Petition Date contracts with these Secondary Customers
as well (the "Secondary Customer Contracts"). The Debtors reviewed their supply
contracts with Secondary Customers to analyze the benefits and burdens of each.
Like the Contracts with major Customers, as a result of this process, the
Debtors determined that, absent specific changes, certain of the Secondary
Customer Contracts were burdensome to the Debtors' Estates because the terms did
not permit the Debtors to generate sufficient profit and cash flow.
This determination was based, in large part, on (a) the substantial rise in the
cost of raw materials; (b) below market pricing for certain component parts; (c)
ineffective timing of payments in light of the cash flow needs of the Debtors;
and (d) the fact that certain Secondary Customer Contracts required pricing
give-backs or reductions for 2005, which were onerous to the Debtors under the
circumstances.
Accordingly, the Debtors engaged in extensive negotiations with their Secondary
Customers to modify the terms of the Secondary Customer Contracts and thereby
relieve the burden on the Estates. The Debtors and the Secondary Customers
ultimately agreed to amend the Secondary Customer Contracts in a manner that was
acceptable to the Debtors. In some instances, the amended Secondary Customer
Contracts required assumption. Thus, in such cases the Debtors have filed
motions as required by the Secondary Customer Contracts and have obtained the
necessary Bankruptcy Court approval.
The Debtors believe that performance under the amended Secondary Customer
Contracts will enhance the Debtors' profitability and generate positive cash
flow. Like the Contracts with the Debtors' Customers, while each of the amended
Secondary Customer Contracts is different, many of them include terms such as:
(a) scrap steel surcharge adjustments that more accurately reflect the Debtors'
cost of scrap steel; (b) accelerated payment terms for certain periods; (c)
prompt payment of outstanding accounts receivable; (d) waiver of certain price
reductions; and (e) adjustments of certain part pricing.
3. Racine Plant Closure
Ganton Technologies, Inc. manufactured, machined, and assembled high pressure
aluminum die castings for the automotive market at its Racine, Wisconsin plant
(the "Racine Plant"). On December 15, 2004, the Debtors announced their intent
to close the Racine Plant due to continued high costs and underutilized
machining and casting capacity. Since that date, Ganton Technologies, Inc. has
taken the steps necessary to ensure an orderly shutdown of the Racine
operations, which was completed in June 2005.
To ensure uninterrupted service to Ganton Technologies, Inc.'s customers, the
Racine Plant closing required movement of most of the work being performed at
Racine to other suppliers, or in some cases, to one of the Debtors' other
facilities. The transfer of work required accomplishment of three principal
objectives: (i) continued performance during
59
the wind-down period; (ii) the sale of certain assets needed by Ganton
Technologies, Inc.'s customers; and (iii) facilitation of negotiations with
employees of the Racine Plant.
A. Wind-Down Performance
To ensure uninterrupted production at the Racine Plant during the wind-down,
Ganton Technologies, Inc. agreed to continue producing component parts pursuant
to purchase orders with Ford and DaimlerChrysler until such customers could
resource their requirements for production to other suppliers. In exchange for
the Debtors' cooperation, Ford and DaimlerChrysler agreed to pay the Debtors
$800,000 and $240,000, respectively, to cover expenses in excess of the Debtors'
budget directly attributable to the wind-down agreements with Ford and
DaimlerChrysler. Ganton Technologies, Inc. completed Ford and DaimlerChrysler
production at the Racine Plant in April 2005.
B. Asset Transfers
On March 7, 2005, the Bankruptcy Court approved Ganton Technologies, Inc.'s sale
of assets used to manufacture component parts at the Racine Plant to certain
other suppliers of Ganton Technologies, Inc.'s customers, including
International Truck and Engine Corporation, Amcan Consolidated Technologies
Corporation, and ICG Castings, Inc. Ganton Technologies, Inc. believes that it
received an amount equal to, if not more than, the total net book value of the
equipment from the sales. In addition, Ganton Technologies, Inc. is currently in
the process of selling certain assets located at the Racine Plant which were not
dedicated to production for any particular customer. Ganton Technologies, Inc.
has received an appraisal for all of the assets located at the Racine Plant, and
all of the asset sales contemplated will deliver an amount within the appraisal
range for such assets. Ganton Technologies, Inc. plans to seek Bankruptcy Court
approval of any such sales.
Ganton Technologies, Inc. is also in the process of analyzing various executory
contracts and unexpired equipment leases pertaining to the Racine Plant to
determine whether it has a continuing need for such contracts or leases at any
of the Debtors' other facilities. Where appropriate, Ganton Technologies, Inc.
is seeking Bankruptcy Court approval of its decision to reject such executory
contracts and unexpired leases.
C. Negotiations With Racine Employees
The Racine Plant closing required negotiations with the International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America,
U.A.W., Local 627, which represents employees of the Racine Plant (the "Racine
Union"), to ensure a smooth wind-down of operations and transfer of work. On
January 24, 2005, Ganton Technologies, Inc. entered into a closing agreement
with the Racine Union to induce hourly employees to remain employed through the
closing and to resolve the Racine Union's claim that a transfer of work would
violate the terms of their collective bargaining agreement (the "Racine Closing
Agreement").
60
The Racine Closing Agreement modified the terms of the collective bargaining
agreement, and, among other things, effected the following: (i) a severance fund
of $1.4 million for distribution to eligible employees, to be paid following
each employee's separation date; (ii) employees separated under the Racine
Closing Agreement are eligible for medical benefits as if they were laid off
under the collective bargaining agreement; (iii) all non-vested participants in
Intermet's Hourly Employee Retirement Plan (as defined therein) who are
separated as a result of the Racine Plant closing are 100% vested in their
accrued benefits regardless of their years of service; (iv) the collective
bargaining agreement remains in full force and effect until the last employee
covered is separated due to the closing; and (v) the Racine Union, on behalf of
itself and the employees it represents, released the Debtors from any and all
claims arising from the employment relationship, including claims that the
Racine Plant closing violated the collective bargaining agreement.
To induce certain key salaried employees to remain employed at the Racine Plant
during the wind-down, Ganton Technologies, Inc. further agreed to pay severance
benefits pursuant to the pre-Petition Date severance plan approved by the
Bankruptcy Court on October 1, 2004, plus additional payments aggregating
$250,000 based on the salaried employee's position and years of seniority. The
Bankruptcy Court approved the Racine Closing Agreement by Order dated March 9,
2005.
D. Plant Sale
Together with its real estate broker, Ganton Technologies, Inc. has been
marketing its Racine Plant for sale, free and clear of all liens, claims and
encumbrances. Ganton Technologies has engaged in extensive solicitation of
potential purchasers of the property, and has, to date, received seven offers.
Ganton Technologies anticipates executing a sale agreement in the near future,
and will seek Bankruptcy Court approval of any proposed sale.
4. Columbus Machining Closure
Intermet U.S. Holding, Inc. formerly operated a machining facility (the
"Columbus Machining Facility") on property located in Columbus, Muscogee County,
Georgia, consisting of approximately 40.636 acres (the "Columbus Property"). At
the Columbus Machining Facility, Intermet U.S. Holding, Inc. manufactured cast
metal automotive components, utilizing inter alia, CNC machining equipment,
assembly machines, conveyors, and parts washers. The Columbus Machining Facility
was not core to the Debtors' business, and because of declining sales and the
need for costly upgrades to the equipment on site, the Debtors closed the
Columbus Machining Facility as of March 31, 2005.
A. Asset Transfers
Following the announcement of the closure of the Columbus Machining Facility,
Intermet U.S. Holding, Inc. entered into negotiations with Honda for the
transfer of the Honda business to another supplier. To facilitate such transfer,
and to ensure the
61
continued supply of component parts to Honda (which remains an
important customer of the Debtors), the Debtors sold the S3V Steering Knuckle
Cell (the "Columbus Assets") to Honda for a purchase price of $970,000.
The fair market value of the assets sold based on an appraisal obtained by
Intermet U.S. Holding, Inc. was $1,090,700, and the liquidation value based on
the same was $892,500. The Bankruptcy Court approved the Honda sale on February
14, 2005.
At approximately the same time, Intermet U.S. Holding, Inc. entered into a
Commercial Real Estate Sales Agreement (the "Columbus Purchase Agreement") with
Jacoby Development, Inc. to sell the Columbus Property for a sale price of
$3,500,000 (the "Columbus Purchase Price").
Intermet U.S. Holding, Inc. had previously obtained an appraisal of the Columbus
Property dated May 13, 2003. The appraisal indicated that the value of the
Columbus Property was between $3,325,000 and $3,850,000. The Columbus Purchase
Price is within the appraisal's range of values for the Columbus Property.
The Bankruptcy Court approved the sale on June 7, 2005. Subject to satisfaction
of certain contingencies, the closing is scheduled to occur on or about
September 30, 2005.
5. Decatur Plant Closure
Wagner Castings Company manufactures ductile iron chassis, powertrain and brake
castings at its Decatur, Illinois plant (the "Wagner Plant"). On March 29, 2005,
the Debtors announced their plans to close the Wagner Plant on or before
December 31, 2005. The Wagner Plant has experienced declining sales volumes and
decreased profitability in recent years.
A. Wind-Down Performance
Wagner Castings plans to consolidate the majority of the Wagner Plant business
into other facilities of the Debtors located around the country, and thereby
improve the Debtors' capacity utilization for the Ferrous Metals Group as a
whole. By transferring the business to other Debtors' facilities, Wagner
Castings will avoid administrative expense claims resulting from non-performance
of certain purchase orders after the closure. Substantially all of these
purchase orders with the Customers have already been assumed in the Customer
negotiations. In addition, many of these purchase orders are terminable at will
by the Customers.
B. Asset Transfers
Over the next several months, and where possible, Wagner Castings will transfer
the Wagner Plant equipment to other Debtor locations around the country. In
addition, Wagner Castings will explore their options of selling the land and
building from which the Wagner Plant operates. It is anticipated that all of
these Assets will be subject to liens in favor of the Exit Lenders, pursuant to
the Exit Financing Facility, due to the fact that
62
the proceeds of the Exit Financing Facility will be used to pay the
Distributions under the Plan, including those to the Pre-Petition Lenders, whose
liens currently attach to these Assets.
C. Negotiations With Decatur Employees
As of the closure announcement, the Wagner Plant had 320 active employees, many
of which were parties to a collective bargaining agreement which expired on June
30, 2005 (the "Wagner CBA"). Wagner Castings also provides retiree medical
benefits to approximately 200 retired employees of Wagner Castings and provides
life insurance to approximately 400 retirees (collectively, the "Wagner
Retirees").
In light of the impending closing, Wagner Castings cannot continue to fund
retiree health and life insurance benefits which are currently estimated to have
an actuarial present value of about $20 million. The Bankruptcy Court appointed
a retiree committee pursuant to Section 1114 of the Bankruptcy Code on May 24,
2005 (the "Wagner Retiree Committee"), to represent the interests of the Wagner
Staff Retirees in connection with Wagner Casting's modification or termination
of retiree benefits. In the 1114 process, the Local 6-728 of the United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union (the "USW") represents the interests of the hourly
retirees. Wagner Castings has begun discussions with the Wagner Retiree
Committee and the USW to modify the benefits, and Wagner Castings hopes to reach
an agreement with the Wagner Retiree Committee and USW with respect to changes
in retiree health and life insurance obligations. To the extent that Wagner
Castings may hereafter be determined to be a member of a "controlled group" with
other Intermet affiliates, including Debtors, for certain purposes under the
federal "COBRA" statute, some or all members of the controlled group may be
determined to have ongoing liability to the Wagner Retirees for COBRA coverage.
In order to effect an orderly closing of the Wagner Plant and to induce hourly
employees to remain employed through the closing, Wagner Castings entered into a
closing agreement (the "Decatur Closing Agreement") with USW which took effect
on July 1, 2005, immediately following expiration of the Wagner CBA. Among other
things, the Decatur Closing Agreement provides that: (i) severance pay equal to
$250 for each full year of service will be paid to employees who remain employed
through their scheduled termination date, at an approximate cost to Wagner
Castings of $1,632,950; (ii) employees separated under the Decatur Closing
Agreement will be eligible for certain benefits, including health insurance, for
the month in which they are terminated and the following month; (iii) in
exchange for the benefits provided in the Decatur Closing Agreement, USW, on
behalf of itself and the employees whom it represents, agreed to release Wagner
Castings and its successors, assigns, officers, directors, employees, agents and
representatives from any and all claims arising out of the employment
relationship between Wagner Castings and the employees represented by USW, with
the exception of claimed violations of the Decatur Closing Agreement, grievances
filed under the Wagner CBA before its expiration, claims that employees may have
under a state workers' compensation statute, state unemployment statutes, or
under any separate benefit or retirement plan.
63
Wagner Castings also agreed to pay severance benefits to certain salaried
employees in addition to the severance benefits already provided salaried
employees under the Debtors' pre-Petition Date severance plan approved by the
Bankruptcy Court, in the amount of approximately $50,000.
Wagner Castings filed a motion seeking approval of the Decatur Closing Agreement
and the additional severance payments to salaried employees on July 28, 2005.
Bankruptcy Court approval is expected.
6. Hannibal Plant
Some customers of Diversified Diemakers, Inc.'s Hannibal facility have informed
Diversified Diemakers, Inc. that present product programs will end or that the
customers intend to move their magnesium die casting work from that facility to
other suppliers or transition to alternative processes. A portion of the work in
that facility will end on or about July 1, 2005. If the customers proceed with
plans to move the remaining work, Diversified Diemakers anticipates that this
would occur in late 2005 or early 2006. If Diversified Diemakers is unable to
secure new business for the Hannibal plant within that timeframe, such Debtor
anticipates that operations at the Hannibal plant would be suspended until
Diversified Diemakers is able to utilize that capacity, and all remaining work
would be transferred to the Palmyra facility, which also produces magnesium die
castings.
7. Other Significant Sales
Wagner Havana is currently negotiating sales of certain equipment located at the
Wagner Havana plant, and will seek Bankruptcy Court approval of such sales as
necessary. In addition, Alexander City Casting Company is currently marketing
the Alexander City plant for sale. As necessary, Bankruptcy Court approval will
be sought for the sale.
E. DEBTOR-IN-POSSESSION FINANCING
On October 22, 2004, the Debtors entered into the DIP Credit Agreement among the
Debtors, the DIP Lenders, and the DIP Agents. The DIP Facility matures on
October 21, 2005.
The DIP Facility provided for a $60 million commitment of debtor-in-possession
financing, and the ability to issue letters of credit up to a maximum amount of
$15 million, to fund the Debtors' working capital requirements and other
corporate purposes during the Cases. Advances have been and are currently being
made to the Debtors under the DIP Facility in accordance with a budget that has
been agreed upon by the Debtors and the DIP Agents, and are subject to a
borrowing base calculated as a percentage of the Debtors' accounts receivable,
inventory and fixed assets, less reserves and fees. Interest on borrowings under
the DIP Facility accrues at a base rate plus 2% per annum or at a Eurodollar
rate plus 3% per annum, as selected by the Debtors. Interest on borrowings made
under the base rate is payable on a monthly basis; for borrowings made under the
64
Eurodollar rate, interest is payable at the end of one, two or three months.
Obligations under the DIP Facility are secured by a super-priority lien over
substantially all of the Debtors' Assets in favor of the DIP Lenders.
The DIP Facility requires the Debtors to meet certain obligations, including the
delivery of weekly borrowing base certificates and cash flow statements, monthly
and yearly financial statements and periodic budget updates containing financial
forecasts. The Debtors are also subject to limitations on paying indebtedness,
creating liens against their property and making investments, and are prohibited
from paying dividends.
Amounts owed by the Debtors under the DIP Facility may be accelerated following
certain events of default, including: failure of the Debtors to make principal
or interest payments under the DIP Facility; failure to make principal or
interest payments on post-petition liabilities; breaches of certain covenants,
representations and warranties set forth in the DIP Facility; the conversion of
any of the Debtors' Cases to cases under Chapter 7 of the Bankruptcy Code or the
appointment of a trustee pursuant to Chapter 11 of the Bankruptcy Code; and the
occurrence of a material adverse effect impacting the business or property of
Intermet and its subsidiaries, taken as a whole.
The DIP Facility received interim approval from the Bankruptcy Court on October
19, 2004, and received final approval on November 8, 2004. On November 19, 2004,
the Creditors' Committee filed a notice of appeal to the United States District
Court for the Eastern District of Michigan (the "District Court") the DIP
Financing Order and a Bankruptcy Court order denying the Creditors' Committee's
motion to conduct certain discovery and adjourn the final hearing on approval of
the DIP Facility.
The Creditors' Committee raised multiple issues on appeal in an effort to
demonstrate that the Bankruptcy Court erred in approving the DIP Facility. On
March 2, 2005, following several extensions to the briefing schedule on appeal,
the Creditors' Committee agreed to dismiss the appeal. The District Court
dismissed the appeal on March 4, 2005.
Initially, the Debtors were only able to access $20 million of the DIP Facility
until such time as the Debtors entered into agreements with Customers consisting
of 75% of their revenues that were satisfactory to the DIP Agents (see Section
VII.D.1. "Negotiations With Major Customers" above) along with certain other
conditions including the completion of certain remaining collateral documents.
Those conditions were met in January 2005 and the Debtors were granted access to
the full $60 million, subject to a budget.
Over the course of the past several months, the Debtors have entered into
various amendments to the DIP Facility which amendments were intended to clarify
certain terms in the DIP Facility, revise certain covenants, extend the time
period for certain deliverables, and/or approve certain asset purchases and
sales, and other transactions.
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F. FORMATION OF THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS
In October 2004, the SEC asked the U.S. Trustee to appoint an official committee
of equity security holders in these Chapter 11 Cases. The Debtors and the
Creditors' Committee opposed the appointment of an official equity committee
because, among other reasons, they believed it was unlikely that Holders of
Equity Interests would be entitled to a Distribution following application of
the absolute priority rule contemplated by Section 1129(b)(2)(B)(ii) of the
Bankruptcy Code.
At some point in late November 2004, the U.S. Trustee declined to appoint an
official equity committee. As a result, on November 23, 2004, certain
shareholders of Intermet filed a motion seeking Bankruptcy Court appointment of
an official equity committee pursuant to Section 1102(a)(2) of the Bankruptcy
Code. The hearing was set for December 14, 2004.
On December 9, 2004, before the hearing could be held on the shareholders'
motion, the U.S. Trustee appointed the Equity Committee. The U.S. Trustee's
action prompted the Debtors, the Creditors' Committee, the Pre-Petition Agent
and the DIP Agents to file a joint motion seeking disbandment of the Equity
Committee (the "Disband Motion").
On February 11, 2005, the Bankruptcy Court denied the Disband Motion on the
basis that the U.S. Trustee had not abused his discretion in appointing the
Equity Committee. The Bankruptcy Court authorized the Equity Committee to retain
counsel, but authorized counsel to be paid only upon filing fee applications
every 120 days as contemplated by 11 U.S.C. Section 331. The Bankruptcy Court
further authorized the Equity Committee to retain Deloitte & Touche as its
financial advisors, but capped Deloitte's fees at $90,000 for the period
beginning January 10, 2005 through June 30, 2005.
G. APPROVAL OF THE KEY EMPLOYEE RETENTION PLAN
On September 20, 2004, the Board of Intermet adopted an employee retention plan
for certain key employees (the "Initial KERP") to create appropriate incentives
for key personnel of the Debtors to remain with them through a successful
reorganization or sale of the Debtors, to properly reward such key personnel,
and to enhance the value of the Debtors on behalf of all of their creditor
constituencies. The Initial KERP provided for the payment of bonuses to key
employees identified by the Board of Intermet, if the employees continued their
employment with Intermet through December 31, 2005. The amount of bonus a
participant in the Initial KERP might have received was calculated based on a
percentage of that person's annual salary as of September 20, 2004. In the event
that the participant's employment terminated prior to December 31, 2005, that
person might have been eligible for a pro rata bonus payment if certain
conditions set forth in the Initial KERP were met.
On December 8, 2004, the Board of Intermet approved the terms of the Key
Employee Retention Plan, or KERP, which replaced the Initial KERP and was
approved by the Bankruptcy Court on December 22, 2004. The Key Employee
Retention Plan preserves the basic payment provisions and criteria set forth in
the Initial KERP, but also links the
66
timing of the payment of bonuses and the calculation of the bonus amounts to the
consummation of either a plan of reorganization or a sale of any substantial
portion of the Debtors' North American assets or business of Intermet as a going
concern. Under the Key Employee Retention Plan, the maximum amount of stay
bonuses payable is approximately $5.1 million (payable in Cash). The timing and
amount of stay bonus payments will be calculated based on whether such plan of
reorganization or sale (i) is consummated after June 30, 2005, but on or before
December 31, 2005, or (ii) is not consummated by December 31, 2005. One-third
(1/3) of each Key Employee Retention Plan participant's payment is due and
payable upon the Effective Date, and the remaining two-thirds (2/3) is due and
payable between January 1, 2006 and January 10, 2006.
The Key Employee Retention Plan also provides for severance benefits under
certain conditions set forth therein, based on a percentage of base salary for
certain participants. Other participants are entitled to severance benefits as
provided in Intermet's existing salaried employee severance plan. Currently,
approximately 100 Intermet employees have been designated by the Board of
Intermet as participants in the Key Employee Retention Plan, including executive
officers. The Board of Intermet, or a committee thereof authorized to act in the
circumstances, may designate additional participants in the Key Employee
Retention Plan.
1. Key Employee Rights Offering
Eligible Key Employees either: (i) may receive in cash any unpaid stay bonuses
to which they may be entitled in accordance with the terms and subject to the
conditions of the KERP, including, without limitation, the stay bonus payment
schedule set forth therein; or (ii) upon consummation of the Plan, may purchase
shares of New Common Stock in connection with the Key Employee Rights Offering
by authorizing Reorganized Intermet to apply, on their behalf, on a
dollar-for-dollar basis, any such stay bonuses toward the purchase of the shares
of New Common Stock covered by the Key Employee Rights Offering.
The Key Employee Rights Offering allows eligible Key Employees to purchase, on a
Pro Rata basis and based upon payments due under the KERP, 181,249 shares of New
Common Stock, in consideration for Cash in the amount of $10.00 per share.
Eligible Key Employees will have the right of over-subscription with respect to
the Key Employee Rights Offering, provided that, in no event will the total
shares in the Key Employee Rights Offering exceed 181,249 shares. Moreover, the
rights to purchase shares of New Common Stock in connection with the Key
Employee Rights Offering will be non-transferable. Other terms and conditions of
the Key Employee Rights Offering are to be determined by the Debtors and the
Initial Committed Purchasers, in consultation with the Creditors' Committee.
Any New Common Stock issued pursuant to the Key Employee Rights Offering will be
subject to the Stockholders' Agreement. In addition, the shares of New Common
Stock issued pursuant to the Key Employee Rights Offering will have the effect
of diluting the ownership interest of the other Persons who receive New Common
Stock pursuant to the Plan.
67
H. GOODWILL AND ASSET IMPAIRMENT
1. Goodwill Impairment
On January 1, 2002, Intermet adopted SFAS No. 142, "Goodwill and Other
Intangible Assets," under which goodwill is no longer amortized but is reviewed
for impairment at the reporting unit level annually, or more frequently if
certain events or changes in circumstances indicate that the carrying value may
not be recoverable. On or about November 17, 2004, Intermet retained SRR as an
"ordinary course professional" to determine whether the goodwill on Intermet's
balance sheet was impaired as of September 30, 2004.
SRR completed its goodwill report on March 21, 2005, concluding that the
goodwill of Intermet's Ferrous Metals and Light Metals manufacturing groups was
fully impaired. Intermet recorded a pre-tax goodwill impairment charge of $165.9
million in its statement of operations for 2004, of which amount approximately
$59.7 million was attributable to the Ferrous Metals unit and $106.2 million was
attributable to the Light Metals unit. As a result, the Debtors showed
approximate consolidated book equity of negative $50 million as of September 30,
2004.
2. Asset Impairment
The Debtors' decisions in 2003 and 2004 to close their Racine, Columbus
Machining, Decatur, and Radford facilities also made an impairment analysis of
the Debtors' fixed assets appropriate. On January 1, 2002, Intermet adopted SFAS
No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," under
which companies recognize impairment losses if the carrying amount of
"long-lived" assets is not recoverable because it exceeds the estimate of the
assets' undiscounted future cash flows. The amount of impairment, if any, is
equal to the difference between the carrying amount of the long-lived assets and
the fair value of those assets.
SRR completed its SFAS 144 report on March 9, 2005, estimating the approximate
amount of asset impairment with respect to total fixed assets (i.e. personal
property assets and real property assets), at each of these facilities as of
September 30, 2004, to be as follows:
- Racine: $6.4 million
- Columbus Machining: no impairment
- Decatur: $10.8 million
- Radford: no impairment
The impairment of the Debtors' fixed assets further reduced their consolidated
book equity position as of September 30, 2004, to approximately negative $67
million. SRR's conclusions about goodwill and asset impairment have been
reviewed by the Debtors' independent auditors, Ernst & Young, LLP.
68
In addition, the Debtors periodically evaluate "idle" equipment not in use at
their various facilities. As of September 30, 2004, the Debtors determined that
the value of such equipment at several plants was impaired--in particular
equipment owned by Wagner Havana, Inc. and Alexander City Casting Company, Inc.
The Debtors therefore recorded a fixed asset charge of approximately $9 million
for idle assets, which was recorded in addition to fixed asset impairment
charges indicated by the SRR reports. The Debtors' evaluation of equipment not
in use was based primarily on a change in expected future use of the now-idle
equipment, and also upon consideration of the risks and uncertainties created by
the Cases, closure of certain of the Debtors' manufacturing plants, and the
indefinite delay of projects for which such equipment would have been used. In
total, the Debtors recorded fixed asset impairment charges of approximately
$26.4 million as of September 30, 2004.
Finally, the Debtors recorded an additional $4 million asset impairment charge
related to Senior Note issuance costs, as required by applicable accounting
guidance for companies in Chapter 11 bankruptcy proceedings.
In sum, the Debtors' consolidated book equity position as of September 30, 2004,
was reduced to approximately negative $80.6 million. On June 24, 2005, Ernst &
Young issued their audit report for Intermet which concluded that the Debtors'
financial statements present fairly the consolidated financial position of
Intermet at December 31, 2004.
VIII. SUMMARY OF THE PLAN
The Debtors, [the Creditors' Committee], the Pre-Petition Agent, the DIP Agents,
and the Initial Committed Purchasers believe that (i) through the Plan, Holders
of Allowed Claims will obtain a recovery from the Estates of the Debtors that is
at least equal to, and likely greater than, the recovery they would receive if
the Assets of the Debtors were liquidated under Chapter 7 of the Bankruptcy
Code, and (ii) the Plan will afford the Debtors the opportunity and ability to
continue in business as viable going concerns for the benefit of all
constituents.
The Plan is annexed hereto as Exhibit A and forms a part of this Disclosure
Statement. The summary of the Plan set forth below is qualified in its entirety
by reference to the provisions of the Plan.
The Plan classifies Claims and Equity Interests separately and provides
different treatment for different Classes of Claims and Equity Interests in
accordance with the Bankruptcy Code for each Debtor.
A. EIGHTEEN (18) DIFFERENT PLANS OF REORGANIZATION
THE PLAN IS PROPOSED JOINTLY BY ALL OF THE DEBTORS, BUT CONSTITUTES A SEPARATE
PLAN FOR EACH DEBTOR. THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED,
SUBSTANTIVELY OR
69
OTHERWISE. ANY CLAIMS HELD AGAINST ONE OF THE DEBTORS WILL BE SATISFIED SOLELY
FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY SET FORTH IN THE
PLAN, NOTHING IN THE PLAN OR THIS DISCLOSURE STATEMENT WILL CONSTITUTE OR BE
DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF THE DEBTORS IS SUBJECT TO OR
LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTORS. THE CLAIMS OF CREDITORS THAT
HOLD CLAIMS AGAINST MULTIPLE DEBTORS WILL BE TREATED AS SEPARATE CLAIMS WITH
RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT LIMITED TO,
DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS PROVIDED IN
THE PLAN. THEREFORE, EXCEPT AS EXPRESSLY SPECIFIED IN THE PLAN, THE
CLASSIFICATIONS OF CLAIMS AND INTERESTS SET FORTH IN THE PLAN WILL BE DEEMED TO
APPLY SEPARATELY WITH RESPECT TO EACH PLAN PROPOSED BY EACH DEBTOR.
In conjunction with the Creditors' Committee, the Debtors have thoroughly
investigated whether or not substantive consolidation would be in the best
interests of the Debtors' Estates. The Debtors concluded, and strongly believe,
that substantive consolidation is not appropriate. The Ad Hoc Committee
disagrees, and has asked the Debtors to seek substantive consolidation of the
Debtors' Estates. The Ad Hoc Committee has also filed a motion with the
Bankruptcy Court seeking authority to prosecute a substantive consolidation
action against the Debtors. Set forth below is a brief summary of the Debtors'
responses to the Ad Hoc Committee's assertions about substantive
consolidation.(8)
1. "Substantial Identity Of Interest"
The Ad Hoc Committee alleges that there exists a substantial identity of
interests between the various Debtor entities. However, the Debtors and the
Creditors' Committee have reviewed a large number of facts that demonstrate that
there is no substantial identity of interest between the Debtor entities. Among
other things, (i) all of the Domestic Subsidiaries which correspond to
particular operating entities have their own businesses, issue their own
purchase orders, and have purchase orders issued to them in their own names;
(ii) the Domestic Subsidiaries hold their Assets in their own names, and Assets
are reflected on the individual books of the specific subsidiary; (iii) separate
minute books are maintained for each incorporated Domestic Subsidiary, and
separate corporate resolutions are prepared regarding bank accounts, loan
transactions, and the election of officers and directors; (iv) multiple bank
accounts are used for the operations of the Domestic Subsidiaries, and the
Domestic Subsidiaries all generate and possess stand alone financial statements;
(v) the Domestic Subsidiaries do not issue any dividends to
- ----------
(8) This is only intended to be a summary of the Debtors' position in response
to specific points raised by the Ad Hoc Committee to date. The Debtors
reserve all of their rights to make any arguments they deem necessary in
response to any substantive consolidation argument raised by the Ad Hoc
Committee or any other party-in-interest, and nothing herein shall be
interpreted as a waiver of the Debtors' rights.
70
Intermet, and Intermet does not make capital contributions to the Domestic
Subsidiaries, but rather, Intermet lends capital to the Domestic Subsidiaries as
necessary and maintains intercompany payables and receivables arising from this
process; (vi) the operating Domestic Subsidiaries have their own distinct
employees, payrolls and benefit plans, and where applicable, collective
bargaining agreements are entered into by the appropriate Domestic Subsidiary;
and (vii) the costs of Intermet's engineering center and headquarters employees
are allocated appropriately among the Domestic Subsidiaries.
2. Benefits Versus Harms
The Debtors have analyzed the Ad Hoc Committee's assertions regarding the
benefits of substantive consolidation as compared to the harm caused by not
substantively consolidating the Estates. The Debtors have concluded that
substantive consolidation would not yield substantial benefits to all
parties-in-interest, and that the Plan is consistent with the Debtors' exercise
of their fiduciary duties to all creditors. Distributions in the Plan are based
upon the product of negotiation.
3. Reliance On Creditworthiness Of Separate Debtors
The Ad Hoc Committee has alleged that creditors relied on the creditworthiness
of the consolidated Intermet enterprise. The Debtors have reviewed this
allegation, and concluded otherwise. For example, in developing and executing
the Indenture, Intermet and its lenders relied upon the separate assets of each
individual Senior Note Guarantor. Separate security agreements were created for
and executed by each of the Domestic Subsidiaries. Separate UCC-1 forms were
filed for each operating Domestic Subsidiary. Separate mortgages in the case of
real estate assets were provided for each of the separate operating Domestic
Subsidiaries.
4. Conclusion And Impact
Both the Debtors and the Creditors' Committee have considered and
investigated--and continue to continue and investigate--the prospect of
substantively consolidating the Estates. Based upon the facts of which the
Debtors are aware, and the paucity of evidence offered by the Ad Hoc Committee
to the contrary, the Debtors do not believe that substantive consolidation is
appropriate.
The most significant impact of having 18 different Estates and plans of
reorganization is that, due to the guarantees discussed in Section V.C. above,
the Noteholder Claims will be recognized at Intermet and every Senior Note
Guarantor (every Debtor except Intermet International, Inc. and Intermet Holding
Company), thereby providing a significantly greater recovery to Holders of
Noteholder Claims than such Noteholders would otherwise receive if substantive
consolidation had been appropriate.
B. TREATMENT OF UNCLASSIFIED CLAIMS
In accordance with Section 1123(a)(1) of the Bankruptcy Code, Administrative
Claims, Tax Claims, DIP Facility Claims, U.S. Trustee Fees, Workers'
Compensation Claims (to
71
the extent such Workers' Compensation Claims are not General Unsecured Claims as
described in Article 3.06 of the Plan), Pension Claims, and Consignment Claims
have not been classified, and the respective treatment of such unclassified
Claims is set forth below.
1. Administrative Claims Against Any Debtor
Administrative Claims are all post-Petition Date Claims or costs and expenses of
administration of the Cases with priority under Section 507(a)(1) of the
Bankruptcy Code, costs and expenses allowed under Section 503(b) of the
Bankruptcy Code, and any indebtedness or obligations entitled to such priority
under the Bankruptcy Code, including Professional Fees of the Debtors and any
official committee appointed in these Cases pursuant to Section 1102 of the
Bankruptcy Code, in each case to the extent allowed by a Final Order of the
Bankruptcy Court under Sections 330(a) or 331 of the Bankruptcy Code.
Except for Holders of DIP Facility Claims, each Holder of an Allowed
Administrative Claim will receive, in full satisfaction of such Allowed Claim,
Cash equal to the amount of such Claim on the later of (i) the Effective Date
and (ii) the date that is ten (10) days after the Allowance Date, unless such
Holder will have agreed to different treatment of such Allowed Claim; provided,
however, that Allowed Administrative Claims representing obligations incurred in
the ordinary course of business by a Debtor will be paid or performed in
accordance with the terms and conditions of the particular transactions and any
agreements relating thereto. Nothing in the Plan will be deemed to accelerate a
Debtor's obligation to make payment on account of any Administrative Claim that
is not due and owing as of the Confirmation Date, is not Allowed, or is subject
to ongoing objections in the Bankruptcy Court or other court of competent
jurisdiction.
The Debtors estimate that the aggregate amount of Allowed Administrative Claims
(not including required funding of the Pension Plans) that have not been paid in
the ordinary course of business is $240,889. Set forth below is a table which
shows the breakdown of the Debtors' estimates by each Debtor. The Debtors assert
rights of setoff with respect to certain Administrative Claims. In the event
such asserted setoff rights are not valid, the aggregate amount of Allowed
Administrative Claims may increase.
ESTIMATED ALLOWED ADMINISTRATIVE CLAIMS NOT
DEBTOR PAID IN ORDINARY COURSE OF BUSINESS
- ------------------------------------ -------------------------------------------
Intermet Corporation ~ $54,977
Alexander City Casting Company, Inc. $ 0
Cast-Matic Corporation $ 0
Columbus Foundry, L.P. ~ $56,402
Diversified Diemakers, Inc. ~ $ 73
Ganton Technologies, Inc. ~ $52,652
Intermet Holding Company $ 0
Intermet Illinois, Inc. $ 0
Intermet International, Inc. $ 0
Intermet U.S. Holding, Inc. $ 0
72
ESTIMATED ALLOWED ADMINISTRATIVE CLAIMS NOT
DEBTOR PAID IN ORDINARY COURSE OF BUSINESS
- ------------------------------------ -------------------------------------------
Ironton Iron, Inc. $ 0
Lynchburg Foundry Company ~ $ 76,785
Northern Castings Corporation $ 0
Sudbury, Inc. $ 0
SUDM, Inc. $ 0
Tool Products, Inc. $ 0
Wagner Castings Company $ 0
Wagner Havana, Inc. $ 0
----------
TOTAL: ~ $240,889
----------
2. Tax Claims Against Any Debtor
Each Holder of an Allowed Tax Claim against any Debtor will receive in full
satisfaction of such Allowed Tax Claim, at the election of the relevant Debtor,
in its sole discretion, either (i) Cash equal to the amount of such Claim on the
later of (1) the Effective Date, and (2) the date that is 10 days after the
Allowance Date, unless such Holder will have agreed to different treatment of
such Allowed Claim, or (ii) in accordance with Section 1129(a)(9)(C) of the
Bankruptcy Code, Cash payments in equal monthly installments commencing on the
first Business Day of the month succeeding the month in which the Effective Date
occurs and continuing on the first Business Day of each month thereafter, until
the month which is six (6) years after the date of assessment of such Claim
totaling the principal amount of such Claim plus interest on any outstanding
balance from the Effective Date calculated at the interest rate equal to the
applicable federal rate as determined in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder, or (iii) such other treatment as to which the Holder of such Allowed
Tax Claim will have agreed in writing; provided, however, that any Claim or
demand for payment of a penalty (other than a penalty of the type specified in
Section 507(a)(8)(G) of the Bankruptcy Code) will be disallowed pursuant to the
Plan and the Holder of an Allowed Tax Claim will not assess or attempt to
collect such penalty from the Debtors, their Estates, the Reorganized Debtors,
or their property.
The Debtors estimate that the amount of Allowed Tax Claims that have not
previously been paid pursuant to an order of the Bankruptcy Court will aggregate
approximately $2,378,876. Set forth below is a table showing the breakdown of
the Debtors' estimates by each Debtor:
ESTIMATED ALLOWED TAX CLAIMS NOT PREVIOUSLY
DEBTOR PAID PURSUANT TO BANKRUPTCY COURT ORDER
- ------------------------------------ -------------------------------------------
Intermet Corporation $149,161
Alexander City Casting Company, Inc. $ 94,868
Cast-Matic Corporation $ 0
Columbus Foundry, L.P. $272,052
Diversified Diemakers, Inc. $558,855
73
ESTIMATED ALLOWED TAX CLAIMS NOT PREVIOUSLY
DEBTOR PAID PURSUANT TO BANKRUPTCY COURT ORDER
------ -------------------------------------------
Ganton Technologies, Inc. $ 272,564
Intermet Holding Company $ 0
Intermet Illinois, Inc. $ 0
Intermet International, Inc. $ 0
Intermet U.S. Holding, Inc. $ 419,747
Ironton Iron, Inc. $ 8,893
Lynchburg Foundry Company $ 439,729
Northern Castings Corporation $ 12,000
Sudbury, Inc. $ 27,007
SUDM, Inc. $ 0
Tool Products, Inc. $ 124,000
Wagner Castings Company $ 0
Wagner Havana, Inc. $ 0
----------
TOTAL: $2,378,876
----------
3. DIP Facility Claims Against Any Debtor
On the Effective Date, in full satisfaction of the DIP Facility Claims against
each Debtor, the DIP Agents (for the benefit of the DIP Lenders, as applicable)
will receive Cash in an amount equal to the then outstanding amount of the DIP
Facility Claims (including, without limitation, all accrued and unpaid interest,
fees and expenses and any other amounts that may then be due and payable under
the DIP Facility) and any undrawn letters of credit issued pursuant to the DIP
Facility will be returned and marked cancelled and will be replaced by letters
of credit issued under the Exit Financing Facility. On the Effective Date, the
DIP Agents' and the DIP Lenders' commitments and obligations under the DIP
Facility will be irrevocably terminated and the Debtors will be deemed to have
unconditionally and irrevocably released the DIP Lenders and the DIP Agents from
all obligations, claims and liabilities arising thereunder or relating thereto.
4. U.S. Trustee Fees Owed By Any Debtor
The U.S. Trustee's quarterly fees owed by any Debtor will be paid in full
without prior approval pursuant to 28 U.S.C. Section 1930 on or before the
Effective Date. All fees payable pursuant to 28 U.S.C. Section 1930 will be paid
by each of the Reorganized Debtors in accordance therewith until the closing of
its respective Case pursuant to Section 350(a) of the Bankruptcy Code.
5. Workers' Compensation Claims Against Any Debtor
Upon the Effective Date of the Plan, with the exception of the Workers'
Compensation Program for the State of Ohio, which relates to Ironton Iron, Inc.
and Sudbury, Inc., the Reorganized Debtors will continue the Workers'
Compensation Programs for all states in which they operate. Nothing in the Plan
will be deemed to discharge, release, or relieve the Debtors or Reorganized
Debtors from any current or future liability with respect to any of its/their
obligations under the Workers' Compensation Programs, provided that in
74
the case of the Workers' Compensation Program for the State of Ohio, which
relates to Ironton Iron, Inc. and Sudbury, Inc., Claims arising thereunder will
be General Unsecured Claims. The Reorganized Debtors will be responsible for all
valid Claims for benefits and liabilities under the applicable Workers'
Compensation Programs, provided that, in the case of the Workers' Compensation
Program for the State of Ohio, which relates to Ironton Iron, Inc. and Sudbury,
Inc., such Claims arising thereunder will be General Unsecured Claims under the
Plan, regardless of when the applicable injuries occurred. All obligations under
the applicable Workers' Compensation Programs will be paid in accordance with
the terms and conditions of applicable Workers' Compensation Programs and all
other applicable laws other than the Workers' Compensation Program for the State
of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., which Claims
will be General Unsecured Claims under the Plan, regardless of when the
applicable injuries occurred. For all states in which the Debtors currently
operate or have operated, with the exception of the State of Ohio, the Workers
Compensation Programs are either (i) self-insured, or (ii) insured with a third
party insurance carrier, and are in all cases secured by letters of credit.
Accordingly, Claims resulting from the Workers' Compensation Program for the
State of Ohio, which relates to Ironton Iron, Inc. and Sudbury, Inc., will be
Class 4 General Unsecured Claims or Class 5 Unsecured Convenience Claims as
applicable.
6. Pension Claims Against Any Debtor
The PBGC is the United States government agency that administers the mandatory
termination insurance program for defined benefit pension plans under Title IV
of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sections
1301-1461 (2000). A defined benefit pension plan is one that provides an
employee, upon retirement, a fixed, periodic payment as determined by the terms
of the plan. See 29 U.S.C. Section 1002(35). The PBGC guarantees the payment of
certain pension benefits upon termination of a defined benefit pension plan. See
29 U.S.C. Sections 1321, 1322.
Upon Confirmation and substantial consummation of the Plan, the Reorganized
Debtors will continue all Pension Plans in accordance with applicable law, and
the Debtors' obligations under applicable law with respect to continued funding
of the Pension Plans will remain unaltered. Nothing in the Plan will be deemed
to discharge, release, or relieve the Debtors, the Reorganized Debtors, or their
control group of or from any current or future liability under applicable law
with respect to the Pension Plans. On the Effective Date, the Debtors will pay
into each Pension Plan the amount then due for the 2004 Pension Plan years,
unless such payments have already been made by the Debtors in the ordinary
course. On the Effective Date, the Debtors will pay into each Pension Plan the
remaining amounts then due under applicable minimum funding standards and the
PBGC will be deemed to have withdrawn its Claims with respect to the Pension
Plans. The PBGC is enjoined from seeking relief against the Reorganized Debtors
under 29 U.S.C. Section 1362(e) as a consequence of the closure of the Debtors'
Racine, Wisconsin or Decatur, Illinois facilities.
The Debtors estimate that the minimum Pension Plan funding amounts due in 2005
will be approximately $8.1 million, broken down by Debtor as shown in the table
below.
75
ESTIMATED PENSION PLAN
DEBTOR CONTRIBUTIONS REQUIRED IN 2005*
------ -------------------------------
Columbus Foundry, L.P. Approximately $1 million
Lynchburg Foundry Company Approximately $5.5 million
Wagner Castings Company $0
Ganton Technologies,Inc. - Racine Salaried Employees Approximately $300,000
Ganton Technologies,Inc. - Racine Hourly Employees Approximately $1 million
Ganton Technologies,Inc. - Pulaski Hourly Employees Approximately $200,000
TOTAL: APPROXIMATELY $8.1 MILLION
* These estimates are based, in part, on estimated quarterly payments due in
2005 which are subject to change. Approximately $6.6 million of the total
payments required in 2005 must be paid on or before September 15, 2005. The
remainder must be paid on or before October 15, 2005.
7. Consignment Claims Against Any Debtor
Notwithstanding Section 1141(c) or any other provision of the Bankruptcy Code,
all Liens, if any, of Persons who provided goods to any of the Debtors on
consignment (i) prior to the Petition Date and who hold valid, enforceable, and
perfected Liens in such goods (a) pursuant to a written agreement with a Debtor
and (b) in accordance with applicable law, or (ii) after the Petition Date
pursuant to any order of the Bankruptcy Court will, in each case, survive the
Effective Date and continue in accordance with the contractual terms of the
underlying agreements between the relevant Debtor and such Persons and will
remain enforceable as of the Effective Date with the same extent, validity and
priority as existed as of the Petition Date or pursuant to such order, as the
case may be. All other Persons who provided goods to any of the Debtors on
consignment will be deemed to hold General Unsecured Claims under the Plan.
C. TREATMENT OF CLASSES THAT ARE UNIMPAIRED UNDER THE PLAN
Classes 1, 2, and 3 are Unimpaired for all Debtors. Holders of Unimpaired Equity
Interests in the Unimpaired Equity Debtors are Unimpaired. Therefore, pursuant
to Section 1126(f) of the Bankruptcy Code, the Holders of Allowed Claims or
Equity Interests in such Classes are conclusively presumed to have accepted the
Plan. Nothing in the Plan will be deemed to accelerate any Debtor's obligation
to make payment on account of any Claim in a Class which is Unimpaired under the
Plan or affect the timing of payment under applicable non-bankruptcy law.
Additionally, the Debtors will retain all rights to dispute or challenge any
Claim which will constitute a Claim in a Class that is Unimpaired under the
Plan.
1. Class 1 For All Debtors - Priority Claims Against Any Debtor
Class 1 for all Debtors is comprised of Priority Claims that are entitled to
priority pursuant to Section 507(a) of the Bankruptcy Code and that are not
Administrative Claims or Tax Claims. Many of the Priority Claims in Class 1 for
all Debtors have been paid pursuant to an order of the Bankruptcy Court entered
in connection with first day motions. The Debtors project that, at the time of
Confirmation, there will be
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approximately $2,458,860 of unpaid Priority Claims. See Section I.C.2, above,
for a breakdown by each Debtor.
Unless the Holder of a Priority Claim and the relevant Debtor agree to a
different treatment, each Holder of an Allowed Priority Claim against any Debtor
will receive, in full satisfaction of such Allowed Claim, Cash equal to the
amount of such Allowed Claim on the latest of (i) the Effective Date, (ii) the
date that is 10 days after the Allowance Date of such Claim, and (iii) the date
when such Allowed Claim becomes due and payable according to its terms and
conditions.
2. Class 2 For All Debtors - Pre-Petition Lender Claims Against Any
Debtor
Class 2 for all Debtors is comprised of Pre-Petition Lender Claims, which will
be Allowed against the relevant Debtor in an amount equal to the sum of (i) the
principal amount of the Pre-Petition Lender Claims as of the Petition Date, plus
all unpaid interest and fees accrued through the Petition Date, plus (ii) all
interest and fees (if any) to which the Pre-Petition Lenders are entitled under
Section 506(b) of the Bankruptcy Code, and (iii) any other amounts owed by the
Debtors under the DIP Order, to the extent not already paid to the Pre-Petition
Lenders as adequate protection pursuant to the DIP Financing Order. On the
Effective Date, in full satisfaction of all of the obligations of the Debtors in
respect of the Pre-Petition Lender Claims, the Disbursing Agent will distribute
to the Pre-Petition Agent (for the benefit of the Pre-Petition Lenders) and
without further notice, application or hearing, Cash in an amount equal to all
principal and interest accrued on the Pre-Petition Lender Claims through the
Effective Date plus all unreimbursed fees and expenses incurred by the
Pre-Petition Agent through the Effective Date (to the extent not already paid as
adequate protection pursuant to the DIP Financing Order and regardless of
whether such interest and fees are Allowed, or allowable, pursuant to Section
506(b) of the Bankruptcy Code). The Pre-Petition Lenders will be entitled to
retain all payments made to the Pre-Petition Lenders prior to the Effective
Date. In addition, as of the Effective Date, the Consenting Pre-Petition Lenders
will be deemed to have been unconditionally and irrevocably released from all
obligations, claims and liabilities arising under or related to the Pre-Petition
Credit Facility or its lending relationship to the Debtors, whether arising
before or after the Petition Date.
See Section I.C.2, above, for a breakdown by each Debtor.
3. Class 3- Secured Claims Against Any Debtor Except Claims In Class
3a As To Wagner Castings Company
Class 3 for all Debtors is comprised of Secured Claims except those in Class 3a,
as to Wagner Castings. Unless the Holder of an Allowed Secured Claim and the
relevant Debtor agree to a different treatment, either (a) the legal, equitable,
and contractual rights of Holders of Secured Claims will be reinstated on the
Effective Date, or (b) the relevant Debtor will (i) Cure any pre-petition
default (other than defaults of the kind specified in Section 365(b)(2) of the
Bankruptcy Code), (ii) reinstate the maturity of such Secured Claim, (iii)
compensate the Holder of an Allowed Secured Claim for any damage
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satisfying Section 1124(2)(c) of the Bankruptcy Code, and (iv) not otherwise
alter the legal, equitable or contractual rights to which such Secured Claim
entitles the Holder. The relevant Debtor's failure to object to such Secured
Claims in the Cases will be without prejudice to the Debtors' right to contest
or otherwise defend against such Claims in the Bankruptcy Court or other
appropriate non-bankruptcy forum (at the option of the Debtors) when and if such
Claims are sought to be enforced by the Holder of the Secured Claim. All
pre-Petition Date Liens on property of any Debtor held by or on behalf of the
Holder of Secured Claims with respect to such Claims will survive the Effective
Date and continue in accordance with the contractual terms of the underlying
agreements with such Holders until, as to each such Holder, the Allowed Claims
of such Holder of such Secured Claims are paid in full.
See Section I.C.2, above, for a breakdown by each Debtor.
4. Class 6a For The Unimpaired Equity Debtors - Unimpaired Equity
Interests In The Unimpaired Equity Debtors
On the Effective Date, all of the Class 6a Unimpaired Equity Interests in the
Unimpaired Equity Debtors will be Allowed and retained by the applicable
Reorganized Debtor. Holders of Unimpaired Equity Interests in the Unimpaired
Equity Debtors will not be entitled to vote and are deemed to have accepted the
Plan. See Section I.C.2. "Classified Claims," above, for breakdown by each
Debtor.
D. TREATMENT OF CLASSES THAT ARE IMPAIRED UNDER THE PLAN
Classes 3a, 4, 4a, 4b, 4c, 5 and Class 6b Impaired Equity Interests are
Impaired. Holders of Allowed Claims in Classes 3a, 4, 4a, 4b, 4c, and 5 are
allowed to vote as a Class to accept or reject the Plan. Holders of Class 6b
Impaired Equity Interests in the Impaired Equity Debtors are deemed to have
rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code.
1. Class 3a - Secured Claims Held By Dana Corporation Against Wagner
Castings Company
On the Effective Date, in full satisfaction of its Allowed Secured Claim for
setoff, Dana will be allowed to setoff such Claim from amounts owed to Wagner
Castings, Columbus Foundry, L.P., Lynchburg Foundry Company, and Intermet, on
the condition that Dana provides the amendments to its purchase orders with the
aforementioned Debtors, set forth in an agreement by and among such Debtors and
Dana, dated April 2005.
2. Class 4 - General Unsecured Claims Other Than Those In Classes
4a, 4b, or 4c
On or as soon as reasonably practicable after the Effective Date, in full
satisfaction of its Allowed General Unsecured Claims in such Class, the
Indenture Trustee, on behalf of each of the Noteholders, or each Holder of the
Allowed General Unsecured Claims, respectively, will receive in full
satisfaction of its Claims against such Debtor:
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(a) the Cash-Out Amount; OR
(b) at the option of each such Holder of a General Unsecured Claim and
only to the extent that such Holder of General Unsecured Claims so elects on the
Ballot:
(i) a Pro Rata portion of shares of New Common Stock allocated to
the applicable Debtor as indicated in Exhibit B to the Plan, and
(ii) its Pro Rata share of the Rights allocated to the applicable
Debtor as indicated on Exhibit B to the Plan; OR
(c) at the option of each such Holder of a General Unsecured Claim and
only to the extent that such Holder of General Unsecured Claims so elects on the
Ballot, the Inducement Cash Amount.
For the avoidance of doubt, in the event a Holder of a General Unsecured Claim
fails to elect the options set forth in subsections (b) or (c) of this section,
such Holder will receive Cash equal to the Cash-Out Amount.
See Section I.C.2, above, for a breakdown by each Debtor, as well as Exhibit B
to the Plan.
A. Explanation Of Creditor Treatment In Class 4
Holders of General Unsecured Claims have two primary options of treatment under
the Plan. They will receive Cash, unless they elect to receive New Common Stock
of Reorganized Intermet. If Holders of General Unsecured Claims elect to receive
New Common Stock, they will receive, in exchange for their Claims, a Pro Rata
portion of 2.5 million shares in the aggregate, as allocated to each Debtor as
indicated in Exhibit B to the Plan, and Exhibit I hereto, based upon the value
of each Debtor. By electing to receive New Common Stock in lieu of Cash, Holders
of General Unsecured Claims will also have the option of purchasing additional
shares of New Common Stock in the Rights Offering (a Pro Rata portion of an
additional 7.5 million shares in the aggregate, as allocated to each Debtor as
indicated in Exhibit B to the Plan, and Exhibit I hereto, based upon the value
of each Debtor).
Should Holders of General Unsecured Claims not vote, or not make an election,
they will receive the Cash-Out Amount of $10.00 per share of New Common Stock
they would have otherwise received had they elected to receive New Common Stock
in lieu of Cash. In the event that they make an election, such Holders have two
options. They may either: (a) elect to receive their Pro Rata share of New
Common Stock allocated to the relevant Debtor and their Pro Rata share of the
Rights allocated to such Debtor, or (b) elect to receive the Inducement Cash.
The Inducement Cash option is designed to give Holders of General Unsecured
Claims a greater percentage recovery than they would have received by electing
the Cash-Out
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Amount, as an incentive to have such Holders: (x) agree to prosecute their
Claim(s) exclusively against the Debtor that is the primary obligor according to
the Debtors' books and records (as shown in the Schedules), (y) agree to waive
their rights to seek recovery from any other Debtor on account of such Claim(s),
and (z) vote in favor of the Plan. However, should the Debtors' assumptions
about which Creditors will exercise the Inducement Cash Election prove
inaccurate, it is possible that Creditors making the Inducement Cash Election
will receive less than the fixed percentage of Inducement Cash Amount shown for
each Debtor in Exhibit B to the Plan, and Exhibit I hereto, but will instead
receive their Pro Rata portion of the Inducement Cash Pool allocated to each
such Debtor. However, the Debtors reserve the right to increase the Inducement
Cash Pools to achieve the fixed percentage payout, with the consent of the
Initial Committed Purchasers. In no event, however, will a Creditor's Pro Rata
portion of the Inducement Cash Pool for any particular Debtor ever be lower than
the value of such Creditor's recovery in the form of New Common Stock and Rights
per the Plan valuation for such Debtor.
The primary assumption the Debtors have made in allocating funds to the
Inducement Cash Pools at each Debtor is that Noteholders will not make the
Inducement Cash Election on their Ballots. The fact that the Senior Notes are
guaranteed by all Debtors except Intermet International, Inc. and Intermet
Holding Company would serve as a disincentive for the Noteholders to waive their
Claims against any other Debtors, which they would be required to do if they
made the Inducement Cash Election. Consequently, the dollar amounts allocated to
the Inducement Cash Pools for each Debtor were chosen by estimating (based on a
review of the Schedules and Proofs of Claims filed to date and discounting
duplicate Claims and Claims reasonably believed to be disallowable)(9) the total
Cash Distributions required if all Holders of General Unsecured Claims other
than the Noteholders actually made the Inducement Cash Election.
Therefore, if the Debtors' assumption about the Noteholders' reluctance to make
the Inducement Cash Election is accurate, and if the Debtors have properly
estimated the dollar number of General Unsecured Claims other than Noteholder
Claims at each particular Debtor, there should be sufficient funds in the
Inducement Cash Pools to meet the fixed percentage Inducement Cash payouts shown
in Exhibit B to the Plan, and Exhibit I hereto. If, however, some Noteholders
make the Inducement Cash Election, or if the Debtors underestimated the total
dollar number of General Unsecured Claims (other than Noteholder Claims) for any
particular Debtor, then Creditors making the Inducement Cash Election for Claims
against such Debtor may ultimately receive less than the fixed percentage of
Inducement Cash shown in Exhibit B to the Plan, and Exhibit I hereto, absent an
increase in the Inducement Cash Pools. In such event, the Holder of an Allowed
General Unsecured Claim will receive its Pro Rata portion of the Inducement Cash
Pool for such Debtor, but, as mentioned above, in no event will a Creditor's Pro
Rata portion of the Inducement Cash Pool for any particular Debtor ever be lower
than
- ----------
(9) The Claims estimates set forth herein reflect current estimates of Claims
at each Debtor. Actual distributions may be higher or lower based on the
resolution of Disputed Claims and actual Allowed Claims at each Debtor.
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such Creditor's recovery in the form of New Common Stock and Rights per the Plan
valuation for such Debtor.
3. Class 4a - General Unsecured Claims Against Wagner Castings
Company
Class 4a is comprised of General Unsecured Claims against Wagner Castings
Company. However, Class 4a shall only exist in the event that the Liquidating
Plan Condition is satisfied. If the Liquidating Plan Condition is not satisfied,
there will be no Class 4a, and Creditors of Wagner Castings will be treated as
Class 4 Creditors.
On or as soon as reasonably practicable after the Effective Date, in full
satisfaction of the Allowed General Unsecured Claims in such Class, the
Indenture Trustee, on behalf of each of the Noteholders, or each Holder of the
Allowed General Unsecured Claims, respectively, will receive in full
satisfaction of their Claims against Wagner Castings:
Cash equal to each Holder's Pro Rata share of all proceeds remaining
after liquidation of all assets of Wagner Castings and the satisfaction of all
Liens thereon, including those arising after the Effective Date, such as the
Liens arising under the Exit Financing Facility.
4. Class 4b - General Unsecured Claims Against SUDM, Inc.
Class 4b is comprised of General Unsecured Claims against SUDM, Inc. On or as
soon as reasonably practicable after the Effective Date, in full satisfaction of
its Allowed General Unsecured Claims in such Class, the Indenture Trustee, on
behalf of each of the Noteholders, or each Holder of the Allowed General
Unsecured Claims, respectively, will receive:
(a) the Indenture Trustee Fee Amount, which shall be paid to the
Indenture Trustee in satisfaction of the Indenture Trustee Fees, and
(b) the Cash-Out Amount with respect to SUDM as indicated in Exhibit B
to the Plan; OR
(c) at the option of each such Holder of a General Unsecured Claim and
only to the extent that such Holder of a General Unsecured Claim so elects on
the Ballot:
(i) a Pro Rata portion of shares of New Common Stock allocated to
SUDM as indicated in Exhibit B to the Plan, and
(ii) its Pro Rata share of the Rights allocated to SUDM and
indicated on Exhibit B to the Plan; OR
(d) at the option of each such Holder of a General Unsecured Claim and
only to the extent that such Holder of a General Unsecured Claim so elects on
the Ballot, the Inducement Cash Amount with respect to SUDM.
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For the avoidance of doubt, in the event a Holder of a General Unsecured Claim
fails to elect the options set forth in subsections (c) or (d) of this Section,
such Holder will receive Cash equal to the Cash-Out Amount.
5. Class 4c - General Unsecured Claims Against Wagner Havana, Inc.
Class 4c is comprised of General Unsecured Claims against Wagner Havana, Inc.,
but only in the event that the Liquidating Plan Condition is satisfied. If the
Liquidating Plan Condition is not satisfied, there will be no Class 4c, and
Creditors of Wagner Havana, Inc. will be treated as Class 4 Creditors.
On the Effective Date, the Indenture Trustee, on behalf of each of the
Noteholders, or a Holder of Allowed General Unsecured Claims against Wagner
Havana, Inc., will receive in full satisfaction of their Claims:
(a) the Cash-Out Amount with respect to Wagner Havana as indicated in
Exhibit B to the Plan; OR
(b) at the option of each such Holder of a General Unsecured Claim and
only to the extent that such Holder of General Unsecured Claims so elects on the
Ballot:
(i) a Pro Rata portion of shares of the New Common Stock
allocated to Wagner Havana as indicated in Exhibit B to the Plan,
(ii) its Pro Rata share of the Rights allocated to Wagner Havana
and indicated on Exhibit B to the Plan; and
(iii) its Pro Rata share of the Reorganized Wagner Havana New
Common Stock which will be conveyed immediately to Reorganized Intermet upon the
Effective Date; OR
(c) at the option of each such Holder of a General Unsecured Claim and
only to the extent that such Holder of General Unsecured Claims so elects on the
Ballot, the Inducement Cash Amount with respect to Wagner Havana as indicated in
Exhibit B to the Plan.
In the event a Holder of a General Unsecured Claim fails to elect the options
set forth in subsections (b) or (c) of this Section, such Holder will receive
the Cash-Out Amount.
6. Class 5 For All Debtors - Unsecured Convenience Claims Against
Any Debtor
Class 5 for all Debtors (except Wagner Castings in the event that the
Liquidating Plan Condition is satisfied and SUDM) is comprised of Unsecured
Convenience Claims. All Allowed Unsecured Convenience Claims against any Debtor
will be paid as soon as
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practicable after the Effective Date, in full satisfaction of such Claims, the
amount equal to the fixed percentage of each Allowed Claim as indicated on
Exhibit B to the Plan and Section I.C.2, above.
7. Class 6b For The Impaired Equity Debtors - Impaired Equity
Interests In Such Debtors
On the Effective Date, all of the Class 6b Impaired Equity Interests in the
Impaired Equity Debtors, will be cancelled without consideration therefor and
will be deemed to have rejected the Plan. See Section I.C.2. "Classified
Claims," above, for breakdown by each Debtor. Ironton Iron, Inc. is an Impaired
Equity Debtor but only with respect to its shares of Existing Preferred Stock.
Wagner Castings Company and Wagner Havana, Inc. are Unimpaired Equity Debtors,
unless the Liquidating Plan Condition is satisfied, when they both become
Impaired Equity Debtors and all Impaired Equity Interests in both entities will
be cancelled. If the Liquidating Plan Condition is satisfied, one (1) share of
Reorganized Wagner Castings New Common Stock will be issued and delivered to a
third-party liquidating trustee acceptable to the Reorganized Debtors, the
Initial Committed Purchasers, and the Creditors' Committee for the purpose of
liquidating Wagner Castings and making the Distributions set forth in Class 4a.
Further, if the Liquidating Plan Condition is satisfied, 1000 shares of the
Reorganized Wagner Havana New Common Stock will be issued to Holders of Claims
against Wagner Havana, which such Holders will immediately transfer to
Reorganized Intermet.
A. Explanation Of Impaired Equity Interest Treatment In Class
6b For Wagner Castings Company And Wagner Havana, Inc.
As demonstrated in the Liquidation Analysis attached hereto as Exhibit F, both
Wagner Castings and Wagner Havana, Inc. are insolvent. Consequently, none of the
Impaired Equity Interests in either entity have any value. Sudbury, Inc. is the
sole Holder of Equity Interests in Wagner Castings, while Wagner Castings is the
sole Holder of Equity Interests in Wagner Havana, Inc.
The Plan contemplates that both Wagner Castings and Wagner Havana, Inc. will be
reorganized, and that all Impaired Classes of Claims against each of these
Debtors will accept the Plans proposed by each. In such event, the Equity
Interests in Wagner Castings and Wagner Havana, Inc. will, by consent of the
Impaired Classes eligible to vote on those Plans, be Allowed and retained by
Reorganized Sudbury, Inc. and Reorganized Wagner Castings Company, respectively.
If, however, the Liquidating Plan Condition is satisfied such that Classes 4 and
5 against Wagner Castings do not accept the Plan proposed by Wagner Castings,
and Wagner Castings is unable to Confirm its Plan under the cram-down provisions
set forth in Section 1129(b) of the Bankruptcy Code, then all Equity Interests
in Wagner Castings
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will be cancelled, and one (1) share of Reorganized Wagner Castings Common Stock
will be transferred to a third-party liquidating trustee for the sole purpose of
liquidating Wagner Castings Company. In such event, (i) Equity Interests in
Wagner Havana, Inc. will be cancelled in their entirety, and (ii) on the
Effective Date, Holders of Claims against Wagner Havana, Inc. will receive a
Distribution of 1000 shares of Reorganized Wagner Havana New Common Stock, which
such Holders will immediately transfer to Reorganized Intermet, thereby
retaining the value, if any, of Wagner Havana in Reorganized Intermet. This
value, if any, will be preserved for the Holders of General Unsecured Claims by
the Distribution of New Common Stock and Rights under the Plan.
Equity Interests in Wagner Havana, Inc. (held exclusively by Wagner Castings
Company) will be cancelled because the Holder of such Equity Interests is not
entitled to any Distribution on account of its Equity Interests before Creditors
of Wagner Havana, Inc. are paid in full (which the Plan does not contemplate).
Consequently, Holders of Claims against (not Equity Interests in) Wagner Havana,
Inc. will receive a Distribution of 1000 shares of Reorganized Wagner Havana New
Common Stock.
By voting to accept the Wagner Havana Plan, Creditors of Wagner Havana will have
consented to transfer all of their shares of Reorganized Wagner Havana New
Common Stock to Reorganized Intermet.
E. INTERCOMPANY CLAIMS
All Intercompany Claims will be released, waived and discharged as of the
Effective Date. Claims held by Non-Debtor Affiliates against the Debtors will,
with the consent of the Initial Committed Purchasers, to the maximum extent
practicable, be (a) released, waived, and discharged as of the Effective Date,
(b) offset against claims held by Debtors against Non-Debtor Affiliates, or (c)
converted to equity with respect to the obligee Debtor.
IX. EFFECT OF CONFIRMATION AND IMPLEMENTATION OF THE PLAN
The Plan provides for the treatment of Claims and Equity Interests as described
above as well as other provisions relating to acceptance or rejection of the
Plan, treatment of Executory Contracts, Distributions, procedures for resolving
disputed, contingent, and unliquidated Claims, retention of jurisdiction and
other miscellaneous provisions.
A. CONFIRMATION
Section 1129(a) of the Bankruptcy Code establishes conditions for the
confirmation of a plan. These conditions are too numerous and detailed to be
fully explained here. Parties are encouraged to seek independent legal counsel
to answer any questions concerning the Chapter 11 process.
Among the several conditions for Confirmation of the Plan under Section 1129(a)
of the Bankruptcy Code are these:
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1. Each Class of Impaired Claims must accept the Plan; provided,
however, that Section 1129(b) of the Bankruptcy Code allows a
plan to be confirmed if one class of impaired claims accepts the
plan and no class junior to a rejecting class takes anything
under the plan.
2. Either each Holder of a Claim in a Class must accept the Plan, or
the Plan must provide at least as much value as would be received
upon liquidation under Chapter 7 of the Bankruptcy Code. In this
regard, attached as Exhibit F is the Liquidation Analysis showing
the anticipated distribution to Creditors in a Chapter 7
liquidation of the Debtors. Pursuant to the Liquidation Analysis,
Creditors would receive far less in a Chapter 7 liquidation than
they would under the Plan, and, therefore this requirement is
satisfied.
3. Confirmation of the Plan is not likely to be followed by the
liquidation or the need for further financial reorganization of
the Debtors, unless such liquidation is proposed in the Plan.
Attached as Exhibit G are the Projections of the Debtors, on a
consolidated basis. They demonstrate that Confirmation of the
Plan will not be followed by the liquidation or the need for
further financial reorganization of the Debtors.
B. EFFECTS OF PLAN CONFIRMATION
1. Discharge of Claims; Related Injunction
Except as may otherwise be provided herein or in the Confirmation Order, the
rights afforded and the payments and Distributions to be made and the treatment
under the Plan will be in complete exchange for, and in full and unconditional
settlement, satisfaction, discharge, and release of any and all existing debts
and Claims and termination of all Equity Interests of any kind, nature, or
description whatsoever against the Debtors, the Reorganized Debtors, the Assets,
their property or their Estates, and will effect a full and complete release,
discharge, and termination of all Liens, security interests, or other claims,
interests, or encumbrances upon all of the Debtors' Assets and property.
Further, all Persons are precluded from asserting, against any of the Debtors or
the Reorganized Debtors or their respective successors, or any property that is
to be Distributed under the terms of the Plan, any Claims, obligations, rights,
causes of action, liabilities, or Equity Interests based upon any act, omission,
transaction, or other activity of any kind or nature that occurred prior to the
Effective Date, other than as expressly provided for in the Plan, or the
Confirmation Order, whether or not (a) a Proof of Claim based upon such debt is
filed or deemed filed under Section 501 of the Bankruptcy Code; (b) a Claim
based upon such debt is Allowed; or (c) the Holder of a Claim based upon such
debt has accepted the Plan.
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Except as otherwise provided in the Plan or the Confirmation Order, all Holders
of Allowed Claims and Equity Interests arising prior to the Effective Date will
be permanently barred and enjoined from asserting against the Reorganized
Debtors or any of the Debtors, or their successors or property, or the Assets,
any of the following actions on account of such Allowed Claim or Equity
Interest:
- commencing or continuing in any manner any action or other proceeding
on account of such Claim or Equity Interest against the Reorganized
Debtors, any of the Debtors, or the property to be distributed under
the terms of the Plan, other than to enforce any right to Distribution
with respect to such property under the Plan;
- enforcing, attaching, collecting, or recovering in any manner any
judgment, award, decree, or order against the Reorganized Debtors, the
Debtors or any of the property to be distributed under the terms of
the Plan, other than as permitted under the first bullet-point listed
above;
- creating, perfecting, or enforcing any Lien or encumbrance against
property of the Reorganized Debtors, any of the Debtors, or any
property to be Distributed under the terms of the Plan;
- asserting any right of setoff, subrogation, or recoupment of any kind,
directly or indirectly, against any obligation due any Debtor, the
Reorganized Debtors, the Assets or any other property of the Debtors,
the Reorganized Debtors, or any direct or indirect transferee of any
property of, or successor in interest to, any of the foregoing
Persons; and
- acting or proceeding in any manner, in any place whatsoever, that does
not conform to, or comply with, the provisions of the Plan.
The foregoing discharge, release and injunction are an integral part of the Plan
and are essential to its implementation. Each of the Debtors and the Reorganized
Debtors will have the right to independently seek the enforcement of the
discharge, release and injunction set forth in Article 10.02 of the Plan.
Except as otherwise specifically provided in the Plan, nothing in the Plan will
be deemed to waive, limit, or restrict in any way the discharge granted to the
Debtors upon Confirmation of the Plan by Section 1141 of the Bankruptcy Code.
2. Vesting Of Property
Except as otherwise provided in the Plan or the Confirmation Order, upon the
Effective Date, (a) the Debtors will continue to exist as the Reorganized
Debtors, with all the powers of corporations under applicable law and without
prejudice to any right to alter or terminate such existence (whether by merger
or otherwise) under applicable state law, and (b) all property of the Estates,
wherever situated, will vest in the relevant Reorganized Debtor, as appropriate,
subject to the provisions of the Plan and the Confirmation Order. Thereafter,
the Reorganized Debtors may operate their businesses
86
and may use, acquire, and dispose of property free of any restrictions of the
Bankruptcy Code, the Bankruptcy Rules, and the Bankruptcy Court.
After the Effective Date, all property retained by the Reorganized Debtors
pursuant hereto will be free and clear of all Claims, debts, Liens, security
interests, encumbrances, and interests, except as contemplated by the Plan and
except for the obligation to perform according to the Plan and the Confirmation
Order.
3. Retention Of Bankruptcy Court Jurisdiction
Following the Effective Date, the Bankruptcy Court will retain such jurisdiction
over these Cases as is legally permissible, including without limitation, such
jurisdiction as is necessary to ensure that the purposes and intent of the Plan
are carried out. The Bankruptcy Court will also expressly retain jurisdiction to
hear and determine all Claims against the Debtors, to hear, determine and
enforce all Causes of Action that may exist on behalf of any Debtor, and for all
purposes pertaining to the treatment, allowance or classification of Claims and
Equity Interests, including issues arising under Section 502(c) of the
Bankruptcy Code proceedings for estimation of Claims. The Bankruptcy Court will
further retain jurisdiction for the following additional purposes:
- to determine all questions and disputes regarding title to the Assets
of the Debtors, all Causes of Action, controversies, disputes, or
conflicts, whether or not subject to any pending action as of the
Effective Date, between any Debtor and any other party, including,
without limitation, the Causes of Actions, the Avoidance Actions, and
any other right to recover Assets pursuant to the provisions of the
Bankruptcy Code;
- to modify the Plan after the Confirmation Date in accordance with the
terms of the Plan and pursuant to the Bankruptcy Code and the
Bankruptcy Rules;
- to enforce and interpret the terms and conditions of the Plan;
- to enter such orders, including, but not limited to, such future
injunctions as are necessary to enforce the respective title, rights,
and powers of the Debtors, the terms of the Plan, and to impose such
limitations, restrictions, terms, and conditions on such title,
rights, and powers as the Bankruptcy Court may deem necessary;
- to enter an order closing these Cases;
- to correct any defect, cure any omission, or reconcile any
inconsistency in the Plan or the Confirmation Order as may be
necessary to implement the purposes and intent of the Plan;
- to determine any and all applications for allowances of compensation
and reimbursement of expenses and the reasonableness of any fees and
expenses authorized to be paid or reimbursed under the Bankruptcy Code
or the Plan or resolve any disputes regarding fees to be paid pursuant
to the Plan;
87
- to determine any applications or motions pending on the Effective Date
or thereafter for the rejection of any Executory Contract and to hear
and determine, and, if need be, to liquidate any and all Claims
arising therefrom;
- to determine any and all motions, applications, adversary proceedings,
and contested matters that may be pending on the Effective Date;
- to consider any modification of the Plan, whether or not the Plan has
been substantially consummated, and to remedy any defect or omission
or to reconcile any inconsistency in any order of the Bankruptcy
Court, to the extent authorized by the Plan or the Bankruptcy Court
and all matters pertinent to modification;
- to determine all controversies, suits, and disputes that may arise in
connection with the interpretation, enforcement, or consummation of
the Plan or the Reorganization Documents;
- to consider and act on the compromise and settlement of any Claim
against or Cause of Action by or against any Debtor or Reorganized
Debtor arising under or in connection with the Plan;
- to issue such orders in aid of execution of the Plan as may be
authorized by Section 1142 of the Bankruptcy Code;
- to determine such other matters or proceedings as may be provided for
under Title 28 or any other title of the United States Code, the
Bankruptcy Code, the Bankruptcy Rules, other applicable law, the Plan,
or in any order or orders of the Bankruptcy Court, including, but not
limited to, the Confirmation Order or any order that may arise in
connection with the Plan, the Cases, or the Confirmation Order; and
- to interpret and enforce, and determine all questions and disputes
regarding, the injunctions, releases, exculpations, and
indemnifications provided for or set forth in the Plan (including,
without limitation, Articles 10.02, 10.05, 10.06 and 13.08 of the
Plan) or the Confirmation Order.
4. Releases
A. On the Effective Date, effective as of the Confirmation
Date, and except as otherwise provided in the Plan or in the
Confirmation Order, Intermet, Reorganized Intermet, the
Debtors, the Reorganized Debtors, each Initial Committed
Purchaser, the Pre-Petition Agent, the Consenting
Pre-Petition Lenders, the DIP Agents on their own behalf and
on behalf of each of the DIP Lenders, the Creditors'
Committee and its members in such capacity and only in such
capacity, and the Indenture Trustee will have, and will be
deemed to have, conclusively, absolutely unconditionally,
irrevocably, forever and completely released and discharged
each of the current and former directors and officers,
employees, agents, managers,
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advisors, attorneys or representatives (in their capacity as
such and in no other capacity) of each of the Debtors from
any and all Released Actions and Avoidance Actions based in
whole or in part upon any act, omission, transaction, event
or other occurrence taking place at any time on or before
the Effective Date, with the sole exception of acts or
omissions resulting from intentional fraud or willful
misconduct as determined by a Final Order of the Bankruptcy
Court.
B. On the Effective Date, effective as of the Confirmation
Date, and except as otherwise provided in the Plan or in the
Confirmation Order, Intermet, Reorganized Intermet, the
Debtors and the Reorganized Debtors as Releasing Parties
have and will be deemed to have, conclusively, absolutely,
unconditionally, irrevocably, forever and completely
released and discharged each Initial Committed Purchaser,
the Pre-Petition Agent, the Consenting Pre-Petition Lenders,
the DIP Agents on their own behalf and on behalf of each of
the DIP Lenders, the Creditors' Committee, and the Indenture
Trustee, and each of their respective current and former
members, officers, directors, agents, financial advisors,
attorneys, employees, equity holders, partners, affiliates
and representatives (in their capacity as such and in no
other capacity) and their respective properties, from any
and all Released Actions other than Avoidance Actions based
in whole or in part upon any act, omission, transaction,
event or other occurrence taking place at any time after the
Petition Date through and including the Effective Date, with
the sole exception of acts or omissions resulting from
intentional fraud or willful misconduct as determined by a
Final Order of the Bankruptcy Court.
C. On the Effective Date, effective as of the Confirmation
Date, and except as otherwise provided in the Plan or in the
Confirmation Order, (i) each Person that votes to accept the
Plan, (ii) all Holders of Claims, in consideration for the
obligations of the Debtors and the Reorganized Debtors under
the Plan and the Cash and other contracts, instruments,
releases, agreements or documents to be delivered in
connection with the Plan, and the treatment under the Plan,
and (iii) each Person (other than the Debtors) that has
held, holds or may hold a claim, as applicable, will have,
and will be deemed to have, conclusively, absolutely,
unconditionally, irrevocably, forever and completely,
released and discharged each Released Party from any and all
of Released Actions based
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in whole or in part upon any act, omission, transaction,
event or other occurrence taking place at any time on or
before the Effective Date, with the sole exception of acts
or omissions resulting from intentional fraud or willful
misconduct as determined by a Final Order of the Bankruptcy
Court, and in all respects, each Released Party will be
entitled to rely upon the advice of counsel with respect to
their duties and responsibilities, if any, under the Plan;
provided, however, that any party in interest may enforce
the terms of the Plan. Nothing in the Plan will prejudice
any right, remedy, defense, claim, cross-claim,
counterclaim, or third party claim that any Person may have
against any Person other than with respect to the Released
Actions against the Released Parties.
D. Notwithstanding any provision of the Plan to the contrary,
the foregoing releases in subsections (b) and (c) will not
apply to (i) any indebtedness of any Person to the Debtors
for money borrowed by such Person, (ii) any setoff or
counterclaim that the Debtors may have or assert against any
Person, provided that the aggregate amount thereof will not
exceed the aggregate amount of any Claims held or asserted
by such Person against the Debtors, and (iii) any
garnishments. Notwithstanding any provision in the Plan to
the contrary, the releases contained in Article 10.05 (b) of
the Plan will not be construed as or operate as a release of
any Retained Actions, including Avoidance Actions.
E. On the Effective Date, effective as of the Confirmation
Date, and except as otherwise provided herein or in the
Confirmation Order, all Persons that hold, have held, or may
hold a Released Action (or, to the extent applicable an
Avoidance Action) or other action, proceeding, cause of
action, suit, account, controversy, promise to pay, right to
legal remedies, right to equitable remedies, right to
payment, claim, obligation, litigation, judgment, damage,
right or liability of any nature whatsoever (including,
without limitation, those arising under the Bankruptcy Code)
that is released pursuant to the provisions of the Plan
(including, without limitation, Articles 10.05(a), (b) and
(c) of the Plan) are hereby and will be permanently enjoined
and barred from taking any of the following actions on
account of, relating to or based upon any such Released
Action (or, to the extent applicable, an Avoidance Action)
or other action, proceeding, cause of action, suit, account,
controversy, promise to pay, right to legal remedies, right
to equitable remedies, right to payment, claim, obligation,
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litigation, judgment, damage, right or liability of any
nature whatsoever (including, without limitation, those
arising under the Bankruptcy Code): (i) commencing or
continuing in any manner any action or other proceeding
against any of the Released Parties or its respective
property; (ii) enforcing, attaching, collecting or
recovering in any manner any judgment, award, decree or
order against any of the Released Parties or its respective
property; (iii) creating, perfecting or enforcing any Lien
or encumbrance against any of the Released Parties or its
respective property; (iv) asserting any setoff, right of
subrogation or recoupment of any kind directly or indirectly
against any debt, liability or obligation due any of the
Released Parties or against its respective property; and (v)
acting or proceeding in any manner, in any place whatsoever,
that does not conform to, or comply with, the provisions of
the Plan or the Confirmation Order.
F. Each of the releases and the injunction provided in Article
10.05 of the Plan is an integral part of the Plan and is
essential to its implementation. Each of the Released
Parties and any other Persons being released under, or
protected by the injunction set forth in Article 10.05 of
the Plan will have the right to independently seek the
enforcement of such release and injunction.
As to the Debtors' directors, officers and employees, the consideration for the
releases provided in Article 10.05 of the Plan is the service rendered by such
individuals during the pendency of the Chapter 11 Cases and the need for their
continued dedication to fully consummate a successful reorganization. The
Debtors will be hampered in their consummation efforts if their directors,
officers and employees are subject to claims and potential litigation that will
distract their attention from operational and other business matters. None of
such individuals are currently the target of any actual claim or litigation, and
the Debtors are not aware of any credible theory on which any claims or
litigation might be pursued against such individuals.
5. Insurance And Indemnification
Notwithstanding anything provided in the Plan to the contrary, the Plan will not
be deemed in any way to diminish or impair the enforceability of any insurance
policies that may cover claims against a Debtor or any other Person. Effective
as of the Effective Date, the Reorganized Debtors will obtain and maintain in
full force tail insurance covering such risks as are presently covered for a
period of not less than 5 years after the Effective Date in favor of the former
and current officers and directors of the Debtors on terms no less favorable to
the officers and directors than the terms of the existing insurance policies
covering the officers and directors and otherwise on terms and conditions
acceptable to the Debtors and the Initial Committed Purchasers; provided,
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however, that the aggregate cost of such tail insurance will not exceed $1.5
million. Effective on the Effective Date and at all relevant times thereafter,
the Reorganized Debtors will indemnify all officers and directors of the Debtors
who served in such capacity at any time prior to the Effective Date for any
amounts such officers and directors are required to pay as a result of any
retentions or deductibles applicable under policies of insurance in effect on
the date hereof or as contemplated by Article 10.06 of the Plan, which policies
(or extensions thereof having terms no less favorable to the officers and
directors) will be (and are hereby deemed to be) assumed by Reorganized Intermet
in the Plan. The indemnity described in Article 10.06 of the Plan will not
include liability relating to any action, omission, transaction, event,
occurrence or other circumstance that would constitute an exclusion under the
applicable policies of insurance or liability in excess of the limits of such
policies. Furthermore, the amounts payable by the Reorganized Debtors pursuant
to Article 10.06 of the Plan will be paid on a current basis on behalf of the
officers and directors, without requiring the officers and directors to first
pay such amounts from their own funds and then seek reimbursement from the
Reorganized Debtors, so long as the Reorganized Debtors have received a written
undertaking by each such officer and director to repay such amounts to the
Reorganized Debtors if it is determined by a court of competent jurisdiction
pursuant to a final, non-appealable order that such officer or director is not
entitled to coverage under such policies of insurance. Each of the provisions
set forth in Article 10.06 of the Plan is an integral part of the Plan and is
essential to its implementation. Each Person entitled to indemnification and
insurance pursuant to Article 10.06 of the Plan will have the right to
independently seek the enforcement of each of the terms of Article 10.06 of the
Plan.
C. EXIT FINANCING
On the Effective Date, the Reorganized Debtors will enter into the Exit
Financing Facility in order to obtain the funds necessary to: (a) repay in full
the DIP Facility Claims and replace any letters of credit issued pursuant to the
DIP Facility, or in the alternative the Exit Lenders may issue letters of credit
to the DIP Lenders to secure payment of any undrawn letters of credit issued
pursuant to the DIP Facility which may remain outstanding after the Effective
Date; (b) make other payments required to be made on the Effective Date,
including, but not limited to, the payment in full in Cash of the Pre-Petition
Lender Claims and any undrawn letters of credit issued pursuant to the
Pre-Petition Credit Facility will be returned and marked cancelled and will be
replaced by letters of credit issued under the Exit Financing Facility or in the
alternative the Exit Lenders may issue letters of credit to the Pre-Petition
Lender to secure payment of any undrawn letters of credit issued pursuant to the
Pre-Petition Credit Facility which may remain outstanding after the Effective
Date. In the Confirmation Order, the Bankruptcy Court will approve the Exit
Financing Facility in substantially the form filed with the Bankruptcy Court and
authorize the Reorganized Debtors to execute the same together with such other
documents as the Exit Lenders may reasonably require to effectuate the treatment
afforded to such parties under the Exit Financing Facility.
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1. Efforts To Procure Exit Financing
Initially, the Debtors met with and sought exit financing proposals from 12
institutions. Based on the relative merits of proposals received, this group of
lenders was narrowed to six institutions. Following further diligence on the
part of the six lenders and subsequent to receiving revised proposals from each,
the Debtors selected two institutions with which to move forward and seek exit
financing commitments.
The Debtors have received [unexecuted] commitments from both lenders for a fully
underwritten transaction of at least $260 million, which is sufficient to meet
the requirements of the Plan and the business plan outlined in the Projections
contained within this Disclosure Statement. With respect to each lender's
commitment, the credit facilities consist of both revolving credit debt and term
loans with maturities ranging from 60 months to 78 months. In each case, the
credit facilities provide for sufficient ongoing liquidity by virtue of unused,
but available borrowing capacity beyond what is necessary to meet the
obligations of the Debtors at exit. Additionally, both lenders have provided for
only minor amortization requirements on the term facilities which will lessen
the Debtors' cash flow requirements to meet their debt service obligations. As
they have at each step in the process, the Debtors continue to negotiate with
both parties in an effort to gain the most optimal terms for their exit
financing, both economically and structurally. The Debtors will sign one of the
commitment letters prior to the Confirmation Hearing.
D. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
1. Assumption And Rejection Of Executory Contracts And Unexpired
Leases.
As of the Confirmation Date, but subject to the occurrence of the Effective
Date, all Executory Contracts (and all insurance contracts and/or policies
providing coverage to the Debtors' current and former directors, officers,
shareholders, agents, employees, representatives, and others for conduct in
connection with the Debtors will be deemed assumed by the relevant Debtor and
retained by the applicable Reorganized Debtor, as appropriate, in accordance
with the provisions and requirements of Sections 365 and 1123 of the Bankruptcy
Code, except those Executory Contracts and unexpired leases that (i) have been
rejected by or pursuant to an order of the Bankruptcy Court, (ii) are the
subject of a motion to reject pending on the Confirmation Date which is later
granted by the Bankruptcy Court, (iii) which are identified on Exhibit L to the
Plan, which will be deemed rejected as of the Confirmation Date or as of the
date set forth in such Exhibit, or (iv) Executory Contracts which are identified
in any modifications made pursuant to Article 13.05 of the Plan. Entry of the
Confirmation Order by the Bankruptcy Court will constitute approval of such
assumptions pursuant to Sections 365(a) and 1123 of the Bankruptcy Code, subject
to the occurrence of the Effective Date. Each Executory Contract assumed
pursuant to Article 8 of the Plan will revest in and be fully enforceable by
Reorganized Intermet or the relevant Reorganized Debtor, as appropriate, in
accordance with its terms, except as may be modified by (i) the provisions of
the Plan, (ii) any order of the Bankruptcy Court approving and authorizing its
assumption, (iii) applicable law, or (iv) agreement of the parties to such
Executory Contracts.
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2. Cure Of Defaults Of Assumed Executory Contracts And Unexpired
Leases.
Any monetary amounts by which each Executory Contract or unexpired lease to be
assumed pursuant to the Plan is in default will be Cured, pursuant to Section
365(b)(1) of the Bankruptcy Code, by the relevant Debtor, by payment of the Cure
amount (as such amount has been agreed upon by Reorganized Intermet, or in the
event of a dispute regarding such Cure amount, as such amount has been
determined by a Final Order of the Bankruptcy Court) in Cash on or before thirty
(30) days after the Effective Date or on such other terms as the parties to such
Executory Contracts may otherwise agree. Notice of the Cure amount is either set
forth in Exhibit M to the Plan. If no Cure amount is set forth in Exhibit M to
the Plan, the Debtors believe that no Cure amount is due. Notwithstanding the
foregoing, in the event of a dispute regarding: (1) the amount of any Cure
payments, (2) the ability of Reorganized Intermet, the relevant Reorganized
Debtor or any assignee to provide "adequate assurance of future performance"
(within the meaning of Section 365 of the Bankruptcy Code) under the Executory
Contract to be assumed, or (3) any other matter pertaining to assumption, the
Cure payments required by Section 365(b)(1) of the Bankruptcy Code will be made
following the entry of a Final Order resolving the dispute and approving the
assumption.
3. Cure Procedure.
The Plan will constitute notice to any non-Debtor party to any Executory
Contract to be assumed pursuant to the Plan of the amount of any Cure amount
owed, if any, under the applicable Executory Contract. Any non-Debtor party that
fails to respond or object on or before the deadline scheduled by the Bankruptcy
Court for objections to the Plan, will be deemed to have consented to such
proposed amount.
4. Rejection Claims.
Each Person who is a party to an Executory Contract rejected pursuant to Article
8 of the Plan will be entitled to file, not later than thirty (30) days after
the Confirmation Date, a Proof of Claim for alleged Rejection Claims. If no such
Proof of Claim for Rejection Claims is timely filed, any such Claim will be
forever barred and will not be enforceable against any Debtor, any Reorganized
Debtor, or any of the Estates. The Bankruptcy Court will retain jurisdiction to
determine any objections to Rejection Claims.
5. Classification Of Rejection Claims.
Except as otherwise provided under the Plan, Rejection Claims against any Debtor
will be treated as Allowed General Unsecured Claims against such Debtor to the
extent they are deemed to be Allowed Claims, and will be satisfied in accordance
with the Plan and the Confirmation Order.
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E. DISTRIBUTIONS
1. Distributions
The Disbursing Agent will make all Distributions required under the Plan except
with respect to (i) the Claims of the Pre-Petition Lenders, such Distributions
will be made by the Disbursing Agent to the Pre-Petition Agent; and (ii) the
Claims of Noteholders, which Distributions will be made by the Disbursing Agent
to the Indenture Trustee which is directed to immediately distribute the
Distributions to the Noteholders as of the Distribution Record Date.
Distributions will be made at the times provided in the Plan or as otherwise
ordered by the Bankruptcy Court.
2. No Interest On Claims Or Equity Interests
Unless otherwise specifically provided for in the Plan, the Confirmation Order,
the DIP Financing Order, or the DIP Facility, post-Petition Date interest will
not accrue or be paid on Claims or Equity Interests, and no Holder of any Claim
or Equity Interest will be entitled to interest accruing on or after the
Petition Date.
3. Claims Administration Responsibility
The Reorganized Debtors will retain responsibility for administering, disputing,
objecting to, compromising or otherwise resolving, subject to Bankruptcy Court
approval, except as provided herein, with respect to all Claims against the
Debtors. The Reorganized Debtors will retain any counter-claims which the
Debtors may have to any Claims. Pursuant to Bankruptcy Rule 9019(a) and Section
363 of the Bankruptcy Code, the Debtors may, up to and including the Effective
Date, compromise and settle various (i) Claims against them, and (ii) Causes of
Action that they have against other Persons without Bankruptcy Court approval if
the amount in controversy is less than $300,000. After the Effective Date, such
rights will pass to the Reorganized Debtors as contemplated by Article 10.01 of
the Plan, without the need for further approval of the Bankruptcy Court, except
as otherwise set forth in the Plan. Unless otherwise extended by the Bankruptcy
Court, any objections to Claims will be served and filed on or before the Claims
Objection Deadline.
4. Delivery of Distributions
Other than Distributions made to the Pre-Petition Agent on behalf of the
Pre-Petition Lenders and the Indenture Trustee on behalf of the Noteholders,
Distributions to Holders of Allowed Claims will be made by the Disbursing Agent
(a) at the addresses set forth on the Proofs of Claim filed by such Holders (or
at the last known addresses of such Holders if no Proof of Claim is filed or if
the Debtors have been notified in writing of a change of address), (b) at the
addresses set forth in any written notices of address changes delivered to the
Disbursing Agent after the date of any related Proof of Claim, or (c) at the
addresses reflected in the Schedules if no Proof of Claim has been filed and the
Disbursing Agent has not received a written notice of a change of address. Other
than Distributions made to the Pre-Petition Agent on behalf of the Pre-Petition
Lenders and the Indenture Trustee on behalf of the Noteholders, (a) if any
Creditor's Distribution is returned as undeliverable, no further Distribution to
such Creditor will be made unless and until the Disbursing Agent is notified of
such Creditor's then-current address, at which time all missed Distributions
will be made to such Creditor without interest; (b)
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amounts in respect of undeliverable Distributions will be returned to the
Reorganized Debtors until such Distributions are claimed; (c) all funds or other
undeliverable Distributions returned to the Reorganized Debtors and not claimed
within three (3) months of return will be Distributed to the other Creditors of
the Class of which the Creditor to whom the Distribution was originally made is
a member in accordance with the provisions of the Plan applicable to
Distributions to that Class; and (d) upon such reversion, the Claim of any
Creditor or their successors with respect to such property will be discharged
and forever barred notwithstanding any federal or state escheat laws to the
contrary. Nothing contained in the Plan will require the Disbursing Agent and
the Indenture Trustee to attempt to locate any Creditor holding an Allowed
Claim, other than as set forth above.
5. Procedures For Treating And Resolving Disputed Claims
Except as provided in this Article 7.05 of the Plan, no Distributions will be
made with respect to all or any portion of a Disputed Claim unless and until all
objections to such Disputed Claim have been settled or withdrawn or have been
determined by a Final Order, and the Disputed Claim has become an Allowed Claim.
The Disbursing Agent, after consultation with Reorganized Intermet, will create
a reserve from the property to be distributed by the Disbursing Agent under the
Plan to Holders of Disputed Claims, other than Rights for which there will be no
reserve.
Payments and Distributions from any reserve created under the Plan to a Creditor
on account of a Disputed Claim, to the extent that it ultimately becomes an
Allowed Claim, will be made in accordance with provisions of the Plan that
govern Distributions to such Creditor.
6. Manner of Cash Distribution Under The Plan
Any Cash payment to be made by the Disbursing Agent as a Distribution pursuant
to the Plan may be made by a check or wire transfer on a United States bank
selected by the Disbursing Agent. Cash paid as the Subscription Purchase Price
for the Rights Offering Shares must be payable in immediately available funds,
such as a wire transfer, bank or cashier's check.
7. Direction To Parties
From and after the Effective Date, the Disbursing Agent, or Reorganized Intermet
may apply to the Bankruptcy Court for an order directing any necessary party to
execute or deliver or to join in the execution or delivery of any instrument
required to effect a transfer of property dealt with by the Plan, and to perform
any other act, including the satisfaction of any Lien, that is necessary for the
consummation of the Plan, pursuant to Section 1142(b) of the Bankruptcy Code.
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8. Setoffs
The Reorganized Debtors may set off against any Allowed Claim and the
Distributions to be made pursuant to the Plan on account of such Allowed Claim,
all claims, rights, and Causes of Action of any nature that any such Debtor may
hold against the Holder of such Allowed Claim that are not otherwise waived,
released, or compromised in accordance with the Plan; provided, however, that
neither the failure to effect such a setoff nor the allowance of any Claim under
the Plan will constitute a waiver or release by such Debtor of any such claims,
rights, and Causes of Action that the Debtor may possess against such Holder,
notwithstanding any compulsory counterclaim rules or requirements to the
contrary.
9. Exemption From Certain Transfer Taxes
Pursuant to Section 1146(c) of the Bankruptcy Code and applicable non-bankruptcy
law, any transfers from the Debtors to Reorganized Intermet, or any other Person
or entity pursuant to the Plan in the United States will not be subject to any
document recording tax, stamp tax, conveyance fee, intangibles or similar tax,
mortgage tax, real estate transfer tax, mortgage recording tax or other similar
tax or governmental assessment. The Confirmation Order will 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.
10. Withholding And Reporting Requirements
In connection with the Plan and all Distributions thereunder, the Disbursing
Agent will comply with all applicable tax withholding and reporting requirements
imposed by any federal, state, provincial, local or foreign taxing authority,
and all Distributions thereunder will be subject to any such withholding and
reporting requirements. The Disbursing Agent will be authorized to take any and
all actions that may be necessary or appropriate to comply with such withholding
and reporting requirements. Notwithstanding any other provision of the Plan,
each Holder of an Allowed Claim or Interest that is to receive a Distribution
pursuant to the Plan will have sole and exclusive responsibility for the
satisfaction and payment of any tax obligations imposed by any governmental
unit, including income, withholding and other tax obligations, on account of
such Distribution.
11. No Fractional Distributions
No fractional shares or amounts of the Plan Securities will be issued or
Distributed under the Plan. Each Person entitled to receive Plan Securities will
receive the total whole number of shares to which such Person is entitled.
Whenever any Distributions to a Person would otherwise call for Distribution of
a fraction of any Plan Security, the actual Distribution of such Plan Security
will be rounded to the next higher or lower whole number with fractions of less
than or equal to one-half (1/2) being rounded to the next lower whole number. No
consideration will be provided in lieu of fractional amounts of Plan Securities
that are rounded down. The total amount of Plan Securities to be Distributed to
each Class of Claims will be adjusted as necessary to account for the
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rounding provided herein. Any other provision of the Plan notwithstanding,
neither the Debtors, nor the Disbursing Agent will be required to make
Distributions or payments of fractions of dollars. Whenever any payment of a
fraction of one dollar under the Plan would otherwise be called for, the actual
payment made will reflect a rounding of such fraction to the nearest whole
dollar (up or down), with one-half (1/2) dollars being rounded down.
F. RETIREE BENEFITS
All payments of Retiree Benefits will continue as they existed prior to the
Petition Date at the level established pursuant to subsection (e)(1)(B) or (g)
of Section 1114 of the Bankruptcy Code as such payments may be modified prior to
the Effective Date, for the duration of the period the applicable Debtor has
obligated itself to provide such benefits. After the Effective Date, the
Reorganized Debtors will retain their rights to amend, modify or terminate
Retiree Benefits in accordance with all relevant agreements and applicable law.
As indicated in Section VII.D.5.c. above, Wagner Castings has begun negotiating
with the Wagner Retiree Committee and the USW to modify Retiree Benefits at
Wagner Castings. In the near future, Wagner Castings intends to file a motion
seeking modification of the Wagner Retirees' Retiree Benefits in accordance with
Section 1114 of the Bankruptcy Code (the "Wagner 1114 Motion"). If the
Bankruptcy Court grants the Wagner 1114 Motion upon or prior to Confirmation,
the payments contemplated by the Wagner 1114 Motion (the "Modified Wagner
Castings Benefits") will be paid by Reorganized Intermet and each of the
operating Reorganized Domestic Subsidiaries on a year-to-year basis after the
Effective Date, with liability for such payments being split equally between
Reorganized Intermet and each of the operating Reorganized Domestic
Subsidiaries.
As indicated in Section VII.D.5.c. above, the Wagner Retirees' Retiree Benefits
are currently estimated to have an actuarial present value of approximately $20
million. The Debtors estimate that the Modified Wagner Castings Benefits will be
significantly less than $20 million.
If, however, the Bankruptcy Court does not grant the Wagner 1114 Motion on or
before Confirmation, then the Liquidating Plan Condition will have been
satisfied, and Wagner Castings will be liquidated. See Article 5.05 of the Plan
for treatment of Claims against Wagner Castings in the event that the
Liquidating Plan Condition is satisfied. In such event, and as indicated above
in Section VII.D.5.c., Intermet or any of its Affiliates that are hereafter
determined to be a member of a "controlled group" with Wagner Castings (for
certain purposes under the federal "COBRA" statute) may be determined to have
ongoing liability to the Wagner Retirees for COBRA coverage. The amount of such
COBRA coverage is currently undetermined, but Wagner Castings believes that it
will have a present actuarial value of no more than approximately $2.5 million.
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G. CORPORATE GOVERNANCE
On the Effective Date, the Board of Directors of Reorganized Intermet will be
composed of seven members. On the Effective Date, (i) five of such members will
be selected by the Initial Committed Purchasers, (ii) one of such members will
be the Chief Executive Officer of Reorganized Intermet, and (iii) one of such
members will be selected by the Creditors' Committee. The member selected by the
Creditors' Committee will be acceptable to the Initial Committed Purchasers. Two
of the five members selected by the Initial Committed Purchasers may not be
officers, directors or employees of either of the Initial Committed Purchasers.
The Effective Date Executive Officers will become employed by Reorganized
Intermet on the Effective Date pursuant to the Employment Agreements. The other
officers of the Debtors immediately prior to the Effective Date will serve as
the officers of the applicable Reorganized Debtor until their successors are
duly appointed in accordance with Reorganized Intermet's governance documents
and applicable law. Each officer will serve from and after the Effective Date
pursuant to the terms of Reorganized Intermet's governance documents and
applicable law. The Employment Agreements will be in form and substance
satisfactory to the Initial Committed Purchasers and will supercede such
officer's pre-Effective Date employment agreement.
H. REORGANIZED DEBTORS
Except as discussed in the Plan and Section I.B., above, each of the Debtors
will continue to exist after the Effective Date as a separate entity, except as
otherwise provided in the Plan, with all the powers under applicable law in the
jurisdiction in which each applicable Debtor is incorporated or otherwise formed
and pursuant to its certificate of incorporation and bylaws or other
organizational documents in effect on the Effective Date, without prejudice to
any right to terminate such existence (whether by merger or otherwise) under
applicable law after the Effective Date. On the Effective Date, Reorganized
Intermet will re-domesticate, by merger or other appropriate means, as a new
corporation under the laws of the State of Delaware with a new Certificate of
Incorporation and Bylaws. The Articles of Incorporation and Bylaws for all other
Debtors continuing after the Effective Date will be amended and restated but
such Debtors will remain subject to the laws of the jurisdictions in which such
Debtors were incorporated or formed prior to the Effective Date.
I. CORPORATE ACTION
- The Certificate of Incorporation and Bylaws of Reorganized Intermet,
will, among other things: (i) authorize the issuance of the New Common
Stock, (ii) prohibit the issuance of nonvoting equity securities, as
required by Section 1123(a)(6) of the Bankruptcy Code, subject to
amendment of such certificate of incorporation and bylaws as permitted
by applicable law, and (iii) effectuate the provisions of the Plan, in
each case without any further action by the officers, stockholders or
directors of the Debtors or the Reorganized Debtors.
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- The Certificate of Incorporation (or other similar document) and
Bylaws of all of the Debtors other than Reorganized Intermet, will,
among other things: (i) prohibit the issuance of nonvoting equity
securities, as required by Section 1123(a)(6) of the Bankruptcy Code,
subject to amendment of such certificate of incorporation and bylaws
as permitted by applicable law, and (ii) effectuate the provisions of
the Plan, in each case without any further action by the officers,
stockholders or directors of the Debtors or the Reorganized Debtors.
- On the Effective Date, the execution and delivery of each agreement on
the Effective Date and any other document necessary to effectuate the
transactions contemplated herein and therein, and all other actions
contemplated by the Plan, or such other documents will be authorized
and approved in all respects (subject to the provisions of the Plan).
All matters provided for in the Plan involving the corporate structure
of the Reorganized Debtors, and any corporate action required by the
Debtors or Reorganized Debtors in connection with the Plan, will be
deemed to have occurred and will be in effect, without any requirement
of further action by the security holders or directors of the Debtors
or Reorganized Debtors. On the Effective Date, the appropriate
officers of the Reorganized Debtors and members of the Boards of the
Reorganized Debtors are authorized and directed to issue, execute and
deliver the agreements, documents, securities and instruments
contemplated by the Plan in the name of, and on behalf of, the
Reorganized Debtors.
- On or as soon as reasonably practicable after the Effective Date,
Reorganized Intermet will issue shares of the New Common Stock to
those Persons entitled to receive such pursuant to the Plan.
- On or as soon as reasonably practicable after the Effective Date, if
the Liquidating Plan Condition is satisfied, then the Articles of
Incorporation and Bylaws of Wagner Castings will authorize the
issuance of one (1) share of Reorganized Wagner Castings New Common
Stock and such share will be issued and delivered to a third-party
liquidating trustee acceptable to the Reorganized Debtors, the Initial
Committed Purchasers, and the Creditors' Committee for the purpose of
liquidating Wagner Castings and making the Distributions set forth in
Class 4a.
- On or as soon as reasonably practicable after the Effective Date, if
the Liquidating Plan Condition is satisfied, then the Articles of
Incorporation and Bylaws of Wagner Havana will authorize the issuance
of the Reorganized Wagner Havana New Common Stock and Reorganized
Wagner Havana will issue Reorganized Wagner Havana New Common Stock to
Holders of Claims against Wagner Havana which such Holders will
immediately transfer to Reorganized Intermet.
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J. NON-DEBTOR AFFILIATES
There are certain Non-Debtor Affiliates of the Debtors that are not Debtors in
these Chapter 11 Cases. The continued existence, operation and ownership of such
Non-Debtor Affiliates is a material component of the Debtors' businesses, and,
as set forth in Article 10.1 of the Plan, substantially all of the Debtors'
Equity Interests and other property interests in such Non-Debtor Affiliates will
revest in the applicable Reorganized Debtor or its successor on the Effective
Date.
K. STOCKHOLDERS' AGREEMENT
All recipients of New Common Stock (including all those who receive New Common
Stock pursuant to the Plan, the Rights Offering, the Key Employee Rights
Offering, stock options, as well as any Persons who acquire New Common Stock
from any of the foregoing persons) will be subject to the Stockholders'
Agreement which will, among other things, govern each recipient's access to
information with respect to the Reorganized Debtors, and ability to transfer
such recipient's New Common Stock. The Stockholders' Agreement is attached to
the Plan as Exhibit F. An election by a Person to receive New Common Stock on
the Ballot will constitute such Person's agreement to be bound by the
Stockholders' Agreement. Each certificate representing share(s) of New Common
Stock will bear a legend indicating that the New Common Stock is subject to the
Stockholders' Agreement. The Stockholders' Agreement will be approved by the
Bankruptcy Court in connection with Confirmation and will be effective as of the
Effective Date.
The Stockholders' Agreement primarily addresses transferability and information
access by the stockholders. The Stockholders' Agreement requires that every
proposed transfer of New Common Stock be submitted to Reorganized Intermet for
approval or rejection by the general counsel or CEO. Proposed transfers to an
existing stockholder or transfers of all a stockholder's interest to only one
person will be authorized. Any transfers that could cause the number of
stockholders to reach the trigger for registering as a public company under the
Securities Act will be rejected. The Stockholders' Agreement also provides that
Reorganized Intermet will distribute to stockholders that so request audited
annual financial statements and requires that the stockholders maintain the
confidentiality of non-public information they receive from Reorganized
Intermet, including any financial information, subject to certain exceptions,
including disclosure to proposed transferees of the New Common Stock or as
required by law. Any amendments to the Stockholders' Agreement in a manner which
would adversely effect the rights or obligations of a stockholder must be
accepted by holders of at least 66 2/3% of the outstanding shares.
L. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
Holders of General Unsecured Claims will have the option of receiving New Common
Stock under the Plan. Section 1145 of the Bankruptcy Code creates certain
exemptions
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from the registration requirements of federal and state securities laws with
respect to the distribution of securities pursuant to a plan of reorganization.
1. Issuance Of Securities Under The Plan
The Debtors intend to rely on Section 1145(a) of the Bankruptcy Code to exempt
from registration under the Securities Act, and any applicable state securities
laws, (i) the issuance of any New Common Stock pursuant to the Plan to Holders
of Claims in exchange for their Claims, (ii) the issuance of any Reorganized
Wagner Havana New Common Stock pursuant to the Plan to Holders of Claims in
exchange for their Claims, and (iii) the issuance of Rights Offering Shares in
connection with the Rights Offering, except that the issuance of New Common
Stock to the Initial Committed Purchasers is not expected to be eligible for the
Section 1145(a) exemption, and therefore will be issued pursuant to the private
placement exemption or another applicable exemption from registration under the
Securities Act.
Generally, Section 1145 of the Bankruptcy Code exempts the issuance of
securities under a plan of reorganization from registration under the Securities
Act and under state securities laws if three principal requirements are
satisfied: (i) the securities must be issued under a plan of reorganization by
the debtor or its successors under a plan or an affiliate participating in a
joint plan of reorganization with the debtor; (ii) the recipients of the
securities must hold a claim against the debtors, an interest in the debtor or a
claim for an administrative expense against the debtor; and (iii) the securities
must be issued entirely in exchange for the recipient's claim against or
interest in the debtor, or "principally" in such exchange and "partly" for cash
or property. Although the issuance of the New Common Stock and the Reorganized
Wagner Havana New Common Stock pursuant to the Plan satisfies the requirements
of Section 1145(a)(1) of the Bankruptcy Code and is, therefore, exempt from
registration under federal and state securities laws, under certain
circumstances subsequent transfer of such securities may be subject to
registration requirements under such securities laws.
2. Transfers Of New Common Stock
Subject to compliance with the Stockholders' Agreement, which imposes
significant restrictions with regard to the sale or transfer of the New Common
Stock, the New Common Stock to be issued pursuant to the Plan (other than the
New Common Stock issued to the Initial Committed Purchasers pursuant to the
Private Placement Purchase Agreement and the Cash-Out Purchase Agreement), and
all resales and subsequent transactions in such New Common Stock, are exempt
from registration under federal and state securities laws, unless the Holder is
an "underwriter" with respect to such securities. Section 1145(b) of the
Bankruptcy Code defines four types of "underwriters":
(i) persons who purchase a claim against, an interest in, or a claim
for an administrative expense against the debtor with a view to distributing any
security received or to be received in exchange for such a claim or interest;
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(ii) persons who offer to sell securities offered or sold under a plan
for the holders of such securities;
(iii) persons who offer to buy such securities from the holders of
such securities, if the offer to buy is (a) with a view to distribution of such
securities, and (b) under an agreement made in connection with the Plan, with
the consummation of the Plan, or with the offer or sale of securities under the
Plan; and
(iv) persons who are an "issuer" with respect to the securities, as
the term "issuer" is defined in Section 2(11) of the Securities Act. Under
Section 2(11) of the Securities Act, an "issuer" includes any persons directly
or indirectly controlling or controlled by the issuer, or any person under
direct or indirect common control with the issuer.
To the extent that Persons deemed to be "underwriters" receive securities
pursuant to the Plan, resales by such Persons would not be exempted by Section
1145 of the Bankruptcy Code from registration under the Securities Act or other
applicable law. Persons deemed to be underwriters, however, may be able to sell
such securities without registration subject to the provisions of Rule 144 under
the Securities Act (which permits the public sale of securities received
pursuant to the Plan by "underwriters", subject to the availability to the
public of current information regarding the issuer and to volume limitations,
method of sale restrictions, and certain other conditions).
Whether or not any particular Person would be deemed to be an "underwriter" with
respect to any security to be issued pursuant to the Plan would depend upon
various facts and circumstances applicable to that Person. Accordingly, the
Debtors express no view as to whether any Person would be an "underwriter" with
respect to any security to be issued pursuant to the Plan.
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A PARTICULAR
PERSON MAY BE AN UNDERWRITER, THE DEBTORS MAKE NO REPRESENTATIONS CONCERNING THE
RIGHT OF ANY PERSON TO OFFER OR SELL IN THE NEW COMMON STOCK TO BE DISTRIBUTED
PURSUANT TO THE PLAN. THE DEBTORS RECOMMEND THAT POTENTIAL RECIPIENTS OF THE NEW
COMMON STOCK CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY OFFER
OR SELL SUCH SECURITIES.
3. Transfers Of Reorganized Wagner Havana New Common Stock
The Plan provides that immediately after issuance on the Effective Date, the
shares of Reorganized Wagner Havana New Common Stock, if any, will be
transferred by the holders thereof to Reorganized Intermet. Therefore, any
Reorganized Wagner Havana Common Stock transferred pursuant to the Plan will not
be transferable except pursuant to the transfer discussed above.
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M. REGISTRATION RIGHTS AGREEMENT
Reorganized Intermet will be obligated to register certain shares of New Common
Stock for resale under the Securities Act pursuant to the terms and conditions
of the Registration Rights Agreement. The Registration Rights Agreement must be
acceptable to the Initial Committed Purchasers, and will provide, among other
things:
- That within 60 days after the date on which Reorganized Intermet will
receive a written request, signed by either of the Initial Committed
Purchasers, pursuant to which such Initial Committed Purchaser will
request that Reorganized Intermet register the resale of the shares of
New Common Stock held by such Initial Committed Purchaser under the
Securities Act, Reorganized Intermet will prepare and file, and will
use its reasonable best efforts to have declared effective within 60
days thereafter, a registration statement under the Securities Act for
the offering on a continuous basis pursuant to Rule 415 of the
Securities Act, of the shares of New Common Stock held by such Initial
Committed Purchaser (the "Shelf Registration");
- That Reorganized Intermet will keep the Shelf Registration effective
for a period ending on the earlier of (a) the date that is the
two-year anniversary of the date upon which such registration
statement is declared effective by the SEC, (b) the date such
Registrable Securities have been disposed of pursuant to an effective
registration statement, (c) the date such Registrable Securities have
been disposed of (1) pursuant to and in accordance with SEC Rule 144
(or any similar provision then in force) under the Securities Act, or
(2) pursuant to another exemption from the registration requirements
of the Securities Act pursuant to which the Registrable Securities are
thereafter freely tradeable without restriction under the Securities
Act, (d) the date such Registrable Securities may be disposed of
pursuant to SEC Rule 144 (or any similar provision then in force)
within the volume limitations thereunder within a 90 day period or
pursuant to SEC Rule 144(k) (or any similar provision then in force)
under the Securities Act, or (e) such Registrable Securities cease to
be outstanding;
- For indemnification and contribution and the payment by Reorganized
Intermet of the fees and expenses incurred by the Initial Committed
Purchasers, customarily included in registration rights agreements
entered into in connection with similar financings; and
- That any person holding more than 10% of the outstanding New Common
Stock on the Effective Date will be entitled to piggy-back
registration rights.
N. CANCELLATION OF EXISTING COMMON STOCK AND EXISTING PREFERRED STOCK
On or as soon as reasonably practicable after the Effective Date, except as
otherwise specifically provided for in the Plan (a) the Existing Common Stock of
the Impaired Equity Debtors and any other note, bond, indenture, or other
instrument or document evidencing or creating any indebtedness or obligation of
or ownership interest in the
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Impaired Equity Debtors, except such notes or other instruments evidencing
indebtedness or obligations of the Impaired Equity Debtors that are reinstated
under the Plan, will be cancelled, and (b) the Existing Preferred Stock will be
cancelled; and (c) obligations of, Claims against, and/or Equity Interests in
the Impaired Equity Debtors under, relating, or pertaining to any agreements,
indentures, certificates of designation, bylaws, or certificates or articles of
incorporation or similar documents evidencing or creating any indebtedness or
obligation of the Impaired Equity Debtors, except such notes, instruments, or
other documents evidencing indebtedness or obligations of the Impaired Equity
Debtors that are reinstated or otherwise expressly assumed or preserved under
the Plan will be released and discharged. The Unimpaired Equity Interests will
be retained by the applicable Reorganized Debtor.
O. MANAGEMENT INCENTIVE PLAN
On or as soon as reasonably practicable after the Effective Date, the Management
Incentive Plan will be implemented to reserve for designated members of senior
management of the Reorganized Debtors equity interests (including, without
limitation, restricted common stock and/or options) in Reorganized Intermet in
an amount up to 5.0% of the New Common Stock issued on the Effective Date. The
Management Incentive Plan will contain terms and conditions that will be
determined by the Board of Reorganized Intermet. The shares of New Common Stock
issued pursuant to the Management Incentive Plan will have the effect of
diluting the ownership interest of the other Persons who receive New Common
Stock pursuant to the Plan.
P. KEY EMPLOYEE RIGHTS OFFERING
The Reorganized Debtors will conduct the Key Employee Rights Offering in
connection with which Reorganized Intermet will offer to the eligible Key
Employees the right to purchase, on a Pro Rata basis (based upon payments due to
Key Employees under the KERP), 181,249 shares of New Common Stock, in
consideration for Cash in the amount of $10.00 per share. Eligible Key Employees
will have the right of over subscription with respect to the Key Employee Rights
Offering, provided that, in no event will the total shares in the Key Employee
Rights Offering exceed 181,249 shares. Moreover, the rights to purchase shares
of New Common Stock in connection with the Key Employee Rights Offering will be
non-transferable. Other terms and conditions of the Key Employee Rights Offering
are to be determined by the Debtors and the Initial Committed Purchasers, in
consultation with the Creditors' Committee. The eligible Key Employees either:
(i) may receive in cash any unpaid stay bonuses to which they may be entitled in
accordance with the terms and subject to the conditions of the KERP, including,
without limitation, the stay bonus payment schedule set forth therein; or (ii)
upon consummation of the Plan, may purchase shares of New Common Stock in
connection with the Key Employee Rights Offering by authorizing Reorganized
Intermet to apply, on their behalf, on a dollar-for-dollar basis, any such stay
bonuses toward the purchase of the shares of New Common Stock covered by the Key
Employee Rights Offering.
Any New Common Stock issued pursuant to the Key Employee Rights Offering will be
subject to the Stockholders' Agreement. In addition, the shares of New Common
Stock
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issued pursuant to the Key Employee Rights Offering will have the effect of
diluting the ownership interest of the other Persons who receive New Common
Stock pursuant to the Plan.
Q. CONTINUATION OF BUSINESS
Except as discussed herein, on and after the Effective Date, the Reorganized
Debtors will continue to engage in the Debtors' businesses, including, without
limitation, performing under all purchase orders existing as of the Effective
Date and assumed. Except as provided herein, the Reorganized Debtors retain all
claims, defenses, counterclaims and offsets with respect to such purchase orders
in existence as of the Effective Date.
Debtors Alexander City Casting Company, Inc., Ironton Iron, Inc., Wagner Havana,
Inc. and Intermet Illinois, Inc., are non-operating entities which currently own
Assets. It is each such Debtor's intention to sell such Assets after the
Effective Date. The proceeds of such sales will be paid to the Exit Lenders. It
is anticipated that all of these Assets will be subject to liens in favor of the
Exit Lenders, pursuant to the Exit Financing Facility, due to the fact that the
proceeds of the Exit Financing Facility will be used to pay the Distributions
under the Plan, including those to the Pre-Petition Lenders, whose liens
currently attach to these Assets.
R. EMPLOYMENT AGREEMENTS
On or before the Effective Date, the Employment Agreements will be entered into
by Reorganized Intermet and deemed approved by the Bankruptcy Court.
S. DISBANDMENT OF OFFICIAL COMMITTEES
On the Effective Date, all committees, including the Creditors' Committee, the
Equity Committee, and the Retiree Committee, will be disbanded and their members
will be discharged from all further authority, duties, responsibilities and
obligations relating to the Cases, and the retention and employment of the
Professionals retained by such committees will also terminate as of the
Effective Date; provided, however, that the Creditors' Committee and the Equity
Committee and their Professionals will be maintained solely with respect to
applications filed pursuant to Sections 330 and 331 of the Bankruptcy Code and
will be compensated for reasonable fees and expenses incurred with respect to
such applications as approved by the Bankruptcy Court. The Reorganized Debtors
will not be responsible for fees or expenses of any committees, including the
Creditors' Committee, Equity Committee, or Retiree Committee or of their
Professionals and agents, incurred after the Effective Date unless otherwise
ordered by the Bankruptcy Court.
T. DISBURSING AGENT
As soon as practicable after the Effective Date, the Disbursing Agent will be
paid all of its fees and expenses incurred in connection with performing its
duties under the Plan.
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U. POST-CONFIRMATION EFFECT OF INDENTURE
Anything in the Plan, the Confirmation Order, or any other document to the
contrary notwithstanding, and notwithstanding the Confirmation and effectiveness
of and Distributions under the Plan and the discharge of the Debtors, the
Indenture will remain in effect for the sole purpose of allowing the Indenture
Trustee to make distributions as provided in Article 7.01 of the Plan. However,
the liability of the Debtors under the Indenture will be discharged pursuant to
the Plan and Section 1141 of the Bankruptcy Code.
V. PRESERVATION OF CERTAIN CAUSES OF ACTION
In accordance with Section 1123(b)(3) of the Bankruptcy Code, and except as
otherwise provided in the Plan and/or the Confirmation Order, the Reorganized
Debtors will retain and may (but are not required to) enforce all Retained
Actions, including Avoidance Actions and other similar claims arising under
applicable state laws, including, without limitation, fraudulent transfer
claims, if any, and all other Causes of Action of a trustee and debtor-in
possession under the Bankruptcy Code. The Debtors or the Reorganized Debtors, in
their sole discretion, will determine whether to bring, settle, release,
compromise, or enforce any rights (or decline to do any of the foregoing) with
respect to the Retained Actions, other than the Avoidance Actions. The
Reorganized Debtors or any successor may pursue such litigation claims in
accordance with the best interests of the Reorganized Debtors or any successors
holding such rights of action. The failure of the Debtors to specifically list
any Claim, Causes of Action, right of action, suit or proceeding in the
Schedules, this Disclosure Statement, or on Exhibit J to the Plan does not, and
will not be deemed to, constitute a waiver or release by the Debtors of such
Claim, Causes of Action, right of action, suit or proceedings, and the
Reorganized Debtors will retain the right to pursue such Claims, Causes of
Action, rights of action, suits or proceedings in their sole discretion and,
therefore, no preclusion doctrine, collateral estoppel, issue preclusion, claim
preclusion, estoppel (judicial, equitable or otherwise) or laches will apply to
such claim, right of action, suit or proceeding upon or after the confirmation
or consummation of the Plan. Further, recovery of any proceeds of Causes of
Action will be deemed "for the benefit of the Estates" as set forth in Section
550(a) of the Bankruptcy Code.
X. THE RESTRUCTURING COMMITMENT LETTER AND THE RIGHTS OFFERING
A. INITIAL COMMITTED PURCHASERS
The Initial Committed Purchasers are R2 Investments, LDC and/or one or more of
its related or associated entities, and Stanfield Capital Partners LLC and/or
one or more of its related or associated entities. As reported by the Initial
Committed Purchasers, they hold, as of the date of this Disclsoure Statement, in
the aggregate approximately $79 million in unsecured claims and $113 million in
secured claims against the Debtors. Except as set forth in this Disclosure
Statement, neither R2 nor Stanfield have
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any known relationship to the Debtors, the Board of Intermet, or the Debtors'
management.
Pursuant to the terms of the Restructuring Commitment Letter, which is attached
as Exhibit A to the Plan, and provided that (i) all conditions precedent set
forth therein have been satisfied or waived, including but not limited to the
negotiation and execution of the Private Placement Purchase Agreement and the
Cash-Out Purchase Agreement, and (ii) the Restructuring Commitment Letter has
not been previously terminated pursuant to the terms of the Restructuring
Commitment Letter, the Initial Committed Purchasers will be obligated to
purchase, on the Effective Date, any and all of the Private Placement Purchase
Shares. This means that the Initial Committed Purchasers have agreed to
guarantee that any shares not purchased in the Rights Offering will be purchased
by the Initial Committed Purchasers. Through this mechanism: (i) the Debtors are
ensured that they will receive an aggregate capital infusion of $75 million in
cash on the Effective Date, regardless of the source of those funds; and (ii)
the Debtors' capital structure will be better than it would otherwise be, given
the equity nature of the investment prescribed in the Restructuring Commitment
Letter, because the Debtors will not be required to take on additional debt to
obtain the additional $75 million.
Accordingly, the Initial Committed Purchasers will pay to Reorganized Intermet,
by wire transfer in immediately available funds on or prior to the Effective
Date, cash in an amount equal to the Subscription Purchase Price for the Private
Placement Purchase Shares.
1. Underwriting Fee
In consideration for the Restructuring Commitment Letter, the Initial Committed
Purchasers will receive an aggregate fee of $3 million on the Effective Date
(the "Commitment Amount") plus the payment of its reimburseable expenses, as
described below. In the event that the Restructuring Commitment Letter is
terminated prior to the Effective Date, for whatever reason, the Commitment
Amount will not be payable and the Initial Committed Purchasers' sole and
exclusive remedy will be limited to the payment of the reimburseable expenses
described below, as accrued up until the date of termination, and the
indemnification obligations described below.
2. Reimburseable Expenses
Intermet is obligated to reimburse the Initial Committed Purchasers for the
reimburseable expenses incurred by the Initial Committed Purchasers and the fees
and expenses of their legal counsel on and after January 10, 2005, in connection
with the Restructuring (as defined therein), plus all of the reasonable and
documented fees and expenses incurred by the Initial Committed Purchasers and
their legal counsel in connection with the drafting, negotiation, prosecution or
defense of the Restructuring Commitment Letter, the Private Placement Purchase
Agreement, the Rights Offering, corporate governance documents, the Cash-Out
Purchase Agreement, the Plan, the Confirmation Order, the Disclosure Statement,
the Stockholders' Agreement, the Exit Financing Facility agreements and related
documents and any and all agreements and other documents ancillary thereto,
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including any fees and expenses incurred by the Initial Committed Purchasers in
connection with obtaining all required regulatory approvals. As of July 31,
2005, approximately $670,000 of reimburseable expenses have accrued.
3. Indemnification Obligations
Subject to Bankruptcy Court approval, Intermet is required to indemnify and hold
harmless the Initial Committed Purchasers and their respective affiliates,
directors, officers, partners, members, employees, attorneys, agents and
assignees (including affiliates thereof) from and against any and all losses,
claims, damages, liabilities (or actions or other proceedings commenced or
threatened in respect thereof) or other expenses insofar as such losses, claims,
damages, liabilities (or actions or other proceedings commenced or threatened in
respect thereof) or other expenses arise out of or in any way relate to or
result from the Restructuring Commitment Letter or the proceeds of the Initial
Committed Purchasers' agreement to purchase shares of New Common Stock under the
Private Placement Purchase Agreement and the Cash-Out Purchase Agreement.
Intermet is further required to reimburse (on an as-incurred monthly basis) each
party indemnified for any reasonable legal or other out-of-pocket expenses
incurred in connection with investigating, defending or participating in any
such loss, claim, damage, liability or action or other proceeding (whether or
not such indemnified party is a party to any action or proceeding out of which
such indemnified expenses arise), but excluding therefrom all losses, claims,
damages, liabilities and expenses that are finally determined in a
non-appealable decision of a court of competent jurisdiction to have resulted
solely from the gross negligence or willful misconduct of such indemnified
party. In the event of any litigation or dispute involving the Restructuring
Commitment Letter, the Initial Committed Purchasers are not responsible or
liable to Intermet or any other person or entity for any special, indirect,
consequential, incidental or punitive damages.
The obligations of Intermet described above and set forth in the Restructuring
Commitment Letter will remain effective whether or not (i) any of the
transactions contemplated in the Restructuring Commitment Letter are
consummated, (ii) any Definitive Investment Documents (as defined in the
Restructuring Commitment Letter) with respect to the Initial Committed
Purchasers' obligation to purchase shares of New Common Stock under the Private
Placement Purchase Agreement and the Cash-Out Purchase Agreement are executed,
and notwithstanding any termination of the Restructuring Commitment Letter, and
(iii) any plan of reorganization of Intermet is consummated.
Notwithstanding the foregoing, any indemnity claim arising solely from an
indemnified party's breach of the Restructuring Commitment Letter or breach of
any other agreements between an indemnified party and Intermet, or among an
indemnified party and Reorganized Intermet, are excluded from Intermet's
indemnity obligations.
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B. TERMS AND CONDITIONS OF THE RESTRUCTURING COMMITMENT LETTER(10)
The Initial Committed Purchasers' and the Debtors' performance under the
Restructuring Commitment Letter are subject to terms and conditions, including
termination rights, that are reasonable and customary for standby purchase
commitments generally. Additionally, the Initial Committed Purchasers'
performance under the Restructuring Commitment Letter is conditioned on, among
other things, the Debtors realizing year-to-date consolidated EBITDA for 2005,
excluding administrative fees and expenses associated with the Cases, through
the latest calendar month ending at least 25 days prior to the Effective Date,
in an amount that is no less than the amount specified for such calendar month
on Exhibit A to the Restructuring Commitment Letter (ranging from $15,230,000 in
June 2005 to $27,459,000 in December 2005).
Furthermore, the Initial Committed Purchasers may terminate the Restructuring
Commitment Letter if, among other things, (i) the Plan is not Confirmed by the
Bankruptcy Court within 75 days of the entry of a Bankruptcy Court order
approving the Restructuring Commitment Letter, (ii) the Effective Date does not
occur on or before the 20th day following Confirmation of the Plan, or (iii)
upon the occurrence of a "material adverse change," or "MAC," as that phrase is
used and defined in the Restructuring Commitment Letter.(11)
The Debtors may terminate the Restructuring Commitment Letter if, among other
things, the Debtors receive a binding offer with respect to a financial
restructuring that (a) pays the Debtors' existing secured Creditors in full in
cash, and (b) delivers a dollar recovery to all unsecured Creditors in excess of
the implied dollar recovery to unsecured Creditors as set forth in the
Disclosure Statement.
As stated above, in the event that the Restructuring Commitment Letter is
terminated prior to the Effective Date, for any reason, the Commitment Amount
shall not be payable and the Initial Committed Purchasers' sole and exclusive
remedy will be limited to the payment of reimburseable expenses described above,
and the indemnification obligations described above.
- ----------
(10) The summary of terms and conditions contained herein is qualified in its
entirety by reference to the Restructuring Commitment Letter.
(11) A "material adverse change" means any change, effect, event, occurrence,
state of facts or development, either alone or in combination, and either
known or unknown by the Debtors as of June 21, 2005, that is materially
adverse to the business, financial condition or results of operation of the
Debtors, taken as a whole; provided, however, that in no event will any
change, effect, event, occurrence, state of facts or development that is
disclosed in Intermet's Annual Report on Form 10-K for the twelve month
period ended December 31, 2003, or in Intermet's Quarterly Reports on Form
10-Q for the three month periods ended March 31, 2004, June 30, 2004, and
September 30, 2004, or on any filing on Form 8-K made by Intermet prior to
June 21, 2005, each in the form first filed by Intermet with the SEC, or
any other information delivered in writing by the Debtors to the Initial
Committed Purchasers prior to June 21, 2005, be considered a "material
adverse change"; and provided further, that in no event will the
prosecution of the Cases on terms and conditions consistent with the terms
and conditions set forth in the Restructuring Commitment Letter be
considered a "material adverse change."
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C. ABILITY TO PARTICIPATE IN THE RIGHTS OFFERING
Holders of General Unsecured Claims against any Debtor on the Subscription
Record Date are entitled to participate in the Rights Offering solely to the
extent of their Rights Participation Claim Amount set forth below. If a General
Unsecured Claim is Allowed, the Holder of such Claim will be entitled to
participate to the extent of the amount of such Allowed General Unsecured Claim.
If a General Unsecured Claim is Disputed, the Holder of such Claim will be
entitled to participate in the Rights Offering, in the amount of the Rights
Participation Claim Amount, and as illustrated below.
The chart below summarizes the right of each Holder of a General Unsecured Claim
on the Subscription Record Date to participate in the Rights Offering. Please
see the Plan for the definition of "Rights Participation Claim Amount."
CHARACTERISTICS OF CLAIM RIGHTS PARTICIPATION CLAIM AMOUNT
- ------------------------ ---------------------------------
Objection to Claim has been filed The undisputed portion of the Claim,
if any.
Holder has filed Proof of Claim, but no The amount of the Proof of Claim.
corresponding Claim listed on Debtors'
Schedules and no objection filed
Holder has filed Proof of Claim but The lesser of the amount listed on
corresponding amount listed in the Schedules and the Proof of Claim
Schedules is different and no amount.
objection has been filed, and the Claim
has not been Temporarily Allowed.
Allowed Claim Amount of Allowed Claim
D. ISSUANCE OF RIGHTS
The Rights will entitle Holders of General Unsecured Claims on the Subscription
Record Date the right to purchase, on a Pro Rata basis using the Rights Offering
Participation Claim Amount, the Rights Offering Shares at a price of $10.00 per
share pursuant to the terms and conditions set forth in Article 6.12 of the
Plan, provided that the Holder executes a Subscription Form, which will be
distributed to each Holder of a General Unsecured Claim together with the
Ballot. The number of Rights Offering Shares will not exceed 7,500,000 shares.
Each Holder of a Rights Participation Claim Amount as of the Subscription Record
Date will be able to purchase its Pro Rata portion of the Rights Offering
Shares. A Subscription Form will be distributed to each Holder of a General
Unsecured Claim together with the Ballot.
E. SUBSCRIPTION PERIOD
The Rights Offering will commence on the Subscription Commencement Date and will
expire on the Subscription Expiration Date. After the Subscription Expiration
Date,
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unexercised Rights will terminate and any purported exercise of any such
unexercised Rights by any Person will be null and void and Reorganized Intermet
will not honor any such purported exercise received by the Subscription Agent
after the Subscription Expiration Date, regardless of when the documents
relating to such exercise were sent.
F. SUBSCRIPTION PRICE
The Subscription Price for Rights will be $10.00 per share of New Common Stock,
payable in Cash.
G. SUBSCRIPTION RECORD DATE
The Subscription Record Date is the date that is ten (10) business days after
entry of an order approving this Disclosure Statement.
H. SUBSCRIPTION AGENT
The Subscription Agents have been engaged by the Debtors to administer the
Rights Offering, as applicable. Their addresses and phone numbers are:
JP Morgan Trust Company a/k/a Administar
at
JP Morgan Trust Company, N.A.,
P.O. Box 56636
Jacksonville, FL 32241
(904) 807-3023
OR
Financial Balloting Group LLC,
Attn: Intermet Balloting Tabulation
757 Third Avenue, 3rd Floor
New York, NY 10017
(646) 282-1800
I. EXERCISE OF RIGHTS
In order to exercise the Rights, each Holder thereof on the Subscription Record
Date must: (i) return a duly completed Subscription Form to the Subscription
Agent so that such form is received by the Subscription Agent on or before the
Subscription Expiration Date and make the appropriate election on its Ballot;
and (ii) pay to the Subscription Agent (on behalf of the Debtors) on or before
the Subscription Expiration Date immediately available funds in an amount equal
to such Holder's aggregated Subscription Purchase Price, such payment to be made
either by wire transfer to the Subscription Agent in accordance with the wire
instructions set forth on the Subscription Form, in the case of a wire. If, on
or prior to the Subscription Expiration Date, the
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Subscription Agent for any reason has not received from a given Holder of Rights
both a duly completed Subscription Form and Cash, in an amount equal to such
Holder's aggregate Subscription Purchase Price, such Holder will be deemed to
have not exercised its Rights and to have relinquished and waived its ability to
participate in the Rights Offering. By completing and submitting the
Subscription Form, a Holder will be agreeing to be bound by the Stockholders'
Agreement. A Subscription Form must also be accompanied by sufficient indication
of ownership of the Claim giving rise to the Rights, as well as appropriate
executed representations as to ownership on the Subscription Record Date. The
payments made in accordance with the Rights Offering will be deposited and held
by the Subscription Agent in a trust account, escrow account, or similar
segregated account or accounts which will be separate and apart from Reorganized
Intermet's general operating funds and any other funds subject to any cash
collateral arrangements, and which segregated account or accounts will be
maintained for the purpose of holding the money for administration of the Rights
Offering until the Effective Date, or such other later date, at the option of
the Reorganized Debtors, but not later than 20 days after the Effective Date.
J. TRANSFER RESTRICTION; REVOCATION
The Rights may be transferred, but only on or before the Subscription Record
Date. After the Subscription Record Date, the Rights are not transferable.
Additionally, once a Holder of Rights has properly exercised its Rights such
exercise cannot to be revoked for any reason.
K. DISTRIBUTION OF RIGHTS OFFERING SHARES
A. Distribution To Exercising Claimants
On the Effective Date, the Disbursing Agent will distribute to the exercising
claimants certificates representing the Rights Offering Shares.
B. Distribution to Initial Committed Purchasers
On the Effective Date, Reorganized Intermet will distribute to the Initial
Committed Purchasers certificates representing the Rights Offering Shares
Private Placement Purchase Shares purchased by the Initial Committed Purchasers.
L. SUBSEQUENT ADJUSTMENTS TO THE RIGHTS PARTICIPATION CLAIM AMOUNT
Holders of Disputed Claims will be entitled to participate in the Rights
Offering solely to the extent of their Rights Participation Claim Amounts. If
any Holder of such Claim has obtained an order of the Bankruptcy Court
estimating its General Unsecured Claim for the purpose of participating in the
Rights Offering prior to the Subscription Expiration Date, such Holder will be
entitled to participate in the Rights Offering. In the event that any such
estimation occurs, each exercising claimant will be cut back Pro Rata and the
difference between the price paid by such exercising claimant and the adjusted
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Subscription Purchase Price will be refunded to such exercising claimant,
without interest, as soon as practicable after the Effective Date.
M. NO INTEREST
In the event any Subscription Purchase Price is repaid to any Person making such
payment, no interest will be paid thereon.
N. VALIDITY OF EXERCISE OF RIGHTS
All questions concerning the timeliness, viability, form and eligibility of any
exercise of Rights will be determined by Reorganized Intermet, with the consent
of the Initial Committed Purchasers, in consultation with the Creditors'
Committee. Such determinations will be final and binding. Reorganized Intermet,
with the consent of the Initial Committed Purchasers, may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
times as it may determine, or reject the purported exercise of any Rights.
Subscription Forms will be deemed not to have been received or accepted until
all irregularities have been waived or cured within such time as Reorganized
Intermet with the consent of the Initial Committed Purchasers determines.
Neither Reorganized Intermet nor the Subscription Agent will be under any duty
to give notification of any defect or irregularity in connection with the
submission of Subscription Forms or incur any liability for failure to give such
notification.
O. USE OF PROCEEDS
On the Effective Date, the proceeds received by Reorganized Intermet from the
Rights Offering will be used to fund the Cash payments required under the Plan
and for general corporate purposes.
P. MARKETING TO OTHER POTENTIAL INVESTORS AND ALTERNATIVES
Lazard directly approached and solicited offers from 3-6 parties regarding an
equity investment in the Reorganized Debtors. Potential investors who expressed
an interest in the investment were provided with confidentiality agreements to
facilitate their review of sensitive financial information in connection with
the equity investment, and were asked to provide a proposed term sheet by a date
certain. Prior to publication of the Debtors' first Disclosure Statement and
Plan, none of these parties with whom the Debtors executed a confidentiality
agreement and provided confidential information memoranda submitted a proposed
term sheet for underwriting a new equity investment.
In addition to directly approaching these parties, Lazard responded to
approximately 3 unsolicited expressions of interest from potential investors. In
those instances in which such parties expressed a willingness to receive
non-public information with regard to the Debtors, Lazard provided these parties
a confidentiality agreement. Upon execution of a confidentiality agreement, a
confidential information memorandum was provided to the parties, with a
requested date by which they were asked to submit a proposed term sheet for the
investment. Prior to publication of the Debtors' first Disclosure Statement and
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Plan of Reorganization, none of these parties submitted a proposed term sheet
for underwriting a new equity investment in the Reorganized Debtors.
Since publication of the Debtors' first Disclosure Statement on June 27, 2005,
no parties, including those that Lazard directly approached or those from whom
Lazard received unsolicited expressions of interest, have provided Lazard or the
Debtors any formal proposals regarding a potential investment in the Reorganized
Debtors.
In addition to soliciting interest from 3rd parties regarding an equity
investment in the Reorganized Debtors, the Debtors pursued other alternatives to
the equity investment structure contemplated by the Plan. In conjunction with
the negotiation of the Restructuring Commitment Letter, the Debtors also pursued
an alternative transaction with the Creditors' Committee and the Pre-Petition
Agent. In this alternative transaction there would be still be a rights offering
pursuant to the Plan, but to the extent that the full $75 million was not
subscribed for, the Pre-Petition Lenders would accept, in partial satisfaction
of their Claims, a shortfall in the form of New Common Stock. This New Common
stock would be in exchange for a commitment fee and an additional fee to the
extent that the Pre-Petition Lenders had to accept any such New Common Stock in
partial satisfaction of their Claims. Ultimately, the Debtors determined that
pursuing the Restructuring Commitment Letter was a better alternative.
Q. JURISDICTION
Each Holder of Rights participating in the Rights Offering consents to the
exclusive jurisdiction and venue of the Bankruptcy Court for the resolution of
any dispute arising thereunder, including, without limitation, in respect of the
Subscription Purchase Price and in respect of the terms of the Rights Offering
set forth in the Plan and the manner of execution of the Rights Offering
pursuant to those terms.
XI. VALUATION ANALYSIS
A. VALUATION OF THE REORGANIZED DEBTORS
THE VALUATION INFORMATION CONTAINED IN THIS SECTION WITH REGARD TO THE
REORGANIZED DEBTORS IS NOT A PREDICTION OR GUARANTEE OF THE ACTUAL MARKET VALUE
THAT MAY BE REALIZED THROUGH THE SALE OF ANY SECURITIES TO BE ISSUED PURSUANT TO
THE PLAN.
1. Overview
The Debtors have been advised by Lazard, its financial advisor, with respect to
the consolidated Enterprise Value (as hereinafter defined) of the Reorganized
Debtors on a going-concern basis. Lazard undertook this valuation analysis for
the purpose of determining value available for Distribution to Holders of
Allowed Claims pursuant to the Plan and to analyze the relative recoveries to
such Holders thereunder. The estimated total value available for Distribution
(the "Distributable Value") to Holders of Allowed Claims is comprised of two
components: (a) an estimated value of the Reorganized
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Debtors' operations on a going concern basis (the "Enterprise Value," as
identified above), and (b) the value of certain projected tax attributes such as
net operating losses ("NOLs"), with which the Debtors will emerge from
bankruptcy.
Based in part on information provided by the Debtors, Lazard has concluded
solely for purposes of the Plan that the Distributable Value of the Reorganized
Debtors ranges from approximately $307.5 to $357.5 million, with a midpoint of
approximately $332.5 million as of an assumed Effective Date of August 31, 2005.
Based on an assumed August 31, 2005 debt balance, net of cash, of approximately
$165.0 million, Lazard's mid-point estimated Enterprise Value implies a value
for the New Common Stock of $167.5 million. Assuming approximately 9,900,000
shares of New Common Stock are Distributed to the Holders of Allowed Claims
pursuant to the Plan, the value of New Common Stock is equal to $16.91 per
share.(12) These values do not give effect to the potentially dilutive impact of
any shares issued upon exercise of any options that may be granted under a
long-term incentive plan which the Board of Directors of Reorganized Intermet
may authorize for management of Reorganized Intermet. Lazard's estimate of
Enterprise Value does not constitute an opinion as to fairness from a financial
point of view of the consideration to be received under the Plan or of the terms
and provisions of the Plan.
THE ASSUMED DISTRIBUTABLE VALUE RANGE, AS OF THE ASSUMED EFFECTIVE DATE OF
AUGUST 31, 2005, REFLECTS WORK PERFORMED BY LAZARD ON THE BASIS OF INFORMATION
AVAILABLE TO LAZARD CURRENT AS OF THE DATE OF THIS DISCLOSURE STATEMENT.
ALTHOUGH SUBSEQUENT DEVELOPMENTS MAY AFFECT LAZARD'S CONCLUSIONS, NEITHER LAZARD
NOR THE DEBTORS HAVE ANY OBLIGATION TO UPDATE, REVISE OR REAFFIRM ITS ESTIMATE.
With respect to the Projections prepared by the management of the Debtors and
included in this Disclosure Statement, Lazard assumed that such Projections were
reasonably prepared in good faith and on a basis reflecting the Debtors' most
accurate currently available estimates and judgments as to the future operating
and financial performance of the Reorganized Debtors. Lazard's Distributable
Value range assumes the Reorganized
- ----------
(12) As previously described, under the Plan, creditors have the option of
electing an Inducement Cash Amount in lieu of a combination of stock and
rights to purchase stock in the Reorganized Intermet in satisfaction of
their claims against the Debtors. In making this election, creditors must
release all other Debtors with respect to their claim. In the event all
creditors other than Noteholders elect to receive cash under the Inducement
Cash Option, approximately 100,000 of the 2,500,000 shares issuable to
unsecured creditors will not be issued. To the extent, however, all such
creditors elect to receive stock and rights to purchase stock in the
Reorganized Intermet, in satisfaction of their claims, the total number of
outstanding common shares of the Reorganized Intermet upon emergence from
bankruptcy will total 10,000,000. The equity value identified above as well
as the total shares outstanding (approximately 9,900,000) and value per
each such share ($16.91) assume all creditors, other than noteholders,
elect to receive the Inducement Cash Amount. As the actual, ultimate future
election by creditors to receive cash in lieu of common stock and rights,
or vice versa, cannot be known at the time of publication of the Disclosure
Statement, this analysis presents a simplifying assumption.
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Debtors will achieve their Projections in all material respects, including gross
profit growth and improvements in operating margins, earnings and cash flow. If
the business performs at levels below those set forth in the Projections, such
performance may have a materially negative impact on Enterprise Value.
In estimating the Enterprise Value and equity value of the Reorganized Debtors,
Lazard: (a) reviewed certain historical financial information of the Debtors for
recent years and interim periods; (b) reviewed certain internal financial and
operating data of the Debtors, including the Projections as described in this
Disclosure Statement, which data were prepared and provided to Lazard by the
management of the Debtors and which relate to the Reorganized Debtors' business
and its prospects; (c) met with members of senior management to discuss the
Debtors' operations and future prospects; (d) reviewed extensive publicly
available financial data for, and considered the market value of, public
companies that Lazard deemed generally comparable to the operating business of
the Debtors; (e) considered certain economic and industry information relevant
to the operating business; and (f) conducted such other studies, analyses,
inquiries and investigations as it deemed appropriate. Although Lazard conducted
a review and analysis of the Debtors' business, operating assets and liabilities
and the Reorganized Debtors' business plan, it assumed and relied on the
accuracy and completeness of all financial and other information furnished to it
by the Debtors, as well as publicly available information.
In addition, Lazard did not independently verify management's Projections in
connection with preparing estimates of Enterprise Value, and no independent
valuations or appraisals of the Debtors were sought or obtained in connection
herewith. Such estimates were developed solely for purposes of the formulation
and negotiation of the Plan and the analysis of implied relative recoveries to
Holders of Allowed Claims thereunder.
Lazard's analysis addresses the estimated going concern Enterprise Value of the
Debtors and the value of certain expected tax attributes, including NOLs. It
does not address other aspects of the proposed reorganization, the Plan or any
other transactions, and it does not address the Debtors' underlying business
decision to effect the reorganization set forth in the Plan. Lazard's estimated
Enterprise Value of the Debtors does not constitute a recommendation to any
Holder of Allowed Claims as to how such person should vote or otherwise act with
respect to the Plan. Lazard has not been asked to nor did Lazard express any
view as to what the value of the Debtors' securities will be when issued
pursuant to the Plan or the prices at which they may trade in the future. The
estimated Enterprise Value of the Debtors set forth herein does not constitute
an opinion as to fairness from a financial point of view to any person of the
consideration to be received by such person under the Plan or of the terms and
provisions of the Plan.
Such estimates reflect the application of various valuation techniques and do
not purport to reflect or constitute appraisals, liquidation values or estimates
of the actual market value that may be realized through the sale of any
securities to be issued pursuant to the Plan, which may be significantly
different than the amounts set forth herein. The value of an operating business
is subject to numerous uncertainties and contingencies which are
117
difficult to predict and will fluctuate with changes in factors affecting the
financial condition and prospects of such a business. As a result, the estimated
Enterprise Value range of the Reorganized Debtors set forth herein is not
necessarily indicative of actual outcomes, which may be significantly more or
less favorable than those set forth herein. Neither the Debtors, Lazard, nor any
other person assumes responsibility for their accuracy. In addition, the
valuation of newly issued securities is subject to additional uncertainties and
contingencies, all of which are difficult to predict. Actual market prices of
such securities at issuance will depend upon, among other things, the operating
performance of the Debtors, prevailing interest rates, conditions in the
financial markets, the anticipated holding period of securities received by
pre-petition creditors (some of whom may prefer to liquidate their investment
rather than hold it on a long-term basis), and other factors which generally
influence the prices of securities.
2. Valuation Methodology
The following is a brief summary of certain financial analyses performed by
Lazard to arrive at its range of estimated Enterprise Values and Distributable
Values for the Reorganized Debtors. Lazard performed certain procedures,
including each of the financial analyses described below, and reviewed with the
management of the Debtors the assumptions on which such analyses were based.
Lazard's valuation analysis must be considered as a whole and selecting just one
methodology or portions of the analysis could create a misleading or incomplete
conclusion as to Enterprise Value.
Under the valuation methodologies summarized below, Lazard derived a range of
Enterprise Values assuming the Reorganized Debtors are full taxpayers. Lazard
separately analyzed the value of the Debtors' tax attributes, including NOLs, as
of the assumed Effective Date. To the extent such attributes were valued
positively, they were added to the Enterprise Value range to calculate a
Distributable Value range. A discussion of Lazard's analysis of such tax
attributes, including the methodology used to value them, is presented below in
section (ii)(d).
A. Comparable Company Analysis
Comparable company analysis estimates the value of a company based on a relative
comparison with other publicly traded companies with similar operating and
financial characteristics. Under this methodology, observed Enterprise Values
and equity values for selected public companies are commonly expressed as
multiples of various measures of earnings, most commonly earnings before
interest, taxes, depreciation and amortization ("EBITDA"), earnings before
interest and taxes ("EBIT") and net income. In addition, each company's
operational performance, operating margins, profitability, leverage and business
trends are examined. Based on these analyses, financial multiples and ratios are
calculated to measure each company's relative performance and valuation. A key
factor to this approach is the selection of companies with relatively similar
business and operational characteristics to the Debtors. Common criteria for
selecting comparable companies for the analysis include, among other relevant
characteristics, similar lines of businesses, business risks, growth prospects,
maturity of businesses, location, market presence and size and scale of
operations. The selection of truly
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comparable companies is often difficult and subject to limitations due to sample
size and the availability of meaningful market-based information. However, the
underlying concept is to develop a premise for relative value, which, when
coupled with other approaches, presents a foundation for determining Enterprise
Value.
Lazard selected the following publicly traded companies (the "Peer Group") on
the basis of general comparability to the Debtors in one or more of the factors
described above: American Axle & Manufacturing Holdings, Inc., ArvinMeritor,
Inc., Dana Corporation, Hayes Lemmerz International, Inc., Linamar Corporation,
Magna International Inc., Noble International Ltd., Shiloh Industries, Inc.,
Superior Industries International, Inc., Tenneco Automotive Inc., and TRW
Automotive Holdings Corp.
Lazard calculated multiples of Enterprise Value to 2005 and 2006 EBITDA for the
Peer Group by dividing the Enterprise Values of each comparable company as of
June 14, 2005, by their projected 2005 EBITDA and 2006 EBITDA, as estimated in
current equity and fixed income research. This analysis produced multiples of
Enterprise Value to estimated 2005 EBITDA ranging from a low of approximately
4.2x to a high of approximately 7.0x, with a mean of approximately 5.5x and a
mid-point or median of approximately 5.3x. Multiples of Enterprise Value as of
June 14, 2005 to estimated 2006 EBITDA ranged from a low of approximately 3.9x
to a high of approximately 6.3x, with a mean of approximately 5.1x and a
mid-point or median of approximately 5.3x.
Having calculated these statistics, Lazard then applied a range of multiples to
the Debtors' forecasted Adjusted 2005 EBITDA and Adjusted 2006 EBITDA ($63.1
million and $75.3 million, respectively) to determine a range of Enterprise
Values. (To calculate Adjusted EBITDA, Lazard adjusted the Debtors' projected
2005 and 2006 earnings before interest, taxes, depreciation and amortization to
exclude forecasted non-recurring expenses/charges, restructuring fees, losses
from discontinued or inactive operations, plant closure costs, and KERP
payments. This calculation is presented in Exhibit G - "Projected Financial
Information For The Reorganized Debtors".)
In applying a range of multiples, Lazard based the range for both 2005 and 2006
EBITDA multiples on the 25th percentile and the mean, using the statistics
observed for the Peer Group. These multiples specifically ranged from 4.4x to
5.5x of 2005 Adjusted EBITDA and 4.3x to 5.1x of 2006 Adjusted EBITDA. In
applying these ranges, Lazard considered a variety of factors, including both
qualitative attributes and quantitative measures such as historical and
projected revenue and EBITDA results; historical Enterprise Value/EBITDA trading
multiples; EBITDA margins; capital efficiency; size; and projected long-term
earnings growth.
B. Precedent Transactions Analysis
Precedent transactions analysis estimates value by examining public merger and
acquisition transactions. An analysis of a company's transaction value as a
multiple of various operating statistics provides industry-wide valuation
multiples for companies in similar lines of business to the Debtors. Transaction
multiples are calculated based on the purchase price (including any debt
assumed) paid to acquire companies that are
119
comparable to the Debtors. Lazard specifically focused on prices paid as a
multiple of Revenue, EBIT, and EBITDA in determining a range of values for the
Debtors. The derived multiples are then applied to the Debtors' key operating
statistics to determine the Enterprise Value or value to a potential strategic
buyer.
Unlike the comparable public company analysis, the valuation in this methodology
reflects a "control" premium, representing the purchase of a majority or
controlling position in a company's assets. Thus, this methodology generally
produces higher valuations than the comparable public company analysis. Other
aspects of value that are manifest in a precedent transaction analysis include
the following: (a) circumstances surrounding a merger transaction may introduce
"diffusive quantitative results" into the analysis (e.g., an additional premium
may be extracted from a buyer in a case of a competitive bidding contest); (b)
the market environment is not identical for transactions occurring at different
periods of time; and (c) circumstances pertaining to the financial position of
the company may have an impact on the resulting purchase price (e.g., a company
in financial distress may receive a lower price due to perceived weakness in its
bargaining leverage).
As with the comparable public company analysis, because no acquisition used in
any analysis is identical to a target transaction, valuation conclusions cannot
be based solely on quantitative results. The reasons for and circumstances
surrounding each acquisition transaction are specific to such transaction, and
there are inherent differences between the businesses, operations, and prospects
of each. Therefore, qualitative judgments must be made concerning the
differences between the characteristics of these transactions and other factors
and issues that could affect the price an acquirer is willing to pay in an
acquisition. The number of completed transactions for which public data is
available also limits this analysis. Because the precedent transaction analysis
explains other aspects of value besides the inherent value of a company, there
are limitations as to its use in the valuation of the Debtors.
In deriving a range of Enterprise Values for Intermet under this methodology,
Lazard calculated multiples of total transaction value ("Transaction Value") to
the latest twelve months ("LTM") EBITDA of the acquired companies and applied
these multiples to Intermet's Adjusted LTM EBITDA. The calculation of Intermet's
Adjusted LTM EBITDA, as defined in the preceding section, is shown in Exhibit G
- - "Projected Financial Information For The Reorganized Debtors."
Lazard evaluated various merger and acquisition transactions that have occurred
in the automotive supply industry between 2002 and 2005. Lazard calculated
multiples of Transaction Value to LTM EBITDA of the target companies by dividing
the disclosed purchase price of the target's equity, plus any debt assumed as
part of the transaction, by disclosed LTM EBITDA. This analysis produced
multiples of Transaction Value to LTM EBITDA ranging from a low of approximately
3.8x to a high of approximately 7.2x, with a mean of approximately 5.6x and a
mid-point or median of approximately 5.6x.
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Lazard then applied a range of multiples to the Debtors' LTM Adjusted EBITDA to
determine a range of Enterprise Values. As it did in its comparable company
analysis, Lazard established a range between the 25th percentile and the mean
(4.9x to 5.6x) of the Transaction Value/EBITDA statistic for the observed
transactions. The use of this range implies Lazard's assumption that Intermet's
relative value among the target companies in this analysis is the same as was
determined for Intermet relative to the Peer Group.
C. Discounted Cash Flow Analysis
The Discounted Cash Flow ("DCF") analysis is a forward-looking enterprise
valuation methodology that relates the value of an asset or business to the
present value of expected future cash flows to be generated by that asset or
business. Under this methodology, projected future cash flows are discounted by
the business' weighted average cost of capital (the "Discount Rate"). The
Discount Rate reflects the estimated blended rate of return debt and equity
investors would require to invest in the business based on its capital
structure. The value of the firm (or Enterprise Value) is determined by
calculating the present value of the Reorganized Debtors' unlevered after-tax
free cash flows based on in its business plan (the Projections) plus an estimate
for the value of the firm beyond the period of 2005 to 2009 (the "Projection
Period") known as the terminal value. The terminal value is derived by applying
a multiple to the Reorganized Debtors' projected EBITDA in the final year of the
Projection Period, discounted back to the assumed date of emergence by the
Discount Rate.
To estimate the Discount Rate, Lazard used the cost of equity and the after-tax
cost of debt for the Reorganized Debtors, assuming a range of targeted long-term
capital structure of 30% to 40% debt to total capital. Lazard calculated the
cost of equity based on the Capital Asset Pricing Model, which assumes that the
required equity return is a function of the risk-free cost of capital and the
correlation of a publicly traded stock's performance to the return on the
broader market. To estimate the cost of debt, Lazard considered the debt
financing costs for comparable companies with leverage similar to the
Reorganized Debtors' target capital structure. In determining the terminal
multiple, Lazard considered the fact that the projections indicated a steady
rise in profitability and no cyclicality of earnings, as would commonly be
encountered in the automotive industry. Lazard therefore selected an exit
multiple range which reflected a peak earnings environment.
Although formulaic methods are used to derive the key estimates for the DCF
methodology, their application and interpretation still involve complex
considerations and judgments concerning potential variances in the projected
financial and operating characteristics of the Reorganized Debtors, which in
turn affect its cost of capital and terminal multiples. Lazard calculated its
DCF valuation on a range of Discount Rates between 13.5% and 14.5% and an EBITDA
multiple range used to derive a terminal value of 3.75x to 4.25x.
In applying the above methodology, Lazard utilized management's detailed
Projections for the period beginning September 1, 2005 and ending December 31,
2009 to derive unlevered after-tax free cash flows. Free cash flow includes
sources and uses of cash not
121
reflected in the income statement, such as changes in working capital and
capital expenditures. For purposes of the DCF, the Reorganized Debtors are
assumed to be full taxpayers; the value of their tax attributes, including NOLs,
is calculated separately as described below. These cash flows, along with the
terminal value, are discounted back to the assumed Effective Date using the
range of Discount Rates described above to arrive at a range of Enterprise
Values.
D. Analysis Of Post-Emergence Tax Attributes
In developing Intermet's Plan, the Debtors, with the assistance of certain tax,
accounting and financial advisors conducted a detailed analysis of the impact of
various (1) debt cancellation strategies and (2) alternatives for restructuring
the Debtors' domestic operations (the "Domestic Restructuring"). In particular,
the Debtors' reviewed alternatives for canceling certain inter-company notes
owing from Intermet Holding Co. (US) to Intermet Holding BV and from Intermet
Corporation to Intermet Europe KG. Tax consequences, which were identified for
each such inter-company note cancellation and Domestic Restructuring strategy
were numerous, and included, but were not limited to, the following: the impact
of cancellation of indebtedness income on the Debtors' tax attributes,
specifically NOLs and tax basis in depreciable assets; the creation of bad debt
deductions in foreign jurisdictions; the ability of Intermet and its foreign
subsidiaries to continue to shelter inter-company interest income by interest
expense; and the impact of various inter-company debt cancellation strategies on
deferred foreign currency gains.
In analyzing the tax consequences of the different debt cancellation and
Domestic Restructuring strategies, the Debtors' management and its advisors
focused on the impact of projected reductions in the tax basis of assets of
certain Debtors. Forecasted reductions to the tax basis of depreciable assets
varied with different debt cancellation and Domestic Restructuring alternatives,
reflecting differing levels of cancellation of indebtedness income. Management
specifically analyzed the impact of such basis reductions on projected taxable
income that would result from decreases in future expected depreciation and
amortization deductions. (Reduced depreciation and amortization deductions would
result in lower future depreciation tax shields, thereby increasing projected
taxable income).
Based on a detailed analysis of such tax consequences, the Debtors' management
has elected to pursue a strategy whereby (1) the inter-company notes identified
above will either be cancelled through offsetting transactions and (2) the
Debtors' domestic operations will be restructured as described in Section I.B.,
"Summary Of Debtors' Corporate Structure." The particular strategy the Debtors
are pursuing is expected to minimize reductions to the tax bases of assets of
Reorganized Intermet's U.S. legal entities.
The debt cancellation strategy the Debtors' management will pursue, while
minimizing expected reductions to the tax basis of assets, is also expected to
reduce existing NOLs which would be available to offset expected future taxable
income following the Debtors' emergence from bankruptcy. Lazard has valued those
NOLs with which the Debtors expect to emerge from bankruptcy by calculating the
present value of the tax savings they
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would provide relative to the taxes the Reorganized Debtors would otherwise pay
absent the application of such NOLs. With regard to pre-emergence NOLs with
which Intermet will emerge from bankruptcy, the NOL valuation analysis assumed
that the annual limitation of such NOL utilization, per Section 382 of the Tax
Code, would be approximately $7 million. The cash tax savings resulting from the
application of the NOLs were discounted at the Debtors' cost of equity.
Because Lazard's calculation of Reorganized Intermet's Enterprise Value does not
consider or reflect either the benefit of those NOLs which survive the Debtors'
restructuring or the negative impact of reductions to asset tax bases, Lazard
separately valued the impact of both of these tax consequences. Specifically,
Lazard valued, as described above, the present value of post-emergence NOLs
subject to limitations under Section 382 of the Tax Code. Similarly, Lazard
valued the slight negative cash tax impact of minor reductions to asset tax
bases and the resulting declines in projected future depreciation tax shields.
Based on this analysis, Lazard estimates the value of Reorganized Intermet's
NOLs exceeds any negative impact resulting from reductions to asset tax bases by
approximately $7.5 million on a NPV basis. As a result, Lazard has, in its
valuation analysis, added an incremental $7.5 million of value to Reorganized
Intermet's Enterprise Value to calculate a total Distributable Value in a range
of $307.5 to $357.5 million.
3. Value Allocation
As described earlier, the Plan provides for the treatment of both classified and
unclassified Claims against and Equity Interests in each of the Debtors. Though
the Plan is proposed jointly by all of the Debtors, it constitutes a separate
Plan for each Debtor. The Estates of the Debtors have not been consolidated,
substantively or otherwise. Any Claims held against one of the Debtors will be
satisfied solely based on the value of the Assets of such Debtor. As a result of
the deconsolidated nature of the plan, Lazard has allocated Enterprise Value for
Reorganized Intermet across all of its legal entities, including the Debtors.
This allocation of value will generally determine ultimate recoveries by
Creditors at each of the Debtors.(13) In deriving this allocation, Lazard
conducted a detailed analysis of the following factors: revenue forecasts /
results of (or contribution by) each Intermet legal entity for the years ending
2005, 2006, and 2007; projected EBITDA contribution by each Intermet legal
entity for the years ending 2005, 2006, and 2007; projected EBIT contribution by
each Intermet legal entity for the years ending 2005, 2006, and 2007; and the
book value of total assets of each Intermet legal entity at December 31, 2004.
This data is presented in tabular format in Exhibit G - "Projected Financial
Information For The Reorganized Debtors." In deriving an allocation of
enterprise values based on this data, Lazard weighted most heavily earnings
measures for the Debtors, specifically EBITDA and EBIT.
- ----------
(13) The allocation of value to each Debtor is implicit in the distribution
schedule attached to the Disclosure Statement as Exhibit J, and attached to
the Plan as Exhibit C.
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THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE
ANALYSES PERFORMED BY LAZARD. THE PREPARATION OF A VALUATION ESTIMATE INVOLVES
VARIOUS DETERMINATIONS AS TO THE MOST APPROPRIATE AND RELEVANT METHODS OF
FINANCIAL ANALYSIS AND THE APPLICATION OF THESE METHODS IN THE PARTICULAR
CIRCUMSTANCES AND, THEREFORE, SUCH AN ESTIMATE IS NOT READILY SUITABLE TO
SUMMARY DESCRIPTION. IN PERFORMING THESE ANALYSES, LAZARD AND THE DEBTORS MADE
NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, BUSINESS AND ECONOMIC
CONDITIONS AND OTHER MATTERS. THE ANALYSES PERFORMED BY LAZARD ARE NOT
NECESSARILY INDICATIVE OF ACTUAL VALUES OR FUTURE RESULTS, WHICH MAY BE
SIGNIFICANTLY MORE OR LESS FAVORABLE THAN SUGGESTED BY SUCH ANALYSES.
XII. CERTAIN FACTORS TO BE CONSIDERED
A. CERTAIN BANKRUPTCY CONSIDERATIONS
Even if the requisite acceptances are received, there can be no assurance that
the Bankruptcy Court, which sits as a court of equity with substantial
discretion, will confirm the Plan. A non-accepting Creditor of the Debtors might
challenge the adequacy of the disclosure or the balloting procedures and results
as not being in compliance with the Bankruptcy Code. Even if the Bankruptcy
Court were to determine that the disclosure and the balloting procedures and
results were appropriate, the Bankruptcy Court could still decline to confirm
the Plan if it were to find that any statutory conditions to Confirmation had
not been met. Section 1129 of the Bankruptcy Code sets forth the requirements
for Confirmation and requires, among other things, a finding by the Bankruptcy
Court that the Confirmation of the Plan is not likely to be followed by a
liquidation or a need for further financial reorganization (except as
contemplated in the Plan) and that the value of Distributions to non-accepting
Creditors will not be less than the value of Distributions such Creditors would
receive if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code.
SEE SECTION XIV - "FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS
TEST - Chapter 7 Liquidation Analysis." There can be no assurance that the
Bankruptcy Court will conclude that these requirements have been met, but the
Debtors believe that the Bankruptcy Court should find that the Plan will not be
followed by a need for further financial reorganization or liquidation (other
than as contemplated) and that non-accepting Creditors will receive
Distributions at least as great as would be received following a liquidation
pursuant to Chapter 7 of the Bankruptcy Code.
Additionally, even if the required acceptances of Classes are received, the
Bankruptcy Court might find that the solicitation did not comply with the
solicitation requirements made applicable by Section 1125(b) of the Bankruptcy
Code and Bankruptcy Rule 3018(a). In such an event, the Debtors may seek to
re-solicit acceptances, but Confirmation of the Plan could be substantially
delayed and possibly jeopardized.
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However, the Debtors believe that their solicitation of acceptances of the Plan
complies with the requirements of Section 1125(b) of the Bankruptcy Code and
Bankruptcy Rule 3018(a), that duly executed Ballots will be in compliance with
applicable provisions of the Bankruptcy Code and the Bankruptcy Rules, and that,
if sufficient acceptances are received, the Plan should be confirmed by the
Bankruptcy Court. SEE SECTION XV -"SOLICITATION OF THE PLAN."
The consummation of the Plan also is subject to certain conditions. SEE SECTION
VIII - "SUMMARY OF THE PLAN." If the Plan were not to be confirmed, it is
unclear whether a reorganization could be implemented and what Holders of Claims
would ultimately receive with respect to their Claims. If an alternative
reorganization could not be effected, it is possible that the Debtors would have
to liquidate their assets, in which case Holders of Claims would very likely
receive less than they would have received pursuant to the Plan.
B. RISKS RELATING TO THE NEW COMMON STOCK
1. Variances From Projections
The assumptions and estimates underlying the Projections set forth in Exhibit G
attached to this Disclosure Statement are inherently uncertain and, though
considered reasonable by management as of the date hereof, are subject to a wide
variety of significant business, economic, competitive and political risks and
uncertainties. The Projections are not necessarily indicative of the future
financial position or results of operations of the Debtors, which may vary
significantly from those set forth in the Projections. Consequently, the
Projections contained herein should not be regarded as a representation by the
Debtors or any of their Affiliates, advisors or any other person that the
projected financial position or results of operations can or will be achieved.
The Projections are also "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Factors that could cause
actual results to differ materially include, but are not limited to, those
identified in the first paragraph of Part II, Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," of Intermet's
Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which
are incorporated herein by reference.
2. Lack Of Trading Market
On the Effective Date, Reorganized Intermet will seek to terminate, or obtain an
exemption from, its reporting and filing obligations under the Securities Act.
Consequently, if permitted, from and after the Effective Date, Reorganized
Intermet will no longer be a public company. Pursuant to the Plan, the Existing
Common Stock will be cancelled and the New Common Stock will not be listed or
traded on any nationally recognized market or exchange. Moreover, the
Stockholders Agreement, which will become effective on the Effective Date,
imposes significant restrictions with regard to the sale or transfer of the New
Common Stock. Accordingly, from and after the Effective Date, the
transferability of the New Common Stock will be severely limited.
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3. Dividend Policies
The Debtors do not anticipate that Reorganized Intermet will pay dividends on
the New Common Stock in the near future.
4. Restrictions On Transfer
The Stockholders' Agreement imposes significant restrictions with regard to the
sale or transfer of the New Common Stock. Therefore, from and after the
Effective Date, the transferability of the New Common Stock will be severely
limited.
In addition, holders of New Common Stock who are deemed to be "underwriters" as
defined in Section 1145(b) of the Bankruptcy Code, including Holders who are
deemed to be "affiliates" or "control persons" within the meaning of the
Securities Act, will be unable freely to transfer or to sell their securities
except pursuant to (i) "ordinary trading transactions" by a Holder that is not
an "issuer" within the meaning of Section 1145(b), (ii) an effective
registration of such securities under the Securities Act and under equivalent
state securities or "blue sky" laws, or (iii) pursuant to the provisions of Rule
144 under the Securities Act or other available exemption from registration
requirements.
5. Control By Initial Committed Purchasers
As a result of Confirmation and consummation of the Plan, the Initial Committed
Purchasers will together initially own [between ___% and ____%] [at least ____%]
of the shares of outstanding New Common Stock. In addition, the Initial
Committed Purchasers will have the right to appoint certain members of the Board
of Reorganized Intermet. Accordingly, the Initial Committed Purchasers will
exercise a controlling influence over the business and affairs of Reorganized
Intermet and the Reorganized Debtors and, although they may not have a majority
of the voting rights, they are likely to have effective control over future
shareholder elections of directors, and hence Reorganized Intermet and the
Reorganized Debtors. Additionally, if the Initial Committed Purchasers are
required to purchase Cash-Out Shares and Rights Offering Shares, the Initial
Committed Purchasers could own sufficient shares of New Common Stock to have
effective power to approve significant corporate transactions such as amendments
to the Articles of Incorporation and Bylaws, mergers, and the sale of all or
substantially all of the assets of Reorganized Intermet. The Initial Committed
Purchasers' voting power could have the effect of deterring or preventing a
change in control of Reorganized Intermet.
C. RISKS ASSOCIATED WITH THE BUSINESSES
A discussion of factors that could negatively impact the Debtors' businesses are
set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," to Intermet's Annual Report on Form 10-K
for the fiscal year ended December 31, 2004.
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XIII. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IF THE PLAN IS CONFIRMED
The following is a summary of certain U.S. federal income tax consequences to
the Debtors and to certain Holders of Claims that are expected to result from
implementation of the Plan. This discussion does not address the federal income
tax consequences to Holders of Claims who are deemed to have rejected the Plan
in accordance with the provisions of Section 1126 of the Bankruptcy Code (i.e.,
Holders of Impaired Equity Interests in the Impaired Equity Debtors) or the
consequences of the Plan to Holders who are deemed to have accepted the Plan
(i.e., Holders of Priority Claims, Pre-Petition Lender Claims, Secured Claims
other than Secured Claims against Wagner Castings, and Unimpaired Equity
Interests in the Unimpaired Equity Debtors). Additionally, this summary does not
address the federal income tax consequences of the Key Employee Rights Offering.
This discussion is based on the IRC, as amended, Treasury Regulations in effect
(or, in some cases, proposed) on the date of this Disclosure Statement, and
administrative and judicial interpretations thereof available on or before such
date. All of the foregoing are subject to change, including changes which could
apply retroactively and could affect the federal income tax consequences
described below. There can be no assurance that the IRS will not take a contrary
view with respect to one or more of the issues discussed below. No ruling has
been applied for or received from the IRS with respect to any of the tax aspects
of the Plan and no opinion of counsel has been requested or received by the
Debtors with respect thereto.
The following summary is for general information only and does not purport to
address all of the U.S. federal income tax consequences that may be applicable
to any particular Holder. The tax consequences to Holders may vary based upon
the individual circumstances of each Holder. This summary does not address the
special tax considerations that may apply to Holders that are subject to special
rules, such as foreign companies, nonresident alien individuals, S corporations,
banks, financial institutions, broker-dealers, dealers or traders in securities
who are subject to mark-to-market taxation, mutual funds, small business
investment companies, regulated investment companies, insurance companies,
tax-exempt organizations, Persons holding Claims as part of a hedging or
conversion transaction, straddle, or other integrated transaction, Persons who
have a "functional currency" other than the U.S. dollar, Persons who acquired an
Equity Interest in connection with the performance of services, certain
expatriates and former long-term residents of the United States, pass-through
entities, or investors in pass-through entities. In addition, this discussion
does not address any aspect of state, local or foreign taxation, or any estate
or gift tax consequences of the Plan.
The following discussion assumes that the Plan will be implemented as described
herein, and does not address the tax consequences if the Plan is not carried
out. This discussion further assumes that the various debt and other
arrangements to which the Debtors are parties and any Distributions and
allocations provided for under the Plan will be respected for federal income tax
purposes in accordance with their form or as described below.
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THE TAX CONSEQUENCES OF THE PLAN ARE COMPLEX, AND SUBJECT TO SIGNIFICANT
UNCERTAINTIES DUE TO THE LACK OF APPLICABLE LEGAL PRECEDENT AND THE POSSIBILITY
OF CHANGES IN THE LAW. THIS DISCUSSION DOES NOT CONSTITUTE TAX ADVICE OR A TAX
OPINION CONCERNING THE MATTERS DESCRIBED. THERE CAN BE NO ASSURANCE THAT THE IRS
WILL NOT CHALLENGE ANY OR ALL OF THE TAX CONSEQUENCES DESCRIBED HEREIN, OR THAT
SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE SUSTAINED. EACH HOLDER OF A CLAIM OR
EQUITY INTEREST IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING
THE FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF HOLDING CLAIMS
OR EQUITY INTERESTS AND OF THE PLAN.
A. U.S. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS
Intermet, the other Debtors, and certain of their corporate subsidiaries are
members of an affiliated group of corporations (the "Intermet Tax Group") that
join in the filing of consolidated federal income tax returns. The Intermet Tax
Group has reported substantial consolidated net operating loss ("NOL")
carryforwards for federal income tax purposes as of December 31, 2003, and
expects to report tax losses for the taxable year that ended on December 31,
2004. Consequently, the Debtors expect the Intermet Tax Group to have NOL
carryforwards to the year ended December 31, 2005 and, to the extent not used or
eliminated in that year, to subsequent years. The amount of such NOLs and NOL
carryforwards remains subject to review and adjustment by the IRS and to
limitations imposed by Sections 108 and 382 of the IRC, as discussed below.
1. Cancellation Of Debt Income
Although the Debtors will realize cancellation of debt ("COD") income as a
result of the discharge of Allowed Claims under the Plan, they will qualify for
an exception under which the Debtors will be permitted to exclude the COD income
from taxable income because they are debtors in cases under the Bankruptcy Code.
However, the Debtors will be required to reduce certain of their tax attributes
by the amount of the COD income so excluded. COD income is generally the amount
by which the adjusted issue price of indebtedness discharged exceeds the amount
of cash, the issue price of any debt instrument, and the fair market value of
any other property given in exchange for the debt instrument. However, certain
statutory or judicial exceptions can apply to limit the amount of COD (such as
where the payment of the cancelled debt would have given rise to a tax deduction
or the cancellation of the debt is treated as a purchase price adjustment).
Under the general rules of Section 108 of the IRC, the excluded COD income must
generally be applied to reduce the Debtors' current year's NOL and NOL
carryforwards, general business credits, minimum tax credits, capital loss
carryovers, and the tax basis of their property, in that order. However, the
Debtors can elect under Section 108(b)(5) of the IRC to apply the tax attribute
reduction first to reduce the tax basis of the Debtors'
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depreciable property and then to reduce NOLs and certain other tax attributes.
It is unlikely that the Debtors will make this election. A reduction in tax
attributes under the foregoing rules does not occur until the end of the taxable
year or, in the case of an asset basis reduction, the first day of the taxable
year following the taxable year, in which the COD income is realized.
Recently finalized regulations address the method for applying tax attribute
reduction to an affiliated group of corporations that files consolidated returns
(such as the Intermet Tax Group). Under these regulations, the tax attributes of
each group member that is excluding COD income is first subject to reduction.
These tax attributes include (1) consolidated attributes attributable to the
debtor member, (2) tax attributes that arose in separate return limitation years
of the debtor member, and (3) the tax basis of property of the debtor member. To
the extent the debtor member's tax basis in stock of a lower-tier member of the
affiliated group is reduced, a "look through rule" requires that a corresponding
reduction be made to the tax attributes of the lower-tier member. To the extent
that a debtor-member's excluded COD income exceeds its tax attributes, the
regulations require the excess to be applied to the reduction of the remaining
consolidated tax attributes of the affiliated group, including tax attributes of
members other than the debtor members that arose or are treated as arising in
certain separate return limitation years.
The Debtors expect the reduction in tax attributes that result from COD income
produced by the Plan to include significant reductions in NOLs and the tax basis
of non-depreciable, non-amortizable assets, and smaller reductions in the tax
basis of current assets and depreciable or amortizable assets. However, the
amount and allocation of tax attribute reduction remain subject to review and
adjustment by the IRS.
If a member of the Intermet Tax Group (the "Parent Member") owns stock in
another member of the Intermet Tax Group (the "Subsidiary Member") in which it
has an "excess loss account" (generally, negative tax basis reflecting the
Intermet Tax Group's use of debt-financed losses of the Subsidiary Member in
excess of the Parent Member's investment in the stock of the Subsidiary Member),
the Parent Member is required to include the excess loss account in its taxable
income if it is considered to have disposed of the stock in the Subsidiary
Member. A disposition will be considered to occur if, among other things, the
Subsidiary Member excludes COD income which is not fully matched by a reduction
in tax attributes of the Subsidiary Member and the Intermet Tax Group.
Applicable Treasury regulations may limit the amount of losses of the Subsidiary
Member and the Intermet Tax Group that can be used to offset such excess loss
account income.
Several members of the Intermet Tax Group currently have excess loss accounts in
Subsidiary Members. The Debtors expect that most if not all of these excess loss
accounts will be eliminated by recapitalizing the Subsidiary Members. To the
extent that an excess loss account of any Subsidiary Member cannot be
eliminated, the Debtors believe that the Parent Member will be able to avoid a
disposition of the Subsidiary Member's stock.
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Under existing law, COD income arising out of the cancellation of a debt of a
member of an affiliated group (such as the Intermet Tax Group) by another member
of the affiliated group is not eligible for exclusion from income under the
bankruptcy exception described above. Thus, COD income resulting from the
discharge of Intercompany Claims will be recognized, but is expected to be
offset fully by the bad debt or other losses realized by Intermet Tax Group
members with respect to such Intercompany Claims. It is anticipated that Claims
against Debtors that are held by foreign Non-Debtor Affiliates will be satisfied
by transfers (or offsets) of notes receivable or other claims against foreign
Non-Debtor Affiliates. These transactions are not expected to generate
significant amounts of COD income, but they are likely to produce other types of
reportable income, including taxable foreign exchange gains.
2. Limitation On Net Operating Loss Carryforwards And Other Tax
Attributes
Under Section 382 of the IRC, if a corporation (or consolidated group) undergoes
an "ownership change," and the corporation does not qualify for (or elects out
of) a special bankruptcy exception described below, the amount of prechange
losses (NOL carryforwards from periods before the ownership change and certain
"built-in" losses and deductions that are economically accrued but unrecognized
as of the date of the ownership change) that may be utilized to offset future
taxable income is subject to an annual limitation (the "Annual Limitation").
Section 383 of the IRC extends and applies the Annual Limitation to
carryforwards of general business credits, minimum tax credits, capital losses,
and foreign tax credits, so that the total reduction in tax in a post-change
year from the carryover of such additional items, along with the NOLs and
recognized built-in losses, from pre-change periods is, in the aggregate,
limited by the Annual Limitation.
The issuance of New Common Stock to Holders of certain Claims pursuant to the
Plan, the purchase of New Common Stock pursuant to the Rights Offering, and/or
the Restructuring Commitment Letter, and the cancellation of Equity Interests in
Intermet will together constitute an ownership change of the Intermet Tax Group
for purposes of IRC Section 382. Moreover, the Debtors are investigating whether
an ownership change occurred in earlier years, which could limit the
availability of certain loss and credit carryforwards from periods prior to any
such earlier ownership change.
In general, the amount of the Annual Limitation to which a corporation (or
consolidated group) that has undergone an ownership change is subject under IRC
Sections 382 and 383 is equal to the product of (a) the fair market value of
stock of the corporation (or, in the case of a consolidated group, the common
parent) immediately before the ownership change (subject to various
adjustments), multiplied by (b) the highest of the adjusted federal long-term
tax-exempt rates in effect for any month in the 3-calendar months ending with
the month in which the ownership change occurs. Any unused Annual Limitation may
be carried forward, thereby increasing the Annual Limitation in the subsequent
taxable year. For any corporation (or consolidated group) in bankruptcy that
undergoes an ownership change pursuant to a confirmed bankruptcy plan, the stock
value is generally determined immediately after (rather than before) the
ownership change by
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taking into account the increase in stock value from the surrender or
cancellation of any creditors' claims, with certain adjustments.
As noted, in addition to limiting the use of NOLs carried forward from periods
prior to the ownership change, IRC Section 382 limits the deductibility of
"built-in losses" recognized after the date of the ownership change. If a loss
corporation (or consolidated group) has a net unrealized built-in loss at the
time of an ownership change (taking into account most assets and items of
"built-in" income and deduction), then any built-in losses recognized during the
following five years (up to the amount of the original net unrealized built-in
loss) generally will be treated as pre-change losses and will be subject to the
Annual Limitation. Conversely, if the loss corporation (or consolidated group)
has a net unrealized built-in gain at the time of an ownership change, any
built-in gains recognized during the following five years (up to the amount of
the original net unrealized built-in gain) generally will increase the Annual
Limitation in the year recognized, thereby permitting the loss corporation (or
consolidated group) to use its pre-change losses and credits against such
built-in gains (or tax thereon) in addition to its regular annual allowance.
Although the rule applicable to net unrealized built-in losses generally applies
to consolidated groups on a consolidated basis, certain corporations that join
the consolidated group within the preceding five years may not be able to be
taken into account in the group computation of net unrealized built-in loss.
Such corporations would nevertheless still be taken into account in determining
whether the consolidated group has a net unrealized built-in gain. In general,
the loss corporation's or consolidated group's net unrealized built-in gain or
loss will be deemed to be zero unless it is greater than the lesser of (a) $10
million or (b) 15% of the fair market value of its assets (with certain
adjustments) before the ownership change.
Section 382(1)(5) of the IRC provides an exception (the "382 Bankruptcy
Exception") to the Annual Limitation where the stockholders and "historic"
creditors receive, in respect of their claims, at least 50% of the vote and
value of the stock of the reorganized debtor. Under this exception, a debtor's
pre-change losses are not limited on an annual basis but, instead, its NOL
carryforwards are required to be reduced by the amount of the debtor's interest
deductions during the three taxable years preceding the taxable year in which
the ownership change occurs and during the portion of the taxable year prior to
and including the reorganization. The ownership change of Intermet on the
Effective Date that results from the issuance of New Common Stock to eligible
Holders of Claims pursuant to the Plan, the purchase of New Common Stock
pursuant to the Rights Offering and/or the Restructuring Commitment Letter, and
the cancellation of Equity Interests in Intermet, may qualify for the 382
Bankruptcy Exception. However, Intermet does not believe that the 382 Bankruptcy
Exception will be advantageous to it and is not expected to make the election.
Accordingly, the Projections assume that the Debtors' pre-change tax attributes
will be subject to the Annual Limitation. If the Debtors determine that the
requirements of the 382 Bankruptcy Exception are met and that it provides
significant tax savings as compared to the Annual Limitation, the Debtors may
choose to apply the 382 Bankruptcy Exception.
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3. Alternative Minimum Tax
A federal alternative minimum tax ("AMT") is imposed on a corporation's
alternative minimum taxable income at a 20% tax rate to the extent such tax
exceeds the corporation's regular federal income tax. For purposes of computing
alternative minimum taxable income, certain tax deductions and other beneficial
allowances are modified or eliminated. In particular, even though for regular
tax purposes a corporation might otherwise be able to offset all of its taxable
income by NOL carryovers from prior years, it is generally not allowed to offset
more than 90% of its taxable income for federal AMT purposes by available NOL
carryforwards (as computed for AMT purposes).
If a corporation (or consolidated group) undergoes an "ownership change" within
the meaning of IRC Section 382, the Section 382 rules discussed above (i.e., the
Annual Limitation with 382 Bankruptcy Exception) also apply to its NOL
carryforwards for AMT purposes. In addition, if the corporation is in a net
unrealized built-in loss position (as determined for AMT purposes) on the date
of the ownership change, the corporation's (or consolidated group's) tax basis
in its assets must be reduced for certain AMT purposes to reflect the fair
market value of such assets as of the change date. Although not entirely clear,
it appears that the application of this basis reduction to the Debtors would be
unaffected by whether the Debtors otherwise qualify for the 382 Bankruptcy
Exception to the Annual Limitation.
Any AMT tax that a corporation pays is generally allowed as a nonrefundable
credit against its regular federal income tax liability in future taxable years
to the extent the corporation is no longer subject to AMT.
B. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS
The U.S. federal income tax consequences to Holders of Claims arising from the
Distributions to be made under the Plan may vary depending upon, among other
things, the type of consideration received by the Holder in exchange for the
indebtedness it holds, the nature of the indebtedness owing to it, whether the
Holder is a corporation, whether the Holder has previously claimed a bad debt or
worthless security deduction in respect of its Claim, whether such Claim
constitutes a "security" for purposes of the reorganization provisions or other
provisions of the IRC, whether the Holder is a resident of the United States for
tax purposes, whether the Holder reports income on the accrual or cash basis,
and whether the Holder receives Distributions under the Plan in more than one
taxable year. In some cases, the modification of a Claim may represent for tax
purposes an exchange of the Claim for a modified Claim, even though no actual
transfer takes place. In addition, the tax consequences will depend on the
actual implementation of the Plan as a taxable or tax-free reorganization.
1. Recognition Of Gain Or Loss
Under the Plan certain Holders of Impaired Claims will receive New Common Stock
or Cash in exchange for their Claims. In addition, certain Holders of Impaired
Claims will receive the Right to purchase New Common Stock pursuant to the
Rights Offering. It is unclear, as a legal and factual matter, whether the
receipt of the Rights, or the acquisition
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of New Common Stock pursuant to the exercise of such Rights, will be deemed to
be additional consideration received in exchange for their Claims. Accordingly,
each Holder should consult its own tax advisor as to whether the Holder is
required to take the Rights into account in computing any gain or loss realized
from the Plan. The remainder of this discussion assumes that the Rights are
treated as consideration received in the exchange.
The receipt of New Common Stock and Rights in exchange for Claims against
Intermet (but not against any subsidiary) that constitute "securities" (within
the meaning of the reorganization provisions of the IRC) pursuant to the Plan
will constitute a recapitalization and a reorganization within the meaning of
Section 368(a)(1)(E) of the IRC. A Holder who receives New Common Stock and
Rights in an exchange qualifying as a reorganization will not recognize gain or
loss on such exchange, except that income or loss may be reportable in respect
of unpaid interest that accrued during such Holder's holding period. See Section
XIII.B.2., "Distributions in Discharge of Accrued but Unpaid Interest," for more
information. The aggregate tax basis of New Common Stock and Rights that are
received by a Holder in an exchange treated as a reorganization for tax purposes
will equal the Holder's tax basis in his Claim (allocated between the New Common
Stock and the Rights in proportion to their fair market values), and the holding
period of such New Common Stock and Rights will include the period for which the
Holder held the Claim surrendered in exchange therefor, provided such Claim is
held as a capital asset at the time of the exchange.
There is no precise definition under the tax law of what constitutes a
"security" for purposes of determining whether the receipt of New Common Stock
and Rights under the Rights Offering in exchange for Claims is a
"reorganization", and all facts and circumstances pertaining to the origin and
character of a Claim are relevant in determining its status. A prominent factor
that courts have relied upon in determining whether a debt instrument
constitutes a "security" is the term of the instrument, i.e., the longer the
term of the debt instrument, the more likely it is a "security." Each Holder of
a Claim should consult its own tax advisor to determine whether its Claim
constitutes a "security" for federal income tax purposes and whether
reorganization treatment may be applicable to it.
Each Holder of a Claim who receives New Common Stock and Rights in an exchange
not qualifying as a reorganization (including any Holder of a Claim against a
subsidiary of Intermet), and each Holder of a Claim who receives Cash with
respect to such Claim, will recognize gain or loss equal to the difference
between (i) such Holder's amount realized in respect of its Claim, which is the
amount of Cash and the fair market value of any property (including New Common
Stock and Rights) received by the Holder in satisfaction of its Claim (other
than in respect of any Claim for accrued but unpaid interest) and (ii) the
Holder's adjusted tax basis in its Claim (other than basis attributable to any
Claim for accrued but unpaid interest). See Section XIII.B.2., "Distributions in
Discharge of Accrued but Unpaid Interest," for more information. The tax basis
of New Common Stock and Rights received by a Holder who is required to report
gain or loss under these rules will be the fair market value of such New Common
Stock and Rights on
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the Effective Date, and the holding period of the New Common Stock and Rights
will commence the day following the Effective Date.
Where gain or loss is recognized by a Holder of a Claim in respect of its Claim,
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 Claim constitutes a capital
asset in the hands of the Holder and how long it has been held, whether the
Claim was acquired at a market discount, and whether and to what extent the
Holder can claim a bad debt deduction.
Subject to certain limitations, IRC Section 166 and the regulations thereunder
allow a deduction for a debt which becomes worthless, or in some cases partially
worthless, during the year. The amount of the bad debt deduction is limited to
the Creditor's tax basis in the indebtedness underlying the Claim. No deduction
is allowed under IRC Section 166 for a debt evidenced by a "security" as defined
in IRC Section 165(g)(2)(C). Instead, IRC Section 165(g) provides that if a
security which is a capital asset becomes worthless during a year, the loss
resulting therefrom is treated as a loss from the sale or exchange, on the last
day of the taxable year, of a capital asset. For this purpose, the term
"security" is defined in IRC Section 165(g)(2)(C) as a bond, debenture, note, or
certificate, or other evidence of indebtedness, issued by a corporation, with
interest coupons or in registered form. Holders of Claims are urged to consult
their tax advisors with respect to their ability to take a bad debt deduction.
A Holder who purchased its Claim from a prior Holder at a market discount may be
subject to the market discount rules of the IRC, under which gain from the
disposition of the Claim may be characterized as ordinary income to the extent
of the market discount that is deemed to have accrued under those rules.
Holders of General Unsecured Claims are urged to consult their tax advisors to
determine the character of any gain or loss recognized in connection with the
implementation of the Plan.
2. Distributions In Discharge Of Accrued But Unpaid Interest
In general, to the extent that money or property (including New Common Stock and
Rights) received by a Holder of a General Unsecured Claim is received in
satisfaction of interest accrued during its holding period, such amount will be
taxable to the Holder as interest income (if not previously included in the
Holder's gross income). Conversely, such a Holder will recognize a deductible
loss to the extent any accrued interest claimed or amortized OID was previously
included in its gross income and is not paid in full. It is unclear whether a
Holder of a Claim with previously included OID that is not paid in full would be
required to recognize a capital loss, rather than an ordinary loss. Holders of
claims for accrued interest including amortized OID should consult their own tax
advisors.
Pursuant to the Plan, all Distributions in respect of any Claim will be
allocated first to the principal amount of such Claim and thereafter, to accrued
but unpaid interest, if any.
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However, there is no assurance that such allocation will be respected by the IRS
for federal income tax purposes.
Each Holder of a General Unsecured Claim is urged to consult its tax advisor
regarding the allocation of consideration and the deductibility of previously
included unpaid interest and OID for tax purposes.
3. Exercise Of Rights
A Holder will not recognize gain or loss upon the exercise of Rights. The basis
of the New Common Stock acquired through a Holder's exercise of such Rights will
be equal to the price paid for the New Common Stock acquired by the exercise of
the Rights, plus the basis of such Rights, if any. The holding period for the
New Common Stock acquired through the exercise of Rights will begin on the day
after the New Common Stock is acquired.
C. U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF NEW COMMON STOCK
1. U.S. Holders
The following is a description of the principal U.S. federal income tax
consequences that may be relevant with respect to the acquisition, ownership,
and disposition of New Common Stock. This description addresses only the U.S.
federal income tax considerations of Holders that will receive New Common Stock
under the Plan and that will hold such New Common Stock as capital assets. For
purposes of this description, a "U.S. Holder" is a beneficial owner of New
Common Stock that, for U.S, federal income tax purposes, is:
- a citizen or resident of the United States, including an alien
individual who is a lawful permanent resident of the United
States under the "substantial presence" test set forth in IRC
Section 7701(b);
- a corporation (or other business entity treated as a corporation
for U.S. federal income tax purposes) created or organized in or
under the laws of the United States or any state thereof
(including the District of Columbia);
- an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
- a trust if (1) the trust validly elects to be treated as a United
States person for U.S. federal income tax purposes or (2) a U.S.
court is able to exercise primary supervision over its
administration and one or more United States persons have the
authority to control all of the substantial decisions of such
trust.
A "Non-U.S. Holder" is a beneficial owner of New Common Stock that is not a U.S.
Holder.
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If a partnership (or any other entity treated as a partnership for U.S. federal
income tax purposes) holds New Common Stock, the tax treatment of a partner in
such partnership will generally depend on the status of the partner and the
activities of the partnership. Such a partner should consult its tax advisor as
to its tax consequences.
2. Dividends And Other Distributions
The gross amount of any distribution by Reorganized Intermet of Cash or property
with respect to the New Common Stock, other than tax-free stock dividends,
spin-offs, and distributions in redemption of stock or in complete or partial
liquidation, will be includible in income by a U.S. Holder as dividend income
when received or accrued (in accordance with the holder's method of accounting)
to the extent such distributions are paid out of the current or accumulated
earnings and profits of Reorganized Intermet as determined under U.S. federal
income tax principles. To the extent, if any, that the amount of any
distribution by Reorganized Intermet exceeds Reorganized Intermet's current and
accumulated earnings and profits as determined under U.S. federal income tax
principles, it will be treated first as a tax-free return of the U.S. Holder's
adjusted tax basis in the New Common Stock and thereafter as gain from an
exchange of the stock (which is capital gain if the stock is held as a capital
asset).
Under current law, noncorporate U.S. Holders will be taxed on dividends paid by
Reorganized Intermet in taxable years beginning on or before December 31, 2008
at the lower rates applicable to long-term capital gains if such individuals
satisfy certain holding period and risk requirements. Holders should consult
their own tax advisors regarding the rate at which dividend income will be
taxed, based on their circumstances.
Subject to certain limitations, a corporate U.S. Holder will generally be
eligible for the dividends received deduction, but the benefit of such deduction
may be reduced by the AMT. Corporate U.S. Holders should consult their tax
advisor regarding the availability of, and limitations on, the dividends
received deduction.
Distributions made on New Common Stock held by a Non-U.S. Holder (other than
dividends that are effectively connected to a U.S. trade or business of the
Non-U.S. Holder) will generally be subject to withholding tax at a 30% rate,
subject to reduction under an applicable income tax treaty. In order to obtain a
reduced rate of withholding under a treaty or by virtue of the dividend's
connection with a U.S. trade or business, a Non-U.S. Holder will be required to
provide a properly executed IRS Form W-8BEN certifying its entitlement to the
benefits of the treaty, or W-8ECI certifying its connection with a U.S. trade or
business, which forms must be updated periodically. A Non-U.S. Holder that is
claiming the benefits of an income tax treaty may be required in certain
circumstances to provide a taxpayer identification number or certain documentary
evidence to prove residence in the treaty country.
3. Sale Or Exchange Of Reorganized Intermet Common Stock
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A U.S. Holder generally will recognize gain or loss on the sale or exchange of
New Common Stock equal to the difference between the amount realized on such
sale or exchange and the U.S. Holder's adjusted tax basis in the New Common
Stock. Such gain or loss will be capital gain or loss if the stock is held as a
capital asset. However, in any case where a Holder claims a bad debt deduction
under IRC Section 166 or other ordinary loss with respect to the Claim exchanged
for the New Common Stock, or uses the cash method of accounting and does not
include in taxable income the amount that would have been included had the Claim
been paid in full, gain from the subsequent sale or exchange of the New Common
Stock will be "recaptured" as ordinary income to the extent of the previously
allowed deduction or excluded income, reduced in each case by any income
recognized by the Holder on receipt of the New Common Stock in exchange for the
Claim.
Under current law, the maximum marginal U.S. federal income tax rate applicable
to long term capital gain of a noncorporate U.S. Holder is lower than the
maximum marginal U.S. federal income tax rate applicable to ordinary income
(other than certain dividends) if such U.S. Holder's holding period for such New
Common Stock exceeds one year.
Subject to the discussion in Section XIII.B.4., "Backup Withholding Tax and
Information Reporting Requirements," a Non-U.S. Holder of New Common Stock
generally will not be subject to U.S. federal income or withholding tax on any
gain realized on the sale or exchange of such New Common Stock unless (1) such
gain is effectively connected with the conduct by such Non-U.S. Holder of a
trade or business in the United States, (2) in the case of any gain realized by
an individual Non-U.S. Holder, such Non-U.S. Holder is present in the United
States for 183 days or more in the taxable year of such sale or exchange and
certain other conditions are met, (3) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to expatriates; or (4)
Reorganized Intermet is or has been a U.S. real property holding corporation
within the meaning of IRC Section 897 within the shorter of the five-year period
preceding the sale, exchange or other disposition of the New Common Stock or the
period the Non-U.S. Holder held the New Common Stock. It is not anticipated that
Reorganized Intermet will be treated as a U.S. real property holding corporation
for U.S. federal income tax purposes.
If a Non-U.S. Holder of New Common Stock is engaged in a trade or business in
the United States, and gain from the sale of New Common Stock is effectively
connected with the conduct of that trade or business, the Non-U.S. Holder may be
subject to tax on such gain in the same manner as a U.S. Holder. Non-U.S.
Holders should consult their tax advisors with regard to U.S. taxation of gain
from the sale of New Common Stock.
4. Backup Withholding Tax And Information Reporting Requirements
United States backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate Holders of Intermet
common stock or Claims. Information reporting generally will apply to payments
under the Plan of interest, compensation and other reportable payments to
Holders of Claims, and payments of dividends on or proceeds from the sale or
redemption of, New Common Stock made
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within the United States to a Holder of New Common Stock or a Holder of a Claim,
other than an exempt recipient, such as a corporation or non-United States
Person that provides an appropriate certification. A payor will be required to
withhold backup withholding tax from any such payment to a Holder, if the Holder
fails to furnish its correct taxpayer identification number or otherwise fails
to comply with, or establish an exemption from, such backup withholding tax
requirements. The backup withholding tax rate is 28% for years 2003 through
2010.
In the case of such payments made within the United States to a foreign simple
trust, a foreign grantor trust or a foreign partnership (other than payments to
a foreign simple trust, a foreign grantor trust or a foreign partnership that
qualifies as a "withholding foreign trust" or a "withholding foreign
partnership" within the meaning of certain U.S. Treasury Regulations) that are
not effectively connected with the conduct of a trade or business in the United
States, the beneficiaries of the foreign simple trust, the persons treated as
the owners of the foreign grantor trust, or the partners of the foreign
partnership, as the case may be, will be required to provide the certification
discussed above in order to establish an exemption from backup withholding tax
and information reporting requirements. Moreover, a payor may rely on a
certification provided by a payee that is not a United States Person only if
such payor does not have actual knowledge or a reason to know that any
information or certification stated in such certificate is incorrect.
5. Importance Of Obtaining Professional Tax Advice
THE FOREGOING DISCUSSION IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE
USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES THAT MAY
BE IMPOSED ON ANY TAXPAYER. THIS DISCUSSION WAS WRITTEN TO SUPPORT THE PROMOTION
OR MARKETING OF THE MATTERS ADDRESSED HEREIN. THE FOREGOING IS INTENDED TO BE
ONLY A SUMMARY OF CERTAIN OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX
PROFESSIONAL. THE FEDERAL, STATE, AND LOCAL INCOME AND OTHER TAX CONSEQUENCES OF
THE PLAN ARE COMPLEX AND UNCERTAIN AND MAY VARY BASED ON THE INDIVIDUAL
CIRCUMSTANCES OF EACH HOLDER OF A CLAIM. ACCORDINGLY, EACH HOLDER OF A CLAIM OR
EQUITY INTEREST IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING
THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES UNDER
THE PLAN BASED ON ITS OWN PARTICULAR CIRCUMSTANCES.
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XIV. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS TEST
A. FEASIBILITY OF THE PLAN
In connection with Confirmation of the Plan, Section 1129(a)(11) of the
Bankruptcy Code requires that the Bankruptcy Court find that Confirmation of the
Plan is not likely to be followed by the liquidation or the need for further
financial reorganization of the Debtors, unless proposed by the Plan. This is
the so-called "feasibility" test. The Debtors believe that with a de-leveraged
capital structure their businesses will return to viability. The decrease in the
amount of debt on Reorganized Intermet's balance sheet will significantly reduce
interest expense and principal requirements. Based on the terms of the Plan, at
emergence Reorganized Intermet will have approximately $190 million of debt,
including amounts funded under the Exit Financing Facility, in contrast to more
than $400 million of debt prior to the restructuring (before considering accrued
interest).
As described in detail in Section IX, "Effect Of Confirmation And Implementation
Of The Plan," the Reorganized Debtors will enter into, on the Effective Date,
the Exit Financing Facility in order to repay in full the DIP Facility Claims
and to make other payments required to be made on the Effective Date. The
Debtors initiated discussions with potential exit lenders in early 2005 and
received initial proposals for the financing by such exit lenders in March. As
of the date of publication of this Disclosure Statement, the Debtors have either
received or expect to receive shortly from one or more lenders final commitment
letters with regard to the Exit Financing Facility. The Debtors are seeking
commitments for approximately $260 million for the Exit Financing Facility, not
all of which they expect to be drawn on the Effective Date, as indicated in the
Projections.
To support their belief in the feasibility of the Plan, the Debtors have
prepared the Projections for the period from 2005 through 2009. The
Professionals have not performed an independent investigation of the accuracy or
completeness of such financial Projections and disclaim any responsibility for
or liability with respect to such Projections. SEE EXHIBIT G - "PROJECTED
FINANCIAL INFORMATION FOR THE REORGANIZED DEBTORS."
The Projections indicate that Reorganized Intermet should have sufficient cash
flow to make the payments required under the Plan on the Effective Date and to
repay and service its post-Confirmation debt obligations and to maintain its
operations during this period. Accordingly, the Debtors believe that the Plan
complies with the standard of Section 1129(a)(11) of the Bankruptcy Code. As
noted in the Projections, however, the Debtors caution that no representations
can be made as to the accuracy of the Projections or as to Reorganized
Intermet's ability to achieve the projected results. Many of the assumptions
upon which the Projections are based are subject to uncertainties outside of the
control of the Debtors. Some assumptions inevitably will not materialize, and
events and circumstances occurring after the date on which the Projections were
prepared may be different from those assumed or may be unanticipated, and may
adversely affect the Debtors' financial results. As discussed elsewhere in this
Disclosure Statement, there are
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numerous circumstances that may cause actual results to vary from the projected
results, and the variations may be material and adverse. SEE SECTION XII -
"CERTAIN FACTORS TO BE CONSIDERED" for a discussion of certain risk factors that
may affect financial feasibility of the Plan.
THE PROJECTIONS ARE QUALIFIED BY AND SUBJECT TO THE ASSUMPTIONS SET FORTH HEREIN
AND THE OTHER INFORMATION CONTAINED HEREIN. THE PROJECTIONS WERE NOT PREPARED
WITH A VIEW TOWARD COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE SEC, AICPA
OR ANY OTHER REGULATORY OR PROFESSIONAL AGENCY OR BODY, GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES OR CONSISTENCY WITH THE AUDITED FINANCIAL STATEMENTS
REFERENCED IN THIS DISCLOSURE STATEMENT. FURTHERMORE, THE PROJECTIONS HAVE NOT
BEEN, AND WILL NOT BE, AUDITED BY THE DEBTORS' INDEPENDENT CERTIFIED
ACCOUNTANTS. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE
BASED ON A VARIETY OF ASSUMPTIONS, SOME OF WHICH HAVE NOT BEEN ACHIEVED TO DATE
AND MAY NOT BE REALIZED IN THE FUTURE, AND ARE SUBJECT TO SIGNIFICANT BUSINESS,
LITIGATION, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF
WHICH ARE BEYOND THE CONTROL OF THE DEBTORS. CONSEQUENTLY, THE PROJECTIONS
SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY BY THE DEBTORS, OR ANY
OTHER PERSON, THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE PRESENTED IN THE PROJECTIONS. THE PROJECTIONS SHOULD BE
READ TOGETHER WITH THE INFORMATION CONTAINED UNDER THE HEADINGS "OPERATIONS OF
THE DEBTORS," AND "CERTAIN FACTORS TO BE CONSIDERED," AND THE OTHER INFORMATION
CONTAINED IN EXHIBITS G & H -"PROJECTED FINANCIAL INFORMATION FOR THE
REORGANIZED DEBTORS" AND "SELECTED HISTORICAL FINANCIAL INFORMATION."
B. BEST INTERESTS TEST
Even if the Plan is accepted by each class of Claims, the Bankruptcy Code
requires that the Bankruptcy Court find that the Plan is in the best interests
of all Classes of Creditors and Equity Interest Holders. The "best interests"
test requires that the Bankruptcy Court find either that all members of an
Impaired Class of Claims or Equity Interests have accepted the Plan or that the
Plan will provide each member who has not accepted the Plan with a recovery of
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 Debtors were
liquidated under Chapter 7 of the Bankruptcy Code.
To calculate the Distribution to members of each Impaired Class of Holders of
Claims and Interests if the Debtors were liquidated, the Bankruptcy Court must
first determine the aggregate dollar amount that would be generated from the
Debtors' assets if the Cases were converted to Chapter 7 cases under the
Bankruptcy Code. This "liquidation value" would consist primarily of the
proceeds from a sale of the Debtors' Assets by a Chapter 7
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trustee and the cash held by the Debtors at the time of the commencement of the
Chapter 7 cases.
The amount of liquidation value generated from the liquidation of the Debtors'
Assets and properties would be reduced by the amount of any Claims secured by
such Assets and the costs and expenses of liquidation, as well as by other
administrative expenses and costs (including any break-up or termination fees
approved by the Bankruptcy Court) of both the Chapter 7 cases and the Chapter 11
Cases. Costs of liquidation under Chapter 7 of the Bankruptcy Code would include
the compensation of a trustee, as well as of counsel and other professionals
retained by the trustee, asset disposition expenses, all unpaid expenses
incurred by the Debtors in the Cases (such as compensation of attorneys,
financial advisors and accountants) that are allowed in the Chapter 7 cases and
litigation costs and claims arising from the operations of the Debtors during
the pendency of the Cases. The liquidation itself could trigger certain priority
payments that otherwise would be due in the ordinary course of business. The
priority claims which may arise in liquidation cases would be paid in full from
the liquidation proceeds before the balance would be made available to pay
pre-Chapter 11 priority and general Claims or to make any distribution in
respect of equity interests. The liquidation would also prompt the rejection of
any Executory Contracts and unexpired leases and thereby create higher amounts
of General Unsecured Claims.
In applying the "best interests" test, it is possible that Claims and Interests
in the Chapter 7 cases may not be classified according to the seniority of such
Claims and Interests as provided in the Plan. In the absence of a contrary
determination by the Bankruptcy Court, all pre-Chapter 11 unsecured Claims which
have the same rights upon liquidation would be treated as one Class for purposes
of determining the potential distributions of the liquidation proceeds resulting
from the Debtors' Chapter 7 cases. The distributions from the liquidation
proceeds would be calculated ratably according to the amount of the Claim held
by each Creditor. Therefore, Creditors who claim to be third-party beneficiaries
of any contractual subordination provisions might be required to seek to enforce
such contractual subordination provisions in the Bankruptcy Court or otherwise.
Section 510(a) of the Bankruptcy Code provides that subordination agreements are
enforceable in a bankruptcy case to the same extent that such subordination is
enforceable under applicable non-bankruptcy law. Therefore, no Class of Claims
that is contractually subordinated to another Class would receive any payment on
account of its Claims, unless and until such senior Class were paid in full.
Once the Bankruptcy Court ascertains the recoveries in liquidation of secured
Creditors and priority claimants, it must determine the probable distribution to
General Unsecured Creditors from the remaining available proceeds in
liquidation. If such probable distribution has a value greater than the
Distributions to be received by such Creditors under the Plan, then the Plan is
not in the best interests of Creditors and cannot be confirmed by the Bankruptcy
Court. As shown in the Liquidation Analysis, the Debtors currently believe that
each Holder of Claims in an Impaired Class will likely receive at least as much
under the Plan as they would receive if the Debtors were liquidated, and
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that the Plan should therefore meet the requirements of Section 1129(a)(7) of
the Bankruptcy Code.
C. CHAPTER 7 LIQUIDATION ANALYSIS
As noted above, the Debtors believe that under the Plan all Claims against any
of the Debtors will receive property with a value not less than the value such
Holder would receive in a liquidation of the Debtors under Chapter 7 of the
Bankruptcy Code. The Debtors' belief is based primarily on:
(i) consideration of the effects that a Chapter 7 liquidation would have on the
ultimate proceeds available for Distribution to Holders of Claims and Equity
Interests, including:
- The increased costs and expenses of a liquidation under Chapter 7
arising from fees payable to a Chapter 7 trustee and professional
advisors to the trustee, all of which take priority over Chapter 11
expenses
- The erosion in value of assets in a Chapter 7 case in the context of
the rapid liquidation required under Chapter 7 and the "forced sale"
atmosphere that would prevail,
- The adverse effects on the Debtors' businesses as a result of the
likely departure of key employees and the probable loss of customers,
- The substantial increases in Claims, such as estimated contingent
Claims, which would be satisfied on a priority basis or on parity with
existing Claims against the Debtors, and
- The substantial delay in Distributions to the Holders of Claims and
Equity Interests that would likely ensue in a Chapter 7 liquidation;
and
(ii) the Liquidation Analysis prepared by the Debtors and described below, which
is attached hereto as Exhibit F.
The Liquidation Analysis is provided solely to discuss the effects of a
hypothetical Chapter 7 liquidation of the Debtors and is subject to the
assumptions set forth herein. The Liquidation Analysis has not been
independently audited or verified and there can be no assurance that such
assumptions would be accepted by the Bankruptcy Court.
The Liquidation Analysis reflects the estimated cash proceeds, net of
liquidation-related costs, that would be available to Creditors if the Debtors
were liquidated in Chapter 7 proceedings. Underlying the Liquidation Analysis
are a number of estimates and assumptions that, although developed and
considered reasonable by the Debtors' management and Lazard, are inherently
subject to significant business, economic and competitive uncertainties and
contingencies beyond the control the Debtors and their management. Accordingly,
while the Liquidation Analysis is necessarily presented with numerical
specificity, there can be no assurance that the values assumed would be realized
if the Debtors were in fact liquidated, nor can there be any assurance that the
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Bankruptcy Court would accept this analysis or concur with such assumptions in
making its determinations under Section 1129(a) of the Bankruptcy Code. Because
the actual proceeds from the liquidation of the Debtors could be materially
lower or higher than the amounts set forth below, no representation or warranty
can be or is being made with respect to the actual proceeds that could be
received in a Chapter 7 liquidation of the Debtors. The Liquidation Analysis was
prepared solely for purposes of estimating proceeds available in Chapter 7
liquidations of the Estates and does not represent values that may be
appropriate for any other purpose. Nothing contained in these valuations is
intended to or may constitute a concession or admission of the Debtors for any
other purpose. 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 A LIQUIDATION, AND ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE
SHOWN HERE.
The table in Exhibit F details the computation of the Debtors' liquidation value
and the estimated distributions to Holders of Impaired Claims in a Chapter 7
liquidation of the Debtors. The Liquidation Analysis was prepared by Lazard and
the Debtors' management based upon the Debtors' North American unaudited balance
sheets of each of the Debtors as of December 31, 2004. The Liquidation Analysis
assumes that the actual December 31, 2004, balance sheets, on which the analysis
is based, is a proxy for the balance sheets on the date on which a liquidation
would commence. The Liquidation Analysis also assumes that the liquidation of
the Debtors would be shepherded by a Bankruptcy Court-appointed trustee and
would continue for approximately six to nine months (the "Liquidation Period"),
during which time all of the Debtors' major Assets would either be sold or
conveyed to the respective Lien Holders and the cash proceeds, net of
liquidation-related costs, would be distributed to Creditors. Although some of
the Debtors' assets might be liquidated during a shorter period of time, other
assets may be more difficult to collect or sell, thus expanding the Liquidation
Period.
During the Liquidation Period, the Debtors' receivables would be collected and
other assets would be sold in a commercially reasonable manner. If the Debtors
failed to perform under existing contracts, massive setoffs would ensue. In the
Liquidation Analysis, the liquidation values of certain assets were determined
by general classes of assets by disposition. The Liquidation Analysis was
performed on the Debtors' North American operations, and assumes that
liquidation proceeds would be distributed in accordance with Bankruptcy Code
Sections 726 and 1129(b). The Liquidation Analysis does not assume proceeds from
recoveries of any Avoidance Actions or other Causes of Action. The Liquidation
Analysis does not assume proceeds from recoveries resulting from bank Liens on
assets held outside of the Debtors and its subsidiaries. Additionally, the
Liquidation Analysis does not assume proceeds from litigation which may provide
awards in favor of the Debtors. These claims could have substantial value.
In summary, subject to all of the assumptions, conditions, and limitations set
forth above, the Debtors believe that Chapter 7 liquidations of the Debtors
could result in a diminution in the value to be realized by the Holders of
Claims and, as set forth in the table found in
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Exhibit F, the Debtors' management estimates that in a liquidation, the Holders
of General Unsecured Claims would not receive distributions on such claims.
XV. SOLICITATION OF THE PLAN
A. PARTIES IN INTEREST ENTITLED TO VOTE
Under Section 1124 of the Bankruptcy Code, a class of claims or interests is
deemed to be "impaired" under a plan unless (i) the plan leaves unaltered the
legal, equitable, and contractual rights to which such claim or interest
entitles the holder thereof 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, the plan cures all
existing defaults (other than defaults resulting from the occurrence of the
bankruptcy); reinstates the maturity of such claim or interest as it existed
before the default; compensates 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 does not otherwise alter the
legal, equitable, or contractual rights to which such claim or interest entitles
the holder of such claim or interest.
Generally, subject to other restrictions of the Bankruptcy Code and the
procedures approved by the court with respect to solicitation of confirmation of
the plan, a holder of a claim or equity interest may vote to accept or to reject
a plan if (i) the claim or interest is "allowed," which means generally that no
party in interest has objected to such claim or interest, and (ii) the claim or
interest is impaired by the plan. If, however, the holder of an impaired claim
or interest will not receive or retain any distribution under the plan on
account of such claim or interest, the Bankruptcy Code deems such holder to have
rejected the plan, and, accordingly, holders of such claims and interests do not
actually vote on the plan. If a claim or interest is not impaired by the plan,
the Bankruptcy Code deems the holder of such claim or interest to have accepted
the plan and, accordingly, holders of such claims and interests are not entitled
to vote on the plan.
By signing and returning the Ballot, each Holder of a Class 3a, 4, 4a, 4b, 4c or
5 Claim will also be confirming that (i) such Holder and/or legal and financial
advisors acting on its behalf has had the opportunity to ask questions of and
receive answers from the Debtors concerning the terms of the Plan, the
businesses of the Debtors and other related matters, (ii) the Debtors have made
available to such Holder or its agents all documents and information relating to
the Plan and related matters reasonably requested by or on behalf of such
Holder, (iii) except for information provided by the Debtors in writing, and by
its own agents, such Holder has not relied on any statements made or other
information received from any person with respect to the Plan; and (iv) if such
Creditor elects to receive New Common Stock, they agree to be bound by the
Stockholders' Agreement as described in Section II.B., above.
By signing and returning the Ballot each Holder of a Class 4, 4a, 4b, 4c or 5
Claim also acknowledges that the securities being offered pursuant to the Plan
are not being offered pursuant to a registration statement filed with the SEC
and represents that any such securities will be acquired for its own account and
not with a view to any distribution of
144
such securities in violation of the Securities Act. It is expected that when
issued pursuant to the Plan such securities will be exempt from the registration
requirements of the Securities Act by virtue of Section 1145 of the Bankruptcy
Code and may be resold by the holders thereof subject to the provisions of such
Section 1145 and the Stockholders' Agreement.
B. CLASSES IMPAIRED UNDER THE PLAN
Pursuant to Section 1126 of the Bankruptcy Code, Classes 3a, 4, 4a, 4b, 4c, and
5 are entitled to vote to accept or reject the Plan. Further, pursuant to
Section 1126 of the Bankruptcy Code, each Unimpaired Class of Claims (Classes 1,
2, 3 and 6a) is deemed to have accepted the Plan and, therefore, is not entitled
to vote to accept or reject the Plan. In addition, because Holders of Class 6b
Impaired Equity Interests will not receive or retain any property under the Plan
on account of their interests, Holders of Class 6b Claims are deemed to have
rejected the Plan and are not entitled to vote.
C. WAIVERS OF DEFECTS, IRREGULARITIES, ETC.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots will be determined by the Balloting Agent
and the Debtors in their sole discretion, which determination will be final and
binding. As indicated below under "Withdrawal of Ballots; Revocation," effective
withdrawals of Ballots must be delivered to the Balloting Agent prior to the
Voting Deadline. The Debtors reserve the absolute right to contest the validity
of any such withdrawal. The Debtors also reserve the right to reject any and all
Ballots not in proper form, the acceptance of which would, in the opinion of the
Debtors or their counsel, be unlawful. 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 deliveries of Ballots 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.
Ballots previously furnished (and as to which any irregularities have not
theretofore been cured or waived) will be invalidated.
D. WITHDRAWAL OF BALLOTS; REVOCATION
Any party who has delivered a valid Ballot for the acceptance or rejection of
the Plan may withdraw such acceptance or rejection by delivering a written
notice of withdrawal to the Balloting Agent at any time prior to the Voting
Deadline. A notice of withdrawal, to be valid, must (i) contain the description
of the Claim(s) to which it relates and the aggregate principal amount
represented by such Claim(s), (ii) be signed by the withdrawing party in the
same manner as the Ballot being withdrawn, (iii) contain a
145
certification that the withdrawing party owns the Claim(s) and possesses the
right to withdraw the vote sought to be withdrawn and (iv) be received by the
Balloting Agent in a timely manner at the address set forth below. The Debtors
intend to consult with the Balloting Agent to determine whether any withdrawals
of Ballots were received and whether the requisite acceptances of the Plan have
been received. As stated above, the Debtors expressly reserve the absolute right
to contest the validity of any such withdrawals of Ballots.
Unless otherwise directed by the Bankruptcy Court, a purported notice of
withdrawal of Ballots which is not received in a timely manner by the Balloting
Agent will not be effective to withdraw a previously cast Ballot.
Any party who has previously submitted to the Balloting Agent prior to the
Voting Deadline a properly completed Ballot may revoke such Ballot and change
his or its vote by submitting to the Balloting Agent prior to the Voting
Deadline a subsequent properly completed ballot for acceptance or rejection of
the Plan. In the case where more than one timely, properly completed Ballot is
received, only the Ballot which bears the latest date of receipt by the
Balloting Agent will he counted for purposes of determining whether the
requisite acceptances have been received.
E. FURTHER INFORMATION; ADDITIONAL COPIES
1. HOLDERS OF IMPAIRED CLAIMS
If you have any questions or require further information about the voting
procedure or voting your Claim or about the packet of material you received, or
if you wish to obtain an additional copy of the Plan, the Disclosure Statement,
or any exhibits or appendices to such documents (at your own expense, unless
otherwise specifically required by Bankruptcy Rule 3017(d)), please contact the
Balloting Agent at WWW.ADMINISTAR.NET or by telephone at (904) 807-3023.
XVI. CONCLUSION
THE DEBTORS [AND THE CREDITORS' COMMITTEE] BELIEVE THAT THE PLAN REPRESENTS THE
MOST VALUE TO THE DEBTORS' CREDITORS. THEY URGE EACH CREDITOR TO VOTE IN FAVOR
OF THE PLAN.
(signatures start on next page)
DATED: AUGUST 5, 2005
146
Signature Pages For Amended Disclosure Statement Of Intermet Corporation
And Certain Of Its Domestic Subsidiaries Dated August 5, 2005
INTERMET CORPORATION,
a Georgia corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
ALEXANDER CITY CASTING COMPANY, INC.,
an Alabama corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
CAST-MATIC CORPORATION,
a Michigan corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
COLUMBUS FOUNDRY, L.P.,
a Delaware limited partnership
By: /s/ Alan J. Miller
-----------------------
Its: Vice President, Intermet U.S. Holding, Inc.
General Partner
--------------------------------------------
DIVERSIFIED DIEMAKERS, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
GANTON TECHNOLOGIES, INC.,
an Illinois corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
Signature Pages For Disclosure Statement Of Intermet Corporation
And Certain Of Its Domestic Subsidiaries Dated June 27, 2005
INTERMET HOLDING COMPANY,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
INTERMET ILLINOIS, INC.,
an Illinois corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
INTERMET INTERNATIONAL, INC.,
a Georgia corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
INTERMET U.S. HOLDING, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
IRONTON IRON, INC.,
an Ohio corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
LYNCHBURG FOUNDRY COMPANY,
a Virginia corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
Signature Pages For Disclosure Statement Of Intermet Corporation
And Certain Of Its Domestic Subsidiaries Dated June 27, 2005
NORTHERN CASTINGS CORPORATION,
a Georgia corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
SUDBURY, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
SUDM, INC.,
a Michigan corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
TOOL PRODUCTS, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
WAGNER CASTINGS COMPANY,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
WAGNER HAVANA, INC.,
a Delaware corporation
By: /s/ Alan J. Miller
-----------------------
Its: Vice President
-----------------------
EXHIBIT A
Debtors' Amended Plans of Reorganization
- ------------------------------------------------------------------------------
The Amended Plans of Reorganization are filed herewith as Exhibit 99.1 to this
Form 8-K.
EXHIBIT B
Corporate Structure Chart
------------------------------------------------------------
Internet Corporation - Organizational Chart
[ORGANIZATIONAL CHART]
EXHIBIT B1
Post-Emergence Corporate Structure Chart
----------------------------------------
Intermet Corporation
Domestic Structure - Post Emergence
[ORGANIZATIONAL CHART]
EXHIBIT C
List of Debtors' Properties
---------------------------
FERROUS METALS SEGMENT
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED TYPE OF PRODUCTS SQUARE FOOTAGE LAND AREA
---- -------- ------ ---------------- -------------- -----------
ARCHER CREEK FOUNDRY LYNCHBURG, VA OWNED DUCTILE IRON CASTINGS 234,000 SQ. FT. MANUFACTURING FACILITY 184 ACRES
19,000 SQ. FT. OFFICE SPACE
110,000 SQ. FT. WAREHOUSE SPACE
COLUMBUS FOUNDRY COLUMBUS, GA LEASED DUCTILE IRON CASTINGS 235,000 SQ. FT. MANUFACTURING FACILITY 9 ACRES
COLUMBUS MACHINING MIDLAND, GA OWNED MACHINED & ASSEMBLED 109,000 SQ. FT. MANUFACTURING FACILITY 40 ACRES
COMPONENTS
DECATUR FOUNDRY DECATUR, IL OWNED DUCTILE IRON CASTINGS 373,000 SQ. FT. MANUFACTURING FACILITY 30 ACRES
HIBBING FOUNDRY HIBBING, MN OWNED DUCTILE IRON CASTINGS 47,000 SQ. FT. MANUFACTURING FACILITY 11 ACRES
NEUNKIRCHEN FOUNDRY NEUNKIRCHEN, OWNED DUCTILE IRON CASTINGS 237,000 SQ. FT. MANUFACTURING FACILITY 16 ACRES
GERMANY
NEW RIVER FOUNDRY RADFORD, VA OWNED DUCTILE IRON CASTINGS 176,000 SQ. FT. MANUFACTURING FACILITY 35 ACRES
PORTO FOUNDRY MAIA, PORTUGAL OWNED IRON CASTINGS 217,000 SQ. FT. MANUFACTURING FACILITY 12 ACRES
UECKERMUNDE FOUNDRY UECKERMUNDE, OWNED DUCTILE AND GRAY IRON 134,000 SQ. FT. MANUFACTURING FACILITY 13 ACRES
GERMANY CASTINGS
</Table>
LIGHT METALS SEGMENT
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED TYPE OF PRODUCTS SQUARE FOOTAGE LAND AREA
---- -------- ------ ---------------- -------------- -----------
HANNIBAL PLANT HANNIBAL, MO OWNED MAGNESIUM DIE CASTINGS 58,000 SQ. FT. MANUFACTURING FACILITY 20 ACRES
JACKSON PLANT JACKSON, TN LEASED PRECISION-ENGINEERED, 120,000 SQ. FT. MANUFACTURING 23 ACRES
CLOSE-TOLERANCE, ALUMINUM FACILITIES (2 BUILDINGS)
DIE CASTINGS
MINNEAPOLIS MINNEAPOLIS, MN OWNED PRECISION-ENGINEERED, 98,000 SQ. FT. MANUFACTURING FACILITY 9 ACRES
CLOSE-TOLERANCE, ALUMINUM
DIE CASTINGS
MONROE CITY PLANT MONROE CITY, MO OWNED ALUMINUM AND ZINC DIE 140,000 SQ. FT. MANUFACTURING 23 ACRES
CASTINGS FACILITIES (MULTIPLE BUILDINGS)
PALMYRA PLANT PALMYRA, MO OWNED MAGNESIUM DIE CASTINGS 164,000 SQ. FT. MANUFACTURING FACILITY 15 ACRES
PULASKI PLANT PULASKI, TN OWNED ALUMINUM DIE CASTINGS 115,000 SQ. FT. MANUFACTURING FACILITY 25 ACRES
RACINE MACHINING RACINE, WI OWNED MACHINED AND ASSEMBLED 155,000 SQ. FT. MANUFACTURING FACILITY 60 ACRES
COMPONENTS 24,000 SQ. FT. OFFICE BUILDING (VACANT)
RACINE PLANT RACINE, WI OWNED ALUMINUM DIE CASTINGS 178,000 SQ. FT. MANUFACTURING FACILITY 17 ACRES
STEVENSVILLE PLANT STEVENSVILLE, MI OWNED ALUMINUM PRESSURE/ 58,000 SQ. FT. MANUFACTURING FACILITY 3 ACRES
COUNTER-PRESSURE CASTINGS
</Table>
OTHER
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED OPERATIONS SQUARE FOOTAGE LAND AREA
---- -------- ------ ---------- -------------- ---------
CENTRAL PATTERN SHOP LYNCHBURG, VA OWNED PATTERN CONSTRUCTION AND 17,000 SQ. FT. MANUFACTURING FACILITY
MAINTENANCE
FLIGHT OPERATIONS WATERFORD, MI LEASED OFFICE/HANGAR FACILITY
EXECUTIVE OFFICES TROY, MI LEASED CORPORATE HEADQUARTERS 33,000 SQ. FT. OFFICE FACILITY
(UNTIL APPROXIMATELY
10/31/05)
EXECUTIVE OFFICES TROY, MI LEASED CORPORATE HEADQUARTERS 35,619 SQ. FT. OFFICE FACILITY
(AFTER APPROXIMATELY
10/31/05)
EUROPE HEADQUARTERS SAARBRUCKEN, LEASED EUROPEAN CORPORATE OFFICES 8,000 SQ. FT. OFFICE FACILITY
GERMANY
FORMER ADDISON PLANT ADDISON, IL OWNED FORMER ADDISON PLANT 47,000 SQ. FT. VACANT 2 ACRES
MANUFACTURING FACILITY
FORMER ALEXANDER CITY ALEXANDER CITY, OWNED FORMER ALEXANDER CITY VACANT 9 ACRES
PLANT AL PLANT
FORMER IRONTON IRONTON, OH OWNED FORMER IRONTON FOUNDRY 25,000 SQ. FT. VACANT OFFICE FACILITY 25 ACRES
FOUNDRY
FORMER RADFORD RADFORD, VA OWNED FORMER RADFORD FOUNDRY VACANT 113 ACRES
FOUNDRY
MANAGEMENT COLUMBUS, GA LEASED OFFICES & DATA CENTER 10,000 SQ. FT. OFFICE FACILITY
INFORMATION SYSTEMS
RESEARCH FOUNDRY LYNCHBURG, VA OWNED RESEARCH FACILITY 10,000 SQ. FT. RESEARCH BUILDING
</Table>
<Table>
<Caption>
OWNED/ APPROXIMATE APPROXIMATE
NAME LOCATION LEASED OPERATIONS SQUARE FOOTAGE LAND AREA
---- -------- ------ ---------- -------------- -----------
TECHNICAL CENTER LYNCHBURG, VA LEASED DESIGN & ENGINEERING, 22,000 SQ. FT. OFFICE/TESTING FACILITY
TECHNICAL SUPPORT
</Table>
EXHIBIT D
List of Pending Litigation
--------------------------
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
Compass Bank v. Intermet Action to recover possession Intermet Corporation
Corporation of machining center by a bank
Muscogee County, Georgia. alleging a lien that has
priority over the purchaser.
Factory Mutual Insurance Claim by subrogated insurer of Intermet Corporation,
v. Intermet a customer for damages of Intermet International, Inc
International, Inc., approximately $2.2 million for
et al. breach of contract for failure
U.S. District Court for to deliver product.
the Western District of
Virginia
Intermet v. American Complaint for declaratory Intermet Corporation,
Axle, et al. judgment that no amounts are Intermet International, Inc.
Oakland County, Mi. owing in the above-described
case titled Factory Mutual
Insurance v. Intermet
International, Inc.
Lemelson Foundation v. Claim for patent infringement Intermet Corporation
Butler Mfg. et al. of bar coding and machine
U.S. District Court vision patents.
for the District
of Arizona.
Parrish, Inc. v. Complaint to recover alleged Intermet Corporation
Intermet Corporation transportation costs of
St. Clair County, approximately $65,000
Illinois incurred by plaintiff
trucking company.
Spanhook v. Intermet Injury claim by employee of Intermet Corporation,
Corporation contractor due to condition Wagner-Havana, Inc.
Macon County, Illinois of premises.
Merchut v. Frisby Complaint alleging age and Intermet Corporation,
P.M.C., Inc. national origin Intermet Illinois, Inc.
U.S. District Court for discrimination.
the Northern District
of Illinois
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
Ramos v. Complaint alleging sexual Intermet Corporation,
Intermet Corporation harassment. Northern Castings
et al. Corporation
U.S. District Court for
the District
of Minnesota
Moore, et al. v. Complaint alleging injury Lynchburg Foundry
Airco, Inc. due to asbestos exposure. Company
et al.
Fulton County, Ga.
Colopy, et al. v. Age discrimination complaint Intermet Corporation,
Intermet Corporation brought by two employees. Intermet
U.S. District Court for International, Inc.
the Middle District of
Georgia
Huffman v. Frisby Complaint for alleged Intermet Corporation,
P.M.C., Incorporated, wrongful termination. Intermet Illinois,
et al. Inc.
Cook County, Illinois
UAW v. Cast-Matic Appeal to National Labor Cast-Matic
National Labor Relations Board from Corporation
Relations Board administrative law judge
decision granting bargaining
order in favor of UAW.
UAW v. Cast-Matic Unfair labor practice Cast-Matic
National Labor charges. Corporation
Relations Board
Edwards, et al. v. Alleged injury due to Intermet Corporation,
Air Products and exposure to benzene. Wagner Castings
Chemicals. Inc., et al. Company
Madison County, Illinois
Johnson v. Air Products Alleged injury due to Intermet Corporation,
and Chemicals. Inc., exposure to benzene. Wagner Castings
et al. Company
Madison County, Illinois
CASE CAPTION DESCRIPTION DEBTORS
- ------------ ----------- -------
McDonald, et al. v. Air Alleged injury due to Intermet Corporation,
Products and Chemicals. exposure to benzene. Wagner Castings
Inc. et al, Company
Madison County, Illinois
O'Brien, et al. v. Alleged injury due to Intermet Corporation,
Air Products and exposure to benzene. Wagner Castings
Chemicals, Inc.. et al. Company
Madison County, Illinois
Rose, et al. v. Alleged injury due to Intermet Corporation,
Air Products and exposure to benzene. Wagner Castings
Chemicals. Inc., et al. Company
Madison County, Illinois
Financial Federal Alleged damages for quantum Intermet Corporation
Credit, Inc. v. meriut, unjust enrichment
Intermet Corporation etc. arising from use of
U.S. District Court for machining center at Columbus
the Northern District of Machining plan.
Georgia
Huffman v. Frisby P.M.C., Alleged wrongful Intermet Corporation,
Incorporated, et al. termination. Intermet Illinois,
Cook County, Illinois Inc.
Fitch v. Waste Wrongful death action SUDM, Inc.,
Management. Inc., et al. against SDB, Inc./Accurate successor to
Orange County, Florida Industries. SDB, Inc.
EXHIBIT E
List of First Day Motions
-------------------------
<Table>
<Caption>
DATE
ORDER
FIRST DAY MOTION ENTERED
- ---------------- -------
Debtors' Ex Parte Motion for Immediate and Expedited Hearings on 9/29/04
First Day Motions
Ex Parte Motion for Expedited Hearing on Emergency Motion for 9/29/04
Approval and Entry of Stipulated Interim Order (I) Authorizing Use
of Cash Collateral of the Pre-Petition Lenders Pursuant to 11 U.S.C.
Section 363 and Grant of Adequate Protection Pursuant to 11 U.S.C.
Sections 363 and 364; and (II) Scheduling a Final Hearing Pursuant
to Bankruptcy Rule 4001(B)
Emergency Motion for Approval and Entry of Stipulated Interim Order 10/1/04
(I) Authorizing Use of Cash Collateral of the Pre-Petition Lenders
Pursuant to 11 U.S.C. Section 363 and Grant of Adequate Protection
Pursuant to 11 U.S.C. Sections 363 and 364, and (II) Scheduling a
Final Hearing Pursuant to Bankruptcy Rule 400l(b)
Debtors' Motion for Order Directing the Joint Administration of the 10/1/04
Debtors' Chapter 11 Cases Pursuant to Rule 1015(b) of the Federal
Rules of Bankruptcy Procedure
Debtors' Motion for Entry of an Order Authorizing Payment of 10/1/04
Pre-Petition Wages, Salaries, Payroll Taxes, and Other Compensation,
Employee Benefits and Reimburseable Employee Expenses and Certain
Other Relief
Debtors' Motion for an Order Authorizing Limited Notice Procedures 10/1/04
with Respect to All Proceedings
Debtors' Motion for Order (I) Authorizing Continued Use of Existing 10/1/04
(A) Bank Accounts, (B) Business Forms and Checks, and (C) Cash
Management System; (II) Authorizing the Continuation of Intercompany
Transactions and According Administrative Expense Status to Claims
for Such Transactions; and (III) Waiving the Investment and Deposit
Requirements of Section 345(b) of the Bankruptcy Code
Debtors' Application to Employ Foley & Lardner LLP as General Counsel 10/8/04
Pursuant to 11 U.S.C. Sections 327(a), 328(a), 329 and 1107, Rules
2014(a) and 2016(b) of the Federal Rules of Bankruptcy Procedure and
Local Bankruptcy Rule 2014-1
Application for Order Authorizing Employment and Retention of 10/8/04
JPMorgan Trust Company, National Association, as the Official Claims
and Noticing Agent of the Bankruptcy Court Pursuant to 28 U.S.C.
Section 156(c)
</Table>
<Table>
<Caption>
DATE
ORDER
FIRST DAY MOTION ENTERED
- ---------------- -------
Debtors' Motion for an Order Under 11 U.S.C. Sections 105, 503(b), 10/8/04
507(a), and 366 (I) Prohibiting Utilities From Altering, Refusing or
Discontinuing Services on Account of Pre-Petition Claims; (II)
Deeming Utilities Adequately Assured of Future Performance; and (III)
Establishing Procedures for Determining Requests for Additional
Adequate Assurance
Debtors' Motion for an Order Under 11 U.S.C. Sections 105(a) and 541 10/8/04
Confirming Authority to Pay Pre-Petition Use, Employment, Single
Business, Property and Other Taxes
Application of the Debtors to Employ Conway MacKenzie & Dunleavy as 10/13/04
Financial Advisors and Investment Bankers Nunc Pro Tune to the
Petition Date
Motion for Entry of an Order Authorizing the Debtors to Obtain 10/19/04
Post-Petition, Debtor-in-Possession Financing Pursuant to 11 USC 363
and 364, Granting Priming Liens and Superpriority Claims to the DIP
Lenders, Approving and Confirming the Grant of Adequate Protection to
the Pre-Petition Lenders and Setting a Hearing for Entry of a Final
Order
</Table>
EXHIBIT F
Liquidation Analysis
--------------------
LIQUIDATION ANALYSIS
Pursuant to section 1129(a)(7) of the Bankruptcy Code (often called the "Best
Interests Test"), Holders of Allowed Claims must either (a) accept the Plan or
(b) receive or retain under the Plan property of value, as of the Plan's assumed
Effective Date, that is not less than the value such non-accepting Holder would
receive or retain if the Debtors were to be liquidated under Chapter 7 of the
Bankruptcy Code. In determining whether the Best Interests Test has been met,
the first step is to determine the dollar amount that would be generated from a
hypothetical liquidation of the Debtors' Assets under Chapter 7. The gross
amount of cash available would be the sum of the proceeds from the disposition
of the Debtors' Assets and the cash held by the Debtors at the commencement of
their Chapter 7 cases. Prior to delivering any proceeds to General Unsecured
Creditors, available cash and asset liquidation proceeds would first be applied
to DIP Facility Claims, Pre-Petition Lender Claims, Secured Claims and amounts
necessary to satisfy any Chapter 7 fees, other professional fees and wind-down
costs (including any incremental Administrative Claims that may result from the
termination of the Debtors' business and the liquidation of the Debtors'
Assets). Any remaining cash and asset liquidation proceeds after satisfaction of
DP Facility Claims, Pre-Petition Lender Claims, Secured Claims, Administrative
Claims and Priority Claims would be available for distribution to General
Unsecured Creditors and Holders of Equity Interests in accordance with the
distribution hierarchy established by Section 726 of the Bankruptcy Code.
Underlying the Liquidation Analysis are a number of estimates and assumptions
regarding liquidation proceeds that, although developed and considered
reasonable by the Debtors' management, Lazard and the Debtors' legal advisors,
are inherently subject to significant business, economic and competitive
uncertainties and contingencies beyond the control of the Debtors and
management. ACCORDINGLY, WHILE THE LIQUIDATION ANALYSIS IS NECESSARILY PRESENTED
WITH NUMERICAL SPECFICITY, 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 A LIQUIDATION; ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE
SHOWN HERE.
Lazard prepared the Liquidation Analysis with the assistance of the Debtors'
management, based upon the Debtors' unaudited actual balance sheets as of
December 31, 2004. The Liquidation Analysis assumes these unaudited actual
balance sheets are a proxy for the balance sheets on the date on which a
liquidation would commence. The Liquidation Analysis also assumes that the
liquidation of the Debtors would commence under the direction of a Bankruptcy
Court-appointed trustee and would continue for six to nine months (the
"Liquidation Period"), during which time all of the Debtors' major Assets would
either be sold or conveyed to the respective Lien Holders and the cash proceeds
or surplus, if any, net of liquidation-related costs, would be distributed to
Creditors in order of priority. Additionally, the Liquidation Analysis assumes a
distressed sale of the Debtors' equity ownership in its European business with
such cash proceeds, net of liquidation-related costs, being distributed to the
Creditors of the Debtor owning equity interests in the European operations.
Although some of the Debtors' Assets might be liquidated during a
shorter period of time, other Assets may be more difficult to collect or sell,
thus expanding the Liquidation Period.
During the Liquidation Period, the Debtors' receivables would be collected and
other Assets would be sold in a commercially reasonable manner. In the
Liquidation Analysis, liquidation values for certain Assets were determined by
general classes of Assets. The Liquidation Analysis was performed on a
Debtor-by-Debtor basis and assumes that liquidation proceeds would be
distributed in accordance with Bankruptcy Code Sections 726 and 1129(b). The
Liquidation Analysis does not assume proceeds from recoveries of any Avoidance
Actions or other Causes of Action. The Liquidation Analysis does not assume
proceeds from recoveries resulting from bank Liens on assets held outside of the
Debtors and its subsidiaries. Additionally, the Liquidation Analysis does not
assume proceeds from litigation which may provide awards in favor of the
Debtors. These claims could have substantial value.
The Liquidation Analysis is prepared on a Debtor-by-Debtor basis consistent with
the deconsolidated structure of the Plan. Therefore, certain Claims not already
allocated to a specific Debtor, including DIP Facility Claims, Pre-Petition
Lender Claims, Secured Claims, Administrative Claims, and Priority Claims, have
been allocated proportionally to each Debtor based on the net liquidation
proceeds available to satisfy those Claims at each Debtor.
Subject to all of the assumptions, conditions, and limitations set forth above,
the Debtors believe that Chapter 7 liquidations of the Debtors could result in a
diminution in the value to be realized by the Holders of Claims and, as set
forth below, the Debtors' management estimates mat in a liquidation, the
Pre-Petition Lender Claims, Holders of Secured Claims, Administrative Claims and
Priority Claims would be Impaired. Furthermore, Holders of General Unsecured
Claims would not receive distributions on such Claims.
I. IMPORTANT CONSIDERATIONS AND ASSUMPTIONS
A. ESTIMATE OF NET PROCEEDS
The Liquidation Analysis assumes that a liquidation of the Debtors' assets would
occur under the direction of a Bankruptcy Court-appointed Chapter 7 trustee.
Liquidation values were generally assessed for classes of Assets by estimating
the percentage recoveries that a Chapter 7 might achieve through the Assets'
disposition. In the cases of machinery/equipment and inventory, Lazard utilized
appraisals produced by a third party appraiser as of December 31, 2004 to
determine liquidation values at some of the Debtors. The proceeds of these sale
transactions would be conveyed to the Debtors' Creditors in order of priority.
Proceeds from the sale of stock of foreign subsidiaries owned by one Debtor were
also estimated. Such sales are assumed to occur on a going concern basis, based
on Transaction Value-to-EBITDA multiples which reflect a distressed sale.
The Liquidation Period, estimated to be a minimum of six months to a maximum of
twelve months, would allow for an expedited sale process and the documentation
and closing of such sale transactions.
B. ESTIMATES OF COSTS
The Debtors' liquidation costs under Chapter 7 would include fees payable to a
Chapter 7 trustee as well as those that might be payable to attorneys, financial
advisors, appraisers, accountants, and other professionals in connection with
the Chapter 7 liquidation. Additionally, the Debtors would incur certain costs
of winding down operations during the Liquidation Period.
C. ALLOCATION OF CLAIMS AND DISTRIBUTION OF NET PROCEEDS BY DEBTOR
The Liquidation Analysis is prepared on a Debtor-by-Debtor basis consistent with
the deconsolidated structure of the Plan. Consequently, certain Claims not
already allocated to a specific Debtor, including certain DIP Facility Claims,
Pre-Petition Lender Claims, Secured Claims, Administrative Claims, and Priority
Claims, have been allocated proportionally to each Debtor based on the net
liquidation proceeds available to satisfy those Claims at each Debtor. This
allocation methodology allows Claims to maximize their recovery across all of
the Debtors.
DIP Facility Claims, Pre-Petition Lender Claims, and Secured Claims have
security interests in the North American Assets being liquidated and therefore
receive recovery from each Debtor before Administrative Claims, Priority Claims,
or General Unsecured Claims. Similarly, the DIP Lenders and the Pre-Petition
Lenders have security interests in two-thirds of me equity ownership of the
Debtors' European operations, the sole asset of Intermet International, Inc.
Therefore, DIP Facility Claims and Pre-Petition Lender Claims are allocated to
Intermet International, Inc. in an amount equal to two-thirds of the assumed
purchase price of the equity of the European operations, net of transaction
fees, relative to all proceeds available to DIP Facility Claims and Pre-Petition
Lender Claims. Administrative Claims and Priority Claims not already allocated
to specific Debtors are allocated proportionally to Debtors with the highest net
proceeds available for distribution, after payments to DIP Facility Claims,
Pre-Petition Lender Claims and Secured Claims. Lastly, General Unsecured Claims
not already allocated to specific Debtors, including mainly Noteholder Claims,
are granted claims in their full amount at every Debtor, except Intermet
International, Inc. and Intermet Holding Company, based on guarantees provided
by all other Debtors. It is assumed that any deficiency claim is treated as pan
passu with General Unsecured Claims at each entity.
The liquidation analysis should be analyzed in conjunction with the footnotes
that follow it. Footnotes (a) through (k) refer to the same items in each
schedule of individual Debtors' buildup to net liquidation proceeds.
II. CLAIMS BY DEBTOR
In preparing the Liquidation Analysis, Lazard, the Debtors and the Debtors'
legal advisors estimated the amount of allowed Claims by Debtor on the
commencement of a hypothetical Chapter 7 liquidation. The following schedule
contains these estimated Claims by Debtor and by class. In the event of an
actual Chapter 7 liquidation, allowed claims may vary materially from those
presented below.
ESTIMATED CLAIMS UNDER HYPOTHETICAL LIQUIDATION AS OF JUNE 2005
- -------------------------------------------------------------------------------------------------------------------
($ in 000s)
Administrative Priority Secured Unsecured Total
-------------- -------- ------- --------- -----
INTERMET CORPORATION ET AL. $39,622 $534 $200,382(a) $180,544 $421,082
ALEXANDER CITY CASTING COMPANY, INC. 0 95 0 0 95
CAST-MATIC 413 127 7 4,436 4,984
COLUMBUS FOUNDRY 2,138 374 202 13,215 15,929
DIVERSIFIED DIEMAKERS 349 606 51 6,186 7,192
GANTON 7,029 430 2,841 11,523 21,824
INTERMET CORPORATION 2,361 1,487 322 12,281 16,451
INTERMET HOLDING CO 0 0 0 0 0
INTERMET ILLINOIS 0 0 0 1,400 1,400
INTERMET INTERNATIONAL 0 7 0 7 14
INTERMET U.S. HOLDING, INC. 1,695 433 23 8,321 10,472
IRONTON 0 9 0 2,807 2,816
LYNCHBURG 416 466 158 12,377 13,416
NORTHERN CASTINGS 259 40 1 2,669 2,968
SUDBURY 0 27 0 2,880 2,907
SUDM 0 0 0 0 0
TOOL PRODUCTS 389 194 618 9,304 10,505
WAGNER CASTINGS 26,559 15 331 27,599 54,504
WAGNER HAVANA 8 0 0 1,691 1,699
------- ------ -------- -------- --------
TOTAL $81,238 $4,845 $204,935 $297,242 $588,268
- ----------
(a) Includes dip facility claim as of the anticipated commencement of the
liquidation period equal to $45.3 million.
III. CONCLUSIONS
After consideration of the effects that a Chapter 7 liquidation would have on
the ultimate proceeds available for distribution to Creditors at each Debtor,
including (i) the increased costs and expenses of a liquidation under Chapter 7
arising from fees payable to a trustee in bankruptcy and professional advisors
to such trustee, (ii) the erosion in value of Assets in a Chapter 7 case in the
context of the expeditious liquidation required under Chapter 7, and (iii)
potential increases in claims which may arise in a liquidation, the Debtors have
determined, as summarized on the charts below, that Confirmation of the Plan
will provide Creditors with a recovery that is not less than they would receive
pursuant to a liquidation of the Debtors under Chapter 7 of the Bankruptcy Code.
IV. RECOVERIES UNDER A HYPOTHETICAL CHAPTER 7 LIQUIDATION
DISTRIBUTIONS OF LIQUIDATION PROCEEDS (LOW - HIGH)
- ------------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
ALEXANDER CITY
CASTINGS CAST-MATIC COLUMBUS DIVERSIFIED GANTON INTERMET
CO., INC. CORPORATION FOUNDRY, L.P. DIEMAKERS, INC. TECH, INC. CORPORATION
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Low High Low High Low High Low High Low High Low High
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Estimated Proceeds $215 $333 $6,577 $8,366 $17,981 $24,747 $19,457 $25,433 $11,015 $14,558 $4,180 $8,651
Net Estimated Proceeds
from Subsidiary(1) 0 0 0 0 0 0 0 0 0 0 19,927 23,735
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Net Estimated
Proceeds $215 $333 $6,577 $8,366 $17,981 $24,747 $19,457 $25,433 $11,015 $14,558 $24,107 $32,386
DIP Facility Claims(TM) 67 77 2,056 1,940 5,621 5,739 6,082 5,898 3,443 3,376 1,307 2,006
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Recovery ($) 67 77 2,056 1,940 5,621 5,739 6,082 5,898 3,443 3,376 1,307 2,006
Recovery (%) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Secured Claims(TM) 241 273 7,372 6,850 20,037 20,251 21,788 20,822 10,958 11,733 4,484 7,062
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Recovery ($) 148 256 4,521 6,425 12,360 19,008 13,375 19,535 7,572 11,182 2,874 6,644
Recovery (%) 61.3% 93.8% 61.3% 93.8% 61.7% 93.9% 61.4% 93.8% 71.7% 95.3% 64.1% 94.1%
Admin Claims 0 0 413 413 2,138 2,138 349 349 7,029 7,029 41,983 41,983
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Recovery ($) 0 0 0 0 0 0 0 0 0 0 19,927 23,735
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 47.5% 56.5%
Priority Claims 95 95 127 127 374 374 606 606 430 430 2,022 2,022
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Recovery ($) 0 0 0 0 0 0 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 180,544 180,544 184,980 184,980 193,759 193,759 186,730 186,730 192,067 192,067 192,825 192,825
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Recovery ($) 0 0 0 0 0 0 0 0 0 0 0 0
Recovery (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 0 0 0 0 0 0 0 0
<Table>
<Caption>
Distribution of Liquidation Proceeds (Low - High)
- ---------------------------------------------------------------------------------------------------------------------------------
($ in 000s)
Intermet
Intermet Intermet International Intermet U.S. Ironton Lynchburg
Holding Company Illinois, Inc. Inc. Holding, Inc. Iron, Inc. Foundry Company
--------------- ---------------- ---------------- ---------------- ---------------- ---------------
Low High Low High Low High Low High Low High Low High
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Net Estimated Proceeds $0 $0 $0 $0 $59,823 $71,248 $14,444 $22,114 $0 $0 $8,343 $11,046
Net Estimated Proceeds
from Subsidiary(1) 0 0 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
TOTAL NET ESTIMATED
PROCEEDS $0 $0 $0 $0 $59,823 $71,248 $14,444 $22,114 $0 $0 $8,343 $11,046
DIP Facility Claims(a) 0 0 0 0 12,467 11,016 4,515 5,129 0 0 2,608 2,562
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Recovery($) 0 0 0 0 12,467 11,016 4,515 5,129 0 0 2,608 2,562
Recovery(%) 0.0% 0.0% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 100.0% 100.0%
Secured Claims(a) 0 0 0 0 44,726 38,894 16,184 18,106 0 0 9,257 9,035
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Recovery($) 0 0 0 0 27,415 36,483 9,929 16,986 0 0 5,735 8,484
Recovery(%) 0.0% 0.0% 0.0% 0.0% 61.3% 93.8% 61.4% 93.8% 0.0% 0.0% 62.0% 93.9%
Admin Claims 0 0 0 0 0 0 1,695 1,695 0 0 416 416
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Recovery($) 0 0 0 0 0 0 0 0 0 0 0 0
Recovery(%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Priority Claims 0 0 0 0 7 7 433 433 9 9 466 466
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Recovery($) 0 0 0 0 7 7 0 0 0 0 0 0
Recovery(%) 0.0% 0.0% 0.0% 0.0% 100.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unsecured Claims 0 0 181,944 181,944 7 7 188,865 188,865 183,351 183,351 192,921 192,921
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ -------
Recovery($) 0 0 0 0 7 7 0 0 0 0 0 0
Recovery(%) 0.0% 0.0% 0.0% 0.0% 100.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Residual Value 0 0 0 0 19,927 23,735 0 0 0 0 0 0
</Table>
DISTRIBUTION OF LIQUIDATION PROCEEDS (LOW - HIGH)
- --------------------------------------------------------------------------------
($ in 000s)
<Table>
<Caption>
NORTHERN CASTINGS TOOL PRODUCTS, WAGNER CASTINGS WAGNER HAVANA,
CORPORATION SUDBURY, INC. SUDM, INC. INC. COMPANY INC.
------------------ ----------------- ----------------- ----------------- ----------------- ------------------
LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
NET
ESTIMATED
PROCEEDS $ 1,706 $ 2,548 $ 4 $ 5 $ 0 $ 0 $ 12,085 $ 16,808 $ 8,328 $ 11,948 $ 693 $ 1,267
NET
ESTIMATED
PROCEEDS
FROM
SUBSIDIARY(1) 0 0 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL NET
ESTIMATED
PROCEEDS $ 1,706 $ 2,548 $ 4 $ 5 $ 0 $ 0 $ 12,085 $ 16,808 $ 8,328 $ 11,948 $ 693 $ 1,267
DIP FACILITY
CLAIMS(M) 533 591 1 1 0 0 3,778 3,898 2,603 2,771 217 294
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RECOVERY ($) 533 591 1 1 0 0 3,778 3,898 2,603 2,771 217 294
RECOVERY (%) 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
SECURED
CLAIMS(N) 1,913 2,086 4 4 0 0 13,163 13,722 9,131 9,762 777 1,038
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RECOVERY ($) 1,173 1,957 3 4 0 0 8,307 12,910 5,725 9,177 476 973
RECOVERY (%) 61.3% 93.8% 61.3% 93.8% 0.0% 0.0% 63.1% 94.1% 62.7% 94.0% 61.3% 93.8%
ADMIN CLAIMS 259 259 0 0 0 0 389 389 26,559 26,559 8 8
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RECOVERY ($) 0 0 0 0 0 0 0 0 0 0 0 0
RECOVERY (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PRIORITY
CLAIMS 40 40 27 27 0 0 194 194 15 15 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RECOVERY ($) 0 0 0 0 0 0 0 0 0 0 0 0
RECOVERY (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
UNSECURED
CLAIMS 183,212 183,212 183,424 183,424 180,544 180,544 189,848 189,848 208,143 208,143 182,235 182,235
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RECOVERY ($) 0 0 0 0 0 0 0 0 0 0 0 0
RECOVERY (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
RESIDUAL
VALUE 0 0 0 0 0 0 0 0 0 0 0 0
</Table>
V. NET LIQUIDATION PROCEEDS DETAIL BY DEBTOR
HYPOTHETICAL LIQUIDATION ANALYSIS ALEXANDER CITY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004 (X) RECOVERY (%) AMOUNT
-------------- ------------------ ------------------
LOW HIGH LOW HIGH
------ ------- ------ ------
CASH AND EQUIVALENTS (b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net (a) 0 65.0% 75.0% 0 0
Inventory (d) 134 40.0% 50.0% 54 67
Land (e) 37 100.0% 100.0% 37 37
Building and Improvements (net) (l) 500 30.0% 50.0% 150 250
Machinery and Equipment (net) (g) 20 20.0% 40.0% 4 8
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
----- ----- -----
TOTAL $691 $245 $362
===== ===== =====
Liquidation Fees, Expenses and Wind Down Costs (k) 12.0% 8.0% ($29) ($29)
----- -----
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $215 $333
===== =====
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS CAST-MATIC
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004 (a) RECOVERY (%) AMOUNT
-------------- ------------------ ------------------
LOW HIGH LOW HIGH
------ ------- ------ ------
CASH AND EQUIVALENTS (b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net (a) 5,601 65.0% 75.0% 3,641 4,201
Inventory (d) 2,436 30.0% 30.0% 731 731
Land (e) 42 100.0% 100.0% 42 42
Building and Improvements (net) (f) 1,876 30.0% 50.0% 563 938
Machinery and Equipment (net) (g) 11,806 21.2% 26.7% 2,498 3,149
Construction in Progress (h) 128 0.0% 25.0% 0 32
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
------- ------ ------
TOTAL $21,889 $7,474 $9,093
======= ====== ======
Liquidation Fees, Expenses and Wind Down Costs (k) 12.0% 8.0% ($897) ($727)
------ ------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $6,577 $8,366
====== ======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: COLUMBUS FOUNDRY
ESTIMATED LIQUIDATION PROCEEDS
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ---------------- ------------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Cash and Equivalents(b) $ 1 100.0% 100.0% $ 1 $ 1
Accounts Receivable, Net(c) 19,253 65.0% 75.0% $12,514 $14,440
Inventory(d) 7,279 45.9% 48.4% 3,341 3,524
Land(e) 345 100.0% 100.0% 345 345
Building and Improvements (net)(f) 3,609 30.0% 50.0% 1,083 1,805
Machinery and Equipment (net)(g) 27,054 11.6% 25.0% 3,149 6,773
Construction in Progress(h) 51 0.0% 25.0% 0 13
Other Assets(i) 635 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------- -------
Total $58,227 $20,432 $26,899
======= ======= =======
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% ($2,452) ($2,152)
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $17,981 $24,747
HYPOTHETICAL LIQUIDATION ANALYSIS: DIVERSIFIED DIEMAKERS
ESTIMATED LIQUIDATION PROCEEDS
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ---------------- ------------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Cash and Equivalents(b) $ 30 100.0% 100.0% $ 30 $ 30
Accounts Receivable, Net(c) 10,702 65.0% 75.0% $ 6,956 $ 8,027
Inventory(d) 11,432 43.7% 45.8% 4,999 5,240
Land(e) 890 100.0% 100.0% 890 890
Building and Improvements (net)(f) 10,197 30.0% 50.0% 3,059 5,099
Machinery and Equipment (net)(g) 23,211 26.6% 34.9% 6,176 8,110
Construction in Progress(h) 1,000 0.0% 25.0% 0 250
Other Assets(i) 430 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------- -------
Total $57,892 $12,110 $27,645
======= ======= =======
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% ($ 2,653) ($ 2,212)
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $19,457 $25,433
HYPOTHETICAL LIQUIDATION ANALYSIS: GANTON TECHNOLOGIES
ESTIMATED LIQUIDATION PROCEEDS
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE --------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
------------- ---------------- ------------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Cash and Equivalents(b) $ 185 100.0% 100.0% $ 185 $ 185
Accounts Receivable, Net(c) 9,897 65.0% 75.0% 6,433 7,423
Inventory(d) 5,329 14.2% 16.1% 758 859
Land(e) 630 100.0% 100.0% 630 630
Building and Improvements (net)(f) 7,595 30.0% 50.0% 2,279 3,798
Machinery and Equipment (net)(g) 11,674 19.1% 23.3% 2,232 2,721
Construction in Progress(h) 831 0.0% 25.0% 0 208
Other Assets(i) 784 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------- -------
Total $36,925 $12,517 $15,824
======= ======= =======
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% ($ 1,502) ($ 1,266)
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $11,015 $14,558
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET CORPORATION
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004 (a) RECOVERY (%) AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- ------ ------
Cash and Equivalents (b) $ 1,477 100.0% 100.0% $1,477 $1,477
Accounts Receivable, Net (c) 1,579 65.0% 75.0% 1,026 1,184
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 22,474 10.0% 30.0% 2,247 6,742
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
------- ------ ------
TOTAL $25,529 $4,750 $9,403
======= ====== ======
Liquidation Fees, Expenses and Wind Down Costs (k) 12.0% 8.0% ($570) ($752)
------ ------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $4,180 $8,651
====== ======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET HOLDING CO.
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004 (a) RECOVERY (%) AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- ------ ------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
------- ------ ------
TOTAL $ 0 $ 0 $ 0
======= ====== ======
Liquidation Fees, Expenses and Wind Down Costs (k) 12.0% 8.0% $ 0 $ 0
------ ------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 0 $ 0
====== ======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET ILLINOIS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004 (a) RECOVERY (%) AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- ------ ------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (c) 0 65.0% 75.0% 0 0
Inventory (d) 0 0.0% 0.0% 0 0
Land (e) 0 100.0% 100.0% 0 0
Building and Improvements (net) (f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net) (g) 0 0.0% 0.0% 0 0
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
------- ------ ------
TOTAL $ 0 $ 0 $ 0
======= ====== ======
Liquidation Fees, Expenses and Wind Down Costs (k) 12.0% 8.0% $ 0 $ 0
------ ------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 0 $ 0
====== ======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET INTERNATIONAL
ESTIMATED LIQUIDATION PROCEEDS
<Table>
<Caption>
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE ------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
---------- --------------- -----------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Cash and Equivalents(b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net(c) 0 65.0% 75.0% 0 0
Inventory(d) 0 0.0% 0.0% 0 0
Land(e) 0 100.0% 100.0% 0 0
Building and Improvements(f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net)(g) 0 0.0% 0.0% 0 0
Construction in Progress(h) 0 0.0% 0.0% 0 0
Other Assets(i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 30,144 206.7% 241.2% 62,316 72,702
------- ------- -------
Total $30,144 $62,316 $72,702
======= ======= =======
Liquidation Fees, Expenses and
Wind Down Costs(k) 4.0% 2.0% ($2,493) ($1,454)
Net Estimated Proceeds Available
for Distribution to Stakeholders $59,823 $71,248
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: INTERMET S. HOLDINGS
ESTIMATED LIQUIDATION PROCEEDS
<Table>
<Caption>
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE ------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
---------- --------------- -----------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Cash and Equivalents(b) $1 100.0% 100.0% $1 $1
Accounts Receivable, Net(c) 8,667 65.0% 75.0% 5,634 6,500
Inventory(d) 6,120 15.5% 16.8% 948 1,026
Land(e) 862 100.0% 100.0% 862 862
Building and Improvements(f) 23,381 30.0% 50,0% 7,014 11,691
Machinery and Equipment (net)(g) 20,381 9.6% 19.4% 1,955 3,950
Construction in Progress(h) 29 0.0% 25.0% 0 7
Other Assets(i) 1,438 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0,0% 0.0% 0 0
------- ------- -------
Total $60,879 $16,414 $24,037
======= ======= =======
Liquidation Fees, Expenses and
Wind Down Costs(k) 12.0% 8.0% ($1,970) ($1,923)
Net Estimated Proceeds Available
for Distribution to Stakeholders $14,444 $22,114
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: IRONTON IRON
ESTIMATED LIQUIDATION PROCEEDS
<Table>
<Caption>
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE ------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
---------- --------------- -----------------
LOW HIGH LOW HIGH
------ ------ ------- -------
Cash and Equivalents(b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net(c) 0 65.0% 75.0% 0 0
Inventory(d) 0 0.0% 0.0% 0 0
Land(e) 0 100.0% 100.0% 0 0
Building and Improvements(f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net)(g) 0 0.0% 0.0% 0 0
Construction in Progress(h) 0 0.0% 25.0% 0 0
Other Assets(i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------- -------
Total $0 $0 $0
======= ======= =======
Liquidation Fees, Expenses and
Wind Down Costs(k) 12.0% 8.0% $0 $0
Net Estimated Proceeds Available
for Distribution to Stakeholders $0 $0
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: LYNCHBURG FOUNDRY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- -------- ------
CASH AND EQUIVALENTS(b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net(c) 6,540 65.0% 75.0% 4,251 4,905
Inventory(d) 3,722 66.7% 74.5% 2,481 2,774
Land(e) 670 100.0% 100.0% 670 670
Building and Improvements (net)(f) 2,348 30.0% 50.0% 704 1,174
Machinery and Equipment (net)(g) 11,705 11.7% 20.7% 1,375 2,419
Construction in Progress(h) 261 0.0% 25.0% 0 65
Other Assets(i) 495 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------ -------
TOTAL $25,741 $9,481 $12,007
======= ====== =======
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% ($1,138) ($961)
------- -------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $8,343 $11,046
======= =======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: NORTHERN CASTINGS
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- -------- ------
CASH AND EQUIVALENTS(b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net(c) 1,723 65.0% 75.0% 1,120 1,292
Inventory(d) 536 61.4% 71.6% 329 384
Land(e) 12 100.0% 100.0% 12 12
Building and Improvements (net)(f) 706 30.0% 50.0% 212 353
Machinery and Equipment (net)(g) 1,037 25.7% 70.3% 266 729
Construction in Progress(h) 0 0.0% 25.0% 0 0
Other Assets(i) 129 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------ -------
TOTAL $ 4,143 $1,939 $ 2,770
======= ====== =======
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% ($233) ($222)
------- -------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $1,706 $ 2,548
======= =======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: SUDBURY
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004(a) RECOVERY % AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- -------- ------
CASH AND EQUIVALENTS(b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net(c) 7 65.0% 75.0% 5 5
Inventory(d) 0 0.0% 0.0% 0 0
Land(e) 0 100.0% 100.0% 0 0
Building and Improvements (net)(f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net)(g) 0 0.0% 0.0% 0 0
Construction in Progress(h) 0 0.0% 25.0% 0 0
Other Assets(i) 77 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
------- ------ -------
TOTAL $ 84 $ 5 $ 5
======= ====== =======
Liquidation Fees, Expenses and Wind Down Costs(k) 12.0% 8.0% ($1) ($0)
------- -------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 4 $ 5
======= =======
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: SUDM INC.
Estimated Liquidation Proceeds
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL LIQUIDATION VALUE RANGE
---------------------------------------
RECOVERY % AMOUNT
BOOK VALUE -------------------- -------------
12/31/2004(a) LOW HIGH LOW HIGH
------------- ------ ------ --- ----
Cash and Equivalents(b) $0 100.0% 100.0% $0 $0
Accounts Receivable, Net(c) 0 65.0% 75.0% 0 0
Inventory(d) 0 0.0% 0.0% 0 0
Land(e) 0 100.0% 100.0% 0 0
Building and Improvements (net)(f) 0 30.0% 50.0% 0 0
Machinery and Equipment (net)(g) 0 0.0% 0.0% 0 0
Construction in Progress(h) 0 0.0% 25.0% 0 0
Other Assets(i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
----- ----- -----
TOTAL $0 $0 $0
===== ===== =====
Liquidation Fees, Expenses and
Wind Down Costs(k) 12.0% 8.0% $0 $0
NET ESTIMATED PROCEEDS AVAILABLE
FOR DISTRIBUTION TO STAKEHOLDERS $0 $0
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: TOOL PRODUCTS
Estimated Liquidation Proceeds
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL LIQUIDATION VALUE RANGE
-----------------------------------------------
RECOVERY % AMOUNT
BOOK VALUE --------------------- -------------------
12/31/2004(a) LOW HIGH LOW HIGH
------------- ------ ------ ------ --------
Cash and Equivalents(b) $3 100.0% 100.0% $3 $3
Accounts Receivable, Net(c) 7,316 65.0% 75.0% 4,755 5,487
Inventory(d) 3,908 41.5% 62.8% 1,624 2,456
Land(e) 356 100.0% 100.0% 356 356
Building and Improvements (net)(f) 8,041 30.0% 50.0% 2,412 4,021
Machinery and Equipment (net)(g) 13,414 34.2% 43.0% 4,582 5,765
Construction in Progress(h) 729 0.0% 25.0% 0 182
Other Assets(i) 590 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
-------- -------- --------
TOTAL $34,357 $13,733 $18,269
======== ======== ========
Liquidation Fees, Expenses and
Wind Down Costs(k) 12.0% 8.0% $(1,648) $(1,462)
NET ESTIMATED PROCEEDS AVAILABLE
FOR DISTRIBUTION TO STAKEHOLDERS $12,085 $16,808
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: WAGNER CASTINGS
Estimated Liquidation Proceeds
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL LIQUIDATION VALUE RANGE
--------------------------------------------------
RECOVERY % AMOUNT
BOOK VALUE ---------------------- -----------------------
12/31/2004(a) LOW HIGH LOW HIGH
------------- ------ ------ -------- --------
Cash and Equivalents(b) $32 100.0% 100.0% $32 $32
Accounts Receivable, Net(c) 8,041 65.0% 75.0% 5,227 6,031
Inventory(d) 5,096 33.3% 38.6% 1,699 1,965
Land(e) 343 100.0% 100.0% 343 343
Building and Improvements (net)(f) 816 30.0% 50.0% 245 408
Machinery and Equipment (net)(g) 12,203 15.7% 32.6% 1,919 3,984
Construction in Progress(h) 899 0.0% 25.0% 0 225
Other Assets(i) 1,264 0.0% 0.0% 0 0
Investment in Subsidiaries(j) 0 0.0% 0.0% 0 0
-------- -------- --------
TOTAL $28,694 $9,464 $12,987
======== ======== ========
Liquidation Fees, Expenses and
Wind Down Costs(k) 12.0% 8.0% $(1,136) $(1,039)
NET ESTIMATED PROCEEDS AVAILABLE
FOR DISTRIBUTION TO STAKEHOLDERS $8,328 $11,948
</Table>
HYPOTHETICAL LIQUIDATION ANALYSIS: WAGNER HAVANA
<Table>
<Caption>
ESTIMATED LIQUIDATION PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL LIQUIDATION VALUE RANGE
BOOK VALUE -----------------------------------------
12/31/2004 (a) RECOVERY (%) AMOUNT
-------------- ------------------ --------------------
LOW HIGH LOW HIGH
------ ------- ------ ------
Cash and Equivalents (b) $ 0 100.0% 100.0% $ 0 $ 0
Accounts Receivable, Net (a) 68 65.0% 75.0% 44 51
Inventory (d) 248 40.0% 50.0% 99 124
Land (e) 6 100.0% 100.0% 6 6
Building and Improvements (net) (f) 793 30.0% 50.0% 238 397
Machinery and Equipment (net) (g) 2,000 20.0% 40.0% 400 800
Construction in Progress (h) 0 0.0% 25.0% 0 0
Other Assets (i) 0 0.0% 0.0% 0 0
Investment in Subsidiaries (j) 0 0.0% 0.0% 0 0
------ ------ ------
TOTAL $3,115 $ 787 $1,378
====== ====== ======
Liquidation Fees, Expenses and Wind Down Costs (k) 12.0% 8.0% ($94) ($110)
------ ------
NET ESTIMATED PROCEEDS AVAILABLE FOR DISTRIBUTION TO STAKEHOLDERS $ 693 $1,267
====== ======
</Table>
NOTES TO LIQUIDATION ANALYSIS
(a) BOOK VALUES AS OF DECEMBER 31, 2004. Unless otherwise stated, the book
values contained/presented in the Liquidation Analysis are book values as
of December 31, 2004, These actual balances are used as a reference point
for the analysis and, as described in the introduction to the Liquidation
Analysis, are used as the value for which percentage recoveries for the
liquidation of certain assets (e.g., accounts receivable) are based.
Management of the Debtors provided all December 31, 2004 book values.
(b) CASH AND EQUIVALENTS. Cash consists of all cash in banks or operating
accounts and liquid investments with maturities of three months or less.
Cash is assumed to be fully recoverable.
(c) ACCOUNTS RECEIVABLE. Estimated proceeds realizable from short-term and
long-term accounts receivable under a liquidation are based on
management's assessment of the ability of the Debtors to collect on their
accounts, taking into consideration the credit quality and aging of the
accounts. The liquidation range of 65%-75% of book value is an estimate of
the proceeds that would be available in a "forced sale" or liquidation
scenario. This range conservatively takes into account the inevitable
difficulty in collecting receivables and any concessions or off-sets which
might be required to facilitate the collection of certain accounts.
(d) INVENTORY. Inventory includes finished goods, work-in-progress and raw
materials. The range of liquidation values is derived from an inventory
appraisal recently produced by a third party appraiser for the following
Debtors based on December 31, 2004 account balances: Cast-Matic
Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton
Technologies, Inc., Intermet U.S. Holding, Inc., Lynchburg Foundry
Company, Northern Castings Corporation, Tool Products, Inc. and Wagner
Castings Company. The low point of the range reflects the forced sale of
all inventory including work-in-progress in "as is" condition. The high
point of the range reflects the conversion of certain work-in-progress
inventory into finished goods. For the remaining entities for which
appraisals were not available, estimates were based on the average range
of liquidation values/recoveries at the Debtors listed above. Those
Debtors for which inventory appraisals were unavailable include Alexander
City Casting Company, Inc., Intermet Corporation, Intermet Holding
Company, Intermet Illinois, Inc., Intermet International, Inc., Ironton
Iron, Inc., Sudbury, Inc., SUDM, Inc., and Wagner Havana, Inc.
(e) LAND. Estimated proceeds realizable from the liquidation of land/real
estate reflect 100% of book value. No appraisals of land/real estate
assets were available for use in the liquidation analysis, and no
provision for environmental costs related to, for example, remediation
were taken into account.
(f) BUILDINGS AND IMPROVEMENTS. Estimated proceeds realizable from the sale of
building and improvements reflect a range of 30% - 50%.
(g) MACHINERY AND EQUIPMENT. Machinery and equipment includes machinery,
equipment and inventory of spare parts and safety equipment. The range of
liquidation proceeds is derived from machinery and equipment appraisals
recently produced by a third party appraiser for the
following Debtors based on December 31, 2004 account balances: Cast-Matic
Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton
Technologies, Inc., Intermet U.S. Holding, Inc., Lynchburg Foundry
Company, Northern Castings Corporation, Tool Products, Inc. and Wagner
Castings Company. The low range reflects a forced liquidation over an
abbreviated period whereas the high range reflects an orderly liquidation
over a longer timeframe. For the remaining entities for which appraisals
were not available, estimates were based on the average range of
liquidation values/recoveries at the debtors listed above. Those Debtors
for which appraisals were unavailable include Alexander City Casting
Company, Inc., Intermet Corporation, Intermet Holding Company, Intermet
Illinois, Inc., Intermet International, Inc., fronton Iron, Inc., Sudbury,
Inc., SUDM, Inc., and Wagner Havana, Inc.
(h) CONSTRUCTION IN PROGRESS. Management estimates that fixed assets under
construction would yield limited to no value in a forced liquidation
scenario, resulting in a recovery range of 0%-25%.
(i) OTHER ASSETS. Management estimates that other assets, which include
tooling intangibles, prepaid assets, deposits, and unamortized bank fees
would not yield significant value in a forced liquidation scenario, and
accordingly have been ascribed 0% recovery. Other assets at Intermet
Corporation, however, do include items, such as cash deposits, which have
some tangible value. Consequently, the recoveries for other assets at
Intermet Corporation ranges from 10%-30%.
(j) INVESTMENTS IN SUBSIDIARIES. Reflects the book value of the equity
ownership in the Debtors' European operations at Intermet International,
Inc.
(k) LIQUIDATION FEES AND EXPENSES. Chapter 7 trustee fees, other professional
fees and wind-down costs are estimated to be 8%-12% of gross sales
proceeds. In the case of Intermet International, liquidation fees and
expenses reflect professional fees that would be incurred in the sale of
the European operations, which are estimated at 2%-4% of gross sales
proceeds.
(l) NET ESTIMATED PROCEEDS FROM SUBSIDIARY. Applies only to Intermet
Corporation's recovery of value from its stock ownership in Intermet
International which, in turn, recovers value from its stock ownership in
Intermet's European subsidiaries. The Liquidation Analysis assumes a
distressed sale of these European subsidiaries, with proceeds, after
payment of net debt and transaction fees, going to Intermet International.
(m) DIP FACILITY CLAIMS. Reflects the projected DIP balance as of the
anticipated commencement of the Liquidation Period.
(n) SECURED CLAIMS. Pre-Petition Lender Claims and Secured Claims have
security interests in the domestic entities as well as two-thirds of the
equity value of the European operations. These Claims are allocated
proportionally by Debtor based on the net proceeds available at each
Debtor to satisfy Secured Claims.
EXHIBIT G
Projected Financial Information for the Reorganized Debtors
-----------------------------------------------------------
I. PRINCIPAL ASSUMPTIONS FOR THE PROJECTIONS
A. GENERAL
1. Methodology. The Projections are based upon detailed operating budgets
for the Debtors for the three-year period ending December 31, 2007,
which were developed by management of the Debtors and CMD at the plant
level in North America and on a consolidated basis in Europe. The
projections for the calendar years 2008 through 2009 were developed by
management of the Debtors and Lazard and were prepared on the same
basis as 2005 through 2007, but through trending analysis using key
top-down assumptions. Sales for all periods were developed by
management of the Debtors on a part-by-part buildup at each plant
based on current booked business as well as estimates for future
business opportunities.
2. Plan Consummation. The operating assumptions assume the Plan will be
confirmed and consummated by August 31, 2005.
3. Macroeconomic and Industry Environment. The Projections reflect
currently forecasted build volumes per recent OEM estimates, steel
prices consistent with current levels experienced by the Debtors and a
rising interest rate environment.
B. PROJECTED STATEMENTS OF OPERATIONS
1. Net Sales. Consolidated revenues, estimated to be $837.2 million in
2004, are projected to increase by 0.8% in 2005 to $844.2 million, and
then to continue to grow through the projection period, peaking in
2009 at $1,050.7 million. Sales for all periods were developed on a
part-by-part buildup at each plant based on current booked business as
well as estimates for future business opportunities.
2. Gross Margin. Gross margin is projected to be 4.1% in 2005, increasing
to 10.9% in 2009 based on more efficient production as unprofitable
facilities are closed or sold and optimum capacities and efficiencies
are realized at the continuing facilities. Gross margin also improves
as a larger sales base absorbs fixed costs.
3. Selling, General and Administrative Expenses ("SG&A"). SG&A includes
corporate, research and development and customer support expenses.
These expenses decrease from $43.4 million in 2005 to $40.2 million in
2006, reflecting cost savings relating to the closure of multiple
facilities in 2005. By 2009, selling, general and administrative
expenses grow to $43.7 million, consistent with the increase in sales
experienced during the 2006-2009 period.
4. Other Operating Costs. Reflects legacy costs at the Debtors' inactive
and discontinued operations including property taxes, utility expense,
insurance premiums, and general maintenance expense.
5. Interest Expense. Interest expense reflects the accrual and payment of
interest on the Debtors' Pre-Petition Credit Facility and DIP Facility
until the Effective Date; and on a $170 million floating-rate term
loan, a $90 million floating-rate revolving credit facility after the
Effective Date, and on various credit facilities in Europe. The
European debt is assumed to be paid down with European cash in excess
of $20 million and interest expense is affected accordingly, Interest
expense also includes letters of credit fees and agency fees.
6. Other Expense. Reflects interest expense and interest income on
certain intercompany obligations, charges to and from affiliates and
gains and losses on foreign exchange transactions.
7. Restructuring Costs. Includes fees paid to professionals advising the
Debtors, fees paid to DIP Lenders and Exit Lenders, fees paid to the
Initial Committed Purchasers, payments pursuant to the KERP and other
one-time charges/expenses. Cancellation of indebtedness income which
is incurred on the Effective Date is also included as income in this
line item.
8. Income Tax Provision. Income taxes in North America and Europe were
prepared by management of the Debtors, with the assistance of tax and
financial advisors. North American taxes reflect the impact of
cancellation of debt income on the Effective Date and differences
between tax and book pretax income are adjusted accordingly. Taxes
presented in North America reflect these differences as well as the
application of pre-petition tax attributes to offset taxable income
subject to Section 382(1)(6) limitations. Income taxes in Europe were
approximated by the Debtors' tax advisors. Book taxes in Europe are
assumed to equal cash taxes.
C. PROJECTED STATEMENTS OF CASH FLOW
1. Working Capital. Accounts receivable are projected to be outstanding
for 50-60 days during the projection period, reflecting historical
trends. Accounts payable are projected to be outstanding for 5 days in
2005 in North America. The days outstanding in North America increases
thereafter to 30 days by 2007 and remains constant through 2009.
Inventory days-on-hand are based on historical trends of approximately
20 days in North America and 45 days in Europe.
2. Capital Expenditures. Capital expenditures are expected to total $43.6
million for 2005. This figure is projected to increase to $50.5
million in 2006 reflecting certain catch-up expenditures and continue
in a normalized range of $40-$50 million per year in 2007-2009.
Capital expenditure projections were developed by management of the
Debtors based on specific capital projects and planned improvements at
specific facilities.
3. Proceeds from Asset Sales. Reflects the estimated sale proceeds from
certain property, machinery and equipment and other assets related to
discontinued or inactive facilities.
4. Increase/(Decrease) in Borrowings. Reflects seasonal borrowings and
repayments on the DIP and post-emergence revolving credit facility as
well as repayments of debt in Europe based on a $20 million minimum
cash balance in Europe.
5. Changes in Other Financing. Reflects the $75 million Rights Offering
on the Effective Date and some miscellaneous debt borrowing and
repayments in Europe.
II. PROJECTED BALANCE SHEET STATEMENT
Fresh Start Accounting
The American Institute of Certified Public Accountants ("AICPA") has issued
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"). The Projections have been prepared in
accordance with the fresh-start reporting principles set forth in the SOP 90-7,
giving effect thereto as of August 31, 2005, subject to significant simplifying
assumptions.
The Pro Forma Reorganized Balance Sheet ("Reorganized Balance Sheet") is
based on an Estimated Pre-Reorganization Balance Sheet, as modified by
"Reorganization" and "Fresh-Start" adjustments. The Pre-Reorganization Balance
Sheet provides estimates of assets and liabilities just prior to confirmation,
including liabilities subject to compromise recorded in accordance with the SOP
90-7. The Reorganization Adjustments adjust the Pre-Reorganization Balance Sheet
for the discharge of administrative claims and of estimated claims allowed by
the Court upon confirmation. The Fresh-Start Adjustments further adjusts the
Pre-Reorganization Balance Sheet of the emerging entity to:
1. Reflect the reorganization value of the assets;
2. Allocate the reorganization value among the assets; and
3. Reflect each liability at the plan confirmation date at its fair value.
Reorganization value approximates the fair value of the entity before
considering liabilities and approximates the amount a willing buyer would pay
for the assets immediately after restructuring. Determination of the
reorganization value requires a detailed valuation of all of the Reorganized
Debtors' identifiable assets as of the Effective Date, including working capital
assets, fixed assets and identifiable intangible assets such as third-party
contracts. Allocation of the reorganization value among assets involves
revaluing each of these assets at its fair value. Each liability of the emerging
entity is reflected at its fair value.
The foregoing assumptions and resulting computations were made solely for
purposes of preparing the Projections. The Reorganized Debtors' will be required
to determine their reorganization value as of the Effective Date. Reorganization
value may change depending on the amount of cash retained upon emergence. The
actual reorganization and fresh start adjustments will depend on the balance
sheet as of the actual confirmation date and a final determination of the fair
value appraisals. Such fair value appraisals could be materially higher or lower
than the values assumed in the foregoing computations. In all events, the
determination of reorganization value and the fair value of Reorganized Debtors'
assets, as well as the determination of their actual liabilities, will be made
as of the Effective Date. Furthermore, the changes between the amounts of any or
all of the foregoing items as assumed in the Projections and the actual amounts
thereof as of the Effective Date may be material.
PRO FORMA PROJECTED BALANCE SHEET (UNAUDITED)
(AS OF AUGUST 31, 2005)
INTERMET CORPORATION
($ in millions)
ESTIMATED PRO FORMA
PRE-REORGANIZATION REORGANIZED
BALANCE REORGANIZATION "FRESH START" BALANCE
SHEET ADJ. ADJ. SHEET(a)
------------------ -------------- ------------- -----------
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 19.4 $6.3 (b) - $ 25.6
Total Receivables 125.9 - - 125.9
Inventory 64.5 - - 64.5
Other Current Assets 9.1 - - 9.1
------- ------- ----- ------
Total Current Assets $218.8 $6.3 $ 0.0 $225.1
NON CURRENT ASSETS
Fixed Assets, Net 271.9 - - 271.9
Other Assets 23.5 - 53.3 (c) 76.8
------- ------- ----- ------
TOTAL Assets $514.2 $6.3 $53.3 $573.8
======= ======= ===== ======
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $22.1 - - $ 22.1
Accrued Liabilities 62.0 (1.7)(d) - 60.2
Accrued Interest 1.2 _ - 1.2
------- ------- ----- ------
Total Current Liabilities $85.2 ($1.7) $ 0.0 $83.5
NON-CURRENT LIABILITIES
DIP $45.3 ($45.3)(e) - -
Exit Revolver 0.0 - - -
Long Term Debt 20.2 170.0 (f) - 190.2
Pre-Petition Liabilities 166.5 (166.5)(g) 39.3 (k) -
Retirement Benefits 88.7 (5.2)(h) - 122.8
Other Long-Term Liabilities 9.9 - - 9.9
------- ------- ----- ------
Total Non-Current Liabilities 330.6 (47.0) 39.3 322.9
Liabilities Subject To Compromise 248.3 (248.3)(i) - -
------- ------- ----- ------
TOTAL LIABILITIES $664.1 ($297.1) $39.3 $406.3
Shareholders' Equity ($149.8) $303.3 (j) $14.0 (1) $167.5
------- ------- ----- ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $514.2 $ 6.3 $53.3 $573.8
======= ======= ===== ======
NOTES TO PRO FORMA PROJECTED BALANCE SHEET
(a) The pro forma balance sheet adjustments contained herein account for
(i) the reorganization and related transactions pursuant to the Plan
and (ii) the implementation of "fresh start" accounting pursuant to SOP
90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code, as issued by the AICPA. The fresh start adjustments
are based on a total equity value of $167.5 million consistent with the
mid-point of Lazard's Enterprise Valuation.
(b) Reflects $6.3 million in cash created in North America by proceeds
received from the Exit Facility financing and the Rights Offering,
partially offset by the repayment of the DIP facility, Pre-Petition
Credit Facility, Pre-Petition Senior Bonds, payments made to unsecured
creditors, fees paid to various professionals, lenders and the Backstop
Parties, KERP payments and pension payments.
(c) Reflects a $53.3 million increase in intangible assets due to the
excess value of the Reorganized Intermet over the fair value of its
assets.
(d) Reflects a $ 1.7 million KERP cash payment.
(e) Reflects repayment of the DIP Facility in cash.
(f) Reflects issuance of a $170 million Exit Term Loan.
(g) Reflects repayment of the Pre-Petition Credit Facility and associated
post-petition interest in cash.
(h) Reflects a $5.2 million cash pension payment.
(i) Reflects extinguishment of pre-petition accounts payable and
pre-petition Senior Notes and pre-petition accrued interest.
(j) Reflects cancellation of indebtedness income, the issuance of the New
Common Stock, Rights Offering, and various cash payments.
(k) Increase in pension liability due to unrealized actuarial loss and
prior service costs/benefits.
(1) Reflects adjustments to shareholders' equity based on the estimated
equity value of the Reorganized Intermet ($167.5 million) in accordance
with "fresh start" accounting provisions of SOP 90-7.
1. PROJECTED STATEMENTS OF OPERATIONS
INTERMET CORPORATION
($ in millions)
FISCAL YEAR ENDING DECEMBER 31,
-------------------------------------------------------------
2005E 2006E 2007E 2008E 2009E
------- ------- ------- ------- -------
NET SALES
North America $626.3 $606.6 $663.0 $728.4 $745.8
Europe 217.9 252.2 265.5 291.7 304.9
------- ------- ------- ------- -------
Total Sales 844.2 858.8 928.5 1,020.2 1,050.7
Cost of Sales 809.8 783.5 838.6 909.9 936.3
------- ------- ------- ------- -------
GROSS MARGIN $34.4 $75.3 $89.9 $110.3 $114.4
Selling, General and Administrative Expense 43.4 40.2 40.3 42.2 43.7
Other Operating Expense 1.2 0.4 0.4 0.4 0.4
------- ------- ------- ------- -------
OPERATING INCOME $(10.2) $34.7 $49.2 $67.7 $70.3
Interest Expense, Net 20.7 20.5 20.2 19.5 19.2
Other Expense 3.7 0.5 0,6 0.6 0.6
Restructuring Expense (a) (111.2) 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Pre-Tax Income 76.6 13.7 28.4 47.6 50.5
Income Taxes - Current 4.4 4.4 9.9 18.5 16.3
Income Taxes - Deferred 0.0 0.0 0.0 (1.9) 0.6
------- ------- ------- ------- -------
Total Income Taxes 4.4 4.4 9.9 16.7 16.9
Minority Interest 0.1 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
NET INCOME (LOSS) $72.3 $9.3 $18.6 $30.9 $33.6
======= ======= ======= ======= =======
(a) Includes cancellation of indebtedness income in 2005 of $145.8 million.
2. PROJECTED BALANCE SHEETS
INTERMET CORPORATION
($ in millions)
<Table>
<Caption>
FISCAL YEAR ENDING DECEMBER 31,
-------------------------------------------------------------------------------
2005E 2006E 2007E 2008E 2009E
------- ------- ------- ------- --------
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 22.0 $ 28.5 $ 33.4 $ 42.4 $ 67.6
Total Receivables 120.3 121.1 125.0 137.3 141.4
Inventory 67.4 67.3 68.8 67.3 67.7
Other Current Assets 8.2 7.8 7.5 7.5 7.5
------ ------ ------ ------ ------
Total Current Assets $217.9 $224.7 $234.7 $254.6 $284.2
NON CURRENT ASSETS
Fixed Assets, Net 269.6 274.1 271.3 276.9 278.2
Other Assets 76.2 74.2 72.2 72.0 69.4
------ ------ ------ ------ ------
TOTAL ASSETS $563.7 $573.0 $578.1 $603.4 $631.8
====== ====== ====== ====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 28.2 $ 47.3 $ 50.5 $ 61.1 $ 63.4
Accrued Liabilities 64.1 56.5 55.0 55.0 55.0
Accrued Interest 0.9 0.9 0.9 0.9 0.9
------ ------ ------ ------ ------
Total Current Liabilities $ 93.2 $104.7 $106.4 $117.0 $119.3
Long Term Debt 188.2 184.7 175.7 164.6 162.6
Retirement Benefits 120.6 112.5 106.4 101.3 95.9
Other Long-Term Liabilities 9.9 9.9 9.9 9.9 9.9
------ ------ ------ ------ ------
Total Liabilities 411.8 411.8 398.4 392.8 387.7
Shareholders' Equity 151.8 161.1 179.7 210.6 244.2
------ ------ ------ ------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $563.7 $573.0 $578.1 $603.4 $631.8
====== ====== ====== ====== ======
</Table>
2.
2. 3. PROJECTED STATEMENTS OF CASH FLOW
FISCAL YEAR ENDING DECEMBER 31,
INTERMET CORPORATION --------------------------------------------------------
($ in millions) 2005E 2006E 2007E 2008E 2009E
-------- ------- ------- ------- -------
FUNDS FROM OPERATIONS:
Net Income $ 72.3 $ 9.3 $ 18.6 $ 30.9 $ 33.6
Depreciation 45.6 41.1 42.7 43.4 44.0
Deferred Taxes 0.0 0.0 0.0 (1.9) 0.6
COD Income (145.8) 0.0 0.0 0.0 0.0
Cash Payment to Unsecured Creditors (10.0) 0.0 0.0 0.0 0.0
WORKING CAPITAL
(Increase)/Decrease in Net A/R (4.1) (0.7) (3.9) (12.3) (4.1)
(Increase)/Decrease in Net Inventory 4.4 0.1 (1.4) 1.5 (0.4)
(Increase)/Decrease in Other Assets 5.6 2.3 2.3 2.0 2.0
Increase/(Decrease) in Accounts Payable 3.1 19.1 3.1 10.6 2.4
Increase/(Decrease) in Accrued Liabilities 3.9 (7.6) (1.5) 0.0 0.0
Increase/(Decrease) in Other LT Liabilities (3.6) (8.0) (6.1) (5.1) (5.5)
Changes in Working Capital 9.4 5.2 (7.5) (3.3) (5.6)
-------- ------ ------ ------ ------
Total ($ 28.5) $ 55.6 $ 53.8 $ 69.1 $ 72.6
FUNDS PROVIDED BY INVESTING ACTIVITIES:
Capital Expenditures (43.6) (50.5) (39.9) (49.0) (45.4)
Proceeds from Asset Sales 8.0 5.0 0.0 0.0 0.0
Other Changes in Investing 4.3 0.0 0.0 0.0 0.0
-------- ------ ------ ------ ------
Total ($ 31.3) ($ 45.5) ($ 39.9) ($ 49.0) ($ 45.4)
FUNDS PROVIDED BY FINANCING ACTIVITIES:
Increase/(Decrease) in Borrowings (2.0) (3.5) (9.0) (11.0) (2.1)
Changes in Other Financing(a) 72.6 0.0 0.0 0.0 0.0
-------- ------ ------ ------ ------
Total $ 70.5 ($ 3.5) ($ 9.0) ($ 11.0) ($ 2.1)
CHANGES IN CASH AND EQUIVALENTS $ 10.7 $ 6.6 $ 4.9 $ 9.0 $ 25.1
Beginning Cash 11.2 22.0 28.5 33.4 42.4
-------- ------ ------ ------ ------
ENDING CASH $ 22.0 $ 28.5 $ 33.4 $ 42.4 $ 67.6
======== ====== ====== ====== ======
- ------------
(a) Reflects new equity investments of $75 million via a rights offering.
4. ADJUSTED EBITDA CALCULATION
INTERMET ADJUSTED EBITDA BUILD-UP
INTERMET CORPORATION --------------------------------------
($ in millions) LTM 2005E 2006E
-------- -------- --------
EBIT ($ 234.4) ($ 10.2) $ 34.7
Plus: Depreciation & Amortization 47.9 45.6 41.1
Less: Other Expense(a) 0.0 (2.9) (0.5)
-------- -------- --------
EBITDA ($ 186.4) $ 32.5 $ 75.3
======== ======== ========
Plus: Pro-Forma Adjustments 209.5(b) 0.0 0.0
Plus: KERP Charge 2.7 3.8 0.0
Less: Impairment Adjustment (1.7) 0.0 0.0
Plus: Pricing and Surcharge Related Adjustments(c) 23.2 0.0 0.0
Plus: Plant Closure/Restructuring Costs 9.8(d) 26.8(e) 0.0
-------- -------- --------
Adjusted EBITDA $ 56.9 $ 63.1 $ 75.3
======== ======== ========
- ------------
(a) Reflects interest expense and interest income on intercompany obligations,
charges to and from affiliates and gains and losses on foreign exchange
transactions.
(b) Includes goodwill and asset impairment charges and reorganization costs.
(c) Includes both North American and European surcharge adjustments.
(d) Includes charges for the closure of the Havana and Decatur facilities and
adjustments related to the Radford and Racine operations.
(e) Includes charges for the closure of the Decatur facilities and adjustments
related to the Columbus Machining, Radford and Racine operations.
5. SUMMARY DEBTOR OPERATING/FINANCIAL STATISTICS
Below are key income statement items by Debtor for the periods
2005-2007 as well as the book value of assets by Debtor entity based on
unaudited balance sheets as of 12/31/04. The value of Intermet Corporation is
attributable to the equity value of Intermet International, the parent of
Intermet's foreign. Revenue, EBITDA and EBIT totals do not include corporate
expenses, corporate eliminations, or any other items not allocated on an
entity-by-entity basis.
<Table>
<Caption>
CONTRIBUTION ANALYSIS
--------------------------------------------------------------------------------------------------
REVENUE EBITDA EBIT
---------------------------- --------------------------- --------------------------- BOOK VALUE
DEBTOR 2005 2006 2007 2005 2006 2007 2005 2006 2007 12/31/04
- ------------------------------- -------- -------- -------- ------- ------- ------- ------- ------- ------- ----------
Intermet Corporation $ 217.9 $ 252.2 $ 265.5 $ 20.8 $ 30.4 $ 33.2 $ 11.3 $ 19.5 $ 21.4 $ 155.6
Columbus Foundry, L.P. 147.1 166.6 180.0 22.5 23.6 26.3 17.4 18.5 21.2 84.2
Diversified Diemakers, Inc. 87.3 78.1 84.6 11.8 11.5 13.3 3.4 3.0 4.4 100.7
Tool Products, Inc. 78.2 80.5 98.5 3.2 8.8 13.3 0.4 5.6 9.4 44.1
Northern Castings Corporation 28.4 33.0 33.1 5.3 6.3 6.1 4.7 5.6 5.4 15.8
Cast-Matic Corporation 47.4 36.3 37.2 4.6 6.7 6.8 2.7 4.7 4.6 21.9
Intermet U.S. Holding, Inc. 79.4 103.6 111.7 1.5 4.1 4.7 (4.6) (1.3) (0.2) 61.5
Ganton Technologies, Inc. 44.1 36.6 44.7 (12.9) 1.3 3.0 (16.6) (0.0) 1.5 43.5
Lynchburg Foundry Company 88.5 73.0 73.9 (0.4) (3.0) (2.8) (3.0) (5.7) (5.4) 29.8
Sudbury, Inc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.9
Wagner Havana, Inc. 0.0 0.0 0.0 (1.0) (0.8) (0.7) (1.0) (0.8) (0.7) 3.1
Alexander City Castings Company,
Inc. 0.0 0.0 0.0 (0.2) (0.1) (0.1) (0.2) (0.1) (0.1) 0.7
Intermet Illinois, Inc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
SUDM, Inc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Intermet Holding Company 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Ironton Iron, Inc. 0.0 0.0 0.0 (0.5) (0.1) (0.1) (0.5) (0.1) (0.1) 0.0
Wagner Castings Company 47.8 0.0 0.0 (14.2) (4.7) (3.3) (17.9) (4.7) (3.3) 28.8
-------- -------- -------- ------- ------- ------- ------- ------- ------- --------
TOTAL $ 866.0 $ 859.8 $ 929.0 $ 40.6 $ 84.1 $ 99.8 ($ 3.8) $ 44.2 $ 58.2 $ 602.6
</Table>
EXHIBIT H
Selected Historical Financial Information
-----------------------------------------
EXHIBIT I
Distribution Schedule
---------------------
DISTRIBUTION SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
($)
Cash Convenience
Cash Shares Rights Inducement Class
per per $/Share per $/Right Recovery Recovery Inducement Recovery
Debtor $1000 $1000 Per $1000 Per as a % of as a % of Cash as a % of
Claim Claim Valuation Claim Valuation Claim Claim Pool (a) Claim
- ---------------------------- ------ ----- ---------- ----- --------- --------- ---------- ----------- ------------
Intermet Corporation (b) $0.00 3.77 $16.91 11.31 $6.91 14.2% 15.0% $1,389,878 22.5%
Columbus Foundry, L.P. 0.00 3.54 16.91 10.63 6.91 13.3% 14.0% 1,325,213 21.0%
Diversified Diemakers, Inc. 0.00 1.40 16.91 4.19 6.91 5.3% 6.0% 201,586 9.0%
Tool Products, Inc. 0.00 1.08 16.91 3.23 6.91 4.1% 5.0% 310,379 7.5%
Northern Castings Corporation 0.00 0.94 16.91 2.81 6.91 3.5% 5.0% 77,550 7.5%
Cast-Matic Corporation 0.00 0.83 16.91 2.48 6.91 3.1% 5.0% 163,326 7.5%
Intermet U.S. Holding, Inc. 0.00 0.45 16.91 1.36 6.91 1.7% 5.0% 297,900 7.5%
Ganton Technologies, Inc. 0.00 0.26 16.91 0.77 6.91 1.0% 5.0% 354,250 7.5%
Lynchburg Foundry Company 0.00 0.17 16.91 0.51 6.91 0.6% 5.0% 470,572 7.5%
Sudbury, Inc. 0.00 0.13 16.91 0.40 6.91 0.5% 5.0% 143,679 7.5%
Wagner Havana, Inc. 0.00 0.14 16.91 0.41 6.91 0.5% 5.0% 71,921 7.5%
Intermet Illinois, Inc. 0.00 0.14 16.91 0.41 6.91 0.5% 5.0% 70,000 7.5%
Ironton Iron, Inc. 0.00 0.13 16.91 0.40 6.91 0.5% 5.0% 140,243 7.5%
Wagner Castings Company (c) 0.00 0.13 16.91 0.40 6.91 0.5% 5.0% 232,445 7,5%
SUDM, Inc. (d) 2.78 0.14 16.91 0.41 6.91 0.8% N/A N/A N/A
Alexander City Castings
Company, Inc. 0.00 0.14 16.91 0.41 6.91 0.5% N/A N/A N/A
Intermet International 0.00 N/A 16.91 N/A 6.91 100.0% N/A N/A 100.0%
Intermet Holding Company 0.00 N/A 16,91 N/A 6.91 N/A N/A N/A N/A
Intermet et. al. (e) 0.00 3.77 16.91 11.31 6.91 14.2% 15.0% 35,355 22.5%
----------
$5,284,298
Noteholders (d) 13.38 $16.91 40.14 $6.91 50.6% N/A N/A N/A
Note: The allocation of shares and rights set forth above reflects current
estimates of claims at each Debtor. Actual distributions may be higher or lower
based on the resolution of disputed claims and actual allowed claims at each
Debtor.
Note: To the extent general unsecured creditors elect to receive shares and
rights in lieu of the Cash Inducement, the Reorganized Company's equity value
per share will increase.
Note: Claims are estimated based on data from Administar as of June 2, 2005.
(a) If outstanding allowed claims increase, claimants' pro rata portion of the
Inducement Cash Pool may be lower than the indicated recovery, provided that the
inducement cash pool may be increased according to the Plan to ensure a
percentage recovery that is at a minimum equal to the recovery that would
otherwise be realized through the issuance of common stock and rights.
(b) Recoveries reflect the equity value of Intermet International, the holding
company for Intermet's European operations. Assumes net debt of zero at Intermet
International.
(c) Recovery analyses for Wagner Castings Company, Inc. reflect no retiree
medical claims. Proposed percentage recoveries available under the Plan of
Reorganization to general unsecured creditors and convenience class claimants at
the entity will be adjusted downward based on the filing of any such claims in
the future.
(d) Recovery includes $500,000 of fees assumed paid to the Indentured Trustee at
SUDM, Inc.
(e) These claims are assumed to have only a single obligor; this presentation
assumes these claims receive treatment equal to the most favorable recovery of
claimants at any of the Debtors (i.e., Intermet Corp.).
EXHIBIT J
Stockholders' Agreement
-----------------------
The Stockholders' Agreement is filed herewith as Exhibit 10.1 Annex A
Exhibit B.