EXHIBIT 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
IN RE: ) CHAPTER 11
)
KEVCO, INC., ET AL. ) CASE NOS. 401-40783-BJH-11
) THROUGH 401-40790-BJH-11
DEBTORS. )
) JOINTLY ADMINISTERED UNDER
) CASE NO. 401-40783-BJH-11
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FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION
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HAYNES AND BOONE, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Tele: (214) 651-5000
Fax: (214) 651-5940
DATED: September 18, 2002
Fort Worth, Texas ATTORNEYS FOR KEVCO, INC., ET AL.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 1
ARTICLE 1
INTRODUCTION
Kevco, Inc. ("Kevco"), Kevco Management, Inc. ("Kevco Management"),
Kevco Holding, Inc. ("Kevco Holding"), Kevco GP, Inc. ("Kevco GP"), Kevco
Components, Inc. ("Kevco Components"), DCM Delaware, Inc. ("DCM"), Kevco
Manufacturing, L.P. ("Kevco Manufacturing"), and Kevco Distribution, L.P.
("Kevco Distribution"), the debtors-in-possession in the above-referenced
bankruptcy cases (collectively, the "Debtors"),(1) submit this Disclosure
Statement pursuant to Bankruptcy Code section 1125 for use in the solicitation
of votes on the Plan. A copy of the Kevco, Inc. and the Official Creditors'
Committee's Joint Plan of liquidation is annexed as Exhibit "1" to this
Disclosure Statement.(2)
This Disclosure Statement sets forth certain relevant information
regarding the Debtors' prepetition operations and financial history, the need to
seek chapter 11 protection, significant events that have occurred during the
chapter 11 case, an analysis of the expected return to the Debtors' unsecured
creditors and the anticipated procedures for liquidating the Debtors' remaining
assets. This Disclosure Statement also describes terms and provisions of the
Plan, including certain alternatives to the Plan, certain effects of
confirmation of the Plan, certain risk factors associated with the Plan, and the
manner in which distributions will be made under the Plan. Additionally, this
Disclosure Statement discusses the confirmation process and the voting
procedures that holders of Claims and Interests must follow for their votes to
be counted.
A. FILING OF THE DEBTORS' CHAPTER 11 CASES
The Debtors filed their voluntary petitions for relief under chapter 11
of the Bankruptcy Code on February 5, 2001 (the "Petition Date") in the United
States Bankruptcy Court for the Northern District of Texas, Fort Worth Division
(the "Bankruptcy Court"). Since the Petition Date, the Debtors have continued to
operate their business and manage their properties and assets as
debtors-in-possession pursuant to Bankruptcy Code sections 1107 and 1108.
B. PURPOSE OF DISCLOSURE STATEMENT
This Disclosure Statement is submitted in accordance with Bankruptcy
Code section 1125 for the purpose of soliciting acceptances of the Plan from
holders of certain Classes of Claims. The only Claimholder whose acceptances of
the Plan are sought are those whose Claims
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(1) On September 18, 2002, the Bankruptcy Court entered an Order Granting the
Debtors' Joint Application for Substantive Consolidation, thereby substantively
consolidating and merging Kevco, Kevco Management, Kevco Holding, Kevco GP,
Kevco Components, DCM, Kevco Manufacturing and their respective bankruptcy
estates into Kevco.
(2) Except as otherwise provided in this Disclosure Statement, capitalized terms
herein have the meanings ascribed to them in the Plan. Any capitalized term used
herein that is not defined in the Plan shall have the meaning ascribed to that
term in the Bankruptcy Code or Bankruptcy Rules, whichever is applicable.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 2
are "impaired" (as that term is defined in Bankruptcy Code section 1124) by the
Plan and who are receiving distributions under the Plan. Holders of Claims that
are not "impaired" are deemed to have accepted the Plan. Holders of Claims or
Interests that are not receiving or retaining any property under the Plan are
deemed to have rejected the Plan.
The Debtors have prepared this Disclosure Statement pursuant to
Bankruptcy Code section 1125, which requires that a copy of the Plan, or a
summary thereof, be submitted to all holders of Claims against, and Interests
in, the Debtors, along with a written disclosure statement containing adequate
information about the Debtors of a kind, and in sufficient detail, as far as is
reasonably practicable, that would enable a hypothetical, reasonable investor
typical of Claimholders and Interestholders to make an informed judgment in
exercising their right to vote on the Plan. A copy of the Plan is included with
the materials sent along with this Disclosure Statement.
This Disclosure Statement was approved by the Bankruptcy Court on
___________________, 2002. Such approval is required by the Bankruptcy Code, and
does not constitute a judgment by the Bankruptcy Court as to the desirability of
the Plan or as to the value or suitability of any consideration offered
thereunder. Such approval does indicate, however, that the Bankruptcy Court has
determined that the Disclosure Statement meets the requirements of Bankruptcy
Code section 1125 and contains adequate information to permit the Claimholders
whose acceptance of the Plan is solicited to make an informed judgment regarding
acceptance or rejection of the Plan.
THE APPROVAL BY THE BANKRUPTCY COURT OF THIS DISCLOSURE STATEMENT DOES
NOT CONSTITUTE AN ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR A
GUARANTEE OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED
HEREIN. THE MATERIAL CONTAINED HEREIN IS INTENDED SOLELY FOR THE USE OF
CREDITORS AND HOLDERS OF INTERESTS OF THE DEBTORS IN EVALUATING THE
PLAN AND VOTING TO ACCEPT OR REJECT THE PLAN AND, ACCORDINGLY, MAY NOT
BE RELIED ON FOR ANY PURPOSE OTHER THAN THE DETERMINATION OF HOW TO
VOTE ON, OR WHETHER TO OBJECT TO, THE PLAN. THE DEBTORS' LIQUIDATION
PURSUANT TO THE PLAN IS SUBJECT TO NUMEROUS CONDITIONS AND VARIABLES,
AND THERE CAN BE NO ABSOLUTE ASSURANCE THAT THE PLAN, AS CONTEMPLATED,
WILL BE EFFECTUATED.
THE DEBTORS AND THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS BELIEVE
THAT THE PLAN AND THE TREATMENT OF CLAIMS AND INTERESTS THEREUNDER IS
IN THE BEST INTERESTS OF CLAIMHOLDERS AND INTERESTHOLDERS AND URGE THAT
YOU VOTE TO ACCEPT THE PLAN.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 3
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE PLAN SHOULD BE REVIEWED
CAREFULLY.
C. HEARING ON CONFIRMATION OF THE PLAN
The Bankruptcy Court has set ___________________, 2002 at __:__ _.m.
Central Standard Time, as the time and date for the hearing (the "Confirmation
Hearing") to determine whether the Plan has been accepted by the requisite
number of Claimholders and Interestholders and whether the other requirements
for confirmation of the Plan have been satisfied. Holders of Claims against or
Interests in the Debtors may vote on the Plan by completing and delivering the
enclosed ballot to Haynes and Boone, LLP, 901 Main Street, Suite 3100, Dallas,
Texas 75202-3789 (Attn: Linda Breedlove), on or before 5:00 p.m. Central
Standard Time on ___________________, 2002. If the Plan is rejected by one or
more impaired Classes of Claims or Interests, the Bankruptcy Court may still
confirm the Plan, or a modification thereof, under Bankruptcy Code section
1129(b) (commonly referred to as a "cramdown") if it determines, among other
things, that the Plan does not discriminate unfairly and is fair and equitable
with respect to the rejecting Class or Classes of Claims or Interests impaired
under the Plan. The procedures and requirements for voting on the Plan are
described in more detail below.
D. SOURCES OF INFORMATION
Except as otherwise expressly indicated, the portions of this
Disclosure Statement describing the Debtors, their business, properties and
management, and the Plan have been prepared from information furnished by the
Debtors.
Certain of the materials contained in this Disclosure Statement are
taken directly from other readily accessible documents or are digests of other
documents. While the Debtors have made every effort to retain the meaning of
such other documents or portions that have been summarized, they urge that any
reliance on the contents of such other documents should depend on a thorough
review of the documents themselves. In the event of a discrepancy between this
Disclosure Statement and the actual terms of a document, the actual terms of
such document shall govern and apply.
The statements contained in this Disclosure Statement are made as of
the date hereof unless another time is specified, and neither the delivery of
this Disclosure Statement nor any exchange of rights made in connection with it
shall, under any circumstances, create an implication that there has been no
change in the facts set forth herein since the date of this Disclosure
Statement.
No statements concerning the Debtors, the value of their property, or
the value of any benefit offered to the holder of a Claim or Interest in
connection with the Plan should be relied on other than as set forth in this
Disclosure Statement. In arriving at a decision, parties should
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 4
not rely on any representation or inducement made to secure their acceptance or
rejection that is contrary to information contained in this Disclosure
Statement, and any such additional representations or inducements should be
immediately reported to counsel for the Debtors, Stephen M. Pezanosky, Esq.,
Haynes and Boone, LLP, 901 Main Street, Suite 3100, Dallas, Texas 75202-3789,
telephone number (214) 651-5254.
ARTICLE 2
EXPLANATION OF CHAPTER 11
A. OVERVIEW OF CHAPTER 11
Chapter 11 is the principal reorganization chapter of the Bankruptcy
Code. Under chapter 11, a debtor-in-possession attempts to reorganize its
business and financial affairs for the benefit of the debtor, its creditors, and
other interested parties.
The commencement of a chapter 11 case creates an estate comprising all
of the Debtors' legal and equitable interests in property as of the date the
petition is filed. Unless the Bankruptcy Court orders the appointment of a
trustee, Bankruptcy Code sections 1101, 1107 and 1108 provide that a chapter 11
debtor may continue to operate its business and control the assets of its estate
as a "debtor-in-possession," as the Debtors have done in this case since the
Petition Date.
The filing of a chapter 11 petition also triggers the automatic stay,
under Bankruptcy Code section 362. The automatic stay halts essentially all
attempts to collect prepetition claims from the debtor or to otherwise interfere
with the debtor's business or its estate.
Formulation of a plan of reorganization/liquidation is the principal
purpose of a chapter 11 case. The plan sets forth the means for satisfying the
claims of creditors against, and interests of equity security holders in, the
debtor. Unless a trustee is appointed, only the debtor may file a plan during
the first 120 days of a chapter 11 case (the "Exclusive Period"). After the
Exclusive Period has expired, a creditor or any other interested party may file
a plan, unless the debtor files a plan within the Exclusive Period. If a debtor
does file a plan within the Exclusive Period, the debtor is given sixty (60)
additional days (the "Solicitation Period") to solicit acceptances of its plan.
Bankruptcy Code section 1121(d) permits the Bankruptcy Court to extend or reduce
the Exclusive Period and the Solicitation Period upon a showing of adequate
"cause." In these cases, the Exclusive Period expired without extension on June
5, 2001. No other party-in-interest has filed an alternative plan.
B. PLAN OF REORGANIZATION/LIQUIDATION
Although usually referred to as a plan of reorganization, a plan may
simply provide for an orderly liquidation of a debtor's property and assets. The
Debtors' Plan does, in fact, essentially provide for an orderly liquidation of
its remaining assets.
After the plan has been filed, the holders of claims against, or
interests in, a debtor are generally permitted to vote on whether to accept or
reject the plan. Chapter 11 does not require
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 5
that each holder of a claim against, or interest in, a debtor vote in favor of a
plan in order for the plan to be confirmed. At a minimum, however, a plan must
be accepted by a majority in number and two-thirds in amount of those claims
actually voting from at least one class of claims impaired under the plan. The
Bankruptcy Code also defines acceptance of a plan by a class of interests
(equity securities) as acceptance by holders of two-thirds of the number of
shares actually voted.
Classes of claims or interests that are not "impaired" under a plan of
reorganization are conclusively presumed to have accepted the plan and therefore
are not entitled to vote. A class is "impaired" if the plan modifies the legal,
equitable, or contractual rights attaching to the claims or interests of that
class. Modification for purposes of impairment does not include curing defaults
and reinstating maturity or payment in full in cash. Conversely, classes of
claims or interests that receive or retain no property under a plan of
reorganization are conclusively presumed to have rejected the plan and therefore
are not entitled to vote.
Even if all classes of claims and interests accept a plan of
reorganization/liquidation, the Bankruptcy Court may nonetheless still deny
confirmation. Bankruptcy Code section 1129 sets forth the requirements for
confirmation and, among other things, requires that a plan be in the "best
interests" of impaired and dissenting creditors and interest holders and that
the plan be feasible. The "best interests" test generally requires that the
value of the consideration to be distributed to impaired and dissenting
creditors and interest holders under a plan may not be less than those parties
would receive if the debtor were liquidated under a hypothetical liquidation
occurring under chapter 7 of the Bankruptcy Code. A plan must also be determined
to be "feasible," which generally requires a finding that there is a reasonable
probability that the debtor will be able to perform the obligations incurred
under the plan and that the debtor will be able to continue operations without
the need for further financial reorganization or liquidation.
The Bankruptcy Court may confirm a plan of reorganization/liquidation
even though fewer than all of the classes of impaired claims and interests
accept it. The Court may do so under the "cramdown" provisions of Bankruptcy
Code section 1129(b). In order for a plan to be confirmed under the cramdown
provisions, despite the rejection of a class of impaired claims or interests,
the proponent of the plan must show, among other things, that the plan does not
discriminate unfairly and that it is fair and equitable with respect to each
impaired class of claims or interests that has not accepted the plan.
The Bankruptcy Court must further find that the economic terms of the
particular plan meet the specific requirements of Bankruptcy Code section
1129(b) with respect to the subject objecting class. If the proponent of the
plan proposes to seek confirmation of the plan under the provisions of
Bankruptcy Code section 1129(b), the proponent must also meet all applicable
requirements of Bankruptcy Code section 1129(a) (except section 1129(a)(8)).
Those requirements include the requirements that (i) the plan comply with
applicable Bankruptcy Code provisions and other applicable law, (ii) that the
plan be proposed in good faith, and (iii) that at least one impaired class of
creditors or interest holders has voted to accept the plan.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 6
ARTICLE 3
VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS
A. BALLOTS AND VOTING DEADLINE
A ballot for voting to accept or reject the Plan is enclosed with this
Disclosure Statement, and has been mailed to Claimholders (or their authorized
representatives) entitled to vote. After carefully reviewing the Disclosure
Statement, including all exhibits, each Claimholder (or its authorized
representative) entitled to vote should indicate its vote on the enclosed
ballot. All Claimholders (or their authorized representatives) entitled to vote
must (i) carefully review the ballot and instructions thereon, (ii) execute the
ballot, and (iii) return it to the address indicated on the ballot by the
deadline (the "Voting Deadline") for the ballot to be considered. With respect
to Beneficial Holders of the Senior Subordinated Notes, only those Beneficial
Holders holding Senior Subordinated Notes on the Disclosure Statement Approval
Date shall be entitled to vote on the Plan.
The Bankruptcy Court has directed that, in order to be counted for
voting purposes, ballots for the acceptance or rejection of the Plan must be
received no later than ___________________, 2002 at 5:00 p.m. Central Standard
Time, at the following address:
HAYNES AND BOONE, LLP
Attn: Linda Breedlove
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
BALLOTS MUST BE RECEIVED AT THE ABOVE ADDRESS NO LATER THAN
___________________, 2002 AT 5:00 P.M. CENTRAL STANDARD TIME. ANY BALLOTS
RECEIVED AFTER THAT DEADLINE WILL NOT BE COUNTED.
B. CLAIMHOLDERS AND INTERESTHOLDERS ENTITLED TO VOTE
Any Claimholder of the Debtors whose claim is impaired under the Plan
is entitled to vote if either (i) the Debtors have scheduled the Claimholder's
Claim (and such Claim is not scheduled as disputed, contingent, or unliquidated)
or (ii) the Claimholder has filed a Proof of Claim on or before the deadline set
by the Bankruptcy Court for such filings. Any holder of a Claim as to which an
objection has been filed (and such objection is still pending) is not entitled
to vote, unless the Bankruptcy Court (on motion by a party whose Claim is
subject to an objection), temporarily allows the Claim in an amount that it
deems proper for the purpose of accepting or rejecting the Plan. Such motion
must be heard and determined by the Bankruptcy Court before the first date set
by the Bankruptcy Court for the Confirmation Hearing of the Plan. In addition, a
Claimholder's vote may be disregarded if the Bankruptcy Court determines that
the Claimholder's acceptance or rejection was not solicited or procured in good
faith or in accordance with the applicable provisions of the Bankruptcy Code.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 7
The Debtors' Interestholders shall not receive any distribution under
the Plan. Accordingly, all such Interestholders are deemed to have rejected the
Plan and are not entitled to vote on the Plan.
C. BAR DATE FOR FILING PROOFS OF CLAIM
The Bankruptcy Court established a bar date for filing proofs of claim
or interests in these chapter 11 cases of June 26, 2001.
D. DEFINITION OF IMPAIRMENT
Under Bankruptcy Code section 1124, a class of claims or equity
interests is impaired under a plan of reorganization/liquidation unless, with
respect to each claim or equity interests of such class, the plan:
leaves unaltered the legal, equitable, and contractual rights of the
holder of such claim or interest; or
notwithstanding any contractual provision or applicable law that
entitles the holder of a claim or interest to receive accelerated
payment of his claim or interest after the occurrence of a default:
(a) cures any such default that occurred before or after the
commencement of the case under the Bankruptcy Code, other than
a default of a kind specified in Bankruptcy Code section
365(b)(2);
(b) reinstates the maturity of such claim or interest as it
existed before the default;
(c) compensates the holder of such claim or interest for
damages incurred as a result of reasonable reliance on such
contractual provision or applicable law; and
(d) does not otherwise alter the legal, equitable, or
contractual rights to which such claim or equity interest
entitles the holder of such claim or interest.
E. CLASSES IMPAIRED UNDER THE PLAN
Claims or Interests in Classes 3, 4, 5, and 6 are impaired under the
Plan. Holders of Claims in Classes 3 or 4 are eligible to vote to accept or
reject the Plan. Claimholders within Class 5 and Interestholders within Class 6
will not receive any distributions under the Plan. As such, Claimholders within
Class 5 and Interestholders within Class 6 are conclusively presumed to have
rejected the Plan and, therefore, are not entitled to vote to accept or reject
the Plan.
Claims in Classes 1 and 2 are unimpaired under the Plan, and therefore
holders of those Claims are not entitled to vote with respect to the acceptance
or rejection of the Plan. Such Creditors will be paid in accordance with the
provisions of the Plan.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 8
F. VOTE REQUIRED FOR CLASS ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by a class of
creditors as acceptance by holders of at least two-thirds in dollar amount and
more than one-half in number of the claims of that class that actually cast
ballots for acceptance or rejection of the Plan; that is, acceptance takes place
only if creditors holding claims at least two-thirds in amount of the total
amount of claims and more than one-half in number of the Creditors actually
voting cast their ballots in favor of acceptance.
The Bankruptcy Code defines acceptance of a plan by a class of
Interests as acceptance by holders of at least two-thirds in amount of the
allowed Interests of that class.
G. INFORMATION ON VOTING AND BALLOTS
1. TRANSMISSION OF BALLOTS TO CREDITORS AND INTEREST HOLDERS
Except as otherwise provided in the Order Under 11 U.S.C. section 1125
and Fed. R. Bankr. P. 3017 Approving Disclosure Statement and Fixing Time for
Filing Acceptances or Rejections of Plan of Liquidation, entered on
___________________, 2002, ballots are being forwarded to all Claimholders.
Those Claimholders whose Claims are unimpaired under the Plan are conclusively
presumed to have accepted the Plan under Bankruptcy Code section 1126(f), and
therefore need not vote with regard to the Plan. Under Bankruptcy Code section
1126(g), Claimholders who do not either receive or retain any property under the
Plan are deemed to have rejected the Plan. In the event a Claimholder does not
vote, the Bankruptcy Court may deem such Claimholder to have accepted the Plan.
2. BALLOT TABULATION PROCEDURES
For purposes of voting on the Plan, the amount and classification of a
Claim and the procedures that will be used to tabulate acceptances and
rejections of the Plan shall be exclusively as follows:
(a) If no Proof of Claim has been timely filed, the voted
amount of a Claim shall be equal to the amount listed for the
particular Claim in the Schedules of Assets and Liabilities,
as and if amended, to the extent such Claim is not listed as
contingent, unliquidated, or disputed, and the Claim shall be
placed in the appropriate Class, based on the Debtors'
records, and consistent with the Schedules of Assets and
Liabilities and the Claims registry of the Clerk of the
Bankruptcy Court (the "Clerk");
(b) If a Proof of Claim has been timely filed, and has not
been objected to before the expiration of the Voting Deadline,
the voted amount of that Claim shall be as specified in the
Proof of Claim filed with the Clerk;
(c) Subject to subparagraph (d) below, a Claim that is the
subject of an objection filed before the Voting Deadline shall
be disallowed for voting
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 9
purposes, except to the extent and in the manner that the
Debtors indicate in their objection that the Claim should be
allowed for voting or other purposes;
(d) If a Claim has been estimated or otherwise allowed for
voting purposes by order of the Bankruptcy Court, the voted
amount and classification shall be that set by the Bankruptcy
Court;
(e) If a Claimholder or its authorized representative did not
use the Ballot or Master Ballot form, as applicable, provided
by the Debtors; the Official Ballot Form authorized under the
Federal Rules of Bankruptcy Procedure; or a substantially
similar form of ballot, such Ballot will not be counted;
(f) If the Ballot is not received by Debtors on or before the
Voting Deadline at the place fixed by the Bankruptcy Court,
the Ballot will not be counted;
(g) If the Ballot is not signed by the Claimholder or its
authorized representative, the Ballot will not be counted;
(h) If the individual or institution casting the Ballot
(whether directly or as a representative) was not the holder
of a Claim on the Voting Record Date (as that term is defined
below), the Ballot will not be counted;
(i) If the Claimholder or its authorized representative did
not check one of the boxes indicating acceptance or rejection
of the Plan, or checked both such boxes, the Ballot will be
counted as an acceptance;
(j) If no Ballots are received on or before the Voting
Deadline with respect to a particular class of Claims, then
such class of Claims shall be deemed to have accepted the
Plan;
(k) Whenever a Claimholder (or its authorized representative)
submits more than one Ballot voting the same Claim(s) before
the applicable deadline for submission of Ballots, except as
otherwise directed by the Bankruptcy Court after notice and a
hearing, the last such Ballot shall be deemed to reflect the
voter's intent and shall supersede any prior Ballots.
3. EXECUTION OF BALLOTS BY REPRESENTATIVES
If a Ballot is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons must indicate their capacity
when signing and, at the Debtors' request, must submit proper evidence
satisfactory to the Debtors of their authority to so act.
4. WAIVERS OF DEFECTS AND OTHER IRREGULARITIES REGARDING BALLOTS
Unless otherwise directed by the Bankruptcy Court, all questions
concerning the validity, form, eligibility (including time of receipt),
acceptance, and revocation or withdrawal of Ballots
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 10
will be determined by the Debtors in their sole discretion, whose determination
will be final and binding. The Debtors 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. 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) determines. 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 liability 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 any
irregularities have been cured or waived. Ballots previously furnished, and as
to which any irregularities have not subsequently been cured or waived, will be
invalidated.
5. WITHDRAWAL OF BALLOTS AND REVOCATION
Any holder of a Claim (or its authorized representative) in an impaired
Class 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 counsel for Debtors at any time before the Voting Deadline.
To be valid, a notice of withdrawal must: (i) contain the description
of the Claims to which it relates and the aggregate principal amount or number
of shares, represented by such Claims; (ii) be signed by the Claimholder (or its
authorized representative) in the same manners as the Ballot; and (iii) be
received by counsel for Debtors in a timely manner at the addresses set forth
herein. 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 that is not received in a timely manner by the Debtors
will not be effective to withdraw a previously furnished Ballot.
Any Claimholder (or its authorized representative) who has previously
submitted a properly completed Ballot to counsel for Debtors before the Voting
Deadline may revoke such Ballot and change its vote by submitting to counsel for
Debtors before the Voting Deadline a subsequent, properly completed Ballot for
acceptance or rejection of the Plan.
H. CONFIRMATION OF PLAN
1. SOLICITATION OF ACCEPTANCES
The Debtors are soliciting your vote. The Debtors will bear the cost of
any solicitation by the Debtors. No other additional compensation shall be
received by any party for any solicitation other than as disclosed to the
Bankruptcy Court.
NO REPRESENTATIONS OR ASSURANCES, IF ANY, CONCERNING THE DEBTORS OR THE
PLAN ARE AUTHORIZED BY THE DEBTORS
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 11
OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. ANY
REPRESENTATIONS OR INDUCEMENTS MADE BY ANY PERSON TO SECURE YOUR VOTE
OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE STATEMENT SHOULD NOT BE
RELIED ON BY YOU IN ARRIVING AT YOUR DECISION, AND SUCH ADDITIONAL
REPRESENTATIONS OR INDUCEMENTS SHOULD BE REPORTED TO COUNSEL FOR THE
DEBTORS FOR SUCH ACTION AS MAY BE DEEMED APPROPRIATE.
THIS IS A SOLICITATION SOLELY BY THE DEBTORS, AND IS NOT A SOLICITATION
BY ANY SHAREHOLDER, ATTORNEY, OR ACCOUNTANT FOR THE DEBTORS. THE
REPRESENTATIONS, IF ANY, MADE HEREIN ARE THOSE OF THE DEBTORS AND NOT
OF SUCH SHAREHOLDERS, ATTORNEYS, OR ACCOUNTANTS, EXCEPT AS MAY BE
OTHERWISE SPECIFICALLY AND EXPRESSLY INDICATED.
Under the Bankruptcy Code, a vote for acceptance or rejection of a plan
may not be solicited unless the claimant has received a copy of a disclosure
statement approved by the Bankruptcy Court prior to, or concurrently with, such
solicitation. This solicitation of votes on the Plan is governed by Bankruptcy
Code section 1125(b). Violation of Bankruptcy Code section 1125(b) may result in
sanctions by the Bankruptcy Court, including disallowance of any improperly
solicited vote.
2. REQUIREMENTS FOR CONFIRMATION OF THE PLAN
At the Confirmation Hearing, the Bankruptcy Court shall determine
whether the requirements of Bankruptcy Code section 1129 have been satisfied, in
which event the Bankruptcy Court shall enter an Order confirming the Plan. For
the Plan to be confirmed, Bankruptcy Code section 1129 requires that:
(a) The Plan comply with the applicable provisions of the
Bankruptcy Code;
(b) The Debtors have complied with the applicable provisions
of the Bankruptcy Code;
(c) The Plan has been proposed in good faith and not by any
means forbidden by law;
(d) Any payment or distribution made or promised by the
Debtors or by a person issuing securities or acquiring
property under the Plan for services or for costs and expense
in connection with the Plan has been disclosed to the
Bankruptcy Court, and any such payment made before the
confirmation of the Plan is reasonable, or if such payment is
to be fixed after confirmation of the Plan, such payment is
subject to the approval of the Bankruptcy Court as reasonable;
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 12
(e) The Debtors have disclosed the identity and affiliation of
any individual proposed to serve, after confirmation of the
Plan, as a director, officer or voting trustee of the Debtors,
an affiliate of the Debtors participating in a joint plan with
the Debtors, or a successor to the Debtors under the Plan; the
appointment to, or continuance in, such office of such
individual is consistent with the interests of Creditors and
Interest Holders and with public policy; and the Debtors have
disclosed the identity of any insider that will be employed or
retained by the reorganized debtor and the nature of any
compensation for such insider;
(f) Any government regulatory commission with jurisdiction
(after confirmation of the Plan) over the rates of the Debtors
has approved any rate change provided for in the Plan, or such
rate change is expressly conditioned on such approval;
(g) With respect to each impaired Class of Claims or
Interests, either each holder of a Claim or Interest of the
Class has accepted the Plan, or will receive or retain under
the Plan on account of that Claim or Interest, property of a
value, as of the Effective Date of the Plan, that is not less
than the amount that such holder would so receive or retain if
the Debtors were liquidated on such date under Chapter 7 of
the Bankruptcy Code. If Bankruptcy Code section 1111(b)(2)
applies to the Claims of a Class, each holder of a Claim of
that Class will receive or retain under the Plan on account of
that Claim property of a value, as of the Effective Date, that
is not less than the value of that holder's interest in the
Debtors' interest in the property that secures that Claim;
(h) Each Class of Claims or Interests has either accepted the
Plan or is not impaired under the Plan;
(i) Except to the extent that the holder of a particular
Administrative Claim or Priority Claim has agreed to a
different treatment of its Claim, the Plan provides that
Administrative Claims and Priority Claims shall be paid in
full on the Effective Date or the Allowed Date;
(j) If a Class of Claims or Interests is impaired under the
Plan, at least one such Class of Claims or Interests has
accepted the Plan, determined without including any acceptance
of the Plan by any insider holding a Claim or Interest of that
Class; and
(k) Confirmation of the Plan is not likely to be followed by
the liquidation or the need for further financial
reorganization of the Debtors or any successor to the Debtors
under the Plan, unless such liquidation or reorganization is
proposed in the Plan.
The Debtors believe that the Plan satisfies all of the statutory
requirements of the Bankruptcy Code for confirmation and that the Plan was
proposed in good faith. The Debtors
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 13
believe it has complied, or will have complied, with all the requirements of the
Bankruptcy Code governing confirmation of the Plan.
3. ACCEPTANCES NECESSARY TO CONFIRM THE PLAN
Voting on the Plan by each holder of a Claim (or its authorized
representative) is important. Chapter 11 of the Bankruptcy Code does not require
that each holder of a Claim vote in favor of the Plan in order for the Court to
confirm the Plan. Generally, to be confirmed under the acceptance provisions of
Bankruptcy Code section 1126(a), the Plan must be accepted by each Class of
Claims that is impaired under the Plan by parties holding at least two-thirds in
dollar amount and more than one-half in number of the Allowed Claims of such
Class actually voting in connection with the Plan. Even if all Classes of Claims
accept the Plan, the Bankruptcy Court may refuse to confirm the Plan.
4. CRAMDOWN
In the event that any impaired Class of Claims does not accept the
Plan, the Bankruptcy Court may still confirm the Plan at the request of the
Debtors if, as to each impaired Class that has not accepted the Plan, the Plan
"does not discriminate unfairly" and is "fair and equitable." A plan of
reorganization/liquidation does not discriminate unfairly within the meaning of
the Bankruptcy Code if no Class receives more than it is legally entitled to
receive for its claims or equity interests. "Fair and equitable" has different
meanings for holders of secured and unsecured claims and equity interests.
With respect to a secured claim, "fair and equitable" means either (i)
the impaired secured creditor retains its liens to the extent of its allowed
claim and receives deferred cash payments at least equal to the allowed amount
of its claims with a present value as of the effective date of the plan at least
equal to the value of such creditor's interest in the property securing its
liens, (ii) property subject to the lien of the impaired secured creditor is
sold free and clear of that lien, with that lien attaching to the proceeds of
sale, and such lien proceeds must be treated in accordance with clauses (i) and
(iii) hereof; or (iii) the impaired secured creditor realizes the "indubitable
equivalent" of its claim under the plan.
With respect to an unsecured claim, "fair and equitable" means either
(i) each impaired creditor receives or retains property of a value equal to the
amount of its allowed claim or (ii) the holders of claims and equity interests
that are junior to the claims of the dissenting class will not receive any
property under the plan.
With respect to equity interests, "fair and equitable" means either (i)
each impaired equity interest receives or retains, on account of that equity
interest, property of a value equal to the greater of the allowed amount of any
fixed liquidation preference to which the holder is entitled, any fixed
redemption price to which the holder is entitled, or the value of the equity
interest; or (ii) the holder of any equity interest that is junior to the equity
interest of that class will not receive or retain under the plan, on account of
that junior equity interest, any property.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 14
In the event at least one Class of impaired Claims or Interests rejects
or is deemed to have rejected the Plan, the Bankruptcy Court will determine at
the Confirmation Hearing whether the Plan is fair and equitable and does not
discriminate unfairly against any rejecting impaired Class of Claims or
Interests.
The Debtors believe that the Plan does not discriminate unfairly and is
fair and equitable with respect to each impaired Class of Claims and Interests.
ARTICLE 4
BACKGROUND OF THE DEBTORS
A. NATURE OF THE DEBTORS' BUSINESS
Kevco is a publicly-held Texas corporation and has its corporate
headquarters in Fort Worth, Texas. The other Debtors are direct or indirect
wholly-owned subsidiaries of Kevco. Prior to the Petition Date, the Debtors were
wholesale distributors of building products to the manufactured housing and
recreational vehicle ("RV") industries. The Debtors also manufactured wood
products including roof trusses and lumber cut to customer specifications,
laminated wallboard products, thermoformed bathtubs, shower enclosures and tub
wall surrounds for the manufactured housing and RV industries.
The Debtors' business was organized into three separate operating
segments: Manufacturing, Wood, and Distribution. All three segments marketed to
the manufactured housing and RV industry. The Manufacturing segment produced
thermoformed products, such as bathtubs and shower enclosures, and laminated
wallboard products. The Wood segment produced roof trusses and lumber cut to
customer specifications. The Distribution segment wholesaled component parts and
raw materials used in the construction of manufactured housing and recreation
vehicles. As of February 2, 2001, the business day immediately prior to the
Petition Date, the Debtors employed approximately 1,331 individuals.
B. ASSETS, LIABILITIES AND LIQUIDATION ANALYSIS
1. ASSETS
On January 31, 2001, the Debtors had assets with an aggregate book
value(3) of $237,689,551.27.(4) That aggregate amount represents the following:
(i) cash in the amount of $9,143,409.91; (ii) trade accounts receivable in the
amount of $21,754,916.68; (iii) inventory in the amount of $43,997,809.59; (iv)
other current assets in the amount of $5,936,659.09; (v) property and equipment
(net) in the amount of $42,301,930.17; (vi) goodwill and other
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(3) The book value of the Debtors' assets included hundreds of millions of
dollars in intercompany receivables and intangible assets, most of which had
little, if any, market value. Thus, the book value of such assets did not
necessarily equate with the fair market value of those assets as of the Petition
Date.
(4) For a complete listing and explanation each of the Debtors' assets as of the
Petition Date, parties should refer to the Schedules of Assets and Liabilities
filed in the bankruptcy case for that Debtor.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 15
intangible assets (net) in the amount of $109,467,764.23; and (vii) other long
term assets in the amount of $5,087,061.40.
As more fully discussed below, the Debtors sold essentially all of
their operating assets during the bankruptcy case to five different purchasers.
The aggregate gross sale price generated by the sales was approximately $41.6
million. The Sales included the sale of certain aspects of the Debtors' business
as going concern as well as mere asset sales. The Debtors also sold various real
property during these cases for a gross sales price of $3.6 million.
2. LIABILITIES
On January 31, 2001, the Debtors had liabilities in the aggregate
amount of approximately $244 million.(5) That aggregate amount is comprised of
the following:
(a) Approximately $75 million in secured debt owing to
Kevco's Lender Group,(6) which was secured by liens
asserted on all or substantially all of the Debtors'
assets. (These claims have been recently been
resolved by a settlement agreement approved by the
Court on June 24, 2002 by final Order.)
(b) $105 million plus accrued interest owed under those
certain 10 3/8% Senior Notes due 2007 issued by Kevco
on or about December 1, 1997.
(c) $23.5 million plus accrued interest under 11.5%
Senior Subordinated Convertible Notes due July 2006
(together with the 10 3/8% Senior Notes due 2007, the
"Kevco Notes").
(d) Approximately $40 million of unsecured trade debt.
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(5) For a complete listing and explanation of each of the Debtors' liabilities
as of the Petition Date, parties should refer to the Schedules of Assets and
Liabilities filed in the bankruptcy case for that Debtor.
(6) Bank of America, N.A. is the administrative agent for the Lender Group. The
remainder of the Lender Group is comprised of National City Bank of Kentucky,
Guaranty Bank, formerly known as Guaranty Federal Bank, F.S.B., Wells Fargo
Bank, N.A., Bank One Texas, N.A., Archimedes Funding, L.L.C., Alliance Capital
Funding, L.L.C., MLCBO IV (Cayman), Pilgrim Prime Rate Trust, and PAM Capital
Funding L.P.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 16
3. DEBTORS' CORPORATE STRUCTURE AND RELATIONSHIP TO AFFILIATES
Prior to the Petition Date, the Debtors were a wholesale distributor of
building products to the manufactured housing and RV industries, which was
conducted primarily through Kevco's indirect, wholly-owned subsidiary, Kevco
Distribution. The Debtors also manufactured certain products for the
manufactured housing and RV industries, which was conducted primarily through
Kevco's indirect, wholly-owned subsidiary, Kevco Manufacturing. The other
subsidiaries of Kevco, Kevco Management, Kevco Holding, Kevco GP, Kevco
Components, and DCM, conducted few business operations. The Debtors believe
there is little or no value to these subsidiaries inasmuch as any assets of
these subsidiaries with any value were previously sold.
C. EXISTING AND POTENTIAL LITIGATION/PROCEEDINGS
1. POTENTIAL LITIGATION
The Debtors may be potential plaintiffs or defendants in other
lawsuits, claims, and administrative proceedings. While the outcome of those
proceedings cannot be predicted with certainty, the Debtors reasonably estimate
that the recoveries generated from, and/or the costs associated with pursuing,
those claims will not materially affect the financial condition of the Debtors
or the distributions to be made under the Plan.
2. COMMITTEE LITIGATION
On July 2, 2001, the Committee commenced an adversary proceeding
against the Debtors' Lender Group(7) on the Debtors' behalf in the Bankruptcy
Court, Adversary Number 01-4076 (the "Committee Litigation"). In the Committee
Litigation, the Committee asserted causes of action under Chapter 5 of the
Bankruptcy Code and sought various forms of relief, including, without
limitation, declaratory judgment as to the validity of certain of the Lender
Group's liens, avoidance of various transactions, money judgment against the
Lender Group and a denial of certain of the Bank Group's claims against the
Debtors.
The Adversary Proceeding was referred to mediation before the Honorable
Harold C. Abramson, United States Bankruptcy Judge. As described in more detail
below, after a full day of negotiation during the mediation and upon several
additional weeks of detailed settlement discussions, the Committee, the Debtors
and the Lender Group reached an agreement in full settlement of the Committee
Litigation. The Agreement generated $6 million free and clear of the Lender
Group's liens and security interests. On June 24, 2002, the Court approved the
parties' settlement of the Committee Litigation.
On June 4, 2002, the Committee further undertook the prosecution of the
estates' claims (the "D&O Litigation") against certain officers of the Debtors,
as well as third parties for, inter alia, breach of fiduciary duties, theft of
trade secrets, tortious interference with contracts and
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(7) Bank of America, N.A. is the administrative agent for the Lender Group. The
remainder of the Lender Group is comprised of National City Bank of Kentucky,
Guaranty Bank, formerly known as Guaranty Federal Bank, F.S.B., Wells Fargo
Bank, N.A., Bank One Texas, N.A., Archimedes Funding, L.L.C., Alliance Capital
Funding, L.L.C., MLCBO IV (Cayman), Pilgrim Prime Rate Trust, and PA M Capital
Funding L.P.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 17
business relations and civil conspiracy. The litigation remains in its infancy
and the amount of any likely recovery remains subject to determination.
D. PREFERENCE AND OTHER AVOIDANCE LITIGATION
During the 90-day period immediately preceding the Petition Date, the
Debtors made various payments and other transfers while insolvent to creditors
on account of antecedent debts. In addition, during the one-year period before
the filing date, the Debtors made certain transfers to, or for the benefit of,
certain "insider" creditors. While most of those payments were made in the
ordinary course of the Debtors' business, some of those payments may be subject
to avoidance and recovery by the Debtors' bankruptcy estate as preferential
and/or fraudulent transfers pursuant to Bankruptcy Code sections 544, 547, 548
and 550. Under Bankruptcy Code section 1123(b)(3)(B), the Debtors, on behalf of
itself and holders of Allowed Claims and Allowed Interests, shall retain all
claims, causes of action, and other legal and equitable rights that it had (or
had power to assert) immediately prior to Confirmation of the Plan, including
actions for the avoidance and recovery of estate property under Bankruptcy Code
section 550, or transfers avoidable under Bankruptcy Code sections 544, 545,
547, 548, 549 or 553(b), and may commence or continue, in any appropriate court
or tribunal, any suit or other proceeding for the enforcement of such actions.
All claims, causes of action, and other legal or equitable rights shall remain
the property of the Debtors. All recoveries from the above-referenced actions
will become Estate Property, and will be distributed to holders of Allowed
Claims and Allowed Interests pursuant to the Plan.
With respect to any potential avoidance actions, the likelihood of
successful recovery must be weighed against the legal fees and other expenses
that would likely be incurred by the Debtors in determining whether to pursue
legal remedies for the avoidance and recovery of any transfers. Inasmuch as the
Debtors' investigation of such payments is in the nascent phase, it is unable to
provide any meaningful estimate of the total amount that could be recovered The
Debtors' Statements of Financial Affairs on file with the Bankruptcy Court
identify the creditors and insiders who received transfers from the Debtors
during the applicable periods as well as the corresponding amount of those
transfers. Each of those transfers may constitute an avoidable preference and/or
fraudulent conveyance.
ARTICLE 5
EVENTS LEADING TO BANKRUPTCY
Beginning in 1995, the Debtors pursued an aggressive growth strategy to
capitalize on anticipated trends in the manufactured housing and RV industries.
In connection with this objective, the Debtors pursued a combination of rapid
internal growth and significant acquisitions. These acquisitions included, among
others, Service Supply Systems, Inc. (in June 1995, for approximately $15.6
million), Bowen Supply, Inc. (in February 1997, for approximately $20.5
million), Consolidated Forest Products, L.L.C. (in February 1997, for
approximately $13 million), and Shelter Components Corporation (in December
1997, for approximately $135.7 million). This growth strategy required
substantial capital, which was primarily generated from borrowings under Kevco's
bank credit facilities, proceeds from
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 18
Kevco's November 1996 initial public offering, and proceeds from the issuance of
the Senior Subordinated Notes.
The Debtors were faced with consolidating these acquisitions into their
existing operations, leading to increased expenditures stemming from the
integration and the administrative and facility redundancies created by the
acquisitions. These integration costs reduced the Debtors' cash flows, and
difficulties in integrating these acquired operations limited the Debtors'
ability to realize economies of scale from the growth associated with the
acquisitions.
A general decline in the manufactured housing and RV industries
beginning in the second half of 1998 also contributed to the Debtors' financial
difficulties. This slow-down was believed to be caused by, among other things,
lenders tightening their approval requirements on marginal buyers, fewer lenders
participating in the manufactured housing market, and an oversupply of retail
dealer inventory.
In an attempt to improve its operating position, in July 1999 Kevco
completed a transaction, pursuant to which an affiliate of Wingate Partners II,
L.P. ("Wingate") acquired, for an approximate purchase price of $37.0 million,
(i) 2,700,000 shares of Kevco's common stock, (ii) three warrants to purchase an
aggregate of 1,743,182 shares of a new class of nonvoting common stock of Kevco,
and (iii) two tranches of Senior Subordinated Exchangeable Notes in the
aggregate principal amount of $23.5 million.
Despite the capital infusion from Wingate, the persistent decline in
the manufactured housing and RV industries continued to place significant
financial pressure on the Debtors' ability to generate sufficient returns to
service their debt and to finance the continued integration of the
newly-acquired operations. Ultimately, these capital constraints, coupled with
encroaching creditor demands, caused the Debtors to seek protection under
chapter 11 of the Bankruptcy Code.
ARTICLE 6
POST-BANKRUPTCY OPERATIONS AND SIGNIFICANT EVENTS
A. POST-BANKRUPTCY OPERATIONS
Both before and after the Petition Date, the Debtors were unable to
obtain external financing which was necessary to fund a successful
reorganization. Since the Petition Date, the Debtors have sold all of their
operating divisions. Prior to the closing of the sales of these operations, the
Debtors had generally been paying postpetition obligations as they became due.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 19
B. SIGNIFICANT ORDERS ENTERED DURING THE CASE
1. FIRST DAY ORDERS
On the Petition Date, the Debtors filed a number of motions designed to
allow it to continue operating its business in the ordinary course without
unnecessary disruption as a result of the bankruptcy filing. Pursuant to those
motions, the Bankruptcy Court entered orders that, among other things, granted
the Debtors the authority to: (i) use the cash collateral of the Lender Group;
(ii) pay prepetition accrued wages, salaries, and other compensation to its
employees; honor certain existing personnel policies (including the Debtors'
medical and 401k plans and vacation and personal time policies, as modified by
the Court) in the ordinary course of business; and reimburse its employees for
business expenses incurred prepetition; (iii) maintain and use its existing bank
accounts, business funds, and consolidated cash management system and (iv)
employ various professionals, including Haynes and Boone, LLP, The Gordian
Group, L.P. and Lain, Faulkner & Co., P.C. The Bankruptcy Court also entered an
order prevent utilities from altering or refusing service to the Debtors except
under certain circumstances.
2. USE OF CASH COLLATERAL
On March 13, 2001, the Bankruptcy Court entered its Final Agreed Order
Regarding Limited Use of Cash Collateral authorizing the Debtors to use the cash
collateral of the Lender Group in accordance with a budget provided by the
Debtors and approved by the Lender Group. Subsequently, the Debtors and the
Lender Group have entered several stipulations extending the Debtors' use of
cash collateral.
3. OFFICIAL COMMITTEE OF UNSECURED CREDITORS
On February 13, 2001, the United States Trustee appointed an Official
Committee of Unsecured Creditors (the "Committee") in this chapter 11 case. The
Committee is composed of the following parties:
Bank of New York as Successor Tolko Industries, Ltd.
Indentured Trustee to U.S. Trust Box 39
Company of New York 3203 30th Avenue
Vernon, B.C., Canada VIT 6M1
Harrigan Lumber Company
P.O. Drawer 926 MiTek Industries, Inc.
Monroeville, AL 36461 P.O. Box 7359
St. Louis, MO 63177-7359
U.S. Brass Corporation
901 10th Street
P.O. Box 869037
Plano, TX 75086-9037
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 20
4. COMMENCEMENT AND SETTLEMENT OF ADVERSARY PROCEEDINGS
On June 28, 2001, the Committee was authorized by the Bankruptcy Court
to commence the Adversary Proceeding on behalf of the Debtors and their estates.
On June 24, 2002, the Court approved the Settlement Agreement, which resolved
the Committee's causes of action against the Lender Group and generated $6
million free and clear of the Lender Group's liens and security interest. Under
the terms of the Settlement Agreement, the Debtors and the Committee agreed to
compromise the Adversary Proceeding against the Lender Group in exchange for
certain concessions by the Lender Group, as set forth in the Settlement
Agreement.
5. EMPLOYEE AND EXECUTIVE RETENTION PLANS
On March 14, 2001, the Bankruptcy Court entered an order approving the
employee retention plans proposed by the Debtors. The goal of the retention plan
was to provide incentives for key employees to remain employed at the Debtors
until certain milestone dates, which would maximize the value of the Debtors'
business and increase the chance of a successful reorganization/liquidation. The
Debtors have paid all bonuses that have already accrued under the retention
plan.
6. THE SALE OF THE DEBTORS' BUSINESS OPERATIONS
Before the Petition Date, the Debtors began marketing their property
and assets as well as their various operating divisions (collectively, the
"Business") and retained the firm of The Gordian Group, L.P. ("Gordian") as
special financial and sales consultants to assist in the sale process. The
Debtors and Gordian believed that the Business was substantially more valuable
if the divisions were sold as ongoing operations rather than liquidation
following a shut down of operations. To facilitate the sale process, the Debtors
and their professionals (i) initiated the marketing of the Business and directly
contacted numerous potential purchasers to solicit expressions of interest for
the acquisition of the Business; (ii) prepared packages consisting of a
management presentation and other information necessary to determine the value
of the Business; (iii) drafted and obtained satisfactory confidentiality
agreements from potential purchasers and then distributed bid packages to those
parties; (iv) established and maintained a data room for potential purchasers to
conduct necessary due diligence; and (v) solicited, received, and negotiated
multiple proposals and letters of intent regarding the acquisition of the
Business.
On February 2, 2001, Kevco Manufacturing, Kevco and Wingate entered
into an agreement to sell its Design Components division to Adorn, LLC
("Adorn"), for approximately $12 million. In connection with this agreement, on
February 23, 2001, the Debtors filed their Motion for Order Pursuant to 11
U.S.C. Sections 105, 363, 365, 1107, 1108 and 1146 Authorizing Debtors to Sell
Assets of Design Components, a Division of Debtor, Kevco Manufacturing, L.P. and
to Assume, Assign and Sell Certain Executory Contracts and Unexpired Leases that
Relate Thereto Free and Clear of All Liens, Claims, and Encumbrances. The motion
sought, among other relief, approval of the proposed sale of the Design
Components division to Adorn free and clear of all interests, along with the
approval of the assumption and assignment of certain executory contracts and
unexpired leases to Adorn. After the requisite hearing, the Bankruptcy
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 21
Court entered an order approving the sale of the Design Components division to
Adorn under the asset purchase agreement, free and clear of all interests under
Bankruptcy Code sections 105 and 363 as well as the assumption and assignment of
the identified executory contracts and unexpired leases under Bankruptcy Code
section 365. The transaction ultimately closed on February 23, 2001.
On March 2, 2001, Kevco Manufacturing entered into an agreement to sell
its Sunbelt Wood Components division to Universal Forest Products Eastern
Division, Inc. ("Universal"), for approximately $7.8 million. In connection with
this agreement, on April 3, 2001, the Debtors filed their Motion for Order
Pursuant to 11 U.S.C. sections 105, 363, 1107, 1108 and 1146 Authorizing Debtors
to Sell Assets of Sunbelt Wood Components, a Division of Debtor, Kevco
Manufacturing, L.P., Free and Clear of All Liens, Claims, and Encumbrances. The
motion sought, among other relief, approval of the proposed sale of the Sunbelt
Wood Components division to Universal free and clear of all interests. After the
requisite hearing, the Bankruptcy Court entered an order approving the sale of
the Sunbelt Wood Components division to Universal under the asset purchase
agreement, free and clear of all interests under Bankruptcy Code sections 105
and 363. The transaction ultimately closed on April 3, 2001.
On April 4, 2001, Kevco Distribution entered into an agreement to sell
its distribution business located in Alabama, Florida, Georgia, Indiana, North
Carolina and Texas (the "Southern Distribution Division") to Alliance Investment
& Management Company, Inc. ("Alliance"), for approximately $3.9 million. In
connection with this agreement, on April 25, 2001, the Debtors filed their
Motion for Order Pursuant to 11 U.S.C. sections 105, 363, 1107, 1108 and 1146
Authorizing Debtors to Sell Assets of South Region of Debtor, Kevco
Manufacturing, L.P. Free and Clear of All Liens, Claims, and Encumbrances and
Other Interests. The motion sought, among other relief, approval of the proposed
sale of the Southern Distribution Division to Alliance free and clear of all
interests. After the requisite hearing, the Bankruptcy Court entered an order
approving the sale of the Southern Distribution Division to Alliance under the
asset purchase agreement, free and clear of all interests under Bankruptcy Code
sections 105 and 363. The transaction ultimately closed on May 1, 2001.
On April 3, 2001, Kevco Manufacturing entered into an agreement to sell
its Better Bath division to Drew Industries Incorporated ("Drew"), for
approximately $9.5 million. In connection with this agreement, on May 21, 2001,
the Debtors filed their Motion for Order Pursuant to 11 U.S.C. sections 105,
363, 365, 1107, 1108 and 1146 Authorizing Debtors to Sell Assets of Better Bath,
a Division of Debtor, Kevco Manufacturing, L.P., and to Assume, Assign and Sell
Certain Executory Contracts and Unexpired Leases that Relate Thereto Free and
Clear of All Liens, Claims, and Encumbrances. The motion sought, among other
relief, approval of the proposed sale of the Better Bath division to Drew free
and clear of all interests, along with the approval of the assumption and
assignment of certain executory contracts and unexpired leases to Drew. After
the requisite hearing, the Bankruptcy Court entered an order approving the sale
of the Better Bath division to Drew under the asset purchase agreement, free and
clear of all interests under Bankruptcy Code sections 105 and 363 as well as the
assumption and assignment of the identified executory contracts and unexpired
leases under Bankruptcy Code section 365. The transaction ultimately closed on
June 1, 2001.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 22
On April 18, 2001, Kevco Manufacturing entered into an agreement to
sell its Duo-Form division to Duo-Form Acquisition Corp. ("DAC"), for
approximately $5.5 million. In connection with this agreement, on May 15 and May
21, 2001, the Debtors filed their Motion for Order Pursuant to 11 U.S.C.
sections 105, 363, 365, 1107, 1108 and 1146 Authorizing Debtors to Sell Assets
of Duo-Form, a Division of Debtor, Kevco Manufacturing, L.P., and to Assume,
Assign and Sell Certain Executory Contracts and Unexpired Leases that Relate
Thereto Free and Clear of All Liens, Claims, and Encumbrances. The motion
sought, among other relief, approval of the proposed sale of the Duo-Form
division to DAC free and clear of all interests, along with the approval of the
assumption and assignment of certain executory contracts and unexpired leases to
DAC. After the requisite hearing, the Bankruptcy Court entered an order
approving the sale of the Duo-Form division to DAC under the asset purchase
agreement, free and clear of all interests under Bankruptcy Code sections 105
and 363 as well as the assumption and assignment of the identified executory
contracts and unexpired leases under Bankruptcy Code section 365. The
transaction ultimately closed on June 1, 2001.
On April 27, 2001, Kevco Distribution entered into an agreement to sell
certain of assets associated with its distribution business located in Alabama,
Florida, Georgia, Indiana, North Carolina and Texas (the "Remaining Southern
Equipment") to Alliance for approximately $400,000. In connection with this
agreement, on May 23, 2001, the Debtors filed their Motion for Order Authorizing
and Approving Process for Sale and Disposition of Debtors' Remaining Equipment
Free and Clear of All Liens, Claims, and Encumbrances. The motion sought, among
other relief, approval of the proposed sale of the Remaining Southern Equipment
to Alliance free and clear of all interests. After the requisite hearing, the
Bankruptcy Court entered an order approving the sale of the Remaining Southern
Equipment to Alliance under the asset purchase agreement, free and clear of all
interests under Bankruptcy Code sections 105 and 363. The transaction ultimately
closed on June 5, 2001.
7. MISCELLANEOUS PROPERTY SALES
On March 22, 2001 the Bankruptcy Court approved a sale of the assets of
the Shepherd Products Group of Kevco Distribution to Mid-American Converting,
Inc. for the purchase price of $340,000, and the transaction closed promptly
thereafter.
On September 27, 2001, the Bankruptcy Court approved a sale of certain
unimproved real property of Kevco Distribution located in Waco, Texas to R. Brad
Davis for the purchase price of $35,000. The transaction closed on January 15,
2002.
On May 8, 2002, the Bankruptcy Court approved a sale of certain real
property of Kevco Manufacturing located at 21608 Protecta Drive in Elkhart,
Indiana to AL-KO Kober Corporation for a purchase price of $1,500,000. The
transaction closed on May 15, 2002.
On November 16, 2001, the Bankruptcy Court approved a sale of certain
real property of Kevco Distribution located in Douglas, Georgia to Run to Win
Freight Lines, Inc. for the purchase price of $850,000. Run to Win Freight
Lines, Inc. failed to close on the sale, and on May 21, 2002, the Bankruptcy
Court approved a sale of the Douglas, Georgia property to
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 23
Danny D. Lewis, Ronnie E. Lewis and Chris D. Lewis for a purchase price of
$760,000. The transaction closed on May 29, 2002.
On July 24, 2002, the Bankruptcy Court approved a sale of certain real
property of Kevco Distribution located at 27217 County Road 6 in Elkhart,
Indiana to Golden Helvey Properties, Inc. for a purchase price of $1,325,000.00.
The transaction closed on August 6, 2002.
During these cases, the Debtors also sold various equipment for the
gross purchase price of $900,000.
8. RESULTS OF DEBTORS' SALE EFFORTS
As previously noted, the sales of the Debtors' various business
operations, real estate and equipment yielded an aggregate gross sales price of
approximately $45 million. The sales resulted in the disposition of
substantially all of the Debtors' property and assets, including its tangible
personal property, inventory, raw materials, trade receivables, intellectual
property (patents and trademarks), books and records, goodwill, and operating
divisions, with the exception of certain parcels of real property for which the
Debtors are currently seeking purchasers. The Debtors retained certain claims
and causes of action, including avoidance and fraudulent conveyance action under
the Bankruptcy Code. Under the Plan, the Plan Administration Agent will
liquidate any of the Debtors' remaining assets and property and distribute any
proceeds therefrom to the Creditors.
9. REJECTION OF EXECUTORY CONTRACTS
As part of the Debtors' sale efforts and operational shut-down, the
Debtors identified several executory contracts that were no longer necessary
beneficial to the Debtors inasmuch as they had sold their property and assets
and were no longer conducting business. During the course of these cases, the
Debtors filed five omnibus motions to reject executory contracts. On April 26,
May 29, June 26, July 3 and October 30, 2001, the Bankruptcy Court entered
orders granting these omnibus motions and rejecting several of the Debtors'
executory contracts and unexpired leases. The rejection of those executory
contracts and unexpired leases forestalled the further accrual of administrative
expense priority claims under those contracts. As the Debtors have now
terminated all operations, the Plan provides that any remaining executory
contracts are rejected as of the Petition Date.
C. PROFESSIONAL FEES AND EXPENSES
1. PROFESSIONALS EMPLOYED BY THE DEBTORS
Pursuant to orders entered by the Bankruptcy Court, the Debtors have
retained certain professionals to represent its interests in this chapter 11
case. In particular, the Debtors retained Haynes and Boone LLP ("Haynes and
Boone) to serve as general bankruptcy counsel.
The Debtors also retained (i) The Gordian Group, L.P. as financial
advisors in connection with the anticipated sale of their business operations,
which is discussed more fully above; (ii)
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 24
Lain, Faulkner & Co., PC as its accountants; (iii) Staubach Global Services,
Inc. as real estate broker; (iv) Ernst & Young, L.L.P. to provide necessary tax
compliance and auditing services in the bankruptcy case and (v) Barnes &
Thornburg to pursue certain property tax appeals. The Debtors have filed an
application to employ Cozen & O'Connor, P.C. to represent Kevco Manufacturing in
connection with claims arising from a fire that destroyed Kevco Manufacturing's
Edwardsburg, Michigan facility. This application is set for hearing on August
28, 2002.
2. PROFESSIONALS EMPLOYED BY THE CREDITORS COMMITTEE
The Committee, pursuant to orders entered by the Bankruptcy Court, has
also retained certain professionals to represent its interests in this chapter
11 case. The Committee retained the law firm of Baker & McKenzie L.L.P. as its
general bankruptcy counsel, and it retained Mark MacDonald and Associates, P.C.
as special counsel to pursue the Committee Litigation.
D. SUBSTANTIVE CONSOLIDATION
On August 14, 2002, the Debtors filed their Joint Application for
Substantive Consolidation of Debtor Entities and Elimination of Inter-Company
Debtor Claims and Brief in Support Thereof (the "Consolidation Motion"). In the
Consolidation Motion, the Debtors requested that the Bankruptcy Court exercise
its power under 11 U.S.C. section 105(a) to substantively consolidate the
separate Debtors into Kevco, Inc. as a single corporate entity for all purposes.
The Debtors further requested that the Court order that all assets and
liabilities of each of the Debtors be merged into Kevco, Inc. and declare that
all proofs of claim filed and all debts scheduled in each of the individual
cases of the Debtors be deemed to have been filed or scheduled in the
consolidated case of Kevco, Inc. On September 18, 2002, the Bankruptcy Court
entered its Order Granting the Consolidation Motion in all respects.
ARTICLE 7
DESCRIPTION OF THE PLAN
A. INTRODUCTION
A summary of the principal provisions of the Plan and the treatment of
Classes of Allowed Claims and Interests is set out below. This Disclosure
Statement is only a summary of the terms of the Plan and is entirely qualified
by the Plan; it is the Plan and not the Disclosure Statement that governs the
rights and obligations of the parties.
That certain Settlement Agreement, dated June 24, 2002, among the
Lender Group, the Committee and the Debtors is incorporated by reference into
and deemed part of the Plan.
B. DESIGNATION OF CLAIMS AND INTERESTS
The following is a designation of the classes of Allowed Claims and
Interests under this Plan. In accordance with section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims and
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 25
Professional Fee Claims described in this Article 7, have not been classified
and are excluded from the following classes. Priority Unsecured Tax Claims will
be classified as Class 1 claims. An Allowed Claim or Interest is classified in a
particular class only to the extent that the Claim or Interest qualifies within
the description of that class, and is classified in another class or classes to
the extent that any remainder of the Allowed Claim or Interest qualifies within
the description of such other class or classes. An Allowed Claim or Interest is
classified in a particular class only to the extent that the Allowed Claim or
Interest in that class has not been paid, released, or otherwise satisfied
before the Effective Date; a Claim or Interest which is not an Allowed Claim or
Interest is not in any Class. Notwithstanding anything to the contrary contained
in this Plan, no distribution shall be made on account of any Claim or Interest
which is not an Allowed Claim or Interest.
<Table>
<Caption>
CLASS STATUS
Class 1: Allowed Priority Unsecured Claims Unimpaired, not entitled to vote
Class 2: Allowed Secured Claims, Other Than Unimpaired, not entitled to vote
Those of Lender Group
Class 3: Allowed Secured Claim of Lender Impaired, entitled to vote
Group under Credit Agreement
Class 4: Allowed General Unsecured Claims Impaired, entitled to vote
Class 5: Allowed Subordinated Claims Impaired, entitled to vote
Class 6: Allowed Interests in Debtor Impaired, deemed to have rejected
</Table>
C. TREATMENT OF ADMINISTRATIVE CLAIMS AND PROFESSIONAL FEE CLAIMS
Subject to the bar date provisions set forth in the Plan, Allowed
Administrative Claim, including Professional Fee Claims and the Indenture
Trustee Fees, incurred through the Effective Date shall be paid by the Plan
Administration Agent from the Administrative Expense Reserve within ten (10)
days following the later of the Effective Date or the date on which they become
Allowed Claims. Allowed Professional Fee Claims incurred through the Effective
Date shall be paid by the Plan Administration Agent within ten (10) days
following the later of the Effective Date or the date on which they become
Allowed Claims (i) first from the balance of any retainers, if any, held by
Professionals until fully exhausted and (ii) then from the Administrative
Expense Reserve. Any Professional Fee Claims incurred by any Professionals
retained by the Plan Administration Agent arising after the Effective Date,
shall be paid by the Plan Administration Agent, subject to Bankruptcy Court
approval, from the Administrative Expense Reserve (i) first from the balance of
any retainers, if any, held by Professionals until fully exhausted and (ii) then
from the Administrative Expense Reserve.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 26
After the Effective Date and until the chapter 11 case is closed, the
Plan Administration Agent shall pay as a Liquidation Cost all fees incurred
under 28 U.S.C. section 1930(a)(6). After the Effective Date, the Plan
Administration Agent shall serve on the Office of the U. S. Trustee a quarterly
financial report for each calendar quarter, or portion thereof, during which the
chapter 11 case remains open. The quarterly financial report shall include a
statement of all Disbursements made during the quarter, pursuant to the Plan or
otherwise.
D. TREATMENT OF RECLAMATION CLAIMS
Both before and after the Petition Date, various claimants sought
reclamation of goods shipped to the Debtors, citing state law and section 546 of
the Bankruptcy Code. Article 2, Section 702 of the Uniform Commercial Code
states that the rights of a reclaiming seller are "subject to the rights of a
buyer in the ordinary course or other good faith purchaser or lien creditor
under this chapter (Section 2.403)." It is well settled that a holder of a prior
perfected security interest in after-acquired property will be treated as a good
faith purchaser for the purposes of 2-702 with rights superior to the seller's
right of reclamation.(8) Courts have also held that the bankruptcy court does
not "deny" a seller's reclamation right by determining that such right is
subordinate to a perfected security interest and that the reclamation claimant
is therefore not entitled to an administrative expense claim in such
instance.(9)
In exchange for pre-petition financing, the Debtors granted the Lender Group a
security interest in all of the Debtors' property, including, without
limitation, inventory and equipment. The Lender Group properly perfected its
liens in such property. Neither the Debtor nor the Official Committee of
Unsecured Creditors has challenged the validity of the Lender Group's liens or
the perfection of such liens as they apply to inventory and equipment. For this
reason, the Debtors believe that the Lender Group would be deemed a good faith
purchaser for purposes of Uniform Commercial Code section 2-702.(10) Since (i)
the rights of reclamation claimants are subject to the Lender Group's rights and
(ii) the value of the Lender Group's collateral is insufficient to satisfy the
Lender Group's secured claims in full, reclamation claimants will receive no
distribution
- ----------
(8) See, e.g., Pester Refining Co. v. Ethyl Corp., (In re Pester Refining Co.),
964 F.2d 842, 845 (8th Cir. 1992); Allegiance Healthcare Corporation v. Primary
Health Systems, Inc. (In re Primary Health Systems, Inc.), 258 B.R. 111, 117
(Bankr. D. Del. 2001); Sandoz Pharmaceuticals Corp. v. Blinn Wholesale Drug Co,
Inc. (In re Blinn Wholesale Drug Co, Inc.), 164 B.R. 440, 443-44 & n.3 (Bankr.
E.D.N.Y. 1994); United States Trust Co. v. Raritan River Steel Co., Inc. (In re
American Spring Bed Manufacturing Co.), 153 B.R. 365, 371-72, (Bankr. D. Mass.
1993) (noting that definition of good faith purchaser includes taking by lien
and citing multiple cases); In re Diversified Food Service Distributors, Inc.,
130 B.R. 427, 429-30 (Bankr. S.D.N.Y. 1991); see also In re Affiliated of
Florida, Inc., 237 B.R. 495, 497 (Bankr. M.D. Fla. 1998) (citing In re Samuels &
Co., Inc., 526 F.2d 1238 (5th Cir. 1976)).
(9) In re Pester Refining Co., 964 F.2d at 847; Bindley Western Industries v.
Reliable Drug Stores, Inc. (In re Reliable Drug Stores, Inc.), 181 B.R. 374,
378-79 (S.D. Ind. 1995), aff'd, 70 F.3d 948 (7th Cir. 1995); Ohio Valley
Flooring, Inc. v. Flooring America, Inc. (In re Flooring America, Inc.), 271
B.R. 911, 920 (Bankr. N.D. Ga. 2001); In re Primary Health Systems, Inc,. 258
B.R. at 117-18; In re Blinn Wholesale Drug Co, Inc , 164 B.R. at 444-49; In re
Leeds Building Products, Inc., 141 B.R. 265, 269-70 (Bankr. N.D. Ga. 1992); see
also In re Victory Markets, Inc., 212 B.R. 738, 743 (Bankr. N.D.N.Y. 1997).
(10) In addition, at the time that most reclamation demands were made, the
Debtors had already sold the goods sought by the reclamation claimant.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 27
under the Plan with respect to their reclamation claims and such claims will not
be granted administrative expense priority. Rather, regardless of any compliance
with the notice provisions of section 546 of the Bankruptcy Code, the claims of
reclamation claimants will be treated as Class 4 Allowed General Unsecured
Claims.
E. TREATMENT OF CLASSIFIED CLAIMS AND INTERESTS
1. TREATMENT OF CLASS 1 ALLOWED PRIORITY UNSECURED CLAIMS.
Allowed Claims in Class 1 shall be completely and fully satisfied by
the payment of Available Cash to the holder of a Class 1 Allowed Claim in the
amount of the Allowed Claim on the later of Effective Date or the date that the
Claim becomes an Allowed Claim.
2. TREATMENT OF CLASS 2 ALLOWED SECURED CLAIMS OTHER THAN THOSE OF
LENDER GROUP.
If there is more than one Class 2 Allowed Secured Claim, each Class 2
Allowed Secured Claim shall be classified in a separate subclass Class 2
Allowed Secured Claims shall be first satisfied by the transfer of any Estate
Property constituting the Cash Collateral of the holder of a Class 2 Allowed
Secured Claim. Any Cash Collateral securing Class 2 Allowed Secured Claims
remaining after full satisfaction of such Claims shall remain Estate Property
free and clear of all liens, claims, interests, and encumbrances. To the extent
the Cash Collateral is insufficient to fully satisfy a Class 2 Allowed Secured
Claim, the remaining portion of that Claim after application of the Cash
Collateral shall be satisfied in full at the election of the Plan Administration
Agent by (i) the sale of any other collateral securing the Allowed Secured
Claims under Section 4.2.3 of the Plan, (ii) the transfer of that collateral to
the holder of the Allowed Secured Claims under Section 4.2.4 of the Plan, or
(iii) an agreement reached between the holder of the Allowed Secured Claims and
the Debtor under Section 4.2.5 of the Plan.
a. SALE OF COLLATERAL. The Plan Administration Agent may sell
for Cash any Estate Property serving as collateral for the Class 2
Allowed Secured Claims. The holder of the Class 2 Allowed Secured
Claims shall be entitled to bid at such sale in accordance with
Bankruptcy Code section 363(k). Any sale proceeds generated by the sale
of any Estate Property serving as collateral for a Class 2 Allowed
Secured Claims (net of reasonable liquidation costs) shall be paid by
the Plan Administration Agent to the holder of the Class 2 Allowed
Secured Claims in satisfaction of those Claims. Any net sale proceeds
remaining after satisfaction of the Class 2 Allowed Secured Claims
shall remain Estate Property free and clear of all interests, liens and
encumbrances.
b. TRANSFER OF COLLATERAL. The Plan Administration Agent may
satisfy any Class 2 Allowed Secured Claims by transferring and
conveying any Estate Property serving as collateral for the Claims to
the holder of the Class 2 Allowed Secured Claims to the extent of the
amount of the Class 2 Allowed Secured Claims. Any collateral
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 28
remaining after satisfaction of the Class 2 Allowed Secured Claims
shall remain Estate Property free and clear of any interests, liens and
encumbrances.
c. OTHER AGREEMENTS. Notwithstanding Sections 4.2.3 and 4.2.4
of the Plan, Class 2 Allowed Secured Claims may otherwise be satisfied
by an agreement between the holder of such Claims and the Plan
Administration Agent. The treatment set forth in any such agreement
will supersede the provisions of Sections 4.2.3 and 4.2.4 of the Plan.
d. RETENTION OF LIEN. Each holder of Class 2 Allowed Secured
Claims shall retain the Liens securing those Claims until it is
satisfied in accordance with the Plan, or until an earlier date agreed
to by the holder and the Plan Administration Agent.
e. DEFICIENCY CLAIM. If the holder of a Class 2 Allowed
Secured Claim has a deficiency claim, it shall be treated under the
Plan as either a Class 4 General Unsecured Claim or a Class 1 Priority
Unsecured Tax Claim, whichever category is applicable. The Bankruptcy
Court shall determine whether a deficiency claim shall be treated as a
Class 4 General Unsecured Claim or a Class 1 Priority Unsecured Tax
Claim.
3. TREATMENT OF CLASS 3 ALLOWED SECURED CLAIM OF LENDER GROUP.
The Allowed Secured Claim of Lender Group shall be satisfied according
to the Settlement Agreement.
4. TREATMENT OF CLASS 4 ALLOWED GENERAL UNSECURED CLAIMS.
Each Allowed General Unsecured Claim shall receive a pro rata portion
of available funds. All distributions to the holders of Senior Notes shall be by
and through the Indenture Trustee. Pursuant to the Substantive Consolidation
Order, all Intercompany Claims have been disallowed.
5. TREATMENT OF CLASS 5 ALLOWED SUBORDINATED CLAIMS.
Holders of any Class 5 Allowed Subordinated Claims shall not receive
any Distribution under the Plan.
6. TREATMENT OF CLASS 6 ALLOWED INTERESTS IN DEBTOR.
Holders of any Class 6 Allowed Interest in Debtor shall not receive any
Distribution under the Plan.
7. TREATMENT OF RECLAMATION CLAIMS.
As set forth in more detail above, Claimholders asserting rights of
reclamation pursuant to section 546 of the Bankruptcy Code and applicable state
law shall receive no Distribution in respect of their reclamation rights. The
Claims of parties seeking reclamation will be treated as Class 4 Allowed General
Unsecured Claims.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 29
F. ESTABLISHMENT OF RESERVES AND PAYMENT OF CREDITOR CLAIMS
1. RESERVE FOR AND PAYMENT OF ADMINISTRATIVE EXPENSES. On or before the
Confirmation Date, the Debtor shall have obtained an order of the Bankruptcy
Court establishing an Administrative Expense Reserve funded with Available Cash
in an amount necessary to pay the claimed amount of all Administrative Claims,
including Professional Fee Claims. Administrative Claims shall be paid from the
Administrative Expense Reserve as allowed by order of the Bankruptcy Court.
Professional Fee Claims shall be paid from retainers or from the Administrative
Expense Reserve as allowed by order of the Bankruptcy Court. To the extent any
funds held in the Administrative Expense Reserve relate to Administrative Claims
or Professional Fee Claims that have either been disallowed by the Bankruptcy
Court or are no longer claimed as evidenced by a written release of such claim
or the failure to seek allowance of such claim within the time required by
Sections 3.1 or 3.2 of the Plan, then the Plan Administration Agent shall seek
an order of the Bankruptcy Court reducing the amount required to be held in the
Administrative Expense Reserve and such funds shall be distributed to holders of
Class 4 Allowed General Unsecured Claims as if such funds were Available Cash.
The Administrative Expense Reserve shall be dissolved once all required payments
have been made.
2. RESERVE FOR AND PAYMENT OF PRIORITY UNSECURED CLAIMS. On or before
the Confirmation Date, the Debtor shall have obtained an order of the Bankruptcy
Court establishing a Priority Unsecured Claim Reserve funded with Available Cash
in an amount necessary to pay the claimed and/or scheduled amount of all Class 1
Allowed Priority Unsecured. Class 1 Allowed Priority Unsecured Claims shall be
fully and completely satisfied by the payment of Cash from the Priority
Unsecured Claim Reserve in an amount equal to the Class 1 Allowed Priority
Unsecured Claims on the later of the Effective Date or the date such Claims
become Allowed Claims. To the extent any funds held in the Priority Unsecured
Claims Reserve relate to a Class 1 Allowed Priority Unsecured Claim that has
either been disallowed by the Bankruptcy Court or is no longer claimed as
evidenced by a written release of such Claims or the failure to seek allowance
of such Claims by the Administrative Claims Bar Date, then the Plan
Administration Agent shall seek an order of the Bankruptcy Court reducing the
amount required to be held in the Priority Unsecured Claim Reserve and such
funds shall be distributed to holders of Class 4 Allowed General Unsecured
Claims as if such funds were Available Cash. The Priority Unsecured Claims
Reserve shall be dissolved once all required payments have been made.
3. OPERATING RESERVE. Subject to the terms of the Settlement Agreement,
before making any Distributions and within thirty (30) days from Effective Date,
the Plan Administration Agent shall establish the Operating Reserve funded
periodically with Available Cash in an amount determined by the Plan
Administration Agent, in consultation with the Advisory Committee, to be
reasonably necessary to pay anticipated Liquidation Costs, fund litigation, fund
contingent liabilities, and otherwise conduct the affairs of the Debtor.
4. DISPUTED CLAIMS RESERVE FOR CLAIMANTS. On or before the Confirmation
Date, the Debtor shall have obtained an order of the Bankruptcy Court
establishing the Disputed
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 30
Claims Reserve. The Plan Administration Agent shall deposit into the Disputed
Claims Reserve any Distribution payable to a Claimant holding a Disputed Claim.
To the extent that Disputed Claims have either been disallowed by the Bankruptcy
Court or are no longer claimed as evidenced by written releases of such Claims
or the failure to seek allowance of such Claims by the Bar Date, then the Plan
Administration Agent shall seek an order of the Bankruptcy Court reducing the
amount required to be held in the Disputed Claims Reserve and such funds shall
be distributed to holders of Class 4 Allowed General Unsecured Claims as if such
funds were Available Cash. The Disputed Claims Reserve shall be dissolved once
all required payments have been made.
5. DISTRIBUTIONS TO HOLDERS OF ALLOWED CLAIMS IN CLASS 4. The Plan
Administration Agent shall only make Distributions from Available Cash, except
as otherwise provided in Article 4 of the Plan, including the Settlement
Agreement. Subject to the limitations of Sections 8.1.1, 8.1.2, 8.1.3., and
8.1.4 of the Plan and the terms of the Settlement Agreement, the Plan
Administration Agent shall have authority to make Distributions of Available
Cash at such time or times the Plan Administration Agent believes there is
sufficient Available Cash to warrant a Distribution, but in no event less than
once a year. The Plan Administration Agent shall not, in any event, retain Cash
in excess of what is reasonably necessary to fund the Reserves.
6. PLACE AND MANNER OF PAYMENTS OR DISTRIBUTIONS. The Plan
Administration Agent shall make Distributions to the holders of Allowed Claims
(or in the case of Senior Note holders, to the Indenture Trustee) by mailing
such Distribution to the Claimholders at their addresses as listed in the
Schedules of Assets and Liabilities, or any proof of claim filed by the
Claimholders, or at such other address as such Claimholders shall have specified
for payment purposes in a written notice to the Plan Administration Agent at
least twenty (20) days before a Distribution Date. The Plan Administration Agent
shall distribute any Available Cash by wire, check, or such other method as the
Plan Administration Agent deems appropriate under the circumstances. Before
receiving any Distributions, all Claimholders, at the Plan Administration
Agent's request, must provide to the Plan Administration Agent written
notification of their respective Federal Tax Identification Numbers or Social
Security Numbers; otherwise, the Plan Administration Agent may suspend
Distributions to any Claimholder who has not provided its applicable Federal Tax
Identification Number or Social Security Number.
7. MINIMUM DISTRIBUTIONS. To the extent a Distribution to a particular
Claimant is less than $100.00, the Plan Administration Agent may hold such
Distribution until the final Distribution or until the aggregate of
Distributions to such Claimant exceeds $100.00. Notwithstanding the foregoing,
no Distribution of less than $10.00 shall be made to any holder on account of an
Allowed Claim unless a request therefore is made in writing to the Plan
Administration Agent. The Plan Administration Agent will distribute, at least
annually to Claimholders, all of the Estate's net income earned and any
Available Cash at times determined to be appropriate by the Advisory Committee
after consultation with the Plan Administration Agent.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 31
8. UNCLAIMED OR UNDELIVERABLE DISTRIBUTIONS. If a Distribution to any
Claimholder is returned as undeliverable, the Plan Administration Agent shall
use reasonable efforts to determine such Claimholder's then current address, and
no further Distributions shall be made to such Claimholder unless and until the
Plan Administration Agent is notified of such Claimholder's then current
address. Approximately every six (6) months after the Effective Date, the Plan
Administration Agent shall file with the Bankruptcy Court and post on the
internet a list of all unclaimed distributions and the identity of the
Claimholders entitled thereto.
If any Person entitled to Distributions of Available Cash or Estate
Property from the Plan Administration Agent cannot be located on the Effective
Date or any time thereafter, then, subject to the provisions of Section 8.5.1
and this Section 8.5.2, such Available Cash Estate Property shall be set aside,
and, in the case of Cash, held in an interest-bearing account or fund maintained
by the Plan Administration Agent on behalf of such Person. Any taxes allocable
to such Person as provided in this Section 8.5.2 shall be funded from any Cash
in such interest-bearing account or fund. If such Person is located within one
(1) year of the Effective Date, such Cash together with any interest actually
earned thereon and proceeds thereof (less the allocable portion of taxes paid by
the Debtor on account of such Person), shall be paid or distributed to such
Person. If such Person cannot be located within one (1) year of the Effective
Date, then (a) such Person shall no longer be deemed to be a Claimant, and (b)
any Available Cash and Estate Property and interest and proceeds thereon
allocable to such Person, net of the allocable portion of taxes paid by the
Debtor, shall be part of the Available Cash or Estate Property free and clear of
and from any claim to such property by or on behalf of such Person (who shall be
deemed to have released such claim) and shall be distributed to the other
Claimholders as provided in the Plan, with such adjustments as are required to
take into account that such Person is no longer deemed a Claimholder.
G. ACCEPTANCE OR REJECTION OF THE PLAN
Claims in Classes 1 and 2 are not impaired under the Plan. As such,
Claimholders within that Class are conclusively presumed to have accepted the
Plan and, therefore, are not entitled to vote to accept or reject the Plan.
Claims in Classes 3 and 4 are impaired under the Plan. As such, Claimholders
within Classes 3 and 4 are entitled to vote to accept or reject the Plan.
Claimholders within Class 5 and Interestholders within Class 6 are impaired but
will not receive any Distributions under the Plan. As such, Claimholders within
Class 5 and Interestholders within Class 6 are conclusively presumed to have
rejected the Plan and, therefore, are not entitled to vote to accept or reject
the Plan.
H. TREATMENT OF EXECUTORY CONTRACTS
All Executory Contracts not otherwise assumed or rejected pursuant to a
Final Order shall be deemed rejected as of the Effective Date. Entry of the
Confirmation Order shall constitute the approval, pursuant to Bankruptcy Code
section 365(a), of the rejection of the remaining Executory Contracts. Unless
the Bankruptcy Court has established an earlier deadline concerning the
rejection of a particular Executory Contract, any Claim arising out of the
rejection of an Executory Contract under Sections 5.1 and 5.2 of the Plan must
be filed with the
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 32
Bankruptcy Court and served on the Debtor and Plan Administration Agent within
thirty (30) days after the Effective Date.
ARTICLE 8
MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN
The Plan contemplates an orderly and efficient liquidation of the
Debtors and their property and assets by a Plan Administration Agent. On the
Effective Date, title to all Estate Property shall vest in Kevco. The
liquidation of the Estate Property and distributions to holders of Claims and
Interests will be conducted by the Plan Administration Agent. The Plan also
contemplates the establishment of a three member Advisory Committee, which shall
be selected by the Committee. The Advisory Committee shall provide advice and
consultation, as necessary, to the Plan Administration Agent and otherwise
perform the duties specified in the Plan, including removal and replacement of
the Plan Administration Agent. The purpose of the Advisory Committee is to
provide a representative for the creditor constituency in connection with the
post-confirmation recovery and distribution of Estate Property.
Following the effective date, the Plan Administration Agent shall
conduct an orderly liquidation of the Estate Property consistent with the term
and conditions of the Plan and the Settlement Agreement. Except as otherwise
expressly limited in the Plan or the Settlement Agreement, the Plan
Administration Agent shall have control and authority over the Estate Property,
including the Avoidance Actions and other causes of action that are owned by the
Debtors, and over the management and disposition of the Estate Property. The
Plan Administration Agent shall exercise its judgment for the benefit of the
holders of Claims and Interests in order to maximum the value of Estate
Property. An illustrative list of actions the Plan Administration Agent is
authorized to take in connection with the management of the Debtors and the use
of the Estate Property is set forth in section 6.4.2 of the Plan. The Plan
Administration Agent shall consult with the Advisory Committee in good faith
regarding all material issues affecting the Bankruptcy Estate including
litigation matters and the disposition of Estate Property.
In accordance with section 6.2.1 of the Plan, the Debtors and the
Committee have nominated Dennis Faulkner as the Plan Administration Agent, and
will seek the approval of that nomination at or before the Confirmation Hearing.
A closing of the various transactions required and contemplated under
the Plan shall take place on the Closing Date at the offices of the Debtors'
counsel, or at such a place identified in a notice provided to those parties
specified in section 16.2 of the Plan. At the closing, all of the then existing
equity interest in Kevco shall be canceled. Further, Kevco shall only authorize
and issue 1,000 shares of its common stock, $1.00 par value, to the Plan
Administration Agent to be held and voted in accordance with the terms and
conditions of the Plan. The remainder of the Debtors will continue to be
subsidiaries of Kevco. The Plan Administration Agent shall be the record owner
of the common stock of Kevco, which shall constitute 100% of the issued and
outstanding shares of capital stock of Kevco. The Plan Administration Agent
shall vote such
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 33
shares at all appropriate times to elect a Plan Administration Agent as the sole
director of Kevco and otherwise to implement the terms and conditions of the
Plan. Also at the closing, Kevco's Articles of Incorporation and By-Laws shall
be amended and all necessary corporate action shall be taken to effectuate the
transaction contemplated under the Plan and otherwise implement the provisions
of the Plan. Each person holding a certificate or instrument evidencing a claim
against, or interest in, the Debtors or the Estate Property, other than Kevco,
and whose claims are treated under the Plan shall surrender such certificate or
instrument to the Plan Administration Agent on the Closing Date as a perquisite
to receiving any distribution under the Plan, unless the nonavailability of such
certificate or instrument is established to the satisfaction of the Plan
Administration Agent.
Following the complete liquidation and distribution of all available
cash and any reserves provided for or contemplated by the Plan, the Plan
Administration Agent shall sign and file appropriate Articles of Dissolution or
other dissolution documents for the Debtors with their respective states of
incorporation or organization. On filing such dissolution documents, the Plan
Administration Agent shall file with the Bankruptcy Court and serve on the
Advisory Committee a final report outlining funds and assets liquidated and
distributed to Creditors containing the information specified in section 6.5.2
of the Plan.
Subject to establishing the reserves required under the Plan, the Plan
Administration Agent shall have authority to make distributions of Available
Cash at such time or times the Plan Administration Agent believes there is
sufficient Available Cash to warrant a distribution, but in no event less than
once a year. The Plan Administration Agent shall only make distributions from
Available Cash, except as otherwise provided in the Plan.
ARTICLE 9
RECOVERY ANALYSIS, FEASIBILITY AND RISKS
A. RECOVERY ANALYSIS AND FEASIBILITY
Recoveries to holders of Claims are subject to many variables at this
point. Most significantly, the outcome of the litigation instituted by the
Committee will largely determine the amount of any recovery for unsecured
creditors. As of the time of this Disclosure Statement, the Debtors cannot
effectively predict the recovery for unsecured creditors. In light of the
settlement of the litigation described in Article 4.C.2. herein, the Debtors
believe that a total distribution of approximately 2% will be made to holders of
Class 4 Allowed General Unsecured Claims. A spreadsheet reflecting the
anticipated recovery for unsecured creditors' is attached hereto as Exhibit "2".
The distribution to holders of Class 4 claims may increase based upon the Plan
Administration Agent's success in pursuing avoidance and other causes of action.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 34
B. AVOIDANCE ACTIONS.
The Committee, through its professionals, is currently analyzing
available avoidance actions through an investigation and review of the Debtors'
books and records. The Committee's efforts and current results remain
preliminary in nature and are, thus, too speculative to effectively predict the
amount, if any, of any avoidance recoveries or their effect upon potential
distributions to unsecured creditors.
C. RISKS ASSOCIATED WITH THE PLAN.
Both the confirmation and consummation of the Plan are subject to a
number of risks. Specifically, if certain standards set forth in the Bankruptcy
Code are not met, the Bankruptcy Court will not confirm the Plan even if
Claimholders accept the Plan. Although the Debtors believe that the Plan meets
such standards, there can be no assurance that the Bankruptcy Court will reach
the same conclusion. If the Bankruptcy Court were to determine that such
requirements were not met, it could require the Debtors to re-solicit
acceptances, which could delay and/or jeopardize confirmation of the Plan. The
Debtors believe that the solicitation of votes on the Plan will comply with
section 1126(b) and that the Bankruptcy Court will confirm the Plan. The
Debtors, however, can provide no assurance that modifications of the Plan will
not be required to obtain confirmation of the Plan, or that such modifications
will not require a re-solicitation of acceptances.
ARTICLE 10
ALTERNATIVES TO PLAN AND LIQUIDATION ANALYSIS
There are three possible consequences if the Plan is rejected or if the
Bankruptcy Court refuses to confirm the Plan: (a) the Bankruptcy Court could
dismiss the Debtors' chapter 11 bankruptcy case, (b) the Debtors' chapter 11
bankruptcy case could be converted to liquidation case under chapter 7 of the
Bankruptcy Code, or (c) the Bankruptcy Court could consider an alternative plan
of reorganization proposed by some other party.
A. DISMISSAL
If the Debtors' bankruptcy case were to be dismissed, the Debtors would
no longer have the protection of the Bankruptcy Court and the applicable
provisions of the Bankruptcy Code. The Lender Group could immediately commence
exercising its rights as secured creditor, including, but not limited to
possibly pursue the foreclose and liquidation of substantially all of the
Debtors' assets. Dismissal could also force a race among other creditors to take
over and dispose of any remaining assets. In the event of dismissal, even the
most diligent unsecured creditors would likely fail to realize any significant
recovery on their claims because substantially all of the Debtors' assets would
likely be seized by the Lender Group and/or other secured creditors. The Debtors
believe that the dismissal of its bankruptcy case will result in far smaller
distributions - and very likely no distributions - being realized by the
unsecured Creditors of this estate than the distributions provided for in the
Plan.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 35
B. CHAPTER 7 LIQUIDATION
If the Plan is not confirmed, it is likely that the Debtors' chapter 11
case will be converted to a case under chapter 7 of the Bankruptcy Code, in
which case a trustee would be elected or appointed to liquidate the assets of
the Debtors for distribution to creditors in accordance with the priorities
established by the Bankruptcy Code. Whether a bankruptcy case is one under
chapter 7 or chapter 11, secured creditors, Administrative Claims and Priority
Claims are entitled to be paid in cash and in full before unsecured creditors
receive any funds.
If the Debtors' chapter 11 case is converted to chapter 7, the present
Administrative Claims may have a priority lower than priority claims generated
by the chapter 7 case, such as the chapter 7 trustee's fees or the fees of
attorneys, accountants and other professionals engaged by the trustee.
The Debtors believe that liquidation under chapter 7 would result in
far smaller distributions being made to Claimholders than those provided for in
the Plan. Conversion to chapter 7 would give rise to (a) additional
administrative expenses involved in the appointment of a trustee and attorneys
and other professionals to assist such trustee; and (b) additional expenses and
Claims, some of which would be entitled to priority, that would be generated
during the liquidation and from the rejection of leases and other executory
contracts in connection with a cessation of the Debtors' operations. In a
chapter 7 liquidation, it is very possible that general unsecured creditors
would receive little or a greatly diminished recovery on their claims.
C. ALTERNATIVE PLAN
If an alternative plan were proposed, it would more than likely be
substantially similar to the Debtors' in that it would propose a liquidation of
the Debtors and the distribution of Available Cash to Creditors. In comparison
to the Debtors' Plan, an alternative plan would not likely provide any greater
return to creditors and any return could even be less due to the additional time
and expense necessary to obtain approval of any alternative plan.
ARTICLE 11
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE PLAN
A. INTRODUCTION
The following discussion summarizes certain United States federal
income tax consequences of the implementation of the Plan to the Debtors and
Claimholders and Interestholders.
The following summary is based on the Internal Revenue Code of 1986,
Treasury regulations thereunder, judicial decisions and published rulings and
pronouncements of the Internal Revenue Service ("IRS") as in effect on the date
hereof. Changes in these rules, or new
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 36
interpretations of these rules, may have retroactive effect and could
significantly affect the federal income tax consequences described below.
The federal income tax consequences of the Plan are complex and are
subject to uncertainties. The Debtors have not requested a ruling from the IRS
or an opinion of counsel with respect to any of the tax aspects of the Plan.
Thus, no assurance can be given as to the interpretation that the IRS will
adopt. In addition, this summary does not address foreign, state or local tax
consequences of the Plan, and it does not purport to address the federal income
tax consequences of the Plan to special classes of taxpayers (such as foreign
taxpayers, broker-dealers, banks, insurance companies, financial institutions,
small business investment corporations, regulated investment companies,
tax-exempt organizations or investors in pass through entities).
ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE
FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL
CIRCUMSTANCES PERTAINING TO THE HOLDER OF A CLAIM. ALL HOLDERS OF
CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE
FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES TO THEM OF THE PLAN.
B. TAX CONSEQUENCES TO THE DEBTORS
Generally, under the terms of the Plan, all Claims and Interests are to
be released. Any income corresponding to the satisfaction of Claims at a
discount should not constitute taxable income to the Debtors since the debt
forgiveness arises in connection with a case under Title 11 of the United States
Code. The Debtors, however, may be required to reduce certain tax attributes,
such as net operating loss ("NOL") carryovers. Any NOLs remaining may be subject
to utilization limitations imposed by Internal Revenue Code section 382, as
amended.
C. TAX CONSEQUENCES TO CREDITORS
1. IN GENERAL
The federal income tax consequences of the implementation of the Plan
to a holder of a Claim will depend, among other things, on (a) whether its Claim
constitutes a debt or security for federal income tax purposes, (b) whether the
Claimholder receives consideration in more than one tax year, (c) whether the
Claimholder is a resident of the United States, (d) whether all of the
consideration by the Claimholder is deemed received by that Claimholder as part
of an integrated transaction, (e) whether the Claimholder reports income using
the accrual or cash method of accounting, and (f) whether the holder has
previously taken a bad debt deduction or worthless security deduction with
respect to the Claim.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 37
2. GAIN OR LOSS ON EXCHANGE
Generally, a holder of an Allowed Claim will realize a gain or loss on
the exchange under the Plan of his Allowed Claim for cash and other property in
an amount equal to the difference between (i) the sum of the amount of any cash
and the fair market value on the date of the exchange of any other property
received by the holder (other than any consideration attributable to accrued but
unpaid interest on the Allowed Claim), and (ii) the adjusted basis of the
Allowed Claim exchanged therefor (other than basis attributable to accrued but
unpaid interest previously included in the holder's taxable income). Any gain
recognized generally will be a capital gain (except to the extent the gain is
attributable to accrued but unpaid interest or accrued market discount, as
described below) if the Claim was a capital asset in the hand of an exchanging
holder, and such gain would be a long-term capital gain if the holder's holding
period for the Claim surrendered exceeded one (1) year at the time of the
exchange.
Any loss recognized by a holder of an Allowed Claim will be a capital
loss if the Claim constitutes a "security" for federal income tax purposes or is
otherwise held as a capital asset. For this purpose, a "security" is a debt
instrument with interest coupons or in registered form.
D. PRESERVATION OF NET OPERATING LOSS AND TAX ATTRIBUTES
Internal Revenue Code section 382 could substantially limit, or deny in
full, the availability of the Debtors' net operating loss and tax credit
carry-forwards as a result of the transactions contemplated under the Plan.
Moreover, Internal Revenue Code section 108 could result in the reduction of the
loss and credit carry-forward based on the amount of debt discharged or
converted to equity in the Debtors as provided by the Plan.
E. INFORMATION REPORTING AND BACKUP WITHHOLDING
Under the backup withholding rules of the Internal Revenue Code,
Claimholders may be subject to backup withholding at the rate of thirty-one
percent (31%) with respect to payments made pursuant to the Plan unless such
holder (i) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a correct taxpayer
identification number and certifies under penalties of perjury that the taxpayer
identification number is correct and that the holder is not subject to backup
withholding because of a failure to report all dividends and interest income.
Any amount withheld under these rules will be credited against the holder's
federal income tax liability. Claimholders may be required to establish
exemption from backup withholding or to make arrangements with respect to the
payment of backup withholding.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 38
ARTICLE 12
CONCLUSION
This Disclosure Statement has attempted to provide information
regarding the Debtors' consolidated bankruptcy estate and the potential benefits
that might accrue to holders of Claims against and Interests in the Debtors
under the Plan as proposed. The Plan is the result of extensive efforts by the
Debtors, its advisors, and management to provide the holders of Allowed Claims
and Allowed Interests with a meaningful dividend. The Debtors believe that the
Plan is feasible and will provide each holder of a Claim or Interest against the
Debtors with an opportunity to receive greater benefits than those that would be
received by termination of the Debtors' business and the liquidation of their
assets, or by any alternative plan or sale of the business to a third party. The
Debtors, therefore, urge interested parties to vote in favor of the Plan.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 39
DATED: September 19, 2002.
DEBTORS:
KEVCO, INC.,
a Texas corporation
/s/ Wilford Simpson
-----------------------------
By: Wilford Simpson
Its: Chief Financial Officer
KEVCO MANAGEMENT, INC.,
a Delaware corporation
/s/ Wilford Simpson
-----------------------------
By: Wilford Simpson
Its: Secretary
KEVCO HOLDING, INC.,
a Delaware corporation
/s/ Wilford Simpson
-----------------------------
By: Wilford Simpson
Its: Secretary
KEVCO GP, INC.,
a Delaware corporation
/s/ Wilford Simpson
-----------------------------
By: Wilford Simpson
Its: Secretary
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 40
KEVCO COMPONENTS, INC.,
a Delaware corporation
/s/ Wilford Simpson
-----------------------------
By: Wilford Simpson
Its: Secretary
DCM DELAWARE, INC.,
a Delaware corporation
/s/ Wilford Simpson
-----------------------------
By: Wilford Simpson
Its: Secretary
KEVCO MANUFACTURING, L.P.,
a Delaware limited partnership
By: KEVCO GP, INC.
Its: General Partner
/s/ Wilford Simpson
--------------------------
By: Wilford Simpson
Its: Secretary
KEVCO DISTRIBUTION, L.P.,
a Delaware limited partnership
By: KEVCO GP, INC.
Its: General Partner
/s/ Wilford Simpson
--------------------------
By: Wilford Simpson
Its: Secretary
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 41
HAYNES AND BOONE, LLP
/s/ Stephen M. Pezanosky
- ------------------------
Robert D. Albergotti
State Bar No. 00969800
Stephen M. Pezanosky
State Bar No. 15881850
Ian T. Peck
State Bar No. 24013306
HAYNES AND BOONE, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Telephone: (214) 651-5000
Facsimile: (214) 651-5940
ATTORNEYS FOR KEVCO, INC., ET AL.
FIRST AMENDED DISCLOSURE STATEMENT UNDER 11 U.S.C. SECTION 1125
IN SUPPORT OF KEVCO INC. AND THE OFFICIAL CREDITOR
COMMITTEE'S JOINT PLAN OF LIQUIDATION PAGE 42
EXHIBIT 1
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
IN RE: )
) CASE NOS. 401-40783-BJH-11
KEVCO, INC., ET AL. ) THROUGH 401-40790-BJH-11
)
DEBTORS ) JOINTLY ADMINISTERED UNDER
) CASE NO. 401-40783-BJH-11
)
- ------------------------------------------------------------------------------
KEVCO, INC. AND THE OFFICIAL CREDITORS' COMMITTEE'S
FIRST AMENDED JOINT PLAN OF LIQUIDATION
- ------------------------------------------------------------------------------
HAYNES AND BOONE, LLP BAKER & MCKENZIE
201 Main Street
Suite 2200 2300 Trammell Crow Center
Fort Worth, Texas 76102 2001 Ross Avenue
Tele: (817) 347-6600 Dallas, Texas 75201
Fax: (817) 347-6650 Tel: (214) 978-3000
Fax: (214) 978-3099/3096
ATTORNEYS FOR KEVCO, INC., ET AL.
805 Third Avenue
New York, NY 10022
Tele: (212) 891-3565
Fax: (212) 759-9133
ATTORNEYS FOR OFFICIAL CREDITORS'
COMMITTEE
DATED: September 18, 2002
Fort Worth, Texas
INTRODUCTION
The Debtor, as the debtor-in-possession in this chapter 11 case and the
successor-in-interest to the Predecessor Debtors, and Official Creditors'
Committee propose this Plan of Liquidation pursuant to sections 1121(a) and (b)
of title 11 of the United States Code. The Plan provides distributions only to
Claimholders who hold Allowed Claims. The Plan does not provide for any
distributions for Intercompany Claims or to Interestholders. On September 18,
2002, the Bankruptcy Court entered the Substantive Consolidation Order, thereby
substantively consolidating and merging Kevco, Kevco Management, Kevco Holding,
Kevco GP, Kevco Components, DCM, Kevco Manufacturing and their respective
bankruptcy estates into the Debtor and disallowing all Intercompany Claims. The
Plan provides that on the Effective Date, or as soon as practicable thereafter,
the Debtor will begin making distributions from the funds that it is holding on
behalf of creditors. This is consistent with the Settlement Agreement, attached
hereto as Exhibit A, which pursuant to Bankruptcy Court order resolves the
Claims of the Committee and Debtor against the Lender Group. The Settlement
Agreement is hereby incorporated by reference into and deemed part of the Plan.
Parties-in-interest should also refer to the Disclosure Statement filed in the
Bankruptcy Court for a summary and analysis of the Plan.
Under Bankruptcy Code section 1125(b), a vote to accept or reject the
Plan cannot be solicited from a Claimholder or Interestholder until the
Disclosure Statement is approved by the Bankruptcy Court and is distributed to
Claimholders and Interestholders. ALL CLAIMHOLDERS AND INTERESTHOLDERS ARE
ENCOURAGED TO READ THE PLAN AND DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE
VOTING TO ACCEPT OR REJECT THE PLAN.
The Debtor expressly reserves its right to alter, amend, or modify the
Plan before its substantial consummation, subject to the amendment restrictions
set forth in Bankruptcy Code section 1127 and Bankruptcy Rule 3019, or otherwise
set forth in the Plan.
ARTICLE 1
DEFINITIONS AND CONSTRUCTION OF TERMS
1.1 DEFINITIONS. Certain capitalized and other terms used in this Plan
are defined in Exhibit B hereto and are used in this Plan with the meanings
ascribed therein. Any capitalized term used in the Plan that is not defined in
either Exhibit B of the Plan or elsewhere in the Plan shall have the meaning
ascribed to that term in the Bankruptcy Code. A capitalized term used in the
Plan that is not defined in either the Plan or the Bankruptcy Code shall have
the meaning ascribed to it in the Bankruptcy Rules.
1.2 RULES OF INTERPRETATION AND CONSTRUCTION. For purposes of the Plan,
(i) any reference in the Plan to an existing document or exhibit filed or to be
filed means that document or exhibit as it may have been or may be amended,
modified, or supplemented; (ii) unless otherwise specified, all references in
the Plan to sections, articles, and exhibits are references to sections,
articles, or exhibits to the Plan; (iii) the words "herein," "hereof," "hereto,"
"hereunder," and other words of similar import refer to the Plan in its entirety
and not to any
particular portion the Plan; (iv) captions and headings contained in the Plan
are inserted for convenience and reference only, and are not intended to be part
of or to affect the interpretation of the Plan; (v) wherever appropriate from
the context, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in the masculine, feminine, or
neuter gender shall include the masculine, feminine, and neuter gender; and (vi)
the rules of construction outlined in Bankruptcy Code section 102 and in the
Bankruptcy Rules shall apply to the Plan.
ARTICLE 2
CLASSIFICATION OF CLAIMS AND INTERESTS; IMPAIRMENT
2.1 CLASSIFICATION. Pursuant to Bankruptcy Code section 1122, a Claim
or Interest is placed in a particular Class for purposes of voting on the Plan
and receiving Distributions under the Plan only to the extent the particular
Claim or Interest is an Allowed Claim or Allowed Interest in that Class and such
Claim or Interest has not been paid, released, or otherwise settled before the
Effective Date. A Claim or Interest shall be classified in a different Class to
the extent that it qualifies within the identification of that different Class.
In accordance with Bankruptcy Code section 1123(a)(1), Administrative Claims and
Professional Fee Claims are not classified under the Plan, and the treatment of
those Claims is set forth in Article 3 of the Plan. Priority Unsecured Tax
Claims will be classified as Class 1 claims and treated as described in Article
4 of the Plan.
2.2 IDENTIFICATION OF CLASSES. The following is the designation of
classes of Claims against and Interests in the Debtor:
Class 1 Allowed Priority Unsecured Claims
Class 2 Allowed Secured Claims, Other Than Those of
Lender Group
Class 3 Allowed Secured Claim of Lender Group under
Credit Agreement
Class 4 Allowed General Unsecured Claims
Class 5 Allowed Subordinated Claims
Class 6 Allowed Interests in Debtor
2.3 UNIMPAIRED CLASSES. Claims in Classes 1 and 2 are not impaired
under the Plan. As such, Claimholders within that Class are conclusively
presumed to have accepted the Plan and, therefore, are not entitled to vote to
accept or reject the Plan.
2.4 IMPAIRED CLASSES. Claims in Classes 3 and 4 are impaired under the
Plan. As such, Claimholders within Classes 3 and 4 are entitled to vote to
accept or reject the Plan.
2
Claimholders within Class 5 and Interestholders within Class 6 are impaired but
will not receive any Distributions under the Plan. As such, Claimholders within
Class 5 and Interestholders within Class 6 are conclusively presumed to have
rejected the Plan and, therefore, are not entitled to vote to accept or reject
the Plan.
ARTICLE 3
TREATMENT OF ADMINISTRATIVE CLAIMS
AND PROFESSIONAL FEE CLAIMS
3.1 ADMINISTRATIVE CLAIMS BAR DATE.
3.1.1 GENERAL ADMINISTRATIVE CLAIMS. All requests for payment
of Administrative Claims arising on or before the Effective Date (except
applications for payment of Professional Fee Claims and the claims of the
Indenture Trustee for post-petition fees and expenses) must be filed with the
Bankruptcy Court and served on the Debtor, the U. S. Trustee, and the Committee
by the Administrative Claims Bar Date. Any Administrative Claim for which an
application or request for payment is not filed within the above-referenced time
period shall be discharged and forever barred, and shall not be entitled to any
Distributions under the Plan.
3.1.2 INDENTURE TRUSTEE FEES AND EXPENSES. The Indenture
Trustee shall be entitled to be paid, in full, in cash, an Allowed
Administrative Claim for its reasonable fees and expenses incurred after the
Petition Date, but on or before the Effective Date, in connection with carrying
out its duties under the Indenture or otherwise pursuant to law. The Indenture
Trustee will be required to establish that its post-petition expenses and
attorneys' fees are reasonable and necessary, but not that the Indenture Trustee
made a "substantial contribution" as defined in section 503(b)(5) of the
Bankruptcy Code. The Indenture Trustee's request for payment of an
Administrative Claim on account of such fees and expenses must be delivered to
counsel for the Debtor, counsel for the Debtor and counsel for the Committee
within forty-five (45) days after the Effective Date. Any Administrative Claim
of the Indenture Trustee for which an application or request for payment is not
filed or delivered within the above-referenced time period shall be discharged
and forever barred, and shall not be entitled to any Distributions under the
Plan. Notwithstanding anything in this Plan to the contrary, the lien in favor
of the Indenture Trustee under the applicable provisions of the Indenture shall
remain fully enforceable to the extent that the reasonable fees and expenses of
the Indenture Trustee remain unpaid as of the Effective Date. In this regard,
the Indenture will continue in effect after the Effective Date to the extent
necessary to allow the Indenture Trustee to receive and make distributions
pursuant to the Plan on account of Senior Notes.
3.2 PROFESSIONAL FEE CLAIM BAR DATE. All requests for payment of
Professional Fee Claims arising on or before the Effective Date must be filed
with the Bankruptcy Court and served on counsel for the Debtor, the U. S.
Trustee, and counsel for the Committee within forty-five (45) days after the
Effective Date. Any Professional Fee Claim for which an application or request
for payment is not filed within that time period shall be discharged and forever
barred, and shall not be entitled to any Distributions under the Plan. The Plan
shall not affect or modify
3
the Special Committee Counsel Fee Agreement. All post-confirmation fees and
reasonable expenses incurred by the Special Committee Counsel, other than those
related to the investigation, negotiation, execution, delivery and consummation
of the Settlement Agreement, shall be paid by the Plan Administration Agent as
Liquidation Costs.
3.3 PAYMENT OF ADMINISTRATIVE CLAIMS AND PROFESSIONAL FEE CLAIMS.
Allowed Administrative Claims incurred through the Effective Date shall be paid
by the Plan Administration Agent from the Administrative Expense Reserve within
ten (10) days following the later of the Effective Date or the date on which
they become Allowed Claims. Allowed Professional Fee Claims incurred through the
Effective Date shall be paid by the Plan Administration Agent within ten (10)
days following the later of the Effective Date or the date on which they become
Allowed Claims (i) first from the balance of any retainers, if any, held by
Professionals until fully exhausted and (ii) then from the Administrative
Expense Reserve. Any Professional Fee Claims incurred by any Professionals
retained by the Plan Administration Agent arising after the Effective Date,
shall be paid by the Plan Administration Agent, subject to Bankruptcy Court
approval, from the Administrative Expense Reserve (i) first from the balance of
any retainers, if any, held by Professionals until fully exhausted and (ii) then
from the Administrative Expense Reserve.
3.4 U. S. TRUSTEE FEES. After the Effective Date and until the chapter
11 case is closed, the Plan Administration Agent shall pay as a Liquidation Cost
all fees incurred under 28 U.S.C. section 1930(a)(6). After the Effective Date,
the Plan Administration Agent shall serve on the Office of the U. S. Trustee a
quarterly financial report for each calendar quarter, or portion thereof, during
which the chapter 11 case remains open. The quarterly financial report shall
include a statement of all Disbursements made during the quarter, pursuant to
the Plan or otherwise.
ARTICLE 4
PROVISIONS FOR TREATMENT OF ALLOWED CLAIMS AND INTERESTS
4.1 TREATMENT OF CLASS 1 ALLOWED PRIORITY UNSECURED CLAIMS. Allowed
Claims in Class 1 shall be completely and fully satisfied by the payment of
Available Cash to the holder of a Class 1 Allowed Claim in the amount of the
Allowed Claim on the later of Effective Date or the date that the Claim becomes
an Allowed Claim.
4.2 TREATMENT OF CLASS 2 ALLOWED SECURED CLAIMS OTHER THAN THOSE OF
LENDER GROUP.
4.2.1 DETERMINATION OF ALLOWED SECURED CLAIM. The Plan
Administration Agent may seek a determination regarding the validity and amount
of any Class 2 Allowed Secured Claim, if any, pursuant to the Bankruptcy Code
and the Bankruptcy Rules. The Plan Administration Agent may, at its sole option,
initiate litigation seeking a determination of the amount, extent, validity, and
priority of any Liens securing any Class 2 Allowed Secured Claim.
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4.2.2 TREATMENT OF CLASS 2 ALLOWED SECURED CLAIMS. If there is
more than one Class 2 Allowed Secured Claim, each Class 2 Allowed Secured Claim
shall be classified in a separate subclass. Class 2 Allowed Secured Claims shall
be first satisfied by the transfer of any Estate Property constituting the Cash
Collateral of the holder of a Class 2 Allowed Secured Claim. Any Cash Collateral
securing Class 2 Allowed Secured Claims remaining after full satisfaction of
such Claims shall remain Estate Property free and clear of all liens, claims,
interests, and encumbrances. To the extent the Cash Collateral is insufficient
to fully satisfy a Class 2 Allowed Secured Claim, the remaining portion of that
Claim after application of the Cash Collateral shall be satisfied in full at the
election of the Plan Administration Agent by (i) the sale of any other
collateral securing the Allowed Secured Claims under Section 4.2.3 of the Plan,
(ii) the transfer of that collateral to the holder of the Allowed Secured Claims
under Section 4.2.4 of the Plan, or (iii) an agreement reached between the
holder of the Allowed Secured Claims and the Debtor under Section 4.2.5 of the
Plan.
4.2.3 SALE OF COLLATERAL. The Plan Administration Agent may
sell for Cash any Estate Property serving as collateral for the Class 2 Allowed
Secured Claims. The holder of the Class 2 Allowed Secured Claims shall be
entitled to bid at such sale in accordance with Bankruptcy Code section 363(k).
Any sale proceeds generated by the sale of any Estate Property serving as
collateral for a Class 2 Allowed Secured Claims (net of reasonable liquidation
costs) shall be paid by the Plan Administration Agent to the holder of the Class
2 Allowed Secured Claims in satisfaction of those Claims. Any net sale proceeds
remaining after satisfaction of the Class 2 Allowed Secured Claims shall remain
Estate Property free and clear of all interests, liens and encumbrances.
4.2.4 TRANSFER OF COLLATERAL. The Plan Administration Agent
may satisfy any Class 2 Allowed Secured Claims by transferring and conveying any
Estate Property serving as collateral for the Claims to the holder of the Class
2 Allowed Secured Claims to the extent of the amount of the Class 2 Allowed
Secured Claims. Any collateral remaining after satisfaction of the Class 2
Allowed Secured Claims shall remain Estate Property free and clear of any
interests, liens and encumbrances.
4.2.5 OTHER AGREEMENTS. Notwithstanding Sections 4.2.3 and
4.2.4 above, Class 2 Allowed Secured Claims may otherwise be satisfied by an
agreement between the holder of such Claims and the Plan Administration Agent.
The treatment set forth in any such agreement will supersede the provisions of
Sections 4.2.3 and 4.2.4 of the Plan.
4.2.6 RETENTION OF LIEN. Each holder of Class 2 Allowed
Secured Claims shall retain the Liens securing those Claims until it is
satisfied in accordance with the Plan, or until an earlier date agreed to by the
holder and the Plan Administration Agent.
4.2.7 DEFICIENCY CLAIM. If the holder of a Class 2 Allowed
Secured Claim has a deficiency claim, it shall be treated under the Plan as
either a Class 4 General Unsecured Claim or a Class 1 Priority Unsecured Tax
Claim, whichever category is applicable. The Bankruptcy Court shall determine
whether a deficiency claim shall be treated as a Class 4 General Unsecured Claim
or a Class 1 Priority Unsecured Tax Claim.
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4.3 TREATMENT OF CLASS 3 ALLOWED SECURED CLAIM OF LENDER GROUP UNDER
CREDIT AGREEMENT. The Allowed Secured Claim of Lender Group shall be satisfied
according to the Settlement Agreement.
4.4 TREATMENT OF CLASS 4 ALLOWED GENERAL UNSECURED CLAIMS
4.4.1 DETERMINATION OF ALLOWED GENERAL UNSECURED CLAIMS. The
Plan Administration Agent may seek a determination regarding the validity and
amount of any of the Allowed General Unsecured Claims, pursuant to the
Bankruptcy Code and the Bankruptcy Rules.
4.4.2 TREATMENT OF THE ALLOWED GENERAL UNSECURED CLAIMS. Each
Allowed General Unsecured Claim shall receive a pro rata portion of available
funds. All distributions to the holders of Senior Notes shall be by and through
the Indenture Trustee. Pursuant to the Substantive Consolidation Order, all
Intercompany Claims have been disallowed.
4.5 TREATMENT OF CLASS 5 ALLOWED SUBORDINATED CLAIMS. Holders of any
Class 5 Allowed Subordinated Claims shall not receive any Distribution under the
Plan.
4.6 TREATMENT OF CLASS 6 ALLOWED INTERESTS IN DEBTOR. Holders of any
Class 6 Allowed Interest in Debtor shall not receive any Distribution under the
Plan.
4.7 TREATMENT OF RECLAMATION CLAIMS. Claimholders asserting rights of
reclamation pursuant to section 546 of the Bankruptcy Code and applicable state
law shall receive no Distribution in respect of their reclamation rights. The
Claims of parties seeking reclamation will be treated as Class 4 Allowed General
Unsecured Claims.
ARTICLE 5
EXECUTORY CONTRACTS
The following provisions shall govern the treatment of all Executory
Contracts entered into by Debtor before the Petition Date and that are still in
effect on the Effective Date:
5.1 ASSUMPTION AND REJECTION. All Executory Contracts not otherwise
assumed or rejected pursuant to a Final Order shall be deemed rejected as of the
Effective Date.
5.2 APPROVAL OF REJECTION. Entry of the Confirmation Order shall
constitute the approval, pursuant to Bankruptcy Code section 365(a), of the
rejection of the remaining Executory Contracts.
5.3 REJECTION CLAIMS. Unless the Bankruptcy Court has established an
earlier deadline concerning the rejection of a particular Executory Contract,
any Claim arising out of the rejection of an Executory Contract under Sections
5.1 and 5.2 of the Plan must be filed with the Bankruptcy Court and served on
the Debtor and Plan Administration Agent within thirty (30) days after the
Effective Date. Any Claims not filed within that time period will be
extinguished and forever barred and, therefore, will not receive any
Distributions under the Plan. Any Claims arising out of the rejection of an
Executory Contract pursuant to a Final Order entered before the
6
Bar Date must have been filed before the Bar Date; otherwise those Claims are
extinguished and forever barred and, therefore, will not receive Distributions
under the Plan. All Claims arising from the rejection of an Executory Contract
shall be treated as Class 4 Allowed General Unsecured Claims under the Plan.
5.4 EMPLOYEE CLAIMS (COMPENSATION AND BENEFIT PROGRAMS). To the extent
not already rejected pursuant to a Final Order or otherwise terminated, all
employment and retirement practices and policies and all compensation,
retirement and employee benefit plans, policies and programs of the Debtor
applicable to its current or former directors, officers, or employees (including
all savings plans, retirement plans, health care plans, accrued unpaid vacation,
sick leave, medical benefits, incentive plans, workers' compensation programs,
and life, disability and other insurance plans), to the extent arising from
Executory Contracts, shall be rejected as of the Effective Date, and shall not
be binding on the Debtor or Plan Administration Agent to any extent.
ARTICLE 6
MEANS FOR EXECUTION OF THE PLAN
A. THE ADVISORY COMMITTEE
6.1 ESTABLISHMENT AND SELECTION OF THE ADVISORY COMMITTEE. At or before
the Confirmation Hearing, the Committee shall select three (3) candidates to
serve on the Advisory Committee, and shall file with the Bankruptcy Court and
serve on the Debtor a list of Advisory Committee members before the Confirmation
Hearing. To the extent the Committee fails to select the candidates before the
Confirmation Hearing, the Debtor shall have the sole right and obligation to
select the candidates. Following the Confirmation Hearing, the candidates shall
undertake their duties as members of the Advisory Committee as specified in the
Plan. In serving as a member of the Advisory Committee, the members shall not
have assumed any fiduciary duties to Claimholders, Interestholders, the Plan
Administration Agent, or any other parties in interest in Debtor's chapter 11
case. The Advisory Committee shall be entitled to retain professionals, as
reasonable and necessary to enforce the terms of the Plan. Compensation of
professionals retained by the Committee shall be subject to Bankruptcy Court
approval and paid as a Liquidation Cost.
6.2 RESIGNATION OF ADVISORY COMMITTEE MEMBERS. A member of the Advisory
Committee may resign at any time. A replacement member shall be selected and
appointed by the remaining Advisory Committee member(s).
6.3 COMPENSATION OF ADVISORY COMMITTEE MEMBERS. The Advisory Committee
members shall not be compensated for services rendered to the Debtor or the
Estate. The Advisory Committee members shall, however, be reimbursed for all
reasonable out-of-pocket expenses incurred in serving on the Advisory Committee,
subject to approval by the Bankruptcy Court, except they shall not be entitled
to fees and expenses of counsel or any other professionals of individual
Advisory Committee members.
7
B. THE PLAN ADMINISTRATION AGENT
6.4 SELECTION OF PLAN ADMINISTRATION AGENT. The Committee has nominated
Dennis Faulkner to serve as the Plan Administration Agent under the Plan. Mr.
Faulkner will be compensated on an hourly basis according to his customary
hourly rate. Mr. Faulkner's appointment as Plan Administration Agent shall be
approved at the Confirmation Hearing, and he shall undertake the required duties
under the Plan on the Effective Date. The Plan Administration Agent shall retain
Baker & McKenzie as his general counsel.
6.5 RESIGNATION OF PLAN ADMINISTRATION AGENT. The Plan Administration
Agent may resign such position only by a written instrument filed with the
Bankruptcy Court at least ninety (90) days before the proposed effective date of
resignation. The Plan Administration Agent shall continue to serve as Plan
Administration Agent after the filing of the resignation until the proposed
effective date, which shall be the effective date of appointment of a successor
Plan Administration Agent in accordance with Section 6.7 of the Plan. Nothing
contained in this paragraph shall restrict the right to remove the Plan
Administration Agent as provided in Section 6.6 of the Plan or for the Advisory
Committee to agree to a shorter notice period or appoint a successor within the
notice period.
6.6 REMOVAL OF PLAN ADMINISTRATION AGENT. The Advisory Committee has
the right to remove the Plan Administration Agent from office only for (i)
fraud, willful misconduct, or gross negligence in connection with his duties
under the Plan, including the liquidation of the Debtor and the Estate Property;
(ii) for such physical or mental disability that substantially prevents the Plan
Administration Agent from performing the duties of Plan Administration Agent
under the Plan; or (iii) for cause, which shall include but not be limited to, a
breach of fiduciary duty or an unresolved conflict of interest, other than as
specified in the foregoing clauses (i) and (ii). Any removal pursuant to this
Section 6.6 requires the unanimous vote of the Advisory Committee members.
6.7 APPOINTMENT OF SUCCESSOR PLAN ADMINISTRATION AGENT.
6.7.1 APPOINTMENT OF SUCCESSOR PLAN ADMINISTRATION AGENT. In
the event of a vacancy by reason of the death or removal of the Plan
Administration Agent or prospective vacancy by reason of resignation, a
successor Plan Administration Agent shall be appointed by the Advisory
Committee. The Advisory Committee may appoint a successor Plan Administration
Agent as soon as practicable, but in any event within ninety (90) days after the
occurrence of the vacancy or, in the case of resignation, at least forty (40)
days before the proposed resignation. If the Advisory Committee fails to appoint
a successor Plan Administration Agent within the applicable period, any member
of the Advisory Committee or any party in interest may nominate a successor Plan
Administration Agent, subject to Bankruptcy Court approval upon notice to the
holders of the 20 largest Allowed General Unsecured Claims and those parties in
interest who have submitted written requests for notice, setting forth (i) the
name of the nominated Plan Administration Agent, (ii) the proposed compensation
for the nominated Plan Administration Agent, and (iii) all material terms of the
proposed retention.
8
6.7.2 VESTING OF RIGHTS IN SUCCESSOR PLAN ADMINISTRATION
AGENT. Every successor Plan Administration Agent appointed pursuant to the Plan
shall execute, acknowledge, and deliver to the Advisory Committee and the
retiring Plan Administration Agent, if any, an instrument accepting the
appointment subject to the terms and provisions of the Plan. Without any further
act, deed or conveyance, the successor Plan Administration Agent shall become
vested with all the rights, powers, trusts, and duties of the Plan
Administration Agent under the Plan, except that the successor Plan
Administration Agent shall not be liable for the acts or omissions of the
retiring Plan Administration Agent.
6.8 [Intentionally Deleted]
6.9 OVERSIGHT BY THE ADVISORY COMMITTEE. The Advisory Committee and its
professionals, if any, shall serve the creditors' interests following the
Effective Date and shall have authority to object to actions taken or not taken
by the Plan Administration Agent including those acts or omissions in resolving
Disputed Claims, Rejection Claims, Avoidance Actions and other causes of action
held by the Estates. The Advisory Committee shall serve any written objections,
including those to actions proposed to be taken by the Plan Administration Agent
in resolving Disputed Claims, Rejection Claims, Avoidance Actions and other
causes of action, upon the Plan Administration Agent. If the Advisory Committee
and Plan Administration Agent are unable to resolve such objections within 10
business days, the Advisory Committee may file its objection with the Bankruptcy
Court for adjudication.
C. THE EFFECTIVE DATE UNDER THE PLAN
6.10 TRANSACTIONS AT THE EFFECTIVE DATE. The following shall occur on
the Effective Date:
6.10.1 CANCELLATION OF INTERESTS IN THE DEBTOR. On the
Effective Date, all of the then existing Interests in the Debtor shall be
cancelled.
6.10.2 AMENDMENT OF DEBTOR'S ARTICLES OF INCORPORATION AND
BYLAWS. Debtor's Articles of Incorporation and Bylaws shall be amended and all
necessary corporate action shall be taken to:
(i) prohibit the issuance of non-voting equity
securities;
(ii) provide for the cancellation of all issued
and outstanding capital stock of Debtor,
including all Interests in Debtor;
(iii) provide for the termination of all then
current officers and directors of Debtor,
effective the day after the Effective Date;
and
(iv) provide for such provisions, terms, and
conditions necessary to comply with and
implement the requirements under the Plan,
including the liquidation of the Debtor and
the Estate Property.
9
6.10.3 EXECUTION OF DOCUMENTS AND CORPORATE ACTION. Debtor
shall deliver all documents and perform all actions reasonably contemplated with
respect to implementation of the Plan. The Plan Administration Agent is
designated as the authorized representative to execute on behalf of the Debtor,
in a representative capacity and not individually, any documents or instruments
to be executed by the Debtor after the Effective Date in order to consummate the
Plan.
6.10.4 SURRENDER AND CANCELLATION OF INSTRUMENTS. Except as
otherwise provided in the Plan, each Claimholder or Interestholder holding a
certificate or instrument evidencing a Claim against, or Interest in, the Debtor
or the Estate Property and whose claims are treated under the Plan shall
surrender such certificate or instrument to the Plan Administration Agent on the
Effective Date as a prerequisite to receiving any distribution under the Plan,
unless the non-availability of such certificate or instrument is established to
the satisfaction of the Plan Administration Agent. As of the Effective Date, all
Senior Notes issued pursuant to the Indenture shall be deemed cancelled. The
Indenture shall be deemed cancelled and of no further force and effect upon the
Indenture Trustee having received and made all distributions pursuant to the
Plan on account of the Senior Notes.
D. RIGHTS AND OBLIGATIONS OF THE PLAN ADMINISTRATION AGENT
6.11 LIQUIDATION AND DISTRIBUTION. Following the Effective Date, the
Plan Administration Agent shall be authorized to conduct an orderly liquidation
of the Debtor's property and assets consistent with the terms and provisions of
the Plan. Following the completion of the liquidation and the application of
Available Cash to the Debtor's expenses and to the Distributions provided for or
contemplated by the Plan, the Plan Administration Agent shall sign and file
appropriate articles of dissolution for the Debtor with its state of
incorporation. No approval of the shareholders, officers or directors of the
Debtor shall be required for filing of the articles of dissolution.
6.12 MANAGEMENT OF DEBTOR. Except as otherwise expressly limited by the
Plan, and with the advice of the Advisory Committee and Baker & McKenzie as
counsel, the Plan Administration Agent shall have control and authority over the
Estate Property, including the Avoidance Actions and other causes of action that
are owned by the Debtor, and over the management and disposition of the Estate
Property (including any transfer of Estate Property that does not constitute a
disposition) to the same extent as if the Plan Administration Agent were the
sole owner of the Estate Property in its own right, and, after the Effective
Date, over the management of the Debtor. Except as provided in the Plan, the
Plan Administration Agent need not obtain any court order or approval in the
exercise of any power or discretion conferred under the Plan, or account to any
court in the absence of a breach of trust. The Plan Administration Agent shall
exercise its judgment for the benefit of the Claimholders in order to maximize
the value of Estate Property, giving due regard to the cost, risk, and delay of
any course of action. In connection with the management and use of the Estate
Property, the Plan Administration Agent's powers with the advice of the Advisory
Committee and counsel, (except as otherwise expressly limited in the Plan) shall
include the following:
10
(i) to accept the Estate Property, to pursue the
liquidation and marshaling of the Estate Property,
and to preserve and protect the Estate Property;
(ii) to reconcile, settle, or object to Claims against
Debtor and to prosecute, settle, or abandon the
Avoidance Actions and other causes of action that are
Estate Property against third parties;
(iii) to make or cause to be made Distributions of
Available Cash in accordance with the terms of the
Plan;
(iv) to liquidate and distribute Estate Property or any
portion of or interest in Estate Property, and to
dispose of the Estate Property for Cash or on such
terms and for such consideration as are reasonable
and appropriate;
(v) to enforce the payment of notes or other obligations
of any Person or to make contracts with respect
thereto;
(vi) to purchase insurance with coverage and limits as it
deems desirable consistent with the budget referred
to in Section 6.16 of the Plan, including insurance
covering liabilities of the Plan Administration Agent
or employees or agents of the Debtor incurred in
connection with their services to the Debtor;
(vii) subject to the requirements of the Plan, to appoint,
engage, employ, supervise, and compensate
Professionals as may be necessary or desirable, to
assist in the performance of the Plan Administration
Agent's duties and responsibilities under the Plan;
(viii) subject to the limitations in the Plan, to the extent
reasonably required to meet claims and contingent
liabilities (including Disputed Claims) or to
maintain the value of Estate Property during
liquidation, to invest and reinvest Available Cash,
pending distribution, and to liquidate such
investments; provided, however, the Plan
Administration Agent shall not receive or retain cash
or cash equivalents in excess of a reasonable amount
necessary to meet claims and contingent liabilities
(including Disputed Claims) or to maintain the value
of the Estate Property during liquidation;
(ix) to establish the manner of ascertaining income and
principal, and the apportionment of income and
principal, and the apportionment between income and
principal of all receipts and disbursements, and to
select an annual accounting period;
(x) change the state of incorporation of the Debtor;
11
(xi) establish funds, reserves and accounts (including the
Reserve accounts), as deemed by the Plan
Administration Agent in its discretion to be useful
in carrying out the purposes of the Plan;
(xii) sue and be sued and participate, as a party or
otherwise, in any judicial, administrative,
arbitrative or other proceeding;
(xiii) delegate any or all of the discretionary power and
authority conferred with respect to all or any
portion of the Estate Property to any one or more
nationally recognized institutional advisers or
investment managers without liability for any action
taken or omission made because of any such delegation
except for such liability as is provided in Section
6.23 of the Plan;
(xiv) consult with the Advisory Committee at such times and
regarding such issues relating to the liquidation of
the Debtor and Estate Property as are desirable in
accordance with the terms of the Plan;
(xv) undertake any duties or obligations and exercise any
rights concerning the treatment of Secured Claims in
Classes 2 and 3 under the Plan;
(xvi) execute, deliver, and perform such other agreements
and documents and to take or cause to be taken any
and all such other actions as may be necessary or
desirable to effectuate and carry out the purposes of
the Plan;
(xvii) undertake any action necessary to maintain the
corporate existence of the Debtor;
(xviii) undertake any action necessary to ensure that the
Debtor is and remains in good standing and compliance
with applicable federal, state, and local laws;
(xix) file any federal, state, or local tax returns and
provide for the payment of any related taxes; and
(xx) undertake any action or perform any obligation
provided for or required under the Plan.
6.13 COMMINGLING OF ESTATE PROPERTY. The Plan Administration Agent
shall not commingle any of the Estate Property with its own property or the
property of any other Person.
6.14 EMPLOYMENT AND COMPENSATION OF PROFESSIONALS. The Plan
Administration Agent shall have the authority to pay one hundred percent (100%)
of the reasonable and
12
necessary fees and out-of-pocket expenses incurred by professionals employed by
the Plan Administration Agent and the Advisory Committee in accordance with the
procedure set forth herein.
6.14.1 On or before the 25th day of each month following the
month for which compensation is sought, each professional will serve a monthly
statement upon the Plan Administration Agent, the Plan Administration Agent's
counsel, the United States Trustee for the Northern District of Texas, and the
Advisory Committee. Each party receiving a statement will have twenty (20) days
after the date of receipt of such statement to raise detailed objections to any
fees or expenses set forth in the statement. At the expiration of the twenty
(20) day objection period, if no objection is made by the parties receiving
notice, the Plan Administration Agent shall pay 100% of the fees and
out-of-pocket expenses identified by the professional in the monthly statement.
6.14.2 In the event that a party receiving notice objects to
the compensation or reimbursement sought in a particular monthly statement, such
party shall, within the twenty (20) day objection period, serve upon the
professional to whose statement the objection is made and the other notice
recipients a written "Notice of Objection to Fee Statement," with a statement
setting forth the precise nature of the objection and the amount at issue.
Thereafter, the objecting party and the relevant professional shall attempt to
reach an agreement regarding the correct payment to be made. If the objecting
party and the relevant professional are unable to reach an agreement to the
objection within fifteen (15) days after receipt of such objection, the relevant
professional shall have the option of either (1) filing the objection, together
with a request for payment of the disputed amount, with the Bankruptcy Court, or
(2) foregoing payment of the disputed amount.
6.14.3 The Plan Administration Agent is required to promptly
pay all fees and expenses that are not the subject of the objection.
6.14.4 The pendency of an objection stating that payment of
any compensation or reimbursement is not proper shall not disqualify the future
payment of monthly and interim compensation or reimbursement of expenses to such
professional, except as otherwise stated by order of the Bankruptcy Court.
6.15 CONSULTATION WITH AND CONSENT OF ADVISORY COMMITTEE. The Plan
Administration Agent shall consult with the Advisory Committee in good faith
regarding all material issues affecting the Estate, including the resolution of
Claims objections, the pursuit of Avoidance Actions, and the disposition of
Estate Property. The Plan Administration Agent may not settle any Avoidance
Action or other Estate cause of action wherein the Plan Administration Agent
seeks to recover more than $50,000 without the Consent of the Advisory
Committee. The Plan Administration Agent shall also seek the advice of the
Advisory Committee regarding proposed budgets for the Estate, setting forth
expected receipts and disbursements for litigation, operations, and other
appropriate purposes.
6.16 BUDGET. The Plan Administration Agent shall cause to be prepared
within thirty (30) days before the end of each quarter of each Fiscal Year a
budget and cash flow projections
13
covering the next quarter and each succeeding quarter for which estimates on
projections may be based. Within forty-five (45) days after the Effective Date,
the Plan Administration Agent, in consultation with the Advisory Committee,
shall prepare a budget and cash flow projections for the current quarter of the
current Fiscal Year.
6.17 QUARTERLY AND ANNUAL REPORTS. The Plan Administration Agent shall
cause to be prepared (a) within forty-five (45) days after the end of each of
the first three quarters of a Fiscal Year (for such quarter) and (b) within
ninety (90) days after the end of each Fiscal Year (for such Fiscal Year),
financial statements of the Estate as of the end of and for such periods,
prepared in accordance with GAAP. The contemplated financial statements shall
include (i) a statement of cash flows; (ii) a schedule, summarizing assets by
type; (iii) a summary listing of the status of the resolution of Claims and
retained Avoidance Actions; and (iv) a schedule of expenses of the Estate,
including accrued and paid administrative expenses.
6.18 DISTRIBUTION OF QUARTERLY AND ANNUAL REPORTS. Within ten (10)
Business Days after the end of the relevant report preparation period, the Plan
Administration Agent shall distribute any financial statements prepared in
accordance with Section 6.18 of the Plan to the Advisory Committee and shall
file the financial statements with the Bankruptcy Court.
6.19 RECORDS. The Plan Administration Agent shall maintain records and
account books relating to the Estate Property, the management of the Estate
Property, and all transactions undertaken by the Plan Administration Agent,
which records and books of account shall be maintained in accordance with GAAP,
consistently applied, except to the extent that any change is approved by the
Estate's independent public accountants. The Plan Administration Agent shall
also maintain records and account books relating to all Distributions
contemplated under the Plan.
6.20 INVESTMENT GUIDELINES. Cash held pending distribution, including
Cash held in Reserves, shall (to the extent permitted by applicable law) be
invested by the Plan Administration Agent in (i) direct obligations of, or
obligations guaranteed or secured by, the United States of America (including
United States Treasury Bills); (ii) obligations of any agency or corporation
that is or may subsequently be created by or pursuant to an Act of the United
States Congress or its agencies or instrumentalities, or (iii) demand deposits
or short-term certificates of deposit at any bank or trust company that has, at
the time of the acquisition by the Plan Administration Agent of such
investments, capital stock and surplus aggregating at least $100 million and
whose short-term debt obligations are rated by at least two nationally
recognized statistical rating organizations in one of the two highest
categories. Such investments shall mature in the amounts and at the times as, in
the judgment of the Plan Administration Agent, are necessary, or are desirable
with a view to providing funds when needed to make payments from the Estate
Property. Any investment purchased with the Estate Property shall be deemed a
part of the Estate Property. All interest, distributions, dividends and proceeds
received by the Plan Administration Agent in connection with such investments
shall be a part of the Estate Property.
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6.21 DISCHARGE OF PLAN ADMINISTRATION AGENT'S RIGHTS AND OBLIGATIONS.
6.21.1 STATEMENT OF ACCOUNTING. The Plan Administration Agent
shall, on either distribution of all Debtor's Estate Property or the Plan
Administration Agent's resignation, removal, or death (in which case the Plan
Administration Agent's estate shall), render a statement of accounting
containing the following information: (i) a list of all assets and funds of the
Debtor originally charged under the Plan Administration Agent's control, (ii) a
summarized accounting, in sufficient detail, of all purchases, sales, gains,
losses, and income in connection with the liquidation and distribution of the
Assets during the Plan Administration Agent's term of service, and (iii) the
ending balance of all assets and funds of the Debtor as of the date of
discharge. At the discretion of the Plan Administration Agent and Advisory
Committee, the statement of accounting may be audited by independent accountants
in accordance with generally accepted auditing standards.
6.21.2 APPROVAL OF STATEMENT OF ACCOUNTING. The statement of
accounting required by Section 6.21.1 shall be served on the Advisory Committee.
Unless a majority of the Advisory Committee members or a majority of the
Claimholders request that the statement of accounting not be approved within
thirty (30) days after the date on which such statement was presented to the
Advisory Committee, the withdrawing Plan Administration Agent shall be
discharged from all liability to the Debtor, Claimholders, Interestholders, or
any Person who has had or may have an interest in the Debtor for acts or
omissions in the Plan Administration Agent's capacity as the Plan Administration
Agent or in any other capacity contemplated by the Plan.
6.21.3 COSTS RELATING TO STATEMENT OF ACCOUNTING. The expenses
of any accounting (including, any statement of accounting) shall be paid by the
Debtor as a Liquidation Cost.
E. MISCELLANEOUS PROVISIONS
6.22 ACCESS TO INFORMATION BY CLAIMHOLDERS AND INTERESTHOLDERS. Each
Claimholder or Interestholder shall have access to the business records of the
Debtor during normal business hours for the purpose of obtaining information
relating to the management of Estate Property for any purpose reasonably related
to the interests generally of the Claimholders and Interestholders; provided,
however, that such holder provides at least 10 business days' written notice and
such access does not constitute an undue burden on the Plan Administration Agent
and is not detrimental to the Estate. Nothing contained in this Section 6.22 is
intended to restrict any Claimholder or Interestholder from access to the
business records of the Plan Administration Agent that the Plan Administration
Agent discretionarily elects to provide or upon further order of the Bankruptcy
Court.
6.23 STANDARD OF CARE; INSURANCE. The Plan Administration Agent, acting
in the capacity as the Plan Administration Agent, and Advisory Committee
members, acting in the capacity of Advisory Committee members, as well as the
respective Professionals retained by the Plan Administration Agent and the
Advisory Committee, shall not be personally liable in
15
connection with any action in furtherance of the liquidation of the Debtor and
its Estate Property or to any Person, except for such acts or omissions
constituting fraud, willful misconduct, or gross negligence. The Plan
Administration Agent and the members of the Advisory Committee shall use their
reasonable best efforts to obtain appropriate insurance for themselves and their
Professionals providing coverage against any action, suit, proceeding, or
investigation brought or threatened against any of the Plan Administration
Agent, the members of the Advisory Committee, and their respective
Professionals. The provisions of this Section of the Plan shall remain available
to and be binding on any former Plan Administration Agent or the estate of any
deceased Plan Administration Agent.
6.24 RELIANCE BY PLAN ADMINISTRATION AGENT. The Plan Administration
Agent may rely on any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, or other instrument or document that
the Plan Administration Agent has no reason to believe is not genuine and to
have been signed or presented by the proper party or parties or, in the case of
facsimiles, to have been sent by the proper party or parties, and the Plan
Administration Agent may conclusively rely as to the truth of the statements and
correctness of the opinions expressed in such documents; provided, however, the
Plan Administration Agent shall be under a duty to examine, or caused to be
examined, the above-referenced documents to determine whether such documents
conform to the requirements of the Plan. The Plan Administration Agent may
consult with counsel, and any opinion of counsel shall be full and complete
authorization and protection regarding any action taken or suffered by the Plan
Administration Agent in accordance with such opinion. The Plan Administration
Agent shall have the right at any time to seek instructions from the Bankruptcy
Court (or any other court of competent jurisdiction after the chapter 11 case is
finally closed) concerning the Estate Property, the Plan, or any other document
executed in connection therewith, and those instructions shall be full and
complete authorization regarding any action taken or suffered by the Plan
Administration Agent in accordance with those instructions.
6.25 TERMINATION OF THE COMMITTEE. The appointment and operations of
the Committee shall terminate on the day immediately following the Effective
Date. Any dissolution or termination of the appointment and operations of the
Committee shall not prejudice the rights of any agents of the Committee
(including its Professionals and Committee members) to pursue their separate
claims for compensation and reimbursement of expenses, including Professional
Fee Claims under the provisions of sections 330, 331 and/or 503(b)(3)(F) of the
Bankruptcy Code.
ARTICLE 7
EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS
7.1 IMPAIRED CLASSES ENTITLED TO VOTE. Claimholders in each impaired
Class of Claims receiving distributions under the Plan are entitled to vote as a
class to accept or reject the Plan. The Debtor will tabulate the votes on the
Plan.
7.2 ACCEPTANCE BY CLASS OF CREDITORS. In accordance with Bankruptcy
Code section 1126(c) and except as provided in Bankruptcy Code section 1126(e),
an impaired Class of Claims shall have accepted the Plan if the Plan is accepted
by the holders of at least
16
two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of the
Allowed Claims of such Class that have timely and properly voted to accept or
reject the Plan.
7.3 NON-CONSENSUAL CONFIRMATION. In the event that less than all
Classes vote to accept the Plan, the Debtor may request confirmation of the Plan
under Bankruptcy Code section 1129(b). Such request may be made orally by Debtor
at the Confirmation Hearing.
7.4 CONFIRMABILITY AND SEVERABILITY OF THE PLAN. The confirmation
requirements of Bankruptcy Code section 1129 must be satisfied. A determination
by the Bankruptcy Court that the Plan is not confirmable under Bankruptcy Code
section 1129 shall not limit or affect the Debtor's ability to modify the Plan
to satisfy the confirmation requirements set forth in Bankruptcy Code section
1129.
7.5 UNMARKED BALLOT. Any Ballot that is executed by the holder of any
Allowed Claim, but which does not indicate acceptance or rejection of the Plan,
shall be deemed to have accepted the Plan. Any Ballot not returned in accordance
with the return instructions on the Ballot pertaining to this Plan shall not be
counted for voting purposes.
ARTICLE 8
PROVISIONS GOVERNING DISTRIBUTIONS
AND THE ESTABLISHMENT OF RESERVES
8.1 ESTABLISHMENT OF RESERVES AND PAYMENT OF CREDITOR CLAIMS.
8.1.1 RESERVE FOR AND PAYMENT OF ADMINISTRATIVE EXPENSES. On
or before the Confirmation Date, the Debtor shall have obtained an order of the
Bankruptcy Court establishing an Administrative Expense Reserve funded with
Available Cash in an amount necessary to pay the claimed amount of all
Administrative Claims, including Professional Fee Claims. Administrative Claims
shall be paid from the Administrative Expense Reserve as allowed by order of the
Bankruptcy Court. Professional Fee Claims shall be paid from retainers or from
the Administrative Expense Reserve as allowed by order of the Bankruptcy Court.
To the extent any funds held in the Administrative Expense Reserve relate to
Administrative Claims or Professional Fee Claims that have either been
disallowed by the Bankruptcy Court or are no longer claimed as evidenced by a
written release of such claim or the failure to seek allowance of such claim
within the time required by Sections 3.1 or 3.2 of the Plan, then the Plan
Administration Agent shall seek an order of the Bankruptcy Court reducing the
amount required to be held in the Administrative Expense Reserve and such funds
shall be distributed to holders of Class 4 Allowed General Unsecured Claims as
if such funds were Available Cash. The Administrative Expense Reserve shall be
dissolved once all required payments have been made.
8.1.2 RESERVE FOR AND PAYMENT OF PRIORITY UNSECURED CLAIMS. On
or before the Confirmation Date, the Debtor shall have obtained an order of the
Bankruptcy Court establishing a Priority Unsecured Claim Reserve funded with
Available Cash in an amount necessary to pay the claimed and/or scheduled amount
of all Class 1 Allowed Priority Unsecured Claims. Class 1 Allowed Priority
Unsecured Claims shall be fully and completely satisfied by
17
the payment of Cash from the Priority Unsecured Claim Reserve in an amount equal
to the Class 1 Allowed Priority Unsecured Claims on the later of the Effective
Date or the date such Claims become Allowed Claims. To the extent any funds held
in the Priority Unsecured Claims Reserve relate to a Class 1 Allowed Priority
Unsecured Claim that has either been disallowed by the Bankruptcy Court or is no
longer claimed as evidenced by a written release of such Claims or the failure
to seek allowance of such Claims by the Administrative Claims Bar Date, then the
Plan Administration Agent shall seek an order of the Bankruptcy Court reducing
the amount required to be held in the Priority Unsecured Claim Reserve and such
funds shall be distributed to holders of Class 4 Allowed General Unsecured
Claims as if such funds were Available Cash. The Priority Unsecured Claims
Reserve shall be dissolved once all required payments have been made.
8.1.3 OPERATING RESERVE. Subject to the terms of the
Settlement Agreement, before making any Distributions and within thirty (30)
days from Effective Date, the Plan Administration Agent shall establish the
Operating Reserve funded periodically with Available Cash in an amount
determined by the Plan Administration Agent, in consultation with the Advisory
Committee, to be reasonably necessary to pay anticipated Liquidation Costs, fund
litigation, fund contingent liabilities, and otherwise conduct the affairs of
the Debtor.
8.1.4 DISPUTED CLAIMS RESERVE FOR CLAIMANTS. On or before the
Confirmation Date, the Debtor shall have obtained an order of the Bankruptcy
Court establishing the Disputed Claims Reserve. The Plan Administration Agent
shall deposit into the Disputed Claims Reserve any Distribution payable to a
Claimant holding a Disputed Claim. To the extent that Disputed Claims have
either been disallowed by the Bankruptcy Court or are no longer claimed as
evidenced by written releases of such Claims or the failure to seek allowance of
such Claims by the Bar Date, then the Plan Administration Agent shall seek an
order of the Bankruptcy Court reducing the amount required to be held in the
Disputed Claims Reserve and such funds shall be distributed to holders of Class
4 Allowed General Unsecured Claims as if such funds were Available Cash. The
Disputed Claims Reserve shall be dissolved once all required payments have been
made.
8.2 DISTRIBUTIONS TO HOLDERS OF ALLOWED CLAIMS IN CLASS 4. The Plan
Administration Agent shall only make Distributions from Available Cash, except
as otherwise provided in Article 4 of the Plan, including the Settlement
Agreement. Subject to the limitations of Sections 8.1.1, 8.1.2, 8.1.3., and
8.1.4 of the Plan and the terms of the Settlement Agreement, the Plan
Administration Agent shall have authority to make Distributions of Available
Cash at such time or times the Plan Administration Agent believes there is
sufficient Available Cash to warrant a Distribution, but in no event less than
once a year. The Plan Administration Agent shall not, in any event, retain Cash
in excess of what is reasonably necessary to fund the Reserves.
8.3 PLACE AND MANNER OF PAYMENTS OR DISTRIBUTIONS. The Plan
Administration Agent shall make Distributions to the holders of Allowed Claims
(or in the case of Senior Note holders, to the Indenture Trustee) by mailing
such Distribution to the Claimholders at their addresses as listed in the
Schedules of Assets and Liabilities, or any proof of claim filed by the
Claimholders, or at such other address as such Claimholders shall have specified
for payment
18
purposes in a written notice to the Plan Administration Agent at least twenty
(20) days before a Distribution Date. The Plan Administration Agent shall
distribute any Available Cash by wire, check, or such other method as the Plan
Administration Agent deems appropriate under the circumstances. Before receiving
any Distributions, all Claimholders, at the Plan Administration Agent's request,
must provide to the Plan Administration Agent written notification of their
respective Federal Tax Identification Numbers or Social Security Numbers;
otherwise, the Plan Administration Agent may suspend Distributions to any
Claimholder who has not provided its applicable Federal Tax Identification
Number or Social Security Number.
8.4 MINIMUM DISTRIBUTIONS. To the extent a Distribution to a particular
Claimant is less than $100.00, the Plan Administration Agent may hold such
Distribution until the final Distribution or until the aggregate of
Distributions to such Claimant exceeds $100.00. Notwithstanding the foregoing,
no Distribution of less than $10.00 shall be made to any holder on account of an
Allowed Claim unless a request therefore is made in writing to the Plan
Administration Agent. The Plan Administration Agent will distribute, at least
annually to Claimholders, all of the Estate's net income earned and any
Available Cash at times determined to be appropriate by the Advisory Committee
after consultation with the Plan Administration Agent.
8.5 UNCLAIMED OR UNDELIVERABLE DISTRIBUTIONS.
8.5.1 UNDELIVERABLE DISTRIBUTIONS. If a Distribution to any
Claimholder is returned as undeliverable, the Plan Administration Agent shall
use reasonable efforts to determine such Claimholder's then current address, and
no further Distributions shall be made to such Claimholder unless and until the
Plan Administration Agent is notified of such Claimholder's then current
address. Approximately every six (6) months after the Effective Date, the Plan
Administration Agent shall file with the Bankruptcy Court and post on the
internet a list of all unclaimed distributions and the identity of the
Claimholders entitled thereto.
8.5.2 TREATMENT OF UNCLAIMED OR UNDELIVERABLE DISTRIBUTIONS.
If any Person entitled to Distributions of Available Cash or Estate Property
from the Plan Administration Agent cannot be located on the Effective Date or
any time thereafter, then, subject to the provisions of Section 8.5.1 and this
Section 8.5.2, such Available Cash Estate Property shall be set aside, and, in
the case of Cash, held in an interest-bearing account or fund maintained by the
Plan Administration Agent on behalf of such Person. Any taxes allocable to such
Person as provided in this Section 8.5.2 shall be funded from any Cash in such
interest-bearing account or fund. If such Person is located within one (1) year
of the Effective Date, such Cash together with any interest actually earned
thereon and proceeds thereof (less the allocable portion of taxes paid by the
Debtor on account of such Person), shall be paid or distributed to such Person.
If such Person cannot be located within one (1) year of the Effective Date, then
(a) such Person shall no longer be deemed to be a Claimant, and (b) any
Available Cash and Estate Property and interest and proceeds thereon allocable
to such Person, net of the allocable portion of taxes paid by the Debtor, shall
be part of the Available Cash or Estate Property free and clear of and from any
claim to such property by or on behalf of such Person (who shall be deemed to
have released such claim) and shall be distributed to the other Claimholders as
provided in the Plan, with such
19
adjustments as are required to take into account that such Person is no longer
deemed a Claimholder.
8.6 TAX MATTERS.
8.6.1 WITHHOLDING. Subject to the terms of the Settlement
Agreement, the Plan Administration Agent may withhold from the amount
distributable from the Debtor at any time to any Person (except with respect to
the IRS) such sum or sums as may be sufficient to pay any tax or taxes or other
charge or charges that have been or may be imposed on such Person or upon the
Debtor with respect to the amount distributable or to be distributed under the
income tax laws of the United States or of any state or political subdivision or
entity by reason of any Distribution provided for in this Article VIII, whenever
such withholding is determined by the Plan Administration Agent in its
discretion to be required by any law, regulation, rule, ruling, directive or
other governmental requirement, and the Plan Administration Agent, in the
exercise of its discretion and judgment, may enter into agreements with taxing
or other authorities for the payment of such amounts as may be withheld in
accordance with the provisions of this Section 8.6.1. Notwithstanding the
foregoing but without prejudice to the Plan Administration Agent's rights
hereunder, such Person shall have the right with respect to the United States,
or any state, or any political subdivision of either, to contest the imposition
of any tax or other charge by reason of any Distribution hereunder.
8.6.2 TAX REPORTING. To the extent that any Claimholder may be
able to use the installment method of reporting income with respect to a
Distribution, the Plan Administration Agent will annually compile and
disseminate to Claimholders who request such information all available tax
return information with respect to interest (stated or unstated) and otherwise
necessary or useful in reporting under the installment method.
8.6.3 INTEREST. In the Plan Administration Agent's discretion,
interest received with respect to principal distributed pursuant to the Plan
shall be distributed along with the underlying principal.
8.7 ADVANCES TO FUND DEBTOR'S CORPORATE MAINTENANCE. Subject to the
terms of the Settlement Agreement, the Plan Administration Agent may use
Available Cash as a Liquidation Cost to the Debtor for the sole purpose of
funding necessary costs and expenses to maintain the Debtor's corporate
existence, manage and maintain the Estate Property, and to comply with IRS,
state, and local filing requirements; provided however, that the Plan
Administration Agent may not advance any amounts in excess of $50,000.00 per
year without the unanimous consent of all members of the Advisory Committee.
ARTICLE 9
VESTING OF ESTATE PROPERTY
On the Effective Date, except as otherwise expressly provided in the
Plan or in the Settlement Agreement, title to all Estate Property shall vest in
the Debtor, and all such Estate Property shall be free and clear of all
interests, liens, claims, and encumbrances of any kind.
20
ARTICLE 10
RELEASE AND EXTINGUISHMENT
OF LIENS, CLAIMS, INTERESTS, AND ENCUMBRANCES
10.1 RELEASE OF DEBTOR. The rights afforded in the Plan and the
Settlement Agreement and the treatment of all Claims and Interests shall be in
exchange for and in complete satisfaction and release of all Claims of any
nature whatsoever against the Debtor and any Estate Property; and subject to the
Settlement Agreement and except as otherwise provided in the Plan, on the
Effective Date, the Debtor shall be deemed released from any and all Claims,
including demands and liabilities that arose before the Effective Date, and all
debts of the kind specified in Bankruptcy Code sections 502(g), 502(h), or
502(i), regardless of whether (a) a proof of claim evidencing such debt was
filed or deemed filed under Bankruptcy Code section 501; (b) a Claim based on
such debt is allowed under Bankruptcy Code section 502; or (c) the holder of a
Claim based on such debt has accepted the Plan. Except as otherwise provided in
the Plan and subject to the Settlement Agreement, the Confirmation Order shall
be a judicial determination of release of all liabilities of the Debtor. Such
release shall void any judgment obtained against the Debtor.
10.2 EXCULPATION OF PROFESSIONALS, COMMITTEE MEMBERS, AND OFFICERS AND
DIRECTORS. Except as otherwise specifically provided in the Plan or the
Settlement Agreement, the Debtor, members of the Committee in their
representative capacity, the professionals retained in the Debtor's chapter 11
case, the Plan Administration Agent, the members of the Advisory Committee, and
any of such parties' respective current or former members, officers, directors,
employees, advisors, attorneys, business consultants, representatives, financial
advisors, investment bankers or agents and any of such parties' successors and
assigns, shall not have or incur, any claim, cause of action, or other
liabilities for any act or omission in connection with, relating to, or arising
out of the pursuit of confirmation of the Plan, the consummation of the Plan,
the administration of the Plan, or the property to be distributed under the
Plan, except for their willful misconduct. In all such instances, the
above-referenced parties shall be and have been entitled to reasonably rely on
the advice of counsel with respect to their duties and responsibilities in
connection with the Debtor's chapter 11 case and under the Plan.
ARTICLE 11
INJUNCTION AGAINST ENFORCEMENT OF PRECONFIRMATION DEBT
11.1 INJUNCTION ENJOINING HOLDERS OF CLAIMS AGAINST DEBTOR. Except as
otherwise expressly provided in the Plan or the Settlement Agreement, after the
Effective Date, all Persons who have been, are, or may be holders of Claims
against or Interests in Debtor arising before the Effective Date shall be
enjoined from taking any of the following actions against or affecting Debtor,
its Estate, or the Estate Property, regarding such Claims or Interests (other
than actions brought to enforce any rights or obligations under the Plan):
(i) commencing, conducting, or continuing in any manner,
directly or indirectly, any suit, action, or other
proceeding of any kind against
21
the Debtor, its Estate, or Estate Property
(including, all suits, actions, and proceedings that
are pending as of the Effective Date, shall be deemed
to be withdrawn or dismissed with prejudice);
(ii) enforcing, levying, attaching, collecting, or
otherwise recovering by any manner or means, directly
or indirectly, any judgment, award, decree, or order
against the Debtor, its Estate, or Estate Property;
(iii) creating, perfecting, or otherwise enforcing in any
manner, directly or indirectly, any Lien against the
Debtor, its Estate, or Estate Property;
(iv) asserting any right of subrogation or recoupment of
any kind, directly or indirectly, against any
obligation due the Debtor, its Estate, or Estate
Property; and
(v) proceeding in any manner and in any place whatsoever
that does not conform to or comply with the
provisions of the Plan.
ARTICLE 12
PROVISIONS FOR THE RESOLUTION OF
OBJECTIONS TO PROOFS OF CLAIM
12.1 RIGHT TO OBJECT TO CLAIMS. Subject to the Settlement Agreement,
the Plan Administration Agent, on behalf of the Debtor, shall have the right to
examine and object to any Claims filed in Debtor's chapter 11 case, and shall
have the right to object to and contest the allowance of any such Claims.
12.2 DEADLINE FOR OBJECTING TO CLAIMS. On or before the date of the
Confirmation Hearing, the Debtor shall file any objections to Claims with the
Bankruptcy Court and serve a copy of the objection on the subject Claimant. The
Plan Administrator may file new or supplemental Claims objections within 90 days
after appointment.
12.3 DEADLINE FOR RESPONDING TO CLAIM OBJECTIONS. Within thirty (30)
days after filing an objection, the Claimant whose Claim has been objected to in
accordance with Section 12.2 of the Plan must file a response to the objection
with the Bankruptcy Court and serve a copy on the objecting party, the Plan
Administration Agent, counsel for the Plan Administration Agent and the parties
identified in Section 16.2 of the Plan. Failure to file a response within the
thirty (30) day time period shall cause the Bankruptcy Court to enter a default
judgment against the non-responding Claimant, thereby granting the relief
requested in the claim objection.
12.4 ESTIMATION OF CLAIMS. The Plan Administration Agent on behalf of
the Debtor may request the Bankruptcy Court to estimate any Claim for purposes
of allowance under Bankruptcy Code section 502(c).
22
ARTICLE 13
PROVISIONS RELATING TO DISPUTED CLAIMS RESERVE
13.1 DISTRIBUTIONS ON ALLOWED CLAIMS ONLY. Distributions under the Plan
shall be made only to the holders of Allowed Claims. Except as otherwise set
forth in the Settlement Agreement, until a Disputed Claim becomes an Allowed
Claim, the holder of that Disputed Claim shall not receive the consideration
otherwise provided to such Claimholder under the Plan.
13.2 ESTABLISHMENT OF DISPUTED CLAIMS RESERVE. Subject to the terms of
the Settlement Agreement, the Plan Administration Agent shall deposit the
Distributions reserved for the holders of Disputed Claims in a segregated,
interest-bearing account called the Disputed Claim Reserve. The Disputed Claim
Reserve shall be held in trust for the benefit of holders of Allowed Claims
whose Distributions are unclaimed and the holders of Disputed Claims pending
determination of their entitlement to Distributions under the Plan. When a
Disputed Claim becomes an Allowed Claim, the Plan Administration Agent, subject
to the Settlement Agreement, shall release and deliver the Distributions
reserved for the particular Disputed Claim (net of distribution cost) from the
Disputed Claim Reserve, together with any earned interest attributable to the
Disputed Claim, subject to order of the Bankruptcy Court authorizing a reduction
in the Disputed Claim Reserve. If the Bankruptcy Court disallows the Disputed
Claim, that portion of the Disputed Claim Reserve, the Distribution and interest
and proceeds thereon shall be Estate Property free and clear of any liens,
claims, interest, or other encumbrances.
ARTICLE 14
PROVISIONS FOR THE RETENTION, ENFORCEMENT,
COMPROMISE, OR ADJUSTMENT OF CLAIMS BELONGING TO THE ESTATE
14.1 RIGHT TO ENFORCE, COMPROMISE, OR ADJUST ESTATE CLAIMS. Pursuant
to, among other authority, Bankruptcy Code section 1123(b)(3)(B), after the
Effective Date, the Plan Administration Agent shall have, for the benefit of
Debtor's Estate, the full power, authority, and standing to prosecute,
compromise, or otherwise resolve any Avoidance Actions and any other claims and
causes of action constituting Estate Property. Pursuant to Section 6.15 of the
Plan, the Plan Administration Agent may not settle any Avoidance Action or other
Estate cause of action wherein the Plan Administration Agent seeks to recover
more than $50,000 without the Consent of the Advisory Committee. All proceeds
derived from the Avoidance Actions or other claims and causes of action shall
become Estate Property and distributed in accordance with the Plan. The Plan
Administration Agent shall not be subject to any counterclaims with respect to
the Avoidance Actions and any other claims and causes of actions constituting
Estate Property; provided, however, that the Avoidance Actions and any other
claims and causes of action constituting Estate Property will be subject to any
setoff rights to the same extent as if the Debtor itself had pursued the
Avoidance Actions and any other claims and causes of action constituting Estate
Property.
23
ARTICLE 15
RETENTION OF JURISDICTION
15.1 RETENTION OF JURISDICTION. The Bankruptcy Court, even after
the case has been closed, shall have jurisdiction over all matters arising
under, arising in, or relating to the Debtor's chapter 11 case, including
proceedings to:
(a) ensure that the Plan is carried out;
(b) enter such orders as may be necessary or appropriate to
implement, consummate, or enforce the provisions of the
Plan and all contracts, instruments, releases, indentures
and other agreements or documents created in connection
with the Plan or the Disclosure Statement;
(c) consider any modification of the Plan under Bankruptcy
Code section 1127;
(d) hear and determine all Claims, controversies, suits and
disputes against the Debtor to the full extent permitted
under 28 U.S.C. section 1334 and 28 U.S.C. section 157;
(e) allow, disallow, determine, liquidate, classify, estimate,
or establish the priority or secured or unsecured status
of any Claim, including the resolution of any and all
objections to the allowance or priority of Claims;
(f) hear, determine, and adjudicate any litigation involving
the Avoidance Actions or other claims or causes of action
constituting Estate Property;
(g) decide or resolve any motions, adversary proceedings,
contested or litigated matters and any other matters and
grant or deny any applications involving the Debtor that
may be pending on or commenced after the Effective Date;
(h) resolve any cases, controversies, suits, or disputes that
may arise in connection with the consummation,
interpretation, or enforcement of the Plan, or any
entity's obligations incurred in connection with the Plan,
or any other agreements governing, instruments evidencing,
or documents relating to any of the foregoing, including
the interpretation or enforcement of any rights, remedies,
or obligations under any of the foregoing;
(i) hear and determine all controversies, suits, and disputes
that may arise out of or in connection with the
enforcement of any and all subordination and similar
agreements among various creditors pursuant to Bankruptcy
Code section 510;
(j) hear and determine all objections and disputes to requests
for compensation and/or reimbursement of expenses that may
be made for fees and expenses payable by the Debtor or the
Plan Administration Agent;
24
(k) enforce any Final Order, the Confirmation Order, the final
decree, and all injunctions contained in those orders;
(l) enter an order concluding and terminating this case;
(m) correct any defect, cure any omission, or reconcile any
inconsistency in the Plan or the Confirmation Order;
(n) determine all questions and disputes regarding title to
Estate Property and any other assets of Debtor;
(o) classify the Claims of any Claimholders and the treatment
of these Claims under the Plan, to re-examine Claims that
may have been allowed for purposes of voting, and to
determine objections that may be filed to any Claims;
(p) take any action described in the Plan involving the
post-confirmation Debtor;
(q) enforce, by injunction or otherwise, the provisions set
forth in the Plan, the Confirmation Order, any final
decree, and any Final Order that provides for the
adjudication of any issue by the Bankruptcy Court;
(r) enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any reason
modified, stayed, reversed, revoked, or vacated; and
(s) enter a Final Decree as contemplated by Bankruptcy Rule
3022.
ARTICLE 16
GENERAL PROVISIONS
16.1 CONFIRMATION ORDER. The Confirmation Order shall contain such
injunctions and other orders that may be necessary to implement the Plan and
Settlement Agreement. To the extent necessary, the Confirmation Order shall
contain any provisions necessary to provide for the substantial consummation of
the Plan and Settlement Agreement on the Effective Date, including designating
Bankruptcy Rule 7062 not applicable to the Confirmation Order by virtue of
Bankruptcy Rule 9014.
16.2 NOTICES. Whenever the Plan requires notice be given, such
notice shall be given to:
Stephen M. Pezanosky
Haynes and Boone, LLP
201 Main Street, Suite 2200
Fort Worth, Texas 76102
25
--and--
Dennis Faulkner
Lain, Faulkner & Company
400 North St. Paul St.
Suite 600
Dallas, TX 75201
--and--
Kristin H. Jain
Baker & McKenzie
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
--and--
Joseph Samet
Baker & McKenzie
805 Third Avenue
New York, New York 10022
--and--
William S. Parkinson
Office of the U.S. Trustee
1100 Commerce Street, Room 9C60
Dallas, Texas 75242
16.3 DATES. The provisions of Bankruptcy Rule 9006, except as
otherwise provided herein, shall govern the calculation of any dates or
deadlines referenced in the Plan.
16.4 FURTHER ACTION. Nothing contained in the Plan shall prevent
the Debtor from taking such actions as may be necessary to consummate the Plan,
even though such actions may not specifically be provided for within the Plan.
16.5 EXHIBITS. All Exhibits attached to the Plan are incorporated
herein by reference and are intended to be an integral part of this document as
though fully set forth in the Plan.
16.6 PLAN AMENDMENTS. The Debtor may propose amendments or
modifications to the Plan in accordance with section 1127 of the Bankruptcy Code
at any time before the Confirmation Date. After the Confirmation Date, the
Debtor may, subject to Bankruptcy Court approval and so long as it does not
materially or adversely affect the rights set
26
forth in the Plan of Creditors and other parties in interest, amend or modify
the Plan to remedy any defect or omission or reconcile any inconsistencies in
the Plan or in the Confirmation Order, in such manner that may be necessary to
carry out the purposes and intent of the Plan. At the Confirmation Hearing, the
Debtor may, either in writing or on oral motion, request a modification of any
provision of the Plan to address any objection to confirmation of the Plan and
may seek confirmation of the Plan, as modified.
16.7 EXEMPTION FROM TRANSFER TAXES. Pursuant to the provisions of
Bankruptcy Code section 1146(c), the issuance, transfer or exchange of notes or
equity securities under the Plan, the creation of any mortgage, deed of trust or
other security interest, the making or assignment of any lease or sublease, or
the making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including any deeds, bills of
sale or assignments executed in connection with any of the transactions
contemplated under the Plan, shall not be subject to any stamp, real estate
transfer, mortgage recording, or other similar tax.
16.8 BINDING EFFECT. The Plan shall be binding on, and inure to
the benefit of, the Debtor, the Committee, the Claimholders and Interestholders,
and their respective successors and assigns, regardless of whether those parties
voted to accept the Plan.
16.9 RATIFICATION. The Confirmation Order shall ratify all
transactions effectuated by Debtor during the pendency of its chapter 11 case.
16.10 GOVERNING LAW. Except to the extent that the Bankruptcy Code
or Bankruptcy Rules are applicable, the rights and obligations arising under the
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of Texas, without giving effect to any conflicts of law
principles.
ARTICLE 17
CONTINGENCIES TO EFFECTIVENESS OF PLAN
17.1 CONTINGENCIES. The Plan shall not be effective until the
Bankruptcy Court enters a confirmation order acceptable in form and substance to
the Debtor and the Committee, unless such condition is expressly waived.
27
DATED: September 20, 2002.
DEBTORS:
KEVCO, INC.,
a Texas corporation
/s/ Wilford Simpson
----------------------------------
By: Wilford Simpson
Its: Chief Financial Officer
KEVCO MANAGEMENT, INC.,
a Delaware corporation
/s/ Wilford Simpson
----------------------------------
By: Wilford Simpson
Its: Secretary
KEVCO HOLDING, INC.,
a Delaware corporation
/s/ Wilford Simpson
----------------------------------
By: Wilford Simpson
Its: Secretary
KEVCO GP, INC.,
a Delaware corporation
/s/ Wilford Simpson
----------------------------------
By: Wilford Simpson
Its: Secretary
KEVCO COMPONENTS, INC.,
a Delaware corporation
/s/ Wilford Simpson
----------------------------------
By: Wilford Simpson
Its: Secretary
28
DCM DELAWARE, INC.,
a Delaware corporation
/s/ Wilford Simpson
----------------------------------
By: Wilford Simpson
Its: Secretary
KEVCO MANUFACTURING, L.P.,
a Delaware limited partnership
By: KEVCO GP, INC.
Its: General Partner
/s/ Wilford Simpson
-------------------------
By: Wilford Simpson
Its: Secretary
KEVCO DISTRIBUTION, L.P.,
a Delaware limited partnership
By: KEVCO GP, INC.
Its: General Partner
/s/ Wilford Simpson
-------------------------
By: Wilford Simpson
Its: Secretary
COMMITTEE:
By: /s/ Daniel Beckel
-----------------------------
Its: Chairman
-----------------------------
29
EXHIBIT A
SETTLEMENT AGREEMENT
A-1
EXHIBIT B
GLOSSARY OF DEFINED TERMS
ADMINISTRATIVE CLAIM means a Claim, or that portion thereof, that is
entitled to priority under sections 503(b) and 507(a)(1) of the Bankruptcy Code,
including, without limitation: (i) the actual and necessary costs and expenses
incurred after the Petition Date of preserving the Estate and operating the
business of the Debtor (such as wages, salaries, or payments for goods and
services); (ii) compensation for legal, financial advisory, accounting and other
services, and reimbursement of expenses awarded or allowed under sections 330(a)
or 331 of the Bankruptcy Code; and (iii) all fees and charges assessed against
the Estate under 28 U.S.C. section 1930.
ADMINISTRATIVE CLAIMS BAR DATE means 30 calendar days after the
Effective Date.
ADMINISTRATIVE EXPENSE RESERVE means that certain reserve of Available
Cash to be established by the Plan Administration Agent pursuant to Section 8.1
of the Plan.
ADVISORY COMMITTEE shall have the meaning ascribed to it in section 6.1
of the Plan.
AFFILIATE means with respect to a Person, (i) an entity that directly
or indirectly owns, controls or holds with power to vote, twenty percent or more
of the outstanding voting securities of such Person, other than an entity that
holds such securities (a) in a fiduciary or agency capacity without sole
discretionary power to vote such securities or (b) solely to secure a debt, if
such entity has not in fact exercised such power to vote, or (ii) a corporation
twenty percent or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote, by such Person, or by
an entity that directly or indirectly owns, controls or holds with power to
vote, twenty percent or more of the outstanding voting securities of such
Person, other than an entity that holds such securities (a) in a fiduciary or
agency capacity without sole discretionary power to vote such securities or (b)
solely to secure a debt, if such entity has not in fact exercised such power to
vote.
ALLOWED ADMINISTRATIVE CLAIM means an Administrative Claim allowed
under Bankruptcy Code section 503(b) and entitled to priority under Bankruptcy
Code section 507(a)(1).
ALLOWED CLAIM means any Claim allowable under section 502 of the
Bankruptcy Code (i) for which a proof of claim was filed on or before the date
designated by the Bankruptcy Court as the last date for filing proofs of claim
against the Debtor and as to which no objection to the allowance thereof has
been timely filed, or if an objection has been timely filed, such claim is
allowed by Final Order, or (ii) for which a proof of claim is not filed and
which has been or hereafter is listed in the Debtor's Schedules of Assets and
Liabilities and is not listed therein as disputed, contingent or unliquidated as
to amount, or (iii) which is deemed allowed by the terms of the Plan. For
purposes of determining the amount of an Allowed Claim there shall be deducted
therefrom an amount equal to the amount of any claim that Debtor may hold
against the Claimant pursuant to section 553 of the Bankruptcy Code.
ALLOWED GENERAL UNSECURED CLAIM means a General Unsecured Claim that is
an Allowed Claim.
B-1
ALLOWED PRIORITY UNSECURED NON-TAX CLAIM means a Priority Unsecured
Non-Tax Claim that is an Allowed Claim.
ALLOWED PRIORITY UNSECURED TAX CLAIM means a Priority Unsecured Tax
Claim that is an Allowed Claim.
ALLOWED SECURED CLAIM means a Secured Claim that is an Allowed Claim.
AVAILABLE CASH means all Cash held or acquired by Kevco less (i) any
Cash held in Reserves, (ii) Cash that is Cash Collateral, and (iii) proceeds
from the sale of property to the extent that such property is encumbered by a
Lien.
AVOIDANCE ACTIONS means any causes of action arising under sections
506, 510, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551 and 553 of the
Bankruptcy Code.
BALLOT means the ballot for voting to accept or reject the Plan.
BANKRUPTCY CODE means title 11 of the United States Code.
BANKRUPTCY COURT means the United States Bankruptcy Court for the
Northern District of Texas, Fort Worth Division, or in the event such court
ceases to exercise jurisdiction over the Debtor's chapter 11 case, such court as
may have jurisdiction with respect to the reorganization or liquidation of the
Debtor under chapter 11 of the Bankruptcy Code.
BAR DATE means June 26, 2001, the date by which proofs of claim and
proofs of interest must be filed in the Debtor's case, as determined by the
Notice of Commencement of Case Under Chapter 11 of the Bankruptcy Code, Meeting
of Creditors, and Fixing of Dates entered by the Bankruptcy Court and
application of Bankruptcy Rule 9006.
BUSINESS means all of the activities in which the Debtor is or has been
engaged prior to the Effective Date.
BUSINESS DAY means any day that is not a Saturday, Sunday or a "legal
holiday" within the meaning of and as determined by Bankruptcy Rule 9006.
CASH means lawful currency of the United States of America, cash
equivalents, and other readily marketable securities or instruments issued by a
Person other than the Debtor, including readily marketable direct obligations of
the United States of America, certificates of deposit issued by federally
insured banks, and money market accounts of federally insured banks.
CASH COLLATERAL shall have the meaning prescribed by 11 U.S.C. section
363(a).
CLAIM shall have the meaning set forth in 11 U.S.C. section 101(5).
CLAIMANT OR CLAIMHOLDER means the holder of an Allowed Claim.
CLASS means a category of holders of Claims or Interests as classified
in the Plan.
B-2
COMMITTEE means the Official Committee of Unsecured Creditors appointed
in Debtor's bankruptcy case pursuant to section 1102 of the Bankruptcy Code.
CONFIRMATION DATE means the date on which the Confirmation Order is
entered on the docket of the Debtor's chapter 11 case by the Clerk of the
Bankruptcy Court.
CONFIRMATION HEARING means the date established by the Bankruptcy Court
to consider confirmation of the Plan.
CONFIRMATION ORDER means the order of the Bankruptcy Court confirming
the Plan in accordance with the provisions of chapter 11 of the Bankruptcy Code.
CONSENT OF THE ADVISORY COMMITTEE means consent given by the members of
the Advisory Committee either (i) following the expiration of 10 calendar days'
written or electronic notice (the "Negative Notice Period") to each member of
the Advisory Committee of a proposed act or omission of the CRO and as to which
a majority of the members of the Advisory Committee does not notify the CRO of
an objection to the proposed act or omission within the Negative Notice Period
or (ii) through affirmative telephonic, electronic or written consent provided
by a majority of the members of the Advisory Committee.
CREDIT AGREEMENT means that certain Credit Agreement, as amended, among
Kevco, Bank of America and the Lenders named therein.
CREDITOR shall have the meaning set forth in 11 U.S.C. section 101(10).
DCM means DCM Delaware, Inc., a Delaware corporation and a chapter 11
debtor in case no. 401-40787-BJH-11, administered jointly under case no.
401-40783-BJH-11.
DEBTOR means Kevco, as the successor-in-interest to each of Kevco,
Kevco Management, Kevco Holding, Kevco GP, Kevco Components, DCM, Kevco
Manufacturing, and Kevco Distribution pursuant to the merger contemplated by the
Substantive Consolidation Order, and as the chapter 11 debtor in case nos.
401-40783-BJH-11 through 401-40790-BJH-11, administered jointly under case no.
401-40783-BJH-11.
DISCLOSURE STATEMENT APPROVAL DATE means the date of entry by the
Bankruptcy Court of an order approving any disclosure statement concerning the
Plan.
DISPUTED CLAIM shall mean (i) any Claim against the Debtor as to which
an objection is timely filed or (ii) any Claim against the Debtor that is listed
as disputed, unliquidated or contingent on the Schedules of Assets and
Liabilities filed with the Bankruptcy Court and that is not otherwise allowed by
the Plan or Final Order.
DISPUTED CLAIMS RESERVE means that certain reserve of Available Cash to
be established by the Plan Administration Agent pursuant to Section 13.2 of the
Plan.
DISTRIBUTION means a distribution of Available Cash by the Plan
Administration Agent.
B-3
DISTRIBUTION DATE means any date on which the Plan Administration Agent
makes Distributions to holders of Allowed Claims or Allowed Interests under the
Plan.
EFFECTIVE DATE means the eleventh day following the Confirmation Date,
unless the Confirmation Order has been stayed, in which case the Effective Date
shall be the first Business Day after the lifting of such stay.
ESTATE means the bankruptcy estate of Kevco pursuant to the Substantive
Consolidation Order and all Property comprising such estate within the meaning
of section 541 of the Bankruptcy Code.
ESTATE PROPERTY means all rights, title, and interest in and to any
property of every kind or natured owned by the Debtor or its Estate as of the
Effective Date, including all property within the meaning of section 541 of the
Bankruptcy Code.
EXECUTORY CONTRACTS means "executory contracts" and "unexpired leases"
as such terms are used within the meaning of section 365 of the Bankruptcy Code.
FINAL ORDER means an order or judgment of the Bankruptcy Court, or
other court of competent jurisdiction, that has not been reversed, stayed,
modified or amended.
FISCAL YEAR means the annual accounting period of the Debtor commencing
on January 1 and ending on December 31 of each year.
GAAP means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") (or in such other statements
by such other entity as approved by a significant segment of the accounting
profession that are in effect in the United States).
GENERAL UNSECURED CLAIM means an Unsecured Claim that is not (i) an
Administrative Claim, (ii) Professional Fee Claim, (iii) Priority Unsecured Tax
Claim, or (iv) Priority Unsecured Non-Tax Claim; but shall specifically include
any and all other Claims not separately classified under the Plan.
INDENTURE means that certain Indenture among Kevco, Kevco Delaware,
Inc., Sunbelt Wood Components, Inc., Consolidated Forest Products, Inc., Bowen
Supply, Inc., and Encore Industries, Inc., and the Indenture Trustee, dated as
of December 1, 1997, and as supplemented by those certain Supplemental
Indentures between the Indenture Trustee and each of Shelter Components,
Corporation, Shelter Distribution, L.P., DCM, Duo-Form of Michigan, Inc., Design
Components, Inc., Shelter Components of Indiana, inc., and BPR Holdings, Inc.,
each dated as of December 1, 1997.
INDENTURE TRUSTEE means Bank of New York, as successor in interest to
United States Trust Company of New York, in its capacity as indenture trustee
pursuant to the Indenture.
INTERCOMPANY CLAIMS means any Claims by and/or among one or more of the
Predecessor Debtors against other Predecessor Debtors.
B-4
INTEREST means the rights of the owners and/or holders of the
outstanding shares of the Debtor's Common Stock, par value $0.01 per share, and
any outstanding securities convertible, with or without consideration, into
shares of Common Stock, any outstanding securities carrying any warrant or right
to subscribe to or purchase shares of Common Stock, and any option or privilege
to acquire shares of Common Stock, with respect of such Interest as of the date
immediately preceding the Petition Date.
INTERESTHOLDER means a holder of an Interest.
IRS means the Internal Revenue Service.
KEVCO means Kevco, Inc., a Texas corporation and the chapter 11 debtor
in case no. 401-40783-BJH-11, administered jointly under case no.
401-40783-BJH-11.
KEVCO COMPONENTS means Kevco Components, Inc., a Delaware corporation
and a chapter 11 debtor in case no. 401-40790-BJH-11, administered jointly under
case no. 401-40783-BJH-11.
KEVCO DISTRIBUTION means Kevco Distribution, L.P., a Delaware limited
partnership and a chapter 11 debtor in case no. 401-40789-BJH-11, administered
jointly under case no. 401-40783-BJH-11.
KEVCO GP means Kevco GP, Inc., a Delaware corporation and a chapter 11
debtor in case no. 401-40786-BJH-11, administered jointly under case no.
401-40783-BJH-11.
KEVCO HOLDING means Kevco Holding, Inc., a Delaware corporation and the
chapter 11 debtor in case no. 401-40785-BJH-11, administered jointly under case
no. 401-40783-BJH-11.
KEVCO MANAGEMENT means Kevco Management, Inc., a Delaware corporation
and the chapter 11 debtor in case no. 401-40788-BJH-11, administered jointly
under case no. 401-40783-BJH-11.
KEVCO MANUFACTURING means Kevco Manufacturing, L.P., a Delaware limited
partnership and a chapter 11 debtor in case no. 401-40784-BJH-11, administered
jointly under case no. 401-40783-BJH-11.
LENDER GROUP means collectively, Bank of America, N.A. for itself and
as agent for National City Bank of Kentucky, Guaranty Bank f/k/a/ Guaranty
Federal Bank, F.S.B., Wells Fargo Bank, N.A., Bank One Texas, N.A., Archimedes
Funding, L.L.C., Alliance Capital Funding, L.L.C., MLC BOIV (Cayman), Pilgrim
Prime Rate Trust, and PAM Capital Funding, L.P.
LGLT means the Lender Group Liquidating Trust, created pursuant to the
Settlement Agreement.
LGLT TRUST AGREEMENT means that certain trust agreement executed and
delivered on the Effective Date by and among Debtor, the Committee, the Lender
Group, and the LGLT Trustee.
B-5
LGLT TRUSTEE means the trustee of the LGLT, as appointed pursuant to
the LGLT Trust Agreement and mutually acceptable to the Debtor, the Committee,
and the Lender Group.
LIEN means a lien, security interest, or other interest or encumbrance
asserted against Estate Property as defined in section 101(37) of the Bankruptcy
Code.
LIQUIDATION COST means any reasonable cost and expense of the Plan
Administration Agent of administering Estate Property or of the Advisory
Committee, including paying taxes on behalf of the Debtor and paying
professional fees of the Plan Administration Agent, the Debtor and the Advisory
Committee.
OPERATING RESERVE means that certain reserve of Available Cash to be
established by the Plan Administration Agent pursuant to Section 8.1.3 of the
Plan to provide for and satisfy Liquidation Costs.
PERSON means and includes natural persons, corporations, limited
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, unincorporated organizations, or other legal entities,
irrespective of whether they are governments, agencies or political subdivisions
thereof.
PETITION DATE means February 5, 2001, the date of filing of the
Debtor's chapter 11 case.
PLAN means the Debtor's Plan of Liquidation under chapter 11 of the
Bankruptcy Code filed by the Debtor, as amended or modified, and incorporating
the terms of the Settlement Agreement.
PLAN ADMINISTRATION AGENT means the plan administration agent and any
successor plan administration agent appointed pursuant to Section 6.7.1 of the
Plan.
PREDECESSOR DEBTORS means, collectively, Kevco, Kevco Management, Kevco
Holding, Kevco GP, Kevco Components, DCM, Kevco Manufacturing, and Kevco
Distribution, which were formerly the chapter 11 debtors in case nos.
401-40783-BJH-11 through 401-40790-BJH-11, administered jointly under case no.
401-40783-BJH-11, the bankruptcy estates of which were substantively
consolidated into the Estate pursuant to the Substantive Consolidation Order.
PRIORITY CLAIM means any Claim against the Debtor entitled to priority
under 11 U.S.C. Sections 507(a) of the Bankruptcy Code, other than an
Administrative Claim or a Priority Unsecured Tax Claim.
PRIORITY UNSECURED CLAIM RESERVE means that certain reserve of
Available Cash to be established by the Plan Administration Agent pursuant to
Section 8.1.2 of the Plan.
PRIORITY UNSECURED NON-TAX CLAIM means an Unsecured Claim, or that
portion thereof, that is entitled to priority in payment under sections
507(a)(2-7) and 507(a)(9) of the Bankruptcy Code.
PRIORITY UNSECURED TAX CLAIM means an Unsecured Claim, or that portion
thereof, that is entitled to priority in payment under section 507(a)(8) of the
Bankruptcy Code.
B-6
PROFESSIONAL means a professional employed in the Debtor's chapter 11
case under 11 U.S.C. Sections 327, 328 and 1103.
PROFESSIONAL FEE CLAIM means a Claim for compensation or reimbursement
of expenses of a Professional retained in the Debtor's case and requested in
accordance with the provisions of sections 327, 328, 330, 331, 503(b) and 1103
of the Bankruptcy Code, excluding the contingent portion of the fees of the
Special Committee Counsel that may be earned pursuant to the Special Committee
Counsel Fee Agreement.
PRO RATA means, as to a particular holder of a Claim or Interest, the
ratio that the amount of the Claim or Interest held by such holder bears to the
total amount of all Claims or Interests held by holders of Claims or Interests
within the same Class of Claims or Interests. Such ratio shall be calculated as
if all Disputed Claims or Interests were Allowed Claims or Interests as of the
Effective Date.
REJECTION CLAIM means a Claim resulting from the rejection of a lease
or executory contract by Debtor.
RELEASE means that certain release, executed by Debtor and the
Committee and delivered to and for the benefit of Lender Group, pursuant to the
terms of the Settlement Agreement.
RESERVES means collectively the Administrative Expense Reserve, the
Priority Unsecured Claim Reserve, the Operating Reserve, and the Disputed Claims
Reserve (as established under the Trust Agreement) or any other reserve account
maintained by the Plan Administration Agent under the Plan.
SCHEDULES OF ASSETS AND LIABILITIES means the schedules of assets and
liabilities filed by the Debtor in its bankruptcy case, as amended or modified.
SECURED CLAIM means a Claim for which a Claimant holds a valid,
perfected and enforceable Lien, not subject to avoidance or subordination under
the Bankruptcy Code or applicable non-bankruptcy law, or a Claim for which a
Claimant asserts a setoff under section 553 of the Bankruptcy Code, but only to
the extent of the value, determined in accordance with section 506(a) of the
Bankruptcy Code, of the Claimant's interest in the Debtor's interest in the
Estate Property or to the extent of the amount subject to such setoff, as the
case may be, unless a timely election has been made under section 1111(b)(2) of
the Bankruptcy Code.
SECURED CLAIM OF LENDER GROUP means the Secured Claim, if any, held by
Lender Group under the Credit Agreement.
SENIOR NOTES means the $105,000,000 aggregate principal amount of
10-3/8% Senior Notes due 2007 under the Indenture.
SENIOR SUBORDINATED EXCHANGEABLE NOTES means the $23,500,000 aggregate
principal amount of Senior Subordinated Exchangeable Notes by Kevco, each dated
July 26, 1999.
SETTLEMENT AGREEMENT means that certain settlement agreement executed
on June 24, 2002, among the Committee, Lender Group, and the Debtor, attached
hereto as Exhibit A.
B-7
SPECIAL COMMITTEE COUNSEL means Mark MacDonald & Associates, P.C.,
which is special counsel to the Committee.
SUBORDINATED CLAIM means a Claim that is subordinated in payment to
Class 4 General Unsecured Claims by contract or by Final Order of the Bankruptcy
Court declaring that such Claim is subordinated in right of payment by virtue of
the applicable provisions of the Bankruptcy Code or applicable state law.
SUBSTANTIVE CONSOLIDATION ORDER means the Order Approving Substantive
Consolidation of the Predecessor Debtors, entered on _______________________,
2001, by the Bankruptcy Court pursuant to which all of the Predecessor Debtors'
estates were substantively consolidated into the Debtor's estate and all
Intercompany Claims were disallowed.
UNSECURED CLAIM means a Claim that is not a Secured Claim. The term
specifically includes any tort Claims or contractual Claims or Claims arising
from damage or harm to the environment and, pursuant to section 506(a) of the
Bankruptcy Code, any Claim of a creditor against the Debtor to the extent that
such Creditor's Claim is greater than the value of the Lien securing such Claim,
any Claim for damages resulting from rejection of any Executory Contract
pursuant to section 365 of the Bankruptcy Code, and any Claim not otherwise
classified under the Plan.
B-8
/s/ Stephen M. Pezanosky
---------------------------------------------
Robert D. Albergotti (State Bar No. 00969800)
Stephen M. Pezanosky (State Bar No. 15881850)
Ian T. Peck (State Bar No. 24013306)
HAYNES AND BOONE, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202-3789
Telephone: 214-651-5000
Telecopier: 214-651-5940
ATTORNEYS FOR DEBTORS
EXHIBIT 2
Tentative and Preliminary
For Discussion Purposes Only
KEVCO, INC. ET AL
ESTIMATED RECOVERY FOR GENERAL UNSECURED CLAIMANTS
AS OF SEPTEMBER 11, 2002
(IN THOUSANDS)
<Table>
<Caption>
Recovery to Recovery to
Cash Available for Unsecured Unsecured Unsecured
Available Estimated General Claims(1) Claimants if Claimants if
for Priority Unsecured Excluding cases NOT Consolidation
Company Claims Claims Claimants Intercompany(2) Consolidated(4) Occurs(5)
- ----------------------- --------- --------- ------------- --------------- -------------- -------------
Kevco, Inc. ............ $ 0 $ 10 $ (10) $ 133,093 .0000 .0242
Kevco Management, Inc... 270 0 270 132,460 .0020 .0242
Kevco Holding, Inc. .... 0 0 0 130,467 .0000 .0242
Kevco GP, Inc. ......... 0 0 0 130,467 .0000 .0242
Kevco Components, Inc... 0 6 (6) 130,467 .0000 .0242
DCM Delaware, Inc. ..... 0 0 0 130,467 .0000 .0242
Kevco Manufacturing LP.. 1,080 128 952 134,451 .0071 .0242
Kevco Distribution LP... 3,150 390 2,760 155,382 .0178 .0242
--------- --------- ------------- --------------- --------------
$ 4,500 $ 534 $ 3,966 $ 1,077,254 .0037(3)
========= ========= ============= =============== ==============
</Table>
Footnotes:
(1) Each entity has joint and several liability for the claims of the U.S. Trust
($106,967,000) and Wingate Partners ($23,500,000). Therefore, in addition to
other estimated general unsecured claims by entity, each entity has $130,467,000
additional unsecured claims based on the combined claims of U.S. Trust and
Wingate Partners.
(2) The Debtors maintained intercompany accounts which attempted to track
transactions between the various entities. In many cases, the transactions were
"pooled" rather than being entity specific. Even though the Debtors are
satisfied with the reliability of the "consolidated" financial presentation
(i.e. when intercompany accounts are eliminated), they are not satisfied with
the reliability of a stand-alone presentation reflecting the various receivables
and payables between the related entities. Since a significant amount of time
and expense would be required to sort out this information, if in fact all the
necessary data to do so still exists, no consideration is given for intercompany
claims or receivables between the Debtors for purposes of this presentation.
(3) This percentage total would be applicable only to the claims of U.S. Trust
and Wingate Partners.
(4) This amount does not include amounts that may be recovered from avoidance
actions.
(5) Total estimated unsecured claims on a consolidated basis is $163,985,465.