IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
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:
In re: : Chapter 11
:
STONE & WEBSTER, INCORPORATED, et al., : Case No. 00-2142 (PJW)
Debtors. :
: Jointly Administered
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DISCLOSURE STATEMENT WITH RESPECT TO THIRD AMENDED
JOINT PLAN OF REORGANIZATION PROPOSED BY THE DEBTORS IN POSSESSION,
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, FEDERAL INSURANCE
COMPANY, MAINE YANKEE ATOMIC POWER COMPANY, AND THE OFFICIAL
COMMITTEE OF EQUITY SECURITY HOLDERS FOR (I) STONE & WEBSTER,
INCORPORATED AND CERTAIN OF ITS SUBSIDIARIES AND AFFILIATES
AND (II) STONE & WEBSTER ENGINEERS AND CONSTRUCTORS, INC.
AND CERTAIN OF ITS SUBSIDIARIES AND AFFILIATES
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
Gregg M. Galardi (I.D. No. 2991)
Eric M. Davis (I.D. No. 3621)
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
(302) 651-3000
- and -
Edward J. Meehan
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Attorneys for Debtors and
Debtors-in-Possession
ORRICK HERRINGTON & SUTCLIFFE LLP
Anthony J. Princi
Lorraine S. McGowen
666 Fifth Avenue
New York, New York 10103-0002
(212) 506-5000
- and -
LANDIS RATH & COBB LLP
Adam G. Landis (I.D. No. 3407)
919 Market Street, Suite 600
P.O. Box 2087
Wilmington, Delaware 19801
(302) 467-4400
Attorneys for the Official Committee
of Unsecured Creditors
MANIER & HEROD
J. Michael Franks
Sam H. Poteet, Jr.
Thomas T. Pennington
One Nashville Place
Suite 2200, 150 Fourth Avenue North
Nashville, Tennessee 37219-2494
(615) 244-0030
- and -
DUANE MORRIS LLP
Michael R. Lastowski (I.D. No. 3892)
1100 North Market Street, Suite 1200
Wilmington, Delaware 19801-1246
(302) 657-4900
Attorneys for Federal Insurance Company
PIERCE ATWOOD
William J. Kayatta, Jr.
One Monument Square
Portland, Maine 04101
(207) 791-1100
- and -
MARCUS, CLEGG & MISTRETTA, P.A.
George J. Marcus
100 Middle Street, East Tower
Portland, Maine 04101-4102
(207) 828-8000
- and -
FERRY, JOSEPH & PEARCE, P.A.
Michael B. Joseph (I.D. No. 392)
Theodore J. Tacconelli (I.D. No. 2678)
824 Market Street, Suite 904
P.O. Box 1351
Wilmington, Delaware 19899-1351
(302) 575-1555
Attorneys for Maine Yankee Atomic
Power Company
BELL, BOYD & LLOYD LLC
David F. Heroy
Carmen H. Lonstein
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
(312) 372-1121
- and -
BIFFERATO, BIFFERATO & GENTILOTTI
Ian Conner Bifferato (I.D. No. 3273)
1308 Delaware Avenue
Wilmington, Delaware 19806
(302) 429-1900
Attorneys for Official Committee of
Equity Security Holders of Stone &
Webster, Incorporated
Dated: Wilmington, Delaware
August 27, 2003
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT RELATES TO THE
THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED BY THE DEBTORS IN
POSSESSION, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, FEDERAL INSURANCE
COMPANY, MAINE YANKEE ATOMIC POWER COMPANY, AND THE OFFICIAL COMMITTEE OF
EQUITY SECURITY HOLDERS FOR (I) STONE & WEBSTER, INCORPORATED AND CERTAIN OF
ITS SUBSIDIARIES AND AFFILIATES AND (II) STONE & WEBSTER ENGINEERS AND
CONSTRUCTORS, INC. AND CERTAIN OF ITS SUBSIDIARIES AND AFFILIATES (THE "THIRD
JOINT PLAN") AND IS INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF
THE THIRD JOINT PLAN AND MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO
MAKE A JUDGMENT WITH RESPECT TO, AND DETERMINE HOW TO VOTE ON, THE THIRD JOINT
PLAN. NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER
THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DISCLOSURE
STATEMENT, REGARDING THE THIRD JOINT PLAN OR THE SOLICITATION OF ACCEPTANCES
OF THE THIRD JOINT PLAN.
ALL CLAIMHOLDERS AND INTERESTHOLDERS ARE ADVISED AND ENCOURAGED TO
READ THIS DISCLOSURE STATEMENT AND THE THIRD JOINT PLAN IN THEIR ENTIRETY
BEFORE VOTING TO ACCEPT OR REJECT THE THIRD JOINT PLAN. SUMMARIES OF THE THIRD
JOINT PLAN AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO THE THIRD JOINT PLAN, THE EXHIBITS ANNEXED TO
THE THIRD JOINT PLAN, AND THIS DISCLOSURE STATEMENT. THE STATEMENTS CONTAINED
IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE
CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT
ANY TIME AFTER THE DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH
BANKRUPTCY CODE SECTION 1125 AND RULE 3106(c) OF THE FEDERAL RULES OF
BANKRUPTCY PROCEDURE AND NOT IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES
LAWS OR OTHER RULES GOVERNING DISCLOSURE OUTSIDE THE CONTEXT OF CHAPTER 11.
THIS DISCLOSURE STATEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON
THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE
CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, AS
TO ANY PLAN PROPONENT, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT
NEGOTIATIONS. THE DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY
NONBANKRUPTCY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, NOR SHALL
IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, OR OTHER LEGAL
EFFECTS OF THE REORGANIZATION OR THIRD JOINT PLAN AS TO HOLDERS OF CLAIMS
AGAINST, OR INTERESTS IN, THE DEBTORS.
EXECUTIVE SUMMARY
Stone & Webster, Incorporated ("SWINC"), Stone & Webster Engineers
and Constructors, Inc. ("SWE&C") and certain of their respective subsidiaries
and affiliates, debtors and debtors-in- possession (together with SWINC and
SWE&C, the "Debtors"), each filed petitions for relief under chapter 11 of
title 11 of the United States Code, 11 U.S.C. ss.ss. 101-1330 (as amended, the
"Bankruptcy Code"), on June 2, 2000. On March 14, 2003, the Debtors filed a
joint plan, supported and co-proposed by the Official Committee of Unsecured
Creditors (the "Creditors' Committee") and Federal Insurance Company, an
Indiana corporation ("Federal"), which was subsequently amended. The current
Third Joint Plan, filed on August 12, 2003, is supported and co-proposed by
the Creditors' Committee, Federal, Maine Yankee Atomic Power Company ("Maine
Yankee") and the Official Committee of Equity Security Holders for Stone &
Webster, Incorporated (the "Equity Committee"). The Third Joint Plan sets
forth how Claims against and Interests in the Debtors will be treated. This
Disclosure Statement describes the Debtors' history, significant events
occurring in the Debtors' Chapter 11 Cases, a summary and analysis of the
Third Joint Plan, and certain related matters. This Executive Summary is
intended solely as a summary of the distribution provisions of the Third Joint
Plan and is qualified in its entirety by the terms and provisions of the Third
Joint Plan. FOR A COMPLETE UNDERSTANDING OF THE THIRD JOINT PLAN, YOU SHOULD
READ THE DISCLOSURE STATEMENT, THE THIRD JOINT PLAN AND THE EXHIBITS THERETO
IN THEIR ENTIRETY. Capitalized terms used in this Executive Summary and not
otherwise defined herein have the meanings ascribed to them in the Disclosure
Statement and the Third Joint Plan.
A. Background
Since the Debtors' sale of substantially all of their assets to Shaw
in July 2000 (the "Shaw Sale"), the Equity Committee, the Creditors'
Committee, the Debtors and certain creditors such as Federal and Maine Yankee
have been embroiled in various disputes regarding the ultimate distribution of
assets and the structure of acceptable plan(s) of reorganization. As a result
of those differences, the Debtors, the Equity Committee and the Creditors'
Committee each initially filed plans of reorganization. Although there were
numerous differences among those plans, the most significant difference was
that the Equity Committee proposed a plan of reorganization that contemplated
separate plans for each and every individual Debtor, the Creditors' Committee
proposed a plan of reorganization that contemplated the substantive
consolidation of each Debtor's assets and liabilities into a single
consolidated plan for all Debtors, and the Debtors proposed a plan calling for
the separate substantive consolidation of SWINC and certain of its
subsidiaries and affiliates into a consolidated SWINC estate and SWE&C and
certain of its subsidiaries and affiliates into a consolidated SWE&C estate.
After the filing of the three plans and preliminary hearings on their
corresponding disclosure statements, the Debtors entered into negotiations
with, among others, the Creditors' Committee, the Equity Committee and
Federal. As a result of those negotiations, the Debtors, the Creditors'
Committee, and Federal settled various disputes and agreed to become joint
sponsors and co- proponents of a plan of reorganization (the "First Joint
Plan"). The Equity Committee continued to pursue its separate plan.
At a hearing on May 20, 2003, the Court approved both the Disclosure
Statement with respect to the First Joint Plan and the Equity Committee's
disclosure statement with respect to the Equity Committee Plan. The Court,
however, ordered the major parties in these cases, including the Debtors, the
Creditors' Committee, the Equity Committee, Federal and Maine Yankee, to
mediation in an attempt to resolve the disputes among the various parties. A
mediation was conducted before the Honorable Erwin Katz on July 8, 2003. No
global resolution of the disputes was reached at the mediation; however, as a
result of that mediation and subsequent negotiations, Maine Yankee agreed to
settle its claims and become a co-proponent of a further amended
reorganization plan.
Once Maine Yankee agreed to become a co-proponent of a further
amended reorganization plan, the four co-proponents made a settlement offer to
the Equity Committee in the hopes of reaching a global settlement of these
cases. On July 25, 2003, the Equity Committee accepted the settlement offer,
and as a result has agreed to withdraw the plan of reorganization it was
separately pursuing and join as a co-proponent of this Third Joint Plan.
The current Third Joint Plan sets forth and the Disclosure Statement
explains the compromises and settlements reached by and among the five Plan
Proponents. The Third Joint Plan provides the means for distributions to
Creditors and Interestholders in these Chapter 11 Cases.
B. Summary of the Third Joint Plan
1. Substantive Consolidation of SWINC and SWINC Subsidiaries
As set forth more fully in the Third Joint Plan and this Disclosure
Statement, the Third Joint Plan proposes as a compromise and settlement of
various disputes and issues raised by, among others, the Debtors, the Equity
Committee, the Creditors' Committee, and certain other creditors, including
Federal and Maine Yankee, the substantive consolidation of (i) SWINC and the
SWINC Subsidiaries into the Consolidated SWINC Estate and (ii) SWE&C and the
SWE&C Subsidiaries into the Consolidated SWE&C Estate. Distributions on
account of Claims against and Interests in SWINC and the SWINC Subsidiaries
will therefore depend only on the consolidated assets and liabilities of the
Consolidated SWINC Estate. Similarly, except as otherwise provided herein and
in the Third Joint Plan, distributions on account of Claims against SWE&C and
the SWE&C Subsidiaries will depend only on the consolidated assets and
liabilities of the Consolidated SWE&C Estate. A list of the Debtor entities
comprising each of the Consolidated SWINC Estate and the Consolidated SWE&C
Estate is attached hereto as Appendix A.
The Third Joint Plan further contemplates that on the Effective Date
(a) each of the SWINC Subsidiaries shall be merged or deemed merged with and
into SWINC, with the surviving corporation being Reorganized SWINC and (b) the
Chapter 11 Cases of the SWINC Subsidiaries shall be closed, following which
any and all proceedings that could have been brought or otherwise commenced in
the Chapter 11 Case of any of the SWINC Subsidiaries shall be brought or
otherwise commenced in SWINC's Chapter 11 Case. SWINC shall continue to exist
and emerge from bankruptcy as Reorganized SWINC after the Effective Date in
accordance with the laws of the State of Delaware and pursuant to the
certificate of incorporation and by-laws of SWINC in effect prior to the
Effective Date, as amended under the Third Joint Plan. Reorganized SWINC will
be authorized to engage in any lawful act for which corporations may be
organized under the Delaware General Corporation Law ("DGCL"). After emerging
from bankruptcy, Reorganized SWINC's business operations will consist of the
management of the Pension Plan, including any efforts in which Reorganized
SWINC may engage to terminate the Pension Plan or transfer its sponsorship in
accordance with applicable law. Although Reorganized SWINC will be fully
authorized to engage in other business operations and management intends to
evaluate opportunities as, when, and if they arise, Reorganized SWINC has no
present intention to engage in business operations and is likely to dissolve
under DGCL ss. 275-282 within the first two (2) years following the Effective
Date. Upon such dissolution, it is anticipated that SWINC will receive a
substantial Reversion as a result of the Pension Plan being overfunded, which
Reversion will benefit Creditors and Interestholders in the manner and as
described in the Third Joint Plan.
2. Substantive Consolidation of SWE&C and SWE&C Subsidiaries
The Third Joint Plan also contemplates that on the Effective Date,
(a) each of the SWE&C Subsidiaries shall be merged or deemed merged with and
into SWE&C and (b) the Chapter 11 Cases of the SWE&C Subsidiaries shall be
closed, following which any and all proceedings that could have been brought
or otherwise commenced in the Chapter 11 Case of any of the SWE&C Subsidiaries
shall be brought or otherwise commenced in SWE&C's Chapter 11 Case.
The Third Joint Plan further contemplates that SWE&C and the SWE&C
Subsidiaries will liquidate and not conduct any business operations following
confirmation and consummation of the Third Joint Plan. In connection with the
liquidation of SWE&C and the SWE&C Subsidiaries, the SWE&C Liquidating Trust
will be formed pursuant to Delaware law and in the discretion of the
Creditors' Committee for the benefit of holders of Claims against the
Consolidated SWE&C Estate. Upon confirmation and consummation of the Third
Joint Plan, holders with Claims against the Consolidated SWE&C Estate will
receive beneficial interests in the SWE&C Liquidating Trust, entitling the
holders thereof to receive distributions pursuant to the terms of the Third
Joint Plan as, when and if available, from funds or other assets held by the
SWE&C Liquidating Trust. The SWE&C Liquidating Trust will distribute any
amounts available for distribution to the holders of Claims against the
Consolidated SWE&C Estate in accordance with the Third Joint Plan. Beneficial
interests in the SWE&C Liquidating Trust will not be certificated and will be
non-transferable, except by operation of law. The SWE&C Liquidating Trust will
terminate on the earlier of (i) the tenth (10) anniversary of the Confirmation
Date or (ii) the distribution of all property in accordance with the terms of
the SWE&C Liquidating Trust Agreement. SWE&C and the SWE&C Subsidiaries shall
be dissolved. If the SWE&C Liquidating Trust Advisory Board deems it necessary
or appropriate, the SWE&C Liquidating Trustee shall file a certificate of
dissolution for SWE&C and/or the SWE&C Subsidiaries and shall take all other
actions necessary or appropriate to effect the dissolution of SWE&C and the
SWE&C Subsidiaries under applicable state law.
3. Pension Plan Reversion
As part of the settlement with respect to Substantive Consolidation,
the Plan Proponents also propose to settle certain disputes regarding the
potential reversionary interest associated with the overfunded Pension Plan.
Specifically, the Plan Proponents believe that the Pension Plan is presently
overfunded and that upon termination of the Pension Plan in a state law
dissolution of Reorganized SWINC, funds in excess of $30 million might revert
to Reorganized SWINC's estates after all liabilities of the Pension Plan to
Pension Plan participants have been satisfied. These excess assets are defined
as the "Reversion" in the Third Joint Plan and would, pursuant to the
provisions of the Third Joint Plan be available to the holders of Claims and
Interests in the Consolidated SWINC Estate and the Consolidated SWE&C Estate.
The income tax consequences of the Third Joint Plan are, however, subject to
substantial uncertainty, and no assurances can be made that income tax
liability with respect to the Reversion would not materially reduce the
ultimate recovery to holders of Claims and Interests in the SWINC and SWE&C
Consolidated Estates.
To avoid further litigation, the Plan Proponents propose to
distribute the Reversion under the Third Joint Plan as follows:
o In the event Class 9A: SWINC Equity Interests vote to
accept the Third Joint Plan, the Reversion from the
Pension Plan will be distributed as follows: (i)
two-thirds of the Reversion's first $30 million to the
Consolidated SWINC Estate; (ii) one-third of the
Reversion's first $30 million to the Consolidated SWE&C
Estate; and (iii) if the Reversion exceeds $30 million,
an equal distribution between the Consolidated SWE&C
Estate and the Consolidated SWINC Estate of any
Reversion in excess of $30 million.
o In the event Class 9A votes to reject the Third Joint
Plan, the Reversion from the Pension Plan will be
distributed as follows: (i) two-thirds of the
Reversion's first $30 million to the Consolidated SWINC
Estate; (ii) one- third of the Reversion's first $30
million to the Consolidated SWE&C Estate; and (iii) if
the Reversion exceeds $30 million, a distribution of
seventy-five percent (75%) of any Reversion in excess of
$30 million to the Consolidated SWE&C Estate and
twenty-five percent (25%) of any Reversion in excess of
$30 million to the Consolidated SWINC Estate.
The Plan Proponents believe that this settlement is fair and
equitable given the historical treatment of the Pension Plan and the facts
upon which the Debtors, the Creditors' Committee and the Equity Committee
determined that Shaw offered the highest and otherwise best price because,
among other things: (i) prior to SWINC becoming the sole legal sponsor of the
Pension Plan, each individual Debtor was a contributing sponsor within the
meaning of section 4001(a)(13) of ERISA; (ii) even after SWINC became the
legal sponsor, the overfunded Pension Plan was carried on the books and
records of SWEC; (iii) Mercer Human Resource Consulting reported on a
nonconsolidated basis by operating unit of the Debtors with respect to Pension
Plan expenses and assets in addition to reporting on a consolidated basis at
the SWINC level in accordance with generally accepted accounting principles;
and (iv) the SWINC Consolidated Estate is receiving valuable consideration as
part of the global settlement in the Third Joint Plan related to Federal and
Maine Yankee.
4. Federal Settlement
As part of the Third Joint Plan, the Proponents also propose a
settlement of various claims filed by Federal. Specifically, Federal initially
filed numerous unliquidated and contingent proofs of claim in the Bankruptcy
Cases in the amount of $371,505,215.90, of which at least $55,208,965.23 has
been subsequently liquidated (the "Federal Liquidated Claim"). The balance of
$316,296,205.69 represents unliquidated claims asserted by Federal against,
among others, SWINC and SWEC. In addition to asserting claims against each of
the primary obligors, Federal also asserted a Claim directly against SWINC
pursuant to certain General Indemnity Agreements executed between Federal and
SWINC. A significant portion of the Federal Liquidated Claim, in the amount of
$44 million, arises in connection with Federal's payment under certain Payment
and Performance Bonds between SWE&C and Federal related to Maine Yankee.
Originally, Federal opposed the Substantive Consolidation proposed by
the Creditors' Committee and was in negotiations with the Equity Committee
regarding support for its plan. Subsequent to the Initial Disclosure Statement
Hearing, however, the Debtors reached an agreement with Federal regarding
Substantive Consolidation and the Federal Claims. As ultimately agreed to by
the Creditors' Committee and incorporated into the First Joint Plan, that
settlement provided, among other things, an opportunity for Holders of Class
9A: SWINC Equity Interests that voted to accept the First Joint Plan an
immediate Cash payment of $0.50 per share. As a result of subsequent events,
including, among other things, the Equity Committee's continued prosecution of
a separate plan, part of the settlement was withdrawn as part of the Second
Joint Plan. Under the Third Joint Plan, however, a similar opportunity exists.
Specifically, the terms of the Federal Settlement are as follows:
o Federal will hold an Allowed Federal Claim in the amount
of $52,113,000 against both the Consolidated SWINC
Estate and the Consolidated SWE&C Estate and will be
permitted to vote such Allowed Federal Claim as an
Allowed Class 5A Claim and an Allowed Class 5B Claim. On
the Effective Date, however, Federal will be deemed to
have elected under Bankruptcy Code Sections 502 and 509
to receive distributions on the Allowed Federal Claim
filed against the Consolidated SWINC Estate only, and
any distribution on such Allowed Federal Claim shall
satisfy and discharge any obligation by the Debtors on
proof of claim No. 5179 filed by Lumbermens in an amount
in excess of $6 million relating to potential losses by
Lumbermens in connection with its issuance of surety
bonds, which claim amended and superseded proofs of
claim Nos. 3300 and 4491.
o In addition, Chubb Canada will receive a distribution of
the Canadian Cash, which Cash shall be held in trust by
Chubb Canada for its use in defending, settling or
otherwise resolving the Isobord Litigation, as well as a
transfer, conveyance, distribution, or assignment from
Debtor or non- debtor affiliate insured/obligee of all
insurance proceeds in excess of the Canadian Cash
relating to Isobord, including, without limitation,
errors and omission, efficacy, directors and officers
and any other policy or bond that may provide coverage
or indemnification for Isobord claims. Any Canadian Cash
remaining at the conclusion of the Isobord Litigation
shall be paid over to the SWE&C Liquidating Trustee to
be distributed in accordance with the Third Joint Plan.
The Debtors, non-debtor affiliates, the Consolidated
SWINC Estate and/or Reorganized SWINC will not be
permitted to settle any potentially insured Isobord
claim without obtaining Federal's consent.
o Upon the allowance of the Federal Claims, Federal will
also release any and all Claims for subrogation or other
Claims it has or might have against the Consolidated
SWINC Estate or the Consolidated SWE&C Estate, including
but not limited to, Claims for indemnification,
contribution, reimbursement or subrogation arising out
of the Isobord Litigation in Canada. Federal shall have
complete control of the Isobord Litigation, with
complete authority to settle or otherwise resolve the
Isobord Litigation without the consent or participation
of any of the Debtors. While Federal will waive any
Claim against the Consolidated SWINC and SWE&C Estates
in connection with the Isobord Litigation, Federal is
not agreeing to indemnify SWINC or any other of the
Debtors from liability in connection with the Isobord
Facility. Furthermore, Federal is also not waiving any
of its rights or defenses as surety, either in law, in
equity or under the bonds that it might have against
Isobord with respect to the Isobord Facility or any
related contract, but in no event will the Allowed
Federal Claim exceed $52,113,000 because of the Isobord
Litigation.
o Federal will also receive the lesser of (i) ten percent
(10%) or (ii) $1,250,000 from the gross proceeds
received from any insurance recovery on the claims
asserted by Maine Yankee by way of transfer, conveyance,
distribution or assignment from the Debtors.
o Finally, if Class 9A: SWINC Equity Interests vote to
accept the Third Joint Plan, then upon the Consolidated
SWINC Estate having made distributions in the aggregate
amount of $25,000,000 to Federal, on account of the
Allowed Federal Claim in Class 5A, Federal will pay to
the Equity Settlement Fund, which shall be administered
by the Consolidated SWINC Estate Governing Board, an
amount equal to $0.50 per share to Holders of Old Common
Stock as of the Equity Voting Record Date that voted to
accept the Third Joint Plan (the aggregate amount of
such distribution not to exceed $7,113,000). On the
Effective Date, the Cash in the Equity Settlement Fund
shall be distributed to holders of Allowed Class 9A:
SWINC Equity Interests (i.e., holders of Old Common
Stock as of the Equity Voting Record Date) that voted to
accept the Third Joint Plan. Federal will have no right
to recoup from the Consolidated SWINC Estate or the
Consolidated SWE&C Estate any portion of the payment
made to the Equity Settlement Fund.
o In the event Class 9A does not vote to accept the Third
Joint Plan, Federal will retain all rights against the
Consolidated SWINC Estate on the Allowed Federal Claim
in Class 5A in the amount of $52,113,000 for
distribution purposes.
The Federal Settlement is contingent upon confirmation of the Third
Joint Plan, and will be binding on all interested parties upon approval of the
Third Joint Plan, and absent the Federal Settlement, certain individual
Debtors, including SWINC and SWEC could be liable to Federal in an amount that
exceeds $80 million.
United States Fidelity and Guaranty Company, St. Paul Fire and Marine
Insurance Company and St. Paul Surplus Lines Insurance Company (collectively,
the Non-Settling Insurers) do not consent to and oppose the assignment,
conveyance, distribution or transfer of any rights under their policies,
including the rights to proceeds, if any. The rights of the Non-Settling
Insurers to challenge the validity, effectiveness or enforceability of any
proposed assignments or transfers under their policies or applicable law are
hereby expressly preserved.
5. The Maine Yankee Settlement
As part of the settlements embodied in the Third Joint Plan, the Plan
Proponents also propose to settle disputes between the Debtors and Maine
Yankee. Specifically, Maine Yankee initially filed numerous proofs of claim in
the Bankruptcy Cases in the amount of $78.2 million stemming from alleged
performance defaults under a decommissioning agreement related to Maine
Yankee's nuclear power plant in Wiscasset, Maine. Maine Yankee's claim was
ultimately capped at $64.8 million after an eight-day proceeding to address
the Maine Yankee claims, of which a total of $20.8 million was estimated to be
Maine Yankee's allowable claim in the SWE&C, SWINC and SWEC bankruptcy cases
($64.8 million less $44 million previously paid by Federal).
Subsequent to the mediation conducted in July 2003, the Debtors,
Federal and the Creditors' Committee reached an agreement with Maine Yankee
regarding the Maine Yankee Claims. Thereafter, and as part of resolving
numerous other disputes, the Equity Committee agreed to settle the Maine
Yankee Claims, approval of which settlement is sought pursuant to the Third
Joint Plan.
The principal terms of the Maine Yankee Settlement are as follows:
o Maine Yankee will hold an Allowed Maine Yankee Claim in
the amount of $20,300,000 against both the Consolidated
SWINC Estate and the Consolidated SWE&C Estate and will
be permitted to vote such Allowed Maine Yankee Claim as
an Allowed Class 5A Claim and an allowed Class 5B Claim.
On the Effective Date, however, Maine Yankee will be
deemed to have elected under Bankruptcy Code Sections
502 and 509 to receive distributions on the Allowed
Maine Yankee Claim filed against the Consolidated SWINC
Estate only.
o If Class 9A: SWINC Equity Interests vote to accept the
Third Joint Plan, SWINC shall make the Initial Maine
Yankee Distribution to Maine Yankee on account of the
Allowed Maine Yankee Claim in Class 5A out of which
Maine Yankee will pay to the Equity Settlement Fund,
which shall be administered by the Consolidated SWINC
Estate Governing Board, an amount equal to $0.12 per
share to Holders of Old Common Stock as of the Equity
Voting Record Date that voted to accept the Third Joint
Plan (the aggregate amount of any such payment cannot
exceed $1,800,000). On the Effective Date, the Cash in
the Equity Settlement Fund shall be distributed to
holders of Allowed Class 9A: SWINC Equity Interests
(i.e., holders of Old Common Stock as of the Equity
Voting Record Date) that voted to accept the Third Joint
Plan. Maine Yankee will not have the right to recoup
from either the Consolidated SWINC Estate or the
Consolidated SWE&C Estate any portion of the payment
made to the Equity Settlement Fund, and the Initial
Maine Yankee Distribution shall count towards the
payment of the Allowed Maine Yankee Claim in Class 5A.
o In the event Class 9A does not vote to accept the Third
Joint Plan, Maine Yankee will retain all rights against
the Consolidated SWINC Estate on the Allowed Maine
Yankee Claim in Class 5A in the amount of $20,300,000
for distribution purposes.
o The Consolidated SWINC Estate will have a contribution/
reimbursement/subrogation claim against the Consolidated
SWE&C Estate in the fixed allowed amount of $16.8
million, regardless of actual cash distributions made by
SWINC on the Allowed Maine Yankee Claim (the "SWINC MY
Contribution Claim"), which claim shall be treated as an
Allowed Class 5B: SWE&C General Unsecured Claim under
the Third Joint Plan; provided, however, that in no
event shall Maine Yankee be entitled to distributions in
excess of $20.3 million (including, without limitation,
amounts received on account of the SWINC MY Contribution
Claim).
o Maine Yankee will have a first lien on any distributions
from the Consolidated SWE&C Estate on account of the
SWINC MY Contribution Claim for any amount necessary to
"top up" the cash recovery by Maine Yankee against SWINC
to $18.5 million, net of any payment made by Maine
Yankee to the Equity Settlement Fund.
o Upon Maine Yankee's receipt of $18.5 million in cash
(after giving effect to any payments made to accepting
Class 9A: SWINC Equity Interests), all proceeds payable
by the Consolidated SWE&C Estate on account of the SWINC
MY Contribution Claim will be made to the Consolidated
SWINC Estate for distribution under the Third Joint
Plan.
o Notwithstanding any contrary provision of Article VII,
Section R of the Third Joint Plan, the Debtors shall
release all claims and causes of action that they or any
one of them have or may have had against Maine Yankee,
as of the Effective Date. Without limiting the
generality of the following, Adversary Proceeding No.
02-02031 (PJW) now pending in the Court, shall be
dismissed, with prejudice and without costs to any
party.
The Maine Yankee Settlement is contingent upon confirmation of the
Third Joint Plan and will be binding.
6. The Equity Settlement Fund
The Equity Settlement Fund shall be Administered by the Consolidated
SWINC Estate for the benefit of all Holders of Old Common Stock, as of the
Equity Voting Record Date, who voted to accept the Third Joint Plan. The cost
of administering the Equity Settlement Fund shall be paid by the Consolidated
SWINC Estate. Holders of Old Common Stock as of the Equity Voting Record Date
that voted to accept the Third Joint Plan shall be deemed to hold a pro rata
beneficial interest in the Equity Settlement Fund, determined by the number of
shares held by each Holder in relation to the total number of shares that
voted to accept the Third Joint Plan.
7. The Asbestos Trust
As part of the Third Joint Plan, the Proponents propose a settlement
of disputes between the Debtors and the Asbestos Insurance Carriers. The
Asbestos Insurance Carriers have contended that they hold certain claims
against the Debtors arising from the Debtors' obligations under certain
insurance policies and claims handling agreements. Specifically, the Asbestos
Insurance Carriers note that the Asbestos Insurance Carriers issued, before
the Petition Date, liability insurance policies to one or more of the Debtors
that relate to, among other things, potential liability for exposure of third
parties to asbestos. The Asbestos Insurance Carriers also contend that SWEC is
party to a number of pre-petition claims handling agreements, including, but
not limited to the Weitz & Luxenberg Agreements, under which SWEC undertook
certain obligations with respect to lawsuits brought against SWEC for personal
injury based upon exposure to asbestos. The Asbestos Insurance Carriers argue
that they hold claims against the Debtors because, under the insurance
policies and the claims handling agreements, the Debtors promised to (i) pay
certain amounts relating to defense costs, (ii) cooperate with the Asbestos
Insurance Carriers in the defense of claims, and (iii) to pay certain amounts
with respect to any settlements or judgments. The Asbestos Insurance Carriers
finally contend that unless the Debtors provide adequate means for performance
of the Debtors' ongoing obligations under the insurance policies and the
claims handling agreements, such as cooperating on the defense of claims,
receipt of service of process and maintaining corporate records, the Asbestos
Insurance Carriers would no longer have a duty to defend or indemnify. The
Debtors dispute these contentions of the Asbestos Insurance Carriers.
In order to resolve the insurance coverage disputes, the Proponents
and the Asbestos Insurance Carriers reached an agreement regarding ongoing
obligations to defend and indemnify. The substance of the agreement is set
forth in the Asbestos Trust Agreement.
If and to the extent United States Fidelity and Guaranty Company, St.
Paul Fire and Marine Insurance Company and St. Paul Surplus Lines Insurance
Company (collectively, the "Non-Settling Insurers") are Asbestos Insurance
Carriers (as defined in the Third Joint Plan), they have not entered into a
compromise agreement relating to Asbestos Claims. Accordingly, the terms of
the Third Joint Plan and Asbestos Trust, which implement compromises with
certain insurers, including without limitation, Article VII(M)(6) of the Third
Joint Plan, do not apply to or affect the claims or rights of the Non-Settling
Insurers.
8. Distributions to Holders of Claims and Interests
Under the Third Joint Plan, Reorganized SWINC will issue three
classes of securities, all as described in more detail below. First,
Reorganized SWINC will issue 100 shares of Reorganized SWINC New Common Stock
to the SWE&C Liquidating Trustee to be held for the benefit of holders of
Claims against the Consolidated SWE&C Estate. Under Article VIII.B of the
Third Joint Plan, the SWE&C Liquidating Trustee has granted an irrevocable
proxy to the Board of Directors of Reorganized SWINC for the limited purpose
of permitting the Board to vote the shares of Reorganized SWINC New Common
Stock, at its discretion, in favor of the dissolution of Reorganized SWINC.
The SWE&C Liquidating Trustee will not be entitled to transfer or otherwise
distribute the Reorganized SWINC New Common Stock, including to the
beneficiaries of the SWE&C Liquidating Trust. Second, Reorganized SWINC will
issue one share of Reorganized SWINC New Series A Preferred Stock to the
Consolidated SWINC Estate to be held for the benefit of holders of Claims and
Interests against the Consolidated SWINC Estate. The Reorganized SWINC New
Series A Preferred Stock will have, upon termination of the Pension Plan and
the liquidation, dissolution and winding up of Reorganized SWINC, a
liquidating distribution calculated as follows: (i) from the Reversion either
(x) two-thirds of the first $30 million in proceeds generated from the
Reversion of the Pension Plan plus 50% of any funds generated from the
Reversion in excess of $30 million or (y) in the event Class 9A: SWINC Equity
Interests vote to reject the Third Joint Plan, two-thirds of the first $30
million in proceeds generated from the Reversion of the Pension Plan plus
twenty-five percent (25%) of any funds generated from the Reversion in excess
of $30 million; and (ii) 100% of the funds generated from the liquidation of
any additional assets, other than the Reversion, of Reorganized SWINC (the
"Series A Liquidation Preference"). The Reorganized SWINC Estate will
distribute the Series A Liquidation Preference to the Holders of Allowed SWINC
Claims and Interests in accordance with the terms of the Third Joint Plan.
Finally, Reorganized SWINC will issue one share of Reorganized SWINC New
Series B Preferred Stock to the SWE&C Liquidating Trustee to be held for the
benefit of holders of Claims and Interests in the Consolidated SWE&C Estate.
Upon termination of the Pension Plan and the liquidation, dissolution and
winding up of Reorganized SWINC, and in accordance with the terms of the Third
Joint Plan, holders of Series B Preferred Stock shall be entitled to receive a
liquidating distribution calculated from the Reversion as follows: either (i)
one-third of the first $30 million in proceeds generated from the Reversion
plus 50% of any funds generated from the Reversion in excess of $30 million or
(ii) in the event Class 9A votes to reject the Third Joint Plan, one-third of
the first $30 million in proceeds generated from the Reversion plus
seventy-five percent (75%) of any funds generated from the Reversion in excess
of $30 million (the "Series B Liquidation Preference"). The SWE&C Liquidating
Trustee will distribute the Series B Liquidation Preference to the Holders of
Allowed SWE&C Claims and Interests in accordance with the terms of the Third
Joint Plan and the SWE&C Liquidating Trust Agreement.
Under the Third Joint Plan, certain Claims are classified as General
Administrative Claims. The Third Joint Plan divides the remaining Claims and
Interests into (i) Claims against and Interests in the Consolidated SWINC
Estate and (ii) Claims against the Consolidated SWE&C Estate. These Claims and
Interests are then further divided into Unclassified Claims against and
Classes of Claims Against and Interests in the Consolidated SWINC Estate and
the Consolidated SWE&C Estate, respectively.
(a) Unclassified Claims
General Administrative Claims. Claims that are incurred in the
ordinary course of business during the Chapter 11 Cases, including, but not
limited to, General Professional Fee Claims that are not allocated to either
the Consolidated SWINC Estate or the Consolidated SWE&C Estate shall be paid
in the ordinary course of business in accordance with the terms and conditions
of any agreements relating thereto out of available funds prior to
distributions being made to the Consolidated SWINC Estate and the Consolidated
SWE&C Estate.
SWINC Administrative Claims. Each holder of an Allowed SWINC
Administrative Claim shall receive in full satisfaction, settlement, release
and discharge of and in exchange for such Allowed SWINC Administrative Claim
(a) Cash equal to the unpaid portion of such Allowed SWINC Administrative
Claim or (b) such other treatment as to which the SWINC Plan Administrator and
such holder shall have agreed upon in writing.
SWINC Priority Tax Claims. Each holder of an Allowed SWINC Priority
Tax Claim shall be entitled to receive on account of such Allowed SWINC
Priority Tax Claim, in full satisfaction, settlement, release and discharge of
and in exchange for such Allowed SWINC Priority Tax Claim (i) equal Cash
payments made on the last Business Day of every three-month period following
the Effective Date, over a period not exceeding six years after the assessment
of the tax on which such Claim is based, totaling the principal amount of such
Claim plus simple interest on any outstanding balance from the Effective Date
calculated at the interest rate available on ninety (90) day United States
Treasuries on the Effective Date, (ii) a single Cash payment to be made on the
Effective Date or as soon as practicable thereafter in an amount equivalent to
the amount of such Allowed Priority Tax Claim, or (iii) such other treatment
as to which SWINC or the SWINC Plan Administrator and such holder shall have
agreed upon in writing.
SWE&C Administrative Claims. Each holder of an Allowed SWE&C
Administrative Claim shall receive a beneficial interest in the SWE&C
Liquidating Trust entitling such holder to receive in full satisfaction,
release and discharge of and in exchange for such Allowed SWE&C Administrative
Claim (a) Cash equal to the unpaid portion of such Allowed SWE&C
Administrative Claim or (b) such other treatment as to which SWE&C or the
SWE&C Liquidating Trustee and such holder shall have agreed upon in writing.
SWE&C Priority Tax Claims. Each holder of an Allowed SWE&C Priority
Tax Claim, at the sole option of the SWE&C Liquidating Trustee, shall be
entitled to receive a beneficial interest in the SWE&C Liquidating Trust
entitling such holder to receive in full satisfaction, release and discharge
of and in exchange for such Allowed Priority Tax Claim (i) equal Cash payments
made on the last Business Day of every three-month period following the
Effective Date, over a period not exceeding six years after the assessment of
the tax on which such Claim is based, totaling the principal amount of such
Claim plus simple interest on any outstanding balance from the Effective Date
calculated at the interest rate available on ninety (90) day United States
Treasuries on the Effective Date, (ii) a single Cash payment to be made on the
Effective Date or as soon as practicable thereafter in an amount equivalent to
the amount of such Allowed SWE&C Priority Tax Claim, or (iii) such other
treatment as to which SWE&C or the SWE&C Liquidating Trustee and such holder
shall have agreed upon in writing.
(b) Classified Claims and Interests
The table below summarizes the classification and treatment under the
Third Joint Plan of the principal pre-petition (i) Claims against and
Interests in the Consolidated SWINC Estate and (ii) Claims against the
Consolidated SWE&C Estate. The classification and treatment for all Classes
are described in more detail in Article IV.F of this Disclosure Statement
entitled "Summary of the Third Joint Plan -- Classification and Treatment of
Claims and Interests." This summary is qualified in its entirety by reference
to the provisions of the Third Joint Plan, a copy of which is attached hereto
as Appendix B, and the balance of this Disclosure Statement.
THE CONSOLIDATED SWINC CLASSES:
Class Description Treatment under the Third Joint Plan
Class 1A: Secured Claims
Class 1A.1: SWE&C o Unimpaired
Setoff Claim
o On the Effective Date, the Allowed
Estimated Amount: Approx. Class 1A.1: SWE&C Setoff Claim held
$190 million by the Consolidated SWE&C Estate
shall be deemed offset against
the Class 7B: Intercompany Claim
held by the Consolidated SWINC
Estate resulting in a net Allowed
Class 7B: Intercompany Claim by
the Consolidated SWINC Estate
against the Consolidated SWE&C
Estate in the approximate amount
of $20 million. As a result, the
Allowed Class 1A.1: SWE&C Setoff
Claim shall be deemed satisfied
in full.
Class 1A.2: SWINC o Unimpaired
Miscellaneous Secured
Claims o Each holder of Allowed
Class 1A.2: SWINC Miscellaneous
Secured Claims shall receive
Estimated Amount: Approx. in full satisfaction, settlement,
$0 to $3 million release and discharge of and
in exchange for such Allowed
Class 1A.2: SWINC Miscellaneous
Secured Claim either (a) Cash
equal to the unpaid portion of
such Allowed Class 1A.2: SWINC
Miscellaneous Secured Claim or
(b) such other treatment as the
SWINC Plan Administrator and such
holder shall have agreed upon in
writing.
o Estimated Recovery: 100%
Class 2A: SWINC Other o Unimpaired
Priority Claims
Estimated Amount:
Approx. $0 to $500,000 o Each holder of an Allowed Class 2A:
SWINC Other Priority Claim shall
receive in full satisfaction,
settlement, release and discharge
of and in exchange for such
Allowed Class 2A: SWINC Other
Priority Claim either (a) Cash
equal to the unpaid portion of
such Allowed Class 2A: SWINC
Other Priority Claim or (b) such
other treatment as to which the
SWINC Plan Administrator and such
holder shall have agreed upon in
writing.
o Estimated Recovery: 100%
Class 3A: SWINC Asbestos Claims o Impaired
Estimated Amount: Approx. o Each holder of an Allowed Class
$0 to $125 million in 3A: SWINC Asbestos Claim shall
total amount of Asbestos receive in full satisfaction,
Claims collectively in the settlement, release and discharge
Consolidated SWINC Estate of and in exchange for such
and the Consolidated SWE&C Allowed Class 3A: SWINC Asbestos
Estate. The Proponents believe Claim (a) its Pro Rata share of
that Allowed Asbestos Claims, the Asbestos Trust Assets (set
if any, will be allowed solely forth in Article VII.L. of the
in the Consolidated SWE&C Third Joint Plan), subject to the
Estate. Out of an abundance terms and conditions of the
of caution, however, the Asbestos Trust Agreement or (b)
Proponents have provided for such other treatment as to which
treatment of Allowed Asbestos the Asbestos Trustee and the
Claims, if any, within the holder of an Allowed Class 3A:
Consolidated SWINC Estate. SWINC Asbestos Claim shall have
agreed upon in writing.
o Estimated Recovery: 50% - 100%
Class 4A: SWINC Convenience o Impaired
Claims
Estimated Amount: Approx. o Each holder of an Allowed Class
$0 to $100,000 5A: SWINC General Unsecured Claim
that elects to be treated as a
Class 4A: SWINC Convenience Claim
shall receive in full
satisfaction, release and
discharge of and in exchange for
such Allowed Class 5A: SWINC
General Unsecured Claim the
lesser of $1000 or 50% of its
Allowed Class 5A: SWINC General
Unsecured Claim.
Only holders of Class 5A: SWINC
General Unsecured Claims who vote
in favor of the Third Joint Plan
may elect to have their claim
treated as a Class 4A: SWINC
Convenience Claim.
o Estimated Recovery: 50%
Class 5A: SWINC General o Impaired
Unsecured Claims
Estimated Amount: Approx. o Each holder of an Allowed Class
$55 to $300 million 5A: SWINC General Unsecured Claim
shall receive its Pro Rata share
of the Initial Class 5A
Distribution Amount. On each
ensuing Semi-Annual Distribution
Date, each holder of an Allowed
Class 5A: SWINC General Unsecured
Claim shall receive its Pro Rata
share of the Semi-Annual Class
5A Distribution Amount.
o Estimated Recovery: 50% - 100%
Class 6A: SWINC Intraestate o Impaired
Claims
Estimated Amount: Approx. o On the Effective Date or such
$100,000 other date set by an order of
the Court, all Allowed Class 6A:
SWINC Intraestate Claims shall be
deemed satisfied, waived,
released, discharged and
cancelled and the holders of
Allowed Class 6A: SWINC
Intraestate Claims shall not be
entitled to and shall not receive
or retain any property or
interest on account of such
Claims.
o Estimated Recovery: 0%
Class 7A: SWINC Subordinated o Impaired
Claims
Estimated Amount: Approx. o Upon the payment in full of the
$0 to $25 million Allowed Class 4A: SWINC Convenience
Class Claims and the Allowed
Class 5A: SWINC General Unsecured
Claims, each holder of an Allowed
Class 7A: SWINC Subordinated
Claim shall receive its Pro Rata
share of the Initial Class 7A
Distribution Amount, if any. On
each ensuing Semi-Annual
Distribution Date, each holder of
an Allowed Class 7A: SWINC
Subordinated Claim shall receive
its Pro Rata share of the
Semi-Annual Class 7A Distribution
Amount.
o Estimated Recovery: 0% - 100%
Class 8A: SWINC Securities o Impaired
Claims
Estimated Amount: o Upon the payment in full of Allowed
$0 to $100 million Class 4A: SWINC Convenience Class
Claims, Allowed Class 5A: SWINC
General Unsecured Claims, and
Allowed Class 7A: SWINC
Subordinated Claims, each holder
of an Allowed Class 8A: SWINC
Securities Claim (less any
insurance proceeds actually
received and retained by such
holder in respect of such Allowed
Class 8A: SWINC Securities Claim)
shall receive its Pro Rata share
(as diluted by Allowed Class 9A:
SWINC Equity Interests) of (i)
the remaining Available Cash in
the SWINC Disputed Claims Reserve
and (ii) any amounts remaining
that were paid to the
Consolidated SWINC Estate as a
liquidation preference with
respect to the SWINC New Series A
Preferred Stock after all Allowed
Class 4A: SWINC Convenience Class
Claims, Allowed Class 5A: SWINC
General Unsecured Claims and
Allowed Class 7A: SWINC
Subordinated Claims have been
satisfied. On each ensuing
Semi-Annual Distribution Date,
each holder of an Allowed Class
8A: SWINC Securities Claim shall
receive its Pro Rata share (as
diluted by Allowed Class 9A:
SWINC Equity Interests) of the
remaining Available Cash in the
SWINC Disputed Claims Reserve and
remaining Available Cash paid to
the Consolidated SWINC Estate as
the liquidation preference with
respect to the SWINC New Series A
Preferred Stock. Upon receipt by
the holder of an Allowed Class
8A: SWINC Securities Claim of any
amounts distributed under the
Third Joint Plan in respect of
such claim, such holder shall be
deemed to have assigned to the
SWINC Plan Administrator all
rights of the holder to recover
such amounts from the applicable
insurer.
o Estimated Recovery: 0% - 100%
Class 9A: SWINC Equity o Impaired
Interests
o Only Holders of Class 9A: Equity
Interests as of the Equity Voting
Record Date (August 27, 2003) are
entitled to vote on the Third
Joint Plan, and only those
Holders that vote to accept the
Third Joint Plan by the Voting
Deadline (October 20, 2003) are
entitled to receive a
distribution from the Equity
Settlement Fund.
Estimated Amount: Approx. 14.3 o In the event that Class 9A: SWINC
million shares with a paid Equity Interests vote to accept
in capital equal to approx. the Third Joint Plan, then on the
$60 million Effective Date, each holder of an
Allowed SWINC Equity Interest
that votes to accept the Third
Joint Plan shall receive up to
$0.62 per share of Old Common
Stock held by such holder from
the Equity Settlement Fund. In
the event that Federal does not
receive the Minimum Federal
Distribution on the Effective
Date, then holders of Old Common
Stock that vote to accept the
Third Joint Plan will receive
only $0.12 per share of Old
Common Stock on the Effective
Date, and an additional $0.50 per
share of Old Common Stock from
the Equity Settlement Fund
shortly after Federal receives
the Minimum Federal
Distributions. In addition, upon
the payment in full of the
Allowed Class 5A: SWINC General
Unsecured Claims, the Allowed
Class 4A: SWINC Convenience Class
Claims, and the Allowed Class 7A:
SWINC Subordinated Claims, each
holder of an Allowed Class 9A:
SWINC Equity Interest shall
receive its Pro Rata share (as
may be diluted by Allowed Class
8A: SWINC Securities Claims) of
(i) the remaining Available Cash
in the SWINC Disputed Claims
Reserve and (ii) any amounts
remaining that were paid to the
Consolidated SWINC Estate as a
liquidation preference with
respect to the SWINC New Series A
Preferred Stock after all Allowed
Class 4A: SWINC Convenience Class
Claims, Allowed Class 5A: SWINC
General Unsecured Claims and
Allowed Class 7A: SWINC
Subordinated Claims have been
satisfied. On each ensuing Semi-
Annual Distribution Date, each
holder of an Allowed Class 9A:
SWINC Equity Interest shall
receive its Pro Rata share (as
may be diluted by Allowed Class
8A: SWINC Securities Claims) of
the remaining Available Cash paid
to the Consolidated SWINC Estate
as the remaining liquidation
preference with respect to the
SWINC New Series A Preferred
Stock.
In the event that Class 9A: SWINC
Equity Interests vote to reject
the Third Joint Plan, the Equity
Settlement Fund will not be
established and Allowed Class 9A:
SWINC Equity Interests will not
receive the Equity Settlement
Fund Distribution. Rather, upon
the payment in full of the
Allowed Class 4A: SWINC
Convenience Class Claims, the
Allowed Class 5A: SWINC General
Unsecured Claims, and the Allowed
Class 7A: SWINC Subordinated
Claims, each holder of an Allowed
Class 9A: SWINC Equity Interest
shall receive its Pro Rata share
(as may be diluted by Allowed
Class 8A: SWINC Securities
Claims) of (i) the remaining
Available Cash in the SWINC
Disputed Claims Reserve and (ii)
any amounts remaining that were
paid to the Consolidated SWINC
Estate as a liquidation
preference with respect to the
SWINC New Series A Preferred
Stock after all Allowed Class 4A:
SWINC Convenience Class Claims,
Allowed Class 5A: General
Unsecured Claims and Allowed
Class 7A: SWINC Subordinated
Claims have been satisfied. On
each ensuing Semi-Annual
Distribution Date, each holder of
an Allowed Class 9A: SWINC Equity
Interest shall receive its Pro
Rata share (as may be diluted by
Allowed Class 8A: SWINC
Securities Claims) of the
remaining Available Cash paid to
the Consolidated SWINC Estate as
the liquidation preference with
respect to the SWINC New Series A
Preferred Stock.
Under the Third Joint Plan, on
the Effective Date, all Old
Common Stock and Old Common Stock
Options in SWINC will be
canceled. Holders of Allowed
Class 9A Equity Interests as of
the Effective Date shall be
deemed to hold a pro rata
beneficial interest in the assets
of the Consolidated SWINC Estate
after payment in full of the
Allowed Class 5A: SWINC General
Unsecured Claims, the Allowed
Class 4A: SWINC Convenience Class
Claims, and the Allowed Class 7A:
SWINC Subordinated Claims, as
provided in the Third Joint Plan.
Only Holders of Old Common Stock
as of the Equity Voting Record
Date that voted to accept the
Third Joint Plan shall be deemed
to hold a pro rata beneficial
interest in the Equity Settlement
Fund.
o Estimated Recovery: $0.00 to
$1.36 per share to Holders that
vote to accept the Third Joint
Plan; provided, however, that it
is expected that all holders that
vote to accept the Third Joint
Plan will, subject to Court
approval of the terms of the
Federal and Maine Yankee
settlements and the required
minimum distribution to Federal,
receive a minimum distribution of
$0.62 per share. The estimated
recovery to holders that vote to
reject the Third Joint Plan is
$0.00 to $0.74 per share.
Class 10A: SWINC Subsidiary o Impaired
Interests
Estimated Amount: SWINC's o On the Effective Date or such
investments in SWINC other date set by an order of the
Subsidiaries are approx. Court, all Interests in the SWINC
$210 million Subsidiaries shall be deemed
cancelled and the holders of
Allowed Class 10A: SWINC
Subsidiary Interests shall not be
entitled to and shall not receive
or retain any property or
interest on account of such
Interests.
o Estimated Recovery: 0%
CONSOLIDATED SWE&C ESTATE CLASSES:
Class Description Treatment under the Third Joint Plan
Class 1B: SWE&C o Unimpaired
Miscellaneous
Secured Claims
Estimated Amount: Approx. o Each holder of an Allowed Class 1B:
$0 to $3 million SWE&C Miscellaneous Secured Claim
shall receive either (a) Cash
equal to the unpaid portion of
such Allowed SWE&C Miscellaneous
Secured Claim or (b) such other
treatment as to which the SWE&C
Liquidating Trustee and the
holder of such Allowed Class 1B:
SWE&C Miscellaneous Secured Claim
agrees to in writing.
o Estimated Recovery: 100%
Class 2B: SWE&C Other
Priority Claims o Unimpaired
Estimated Amount: Approx. o Each holder of an Allowed Class
$0 to $500,000 2B: SWE&C Other Priority Claim
shall receive in full
satisfaction, settlement, release
and discharge of and in exchange
for such Allowed Class 2B: SWE&C
Other Priority Claim either (a)
Cash equal to the unpaid portion
of such Allowed Class 2B: SWE&C
Other Priority Claim or (b) such
other treatment as to which the
SWE&C Liquidating Trustee and the
holder of such Allowed SWE&C
Other Priority Claim shall have
agreed upon in writing.
o Estimated Recovery: 100%
Class 3B: - SWE&C Asbestos o Impaired
Claims
Estimated Amount: o Each holder of an Allowed Class
Approx. $0 to $125 3B: SWE&C Asbestos Claim shall
million in total amount receive in full satisfaction,
of Asbestos Claims settlement, release and discharge
collectively in the of, and in exchange for such
Consolidated SWINC Allowed Class 3B: SWE&C Asbestos
Estate and the Claim (a) its Pro Rata share of
Consolidated SWE&C the Asbestos Trust Assets (as set
Estate. The Proponents forth in Article VII.L. of the
believe that Allowed Third Joint Plan), subject to the
Asbestos Claims, if any, terms and conditions of the
will reside solely in Asbestos Trust Agreement, or (b)
the Consolidated SWE&C such other treatment as to which
Estate. the Asbestos Trustee and such
holder shall have agreed upon in
writing.
o Estimated Recovery: 20% - 100%
Class 4B: SWE&C Convenience o Impaired
Claims
Estimated Amount: Approx. o Each holder of an Allowed Class
$0 to $50,000 5B: SWE&C General Unsecured Claim
that elects to be treated as a
Class 4B: SWE&C Convenience Claim
shall receive in full
satisfaction, release and
discharge of and in exchange for
such Allowed Class 5B: SWE&C
General Unsecured Claim the
lesser of $1000 or 50% of its
Allowed Class 5B: SWE&C General
Unsecured Claim.
Only holders of Class 5B: SWE&C
General Unsecured Claim who vote
in favor of the Third Joint Plan
may elect to have their claim
treated as a Class 4B: SWE&C
Convenience Claim.
o Estimated Recovery: 50%
Class 5B: SWE&C General o Impaired
Unsecured Claims
Estimated Amount: Approx. o Each holder of an Allowed Class
$55 to $300 million 5B: SWE&C General Unsecured Claim
shall receive a beneficial
interest in the SWE&C Liquidating
Trust entitling such holder to
receive in full satisfaction,
release and discharge of, and in
exchange for such Allowed Class
5B: SWE&C General Unsecured
Claim, its Pro Rata share of the
Semi-Annual Class 5B Distribution
Amount.
o Estimated Recovery: 20% - 50%
Class 6B: SWE&C Intraestate o Impaired
Claims
Estimated Amount: Approx. o On the Effective Date or such
$0 to $100,000 other date set by an order of the
Court, all Allowed Class 6B:
SWE&C Intraestate Claims shall be
deemed waived, released,
discharged and cancelled and the
holders of Allowed Class 6B:
SWE&C Intraestate Claims shall
not be entitled to and shall not
receive or retain any property or
interest on account of such
Allowed Claims.
o Estimated Recovery: 0%
Class 7B: SWINC Intercompany o Impaired
Claims
Estimated Amount: Approx. o Holders of Allowed Class 7B: SWINC
$210 million Intercompany Claims shall not
receive or retain any
distribution on account of such
Allowed Class 7B: SWINC
Intercompany Claim.
o Estimated Recovery: 0%
Class 8B: SWE&C Subordinated o Impaired
Claims
Estimated Amount: Approx. o Each holder of Allowed Class 8B:
$0 to $25 million SWE&C Subordinated Claims shall
not receive or retain any
distribution on account of such
Allowed Class 8B: SWE&C
Subordinated Claim.
o Estimated Recovery: 0%
Class 9B: - SWE&C Subsidiary o Impaired
Interests
Estimated Amount: Approx. o On the Effective Date or such
$0 to $230 million other date set by an order of the
Court, all Interests in the SWE&C
Subsidiaries shall be cancelled
and the holders of Allowed Class
9B: SWE&C Subsidiary Interests
shall not be entitled to and
shall not receive or retain any
property or interest on account
of such Interests.
o Estimated Recovery: 0%
Class 10B: SWE&C Equity o Impaired
Interests
o On the Effective Date or such
other date set by an order of the
Court, all Interests in SWE&C
shall be cancelled and the
holders of Class 10B: SWE&C
Interests shall not be entitled
to and shall not receive or
retain any property or interest
on account of such Interests.
o Estimated Recovery: 0%
C. Claims Estimates
1. SWINC
The estimated recovery to the holders of Claims and Interests
relating to SWINC and the SWINC Subsidiaries is based upon the Plan
Proponents' current estimates of Allowed SWINC Claims and Allowed SWINC
Interests. As of June 30, 2003, the aggregate amount of SWINC Administrative
Claims, SWINC Priority Tax Claims, SWINC Other Priority Claims, and the
Secured Intercompany Claims against SWINC and the SWINC Subsidiaries, as
reflected in the proofs of claim filed by holders of such claims, or in the
event no proof of claim was filed, in the Schedules or, with respect to SWINC
Administrative Claims, in the Debtors' books and records, is approximately
$5.3 million, excluding Claims for which no amounts were specified,
unliquidated Claims, amended Claims and duplicative Claims.
As of June 30, 2003, the aggregate amount of SWINC Asbestos Claims
(with the caveat set forth in B.6 above), SWINC General Unsecured Claims,
SWINC Intraestate Claims, SWINC Subordinated Claims, and SWINC Securities
Claims against SWINC and the SWINC Subsidiaries, as reflected in the proofs of
claim filed by holders of such claims, or, in the event no proof of claim was
filed, in the Schedules, is approximately $550 million, excluding Claims for
which no amounts were specified, unliquidated Claims, amended Claims and
duplicative Claims.
The aggregate number of Class 9A: SWINC Equity Interests issued and
outstanding as of the Petition Date is approximately 14.3 million shares.
The Plan Proponents estimate that after the completion of the Claims
and Interests reconciliation, and Claims and Interests objection processes
currently under way, the amount of Allowed SWINC Administrative Claims,
Allowed SWINC Priority Tax Claims, Allowed Other SWINC Priority Claims, and
the SWINC Secured Claims (including the SWE&C Setoff Claims) against SWINC and
the SWINC Subsidiaries will aggregate between $6.0 million and $7.0 million.
The Plan Proponents estimate that the amount of Allowed SWINC Asbestos Claims,
Allowed SWINC General Unsecured Claims, Allowed SWINC Intraestate Claims,
Allowed SWINC Subordinated Claims, and Allowed SWINC Securities Claims will
aggregate between $67.0 million and $126.5 million. To the extent that the
actual amount of Allowed SWINC Claims varies from the amount estimated by the
Plan Proponents the recoveries of holders of Allowed Class 3A: SWINC Asbestos
Claims, Allowed Class 5A: SWINC General Unsecured Claims, Allowed Class 7A:
SWINC Subordinated Claims, Allowed Class 8A: SWINC Securities Claims and
Allowed Class 9A: SWINC Equity Interests may be higher or lower than such
estimated amounts.
2. SWE&C
As of June 30, 2003, the aggregate amount of SWE&C Administrative
Claims, SWE&C Priority Tax Claims, SWE&C Other Priority Claims and SWE&C
Miscellaneous Secured Claims against SWE&C and the SWE&C Subsidiaries, as
reflected in the proofs of claim filed by holders of such claims, or, in the
event no proof of claim was filed, in the Schedules, in the Debtors' books and
records or, with respect to SWE&C Administrative Claims, in the Debtors' books
and records, is approximately $6.0 million, excluding Claims for which no
amounts were specified, unliquidated Claims, amended Claims and duplicative
Claims.
As of June 30, 2003, the aggregate amount of SWE&C Asbestos Claims
(with the caveat set forth in B.6 above), SWE&C General Unsecured Claims,
SWE&C Intraestate Claims, SWE&C Intercompany Claims, and SWE&C Subordinated
Claims as reflected in the proofs of claim filed by holders of such claims,
or, in the event no proof of claim was filed, in the Schedules, is
approximately $550 million, excluding Claims for which no amounts were
specified, unliquidated Claims, amended Claims and duplicative Claims.
The Plan Proponents estimate that after the completion of the Claims
and Interests reconciliation and Claims and Interests objection processes
currently under way, the amount of Allowed SWE&C Administrative Claims,
Allowed SWE&C Priority Tax Claims, Allowed SWE&C Other Priority Claims, and
Allowed SWE&C Miscellaneous Secured Claims will aggregate between $7 million
to $8 million. The Plan Proponents estimate that the amount of Allowed SWE&C
Asbestos Claims, Allowed SWE&C General Unsecured Claims, Allowed SWE&C
Intercompany Claims, and Allowed SWE&C Subordinated Claims will aggregate
between $50 million and $400 million. To the extent that the actual amount of
Allowed SWE&C Claims varies from the amount estimated by the Plan Proponents,
the recoveries of holders of Allowed Class 3B: SWE&C Asbestos Claims, Allowed
Class 5B: SWE&C General Unsecured Claims, Allowed Class 7B: SWE&C Intercompany
Claims and Allowed Class 8B: SWE&C Subordinated Claims may be higher or lower
than such estimated amounts. Moreover, if Class 5B: SWE&C General Unsecured
Claims do not vote to accept the Third Joint Plan, then Class 7B: SWE&C
Intercompany Claims will not be subordinated. In that event, the estimated
recovery for holders of Allowed Claims in Class 5B will be dramatically
decreased.
ALTHOUGH THE PLAN PROPONENTS BELIEVE THAT THE ESTIMATED PERCENTAGE
RECOVERIES ARE REASONABLE AND WITHIN THE RANGE OF ASSUMED RECOVERY, THERE IS
NO ASSURANCE THAT THE ACTUAL AMOUNTS OF ALLOWED CLAIMS IN EACH CLASS WILL NOT
MATERIALLY EXCEED OR BE EXCEEDED BY THE ESTIMATED AGGREGATE AMOUNTS SHOWN IN
THE TABLE ABOVE. The actual recoveries under the Third Joint Plan by the tax
consequences to the Debtors, the Debtors' creditors will be dependent upon a
variety of factors including, but not limited to, whether, and in what amount,
contingent claims against the Debtors become non-contingent and fixed and
whether, and to what extent, Disputed Claims and Disputed Interests are
resolved in favor of the Debtors rather than the claimants. Accordingly, no
representation can be or is being made with respect to whether each Estimated
Percentage Recovery shown in the table above will be realized by the holder of
an Allowed Claim or Allowed Interest in any particular Class.
D. Distributions
Unless otherwise provided in the Third Joint Plan, distributions with
respect to Allowed Claims or Interests shall be made on the later of (i) the
Effective Date or (ii) the first Semi-annual Distribution Date after the date
on which a Claim or Interest becomes Allowed and shall be in the amounts and
of the type specified in the Third Joint Plan. In the event that a Claim or
Interest becomes an Allowed Claim or Interest after a distribution has been
made to an Allowed Claim or Interest in the same class, the holder of such an
Allowed Claim will receive its Pro Rata Share of the previous distributions to
the holders of Allowed Claims or Interests in the Class in addition to its Pro
Rata Share of the Semi-Annual Distribution to that Class of Claims or
Interests.
TABLE OF CONTENTS
PAGE
EXECUTIVE SUMMARY...................................................................................v
A. Background...............................................................v
B. Summary of the Third Joint Plan.........................................vi
1. Substantive Consolidation of SWINC and SWINC
Subsidiaries...................................................vi
2. Substantive Consolidation of SWE&C and SWE&C
Subsidiaries..................................................vii
3. Pension Plan Reversion........................................vii
4. Federal Settlement...........................................viii
5. The Maine Yankee Settlement....................................xi
6. The Equity Settlement Fund....................................xii
8. Distributions to Holders of Claims and Interests.............xiii
C. Claims Estimates.....................................................xxvii
1. SWINC.......................................................xxvii
2. SWE&C......................................................xxviii
D. Distributions.........................................................xxix
I. INTRODUCTION...............................................................................1
A. Definitions..............................................................2
B. Notice to Holders of Claims and Interests................................2
C. Solicitation Package.....................................................2
D. General Voting Procedures, Ballots, and Voting Deadline..................3
E. Parties in Interest Entitled to Vote.....................................3
F. Classes Impaired Under the Third Joint Plan..............................3
1. SWINC Impaired Classes..........................................3
2. SWE&C Impaired Classes..........................................4
G. Special Voting Procedures for Holders of Equity Securities...............5
1. Beneficial Owners...............................................5
2. Brokerage Firms, Banks and Other Nominees.......................6
H. Confirmation Hearing and Deadline for Objections to Confirmation.........6
II. HISTORY OF THE DEBTORS AND COMMENCEMENT OF THE CHAPTER 11 CASES............................8
A. Description of the Company's Business Operations.........................8
1. The Engineering, Construction and Consulting Business...........8
2. The Nordic Business.............................................9
B. Capital Structure of the Debtors.........................................9
C. Corporate Structure of the Company.......................................9
1. Current Corporate Structure.....................................9
2. Board of Directors..............................................9
3. Senior Officers................................................10
4. Disclosure of Director and Officer Interests...................10
D. Summary of Securities Litigation........................................10
E. Events Leading to Chapter 11 Filings....................................11
III. THE CHAPTER 11 CASES......................................................................12
A. First Day Orders........................................................12
B. Appointment of Creditors' Committee and Equity Committee................13
C. Sale of Substantially All of the Debtors' Assets........................14
D. Chapter 11 Cases Subsequent to the Shaw Sale............................14
E. Assets from Non-Debtor U.K. Affiliate...................................15
F. Summary of Claims Process and Bar Date..................................16
1. Schedules of Statements and Financial Affairs..................16
2. Claims Bar Date and Proofs of Claim............................16
3. The Claims Agent...............................................16
4. Claims Objections and Claims Reconciliation....................16
5. Reclassification of Claims.....................................17
G. Summary of Material Claims Litigation Matters...........................18
1. Maine Yankee...................................................18
2. Isobord .......................................................19
3. CanFibre of Riverside..........................................19
4. CanFibre of Lackawanna.........................................20
5. Ras Tanura.....................................................22
6. Environmental Claims...........................................24
H. The Creditors' Committee Plan and the Equity Committee Plan.............25
1. The Creditors' Committee Plan..................................25
2. The Equity Committee Plan......................................25
IV. SUMMARY OF THE THIRD JOINT PLAN...........................................................26
A. Overall Structure of the Third Joint Plan...............................27
B. Substantive Consolidation...............................................27
1. General Description............................................28
2. Legal Standards for Substantive Consolidation..................28
3. The Substantive Consolidation Litigation.......................29
4. The Bases for Two Substantively Consolidated Estates...........33
5. The Substantive Consolidation Settlement.......................34
C. The Federal Settlement..................................................36
D. The Maine Yankee Settlement.............................................38
E. The Equity Settlement Fund..............................................40
F. The Asbestos Trust......................................................40
G. Reorganized SWINC and the SWE&C Liquidating Trust.......................41
H. Classification and Treatment of Claims and Interests....................42
1. General Administrative Claims..................................43
2. Treatment of Claims Against and Interests in the
Consolidated SWINC Estate......................................44
3. Treatment of Claims Against and Interests in the
Consolidated SWE&C Estates.....................................49
I. Distributions Under the Third Joint Plan................................53
1. Sources of Cash for Plan Distributions.........................54
2. Distributions for Claims or Interests Allowed as of the
Effective Date.................................................54
3. Resolution and Treatment of Disputed, Contingent and
Unliquidated Claims and Disputed Interests.....................56
J. Means for Implementation of the Third Joint Plan........................60
1. Merger of Entities.............................................60
2. Continued Corporate Existence; Dissolution of SWE&C
and the SWE&C Subsidiaries ....................................60
3. Certificate of Incorporation and By-laws of Reorganized
SWINC..........................................................60
4. Directors and Officers of Reorganized SWINC....................61
5. Corporate Action...............................................61
6. Cancellation of Securities, Instruments and Agreements
Evidencing Claims and Interests................................61
7. Issuance of Reorganized SWINC New Common Stock
and Preferred Stock............................................61
8. Effectuating Documents; Further Transactions...................65
9. No Revesting of Assets.........................................65
10. Preservation of Rights of Action...............................66
11. Creditors' Committee and Equity Committee......................67
12. Special Provisions Regarding Insured Claims....................68
13. Consolidated SWINC Estate Governing Board......................68
K. The SWINC Plan Administrator............................................69
1. Appointment....................................................69
2. Rights, Powers and Duties of the SWINC Estate and the
SWINC Plan Administrator.......................................69
3. Compensation...................................................70
4. Indemnification................................................70
5. Insurance......................................................71
L. The Asbestos Trust......................................................71
M. The Asbestos Trustee....................................................72
1. Appointment....................................................72
2. Rights, Powers and Duties of the Asbestos Trustee .............72
3. Compensation of the Asbestos Trustee...........................73
4. Indemnification................................................73
5. Insurance......................................................73
6. Asbestos Insurance Policies....................................74
N. The SWE&C Liquidating Trust.............................................74
1. Appointment of Trustee.........................................74
2. Transfer of SWE&C Liquidating Trust Assets to the
SWE&C Liquidating Trust........................................74
3. The SWE&C Liquidating Trust....................................74
4. Compensation of the SWE&C Liquidating Trustee..................76
5. The SWE&C Liquidating Trust Advisory Board.....................76
O. Interestate Oversight Board.............................................77
P. Other Matters...........................................................78
1. Treatment of Executory Contracts and Unexpired Leases..........78
2. Bar Dates for Certain Claims...................................79
3. Withholding and Reporting Requirements.........................80
4. Setoffs........................................................80
5. Payment of Statutory Fees......................................80
6. Amendment or Modification of the Third Joint Plan..............80
7. Severability of Plan Provisions................................81
8. Successors and Assigns.........................................81
9. Plan Supplement................................................81
10. Revocation, Withdrawal or Non-Consummation.....................81
Q. Retention of Jurisdiction...............................................82
R. Conditions To Confirmation and Consummation.............................83
1. Conditions to Confirmation.....................................83
2. Conditions to Effective Date...................................84
3. Waiver of Conditions...........................................84
S. Effect of Third Joint Plan Confirmation.................................84
1. Binding Effect.................................................84
2. Releases.......................................................85
3. Discharge of Claims and Termination of Interests...............86
4. Exculpation and Limitation of Liability........................86
5. Injunction.....................................................87
6. Treatment of Indemnification Claims............................88
7. Term of Injunction or Stays....................................89
V. CERTAIN RISK FACTORS TO BE CONSIDERED.....................................................89
A. Certain Bankruptcy Considerations.......................................89
B. Claims Estimations......................................................89
C. Certain Litigation......................................................90
D. Income Taxes............................................................90
E. Pension Plan............................................................91
VI. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS........................................92
VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE THIRD JOINT PLAN...........................92
A. Tax Consequences to the Debtors.........................................93
B. Tax Consequences to Holders of Claims and Interests.....................94
C. Consequences to Pension Plan...........................................101
D. Importance of Obtaining Professional Tax Assistance....................102
E. Importance of Obtaining Professional Tax Assistance....................102
VIII. CONFIRMATION OF THE THIRD JOINT PLAN.....................................................102
A. Acceptance of the Third Joint Plan.....................................103
B. Feasibility............................................................103
C. Best Interests Test....................................................103
D. Liquidation Analysis...................................................104
E. Application of the "Best Interests" Test to the Liquidation
Analysis and the Valuation.............................................104
F. Confirmation Without Acceptance Of All Impaired Classes: The
"Cramdown" Alternative.................................................105
IX. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE THIRD JOINT PLAN....................105
A. Continuation of the Bankruptcy Cases...................................106
B. Alternative Plan(s)....................................................106
C. Liquidation under Chapter 7............................................106
X. RECOMMENDATION AND CONCLUSION............................................................107
APPENDICES
APPENDIX A LIST OF DEBTOR ENTITIES COMPRISING THE CONSOLIDATED SWINC
ESTATE AND THE CONSOLIDATED SWE&C ESTATE
APPENDIX B THIRD AMENDED JOINT PLAN OF REORGANIZATION OF THE DEBTORS
IN POSSESSION, OFFICIAL COMMITTEE OF UNSECURED CREDITORS,
FEDERAL INSURANCE COMPANY, MAINE YANKEE ATOMIC POWER
COMPANY, AND THE OFFICIAL COMMITTEE OF EQUITY SECURITY
HOLDERS WITH RESPECT TO (I) STONE & WEBSTER, INCORPORATED
AND CERTAIN OF ITS SUBSIDIARIES AND AFFILIATES AND (II) STONE &
WEBSTER ENGINEERS AND CONSTRUCTORS, INC. AND CERTAIN OF ITS
SUBSIDIARIES AND AFFILIATES
APPENDIX C LIQUIDATION ANALYSIS
Appendix C-1: Liquidation Analysis for Consolidated SWINC Estate and
Consolidated SWE&C Estate
Appendix C-2: Liquidation Analysis for Each Debtor
APPENDIX D SUBSTANTIVE CONSOLIDATION SETTLEMENT CASH FUNDING ANALYSIS
APPENDIX E INCURRED PROFESSIONAL FEE SUMMARY BY ESTATE
I. INTRODUCTION
Stone & Webster, Incorporated ("SWINC"), Stone & Webster Engineers
and Constructors, Inc. ("SWE&C"), and their subsidiaries and affiliates that
are debtors and debtors-in- possession in the above-captioned Chapter 11 Cases
(together with SWINC and SWE&C, the "Debtors" or the "Company") and their
co-proponents the Official Committee of Unsecured Creditors (the "Creditors'
Committee"), Federal Insurance Company, an Indiana corporation ("Federal"),
Maine Yankee Atomic Power Company ("Maine Yankee"), and the Official Committee
of Equity Security Holders of Stone & Webster, Incorporated (the "Equity
Committee") (collectively, the "Plan Proponents"), submit this disclosure
statement (the "Disclosure Statement") pursuant to section 1125 of the United
States Bankruptcy Code (the "Bankruptcy Code"), for use in the solicitation of
votes on the Third Amended Joint Plan of Reorganization of the Debtors in
Possession, Official Committee of Unsecured Creditors, Federal Insurance
Company, Maine Yankee Atomic Power Company, and the Official Committee of
Equity Security Holders for (I) Stone & Webster, Incorporated and Certain of
its Subsidiaries and Affiliates and (II) Stone & Webster Engineers and
Constructors, Inc. and Certain of its Subsidiaries and Affiliates dated August
12, 2003 (the "Third Joint Plan"), which Third Joint Plan was filed with the
United States Bankruptcy Court for the District of Delaware (the "Court"), a
copy of which is attached as Appendix B hereto.
This Disclosure Statement sets forth certain information regarding
the Debtors' pre- petition history and significant events that have occurred
during the Debtors' Chapter 11 Cases. This Disclosure Statement also describes
the Third Joint Plan, alternatives to the Third Joint Plan, effects of
confirmation of the Third Joint Plan, and the manner in which distributions
will be made under the Third Joint Plan. In addition, 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.
FOR A DESCRIPTION OF THE THIRD JOINT PLAN AS IT RELATES TO HOLDERS OF
CLAIMS AGAINST AND INTERESTS IN THE DEBTORS, PLEASE SEE ARTICLE IV - "SUMMARY
OF THE THIRD JOINT PLAN."
THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF
THE THIRD JOINT PLAN, STATUTORY PROVISIONS, DOCUMENTS RELATED TO THE THIRD
JOINT PLAN, EVENTS IN THE DEBTORS' CHAPTER 11 CASES, AND FINANCIAL
INFORMATION. ALTHOUGH THE PLAN PROPONENTS BELIEVE THAT THE THIRD JOINT PLAN
AND RELATED DOCUMENT SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE
QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH
DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS
DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT, EXCEPT
WHERE OTHERWISE SPECIFICALLY NOTED. THE PLAN PROPONENTS ARE UNABLE TO WARRANT
OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL
INFORMATION, IS WITHOUT ANY INACCURACY OR OMISSION.
NOTHING CONTAINED HEREIN SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR
LIABILITY BY ANY PARTY, BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING
INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE ADVICE ON
THE TAX OR OTHER LEGAL EFFECTS OF THE DEBTORS' LIQUIDATION OR THIRD JOINT PLAN
AS TO HOLDERS OF CLAIMS OR INTERESTS. YOU SHOULD CONSULT YOUR PERSONAL COUNSEL
OR TAX ADVISOR ON ANY QUESTIONS OR CONCERNS REGARDING TAX OR OTHER LEGAL
CONSEQUENCES OF THE THIRD JOINT PLAN.
A. Definitions
Unless otherwise defined, capitalized terms used in this Disclosure
Statement have the meanings ascribed to them in the Third Joint Plan.
B. Notice to Holders of Claims and Interests
This Disclosure Statement is being transmitted to certain holders of
Claims and Interests for the purpose of soliciting votes on the Third Joint
Plan and to others for informational purposes. The primary purpose of this
Disclosure Statement is to provide adequate information to enable the holder
of a Claim against or Interest in the Debtors to make a reasonably informed
decision with respect to the Third Joint Plan before exercising their right to
vote to accept or to reject the Third Joint Plan.
On August 27, 2003, the Court approved this Disclosure Statement as
containing information of a kind and in sufficient detail adequate to enable
the holders of Claims against and Interests in the Debtors to make an informed
judgment about the Third Joint Plan. THE COURT'S APPROVAL OF THIS DISCLOSURE
STATEMENT CONSTITUTES NEITHER A GUARANTY OF THE ACCURACY OR COMPLETENESS OF
THE INFORMATION CONTAINED HEREIN, NOR AN ENDORSEMENT OF THE THIRD JOINT PLAN
BY THE COURT.
WHEN AND IF CONFIRMED BY THE COURT, THE THIRD JOINT PLAN WILL BIND
ALL HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTORS, WHETHER OR NOT
THEY ARE ENTITLED TO VOTE OR DID VOTE ON THE THIRD JOINT PLAN AND WHETHER OR
NOT THEY RECEIVE OR RETAIN ANY DISTRIBUTIONS OR PROPERTY UNDER THE THIRD JOINT
PLAN. THUS, YOU ARE ENCOURAGED TO READ THE THIRD JOINT PLAN AND THIS
DISCLOSURE STATEMENT CAREFULLY. IN PARTICULAR, HOLDERS OF IMPAIRED CLAIMS OR
IMPAIRED INTERESTS WHO ARE ENTITLED TO VOTE ON THE THIRD JOINT PLAN ARE
ENCOURAGED TO READ THIS DISCLOSURE STATEMENT, THE THIRD JOINT PLAN, AND THE
EXHIBITS TO THE THIRD JOINT PLAN CAREFULLY AND IN THEIR ENTIRETY BEFORE VOTING
TO ACCEPT OR TO REJECT THE THIRD JOINT PLAN. This Disclosure Statement
contains important information about the Third Joint Plan, considerations
pertinent to acceptance or rejection of the Third Joint Plan, and developments
concerning the Chapter 11 Cases.
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT AUTHORIZED BY THE
COURT TO BE USED IN CONNECTION WITH THE SOLICITATION OF VOTES ON THE THIRD
JOINT PLAN. No solicitation of votes may be made until distribution of this
Disclosure Statement, and no person has been authorized to distribute any
information concerning the Debtors other than the information contained
herein.
C. Solicitation Package
Accompanying this Disclosure Statement are copies of (i) the Third
Joint Plan (Appendix B hereto); (ii) the notice of, among other things, the
time for submitting Ballots to accept or reject the Third Joint Plan, the
date, time and place of the hearing to consider confirmation of the Third
Joint Plan and related matters, and the time for filing objections to
confirmation of the Third Joint Plan (the "Confirmation Hearing Notice"); and
(iii) if you are entitled to vote, one or more Ballots (and return envelopes)
to be used by you in voting to accept or to reject the Third Joint Plan. If
you did not receive a Ballot in your package and believe that you should have,
please contact the Voting Agent named below at the address or telephone number
set forth in the next subsection.
D. General Voting Procedures, Ballots, and Voting Deadline
After carefully reviewing the Third Joint Plan, this Disclosure
Statement, and (if you are entitled to vote) the detailed instructions
accompanying your Ballot, please indicate your acceptance or rejection of the
Third Joint Plan by checking the appropriate box on the enclosed Ballot. To
accept or reject the Third Joint Plan, you must complete and sign your
original Ballot (copies will not be accepted) and return it in the envelope
provided so that it is RECEIVED NO LATER THAN OCTOBER 20, 2003 AT 4:00 P.M.
(EASTERN TIME) (THE "VOTING DEADLINE") BY TRUMBULL SERVICES, L.L.C. (THE
"CREDITOR VOTING AGENT") AT SUCH ADDRESS LISTED ON THE BALLOT. BALLOTS
RECEIVED AFTER SUCH TIME WILL NOT BE COUNTED.
Each Ballot has been coded to reflect the Class of Claims or
Interests in which you are voting. Accordingly, in voting to accept or reject
the Third Joint Plan, you must use only the coded Ballot or Ballots sent to
you with this Disclosure Statement. The Ballot(s) you were provided were based
upon the Debtors' review of the proofs of claims filed in this case and the
classification of Claims included in the Debtors' Amended Schedules and
Statements. See Article III.E.1. If you believe you received the wrong Ballot
or did not receive a Ballot for a Class in which you hold a Claim or Interest,
please contact the Voting Agent named below at the address or telephone number
set forth in the Section F below.
E. Parties in Interest Entitled to Vote
Under Bankruptcy Code section 1124, a class of claims or interests is
deemed to be "impaired" under a plan unless (i) the plan leaves unaltered the
legal, equitable, and contractual rights to which such claim or interest
entitles the holder thereof or (ii) notwithstanding any legal right to an
accelerated payment of such claim or interest, the plan cures all existing
defaults (other than defaults resulting from the occurrence of events of
bankruptcy) and reinstates the maturity of such claim or interest as it
existed before the default.
In general, a holder of a claim or interest may vote to accept or to
reject a plan if (i) the claim or interest is "allowed," which means generally
that no party in interest has objected to such claim or interest, and (ii) the
claim or interest is impaired by the plan. If, however, the holder of an
impaired claim or interest will not receive or retain any distribution under
the plan on account of such claim or interest, the Bankruptcy Code deems such
holder to have rejected the plan, and, accordingly, holders of such claims and
interests do not actually vote on the plan. If a claim or interest is not
impaired by the plan, the Bankruptcy Code deems the holder of such claim or
interest to have accepted the plan and, accordingly, holders of such claims
and interests are not entitled to vote on the plan.
F. Classes Impaired Under the Third Joint Plan
1. SWINC Impaired Classes
Classes 3A, 4A, 5A, 7A, 8A, and 9A are entitled to vote to accept or
reject the Third Joint Plan. By operation of law, each Unimpaired Class of
Claims or Interests is deemed to have accepted the Third Joint Plan and,
therefore, is not entitled to vote to accept or reject the Third Joint Plan.
By operation of law, Classes 6A and 10A are deemed to have rejected the Third
Joint Plan and therefore are not entitled to vote to accept or reject the
Third Joint Plan.
2. SWE&C Impaired Classes
Classes 3B, 4B, 5B and 7B are entitled to vote to accept or reject
the Third Joint Plan. By operation of law, each Unimpaired Class of Claims or
Interests is deemed to have accepted the Third Joint Plan and, therefore, is
not entitled to vote to accept or reject the Third Joint Plan. By operation of
law, Classes 6B, 8B, 9B and 10B are deemed to have rejected the Third Joint
Plan and therefore are not entitled to vote to accept or reject the Third
Joint Plan.
FOR HOLDERS OF CLASS 3A, 5A, 7A, 8A, 3B, AND 5B CLAIMS, IN ORDER FOR
YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AND RETURNED
TO THE ADDRESS IN THE PRE-ADDRESSED ENVELOPE PROVIDED, IN ACCORDANCE WITH THE
VOTING INSTRUCTIONS ACCOMPANYING THE BALLOT AND RECEIVED NO LATER THAN THE
VOTING DEADLINE (DEFINED ABOVE). BALLOTS RECEIVED AFTER SUCH TIME WILL NOT BE
COUNTED.
FOR HOLDERS OF CLASS 9A: SWINC EQUITY INTERESTS, IN ORDER FOR YOUR
VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AND RETURNED TO THE
ADDRESS ON THE PRE-ADDRESSED ENVELOPE PROVIDED. YOUR BALLOT (IF PREVALIDATED)
OR THE MASTER BALLOT CAST ON YOUR BEHALF MUST BE RECEIVED NO LATER THAN
OCTOBER 20, 2003 AT 4:00 P.M. EASTERN TIME BY INNISFREE M&A (THE "SECURITIES
VOTING AGENT") AT THE ADDRESS LISTED ON THE BALLOT. BALLOTS RECEIVED AFTER
SUCH TIME WILL NOT BE COUNTED.
In addition to voting to accept or reject the Third Joint Plan,
holders of Claims in Class 5A: SWINC General Unsecured Claims and Class 5B:
SWE&C General Unsecured Claims have the right to elect to have their Allowed
Claim in Class 5A or Class 5B treated as an Allowed Convenience Claim in Class
4A or Class 4B, respectively. There are no separate Class 4A or Class 4B
Ballots. To make such an election, the holder of a Class 5A General Unsecured
Claim or Class 5B: SWE&C General Secured Claim must check the box on their
respective Ballot to show that the holder has elected treatment as a
Convenience Claim. Absent checking the box on the Ballot, the holder of a
Class 5A or Class 5B Claim shall be deemed to have elected not to be treated
as a Convenience Claim.
If you have any questions about the procedure for voting your Claim
or Interest or with respect to the packet of materials that you have received,
please contact the Creditor Voting Agent at the following address and phone
number:
Stone & Webster Incorporated
c/o Trumbull Services LLC
P.O. Box 673
Windsor, Connecticut 06095-9718
(860) 687-3917
If you have any questions about the procedure for voting your Class
9A: SWINC Equity Interest, please contact the Equity Voting Agent at the
following address and phone number:
Stone & Webster Incorporated
c/o Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
(877) 750-2689
If you wish to obtain, at your own expense unless otherwise
specifically required by Bankruptcy Rule 3017(d), an additional copy of the
Third Joint Plan, this Disclosure Statement, or any exhibits to such
documents, please contact the Creditor Voting Agent or the Equity Voting
Agent, as appropriate.
G. Special Voting Procedures for Holders of Equity Securities
The record date for determining which holders of Old Securities in
SWINC are entitled to vote on the Third Joint Plan is August 27, 2003 (the
"Equity Voting Record Date"). The indenture trustees, agents, or servicers, as
the case may be, for the Old Securities will not vote on behalf of the holders
of such Old Securities. Holders must submit their own Ballots, except as
provided in subsection G.2 below.
1. Beneficial Owners
(a) Any beneficial owner holding Old Securities as record
holder in its own name should vote on the Third Joint
Plan by completing and signing the enclosed Ballot
and returning it directly to the Securities Voting
Agent on or before the Voting Deadline using the
enclosed self-addressed, stamped envelope.
(b) Any beneficial owner holding Old Securities in
"street name" through a brokerage firm, bank, trust
company, or other nominee should vote on the Third
Joint Plan by one of the following two methods (as
selected by the Nominee):
(i) Complete and sign the enclosed beneficial owner
Ballot. Return the Ballot to your nominee as promptly as possible and in
sufficient time to allow such nominee to process the Ballot and return it to
the Securities Voting Agent by the Voting Deadline. If no self-addressed,
stamped envelope was enclosed for this purpose, contact the Voting Agent for
instructions; or
(ii) Complete and sign the Pre-Validated Ballot (as
defined below) provided to you by your bank, brokerage firm, trust company or
other nominee. Return the Pre-Validated Ballot to the Securities Voting Agent
by the Voting Deadline using the return envelope provided in the Solicitation
Package.
Any Ballot returned to a nominee by a beneficial owner will not be
counted for purposes of acceptance or rejection of the Third Joint Plan until
such nominee properly completes and delivers to the Securities Voting Agent a
master ballot (the "Master Ballot") that reflects the vote of such beneficial
owner.
If any beneficial owner owns Old Securities through more than one
broker, bank, or other nominee, such beneficial owner may receive multiple
mailings containing the Ballots. Each such beneficial owner should execute a
separate Ballot for each block of Old Securities that it holds through any
particular nominee and return each Ballot to the respective nominee in the
return envelope provided therewith. Beneficial owners who execute multiple
Ballots with respect to Old Securities held through more than one nominee must
indicate on each Ballot the names of ALL such other nominees and the
additional amounts of such Old Securities so held and voted. If a beneficial
owner holds a portion of the Old Securities through a nominee and another
portion as a record holder, such owner should follow the procedures described
in subparagraph (1)(a) above to vote the portion held of record and the
procedures described in subparagraph (1)(b) above to vote the portion held
through a nominee or nominees.
2. Brokerage Firms, Banks and Other Nominees
An entity (other than a beneficial owner) which is the registered
holder of Old Securities should vote on behalf of the beneficial owners of
such Old Securities by (i) immediately distributing a copy of the Disclosure
Statement and accompanying materials, all appropriate Ballots, and
self-addressed return envelopes to all beneficial owners for whom it holds
such securities, (ii) collecting completed Ballots from its beneficial owners,
and (iii) completing a Master Ballot compiling the votes and other information
from the Ballots so collected, and (iv) transmitting such Master Ballot to the
Securities Voting Agent on or before the Voting Deadline. Such entity may also
pre-validate a ballot by completing all information to be entered on the
Ballot (the "Pre-Validated Ballot") and forwarding the Pre-Validated Ballot to
the beneficial owner for voting. A proxy intermediary acting on behalf of a
brokerage firm or bank may follow the procedures outlined in the preceding
sentence to vote on behalf of such party.
H. Confirmation Hearing and Deadline for Objections to Confirmation
Pursuant to Bankruptcy Code section 1128 and Bankruptcy Rule 3017(c),
the Court has scheduled a hearing on confirmation of the Third Joint Plan (the
"Confirmation Hearing") to commence on October 31, 2003 at 10:00 a.m.,
prevailing Eastern Time, before the Honorable Peter J. Walsh, Chief United
States Bankruptcy Judge, in the United States Bankruptcy Court, 824 N. Market
Street, Wilmington, Delaware 19801. The Court has directed that objections, if
any, to confirmation of the Third Joint Plan must be filed with the clerk of
the Bankruptcy Court and served so that they are RECEIVED on or before October
20, 2003, at 4:00 p.m. Eastern Time by:
Counsel to the Debtors:
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
Attn: Gregg M. Galardi, Esq.
Eric M. Davis, Esq.
Counsel to the Creditors' Committee:
ORRICK, HERRINGTON & SUTCLIFFE LLP
666 Fifth Avenue
New York, New York 10103-0002
Attn: Anthony J. Princi, Esq.
Lorraine S. McGowen, Esq.
- and -
LANDIS RATH & COBB LLP
919 Market Street, Suite 600
P.O. Box 2087
Wilmington, Delaware 19801
Attn: Adam G. Landis, Esq.
Counsel to Federal:
MANIER & HEROD
One Nashville Place
Suite 2200
150 Fourth Avenue North
Nashville, Tennessee 37219-2494
Attn: J. Michael Franks
Sam H. Poteet, Jr.
Thomas T. Pennington
- and -
DUANE MORRIS LLP
1100 North Market Street
Suite 1200
Wilmington, Delaware 19801-1246
Attn: Michael R. Lastowski
Counsel to the Equity Committee:
BELL BOYD & LLOYD LLC
70 West Madison Street
Chicago, Illinois 60602
Attn: David F. Heroy
Carmen H. Lonstein
- and -
BIFFERATO, BIFFERATO & GENTILOTTI
1308 Delaware Avenue
Wilmington, Delaware 19899
Attn: Ian Connor Bifferato, Esq.
Counsel to Maine Yankee
PIERCE ATWOOD
One Monument Square
Portland, Maine 04101
Attn: William J. Kayatta, Jr.
- and-
MARCUS, CLEGG & MISTRETTA, P.A.
100 Middle Street, East Tower
Portland, Maine 04101-4102
Attn: George J. Marcus
- and -
FERRY, JOSEPH & PEARCE, P.A.
824 Market Street, Suite 904
P.O. Box 1351
Wilmington, Delaware 19899-1351
Attn: Michael B. Joseph
Theodore J. Tacconelli
United States Trustee:
OFFICE OF THE UNITED STATES TRUSTEE
844 North King Street
Wilmington, Delaware 19801
Attn: Margaret Harrison, Esq.
The Confirmation Hearing may be adjourned from time to time by the
Court without further notice except for the announcement of the adjournment at
the Confirmation Hearing or at any subsequent adjourned Confirmation Hearing.
II. HISTORY OF THE DEBTORS AND
COMMENCEMENT OF THE CHAPTER 11 CASES
A. Description of the Company's Business Operations
As of the Petition Date, the Company was principally engaged in
providing professional engineering, construction and consulting services (the
"Engineering, Construction and Consulting Business"). Additionally, certain of
the Company's subsidiaries owned and operated fourteen cold storage
warehousing facilities located primarily in the southeastern United States
(the "Nordic Business") and others owned and operated Stone & Webster office
buildings in Houston, Texas and Schenectady, New York.
1. The Engineering, Construction and Consulting Business
The Company provided engineering, design, construction, consulting
and full environmental services for power, process, governmental, industrial,
transportation and civil works projects. The Company also remained active in
the nuclear power business for utility and governmental clients, and continued
to undertake a significant amount of modification and maintenance work on
existing nuclear power plants as well as decommissioning and decontamination
projects.
The Construction and Consulting Business included three divisions and
a consulting organization which were responsible for marketing and executing
projects on a worldwide basis. Where appropriate, lump-sum contracts were
entered into with customers as a means of providing comprehensive services for
a fixed price, thereby assuming more risk and making the Company more
attractive to the customer.
In fiscal 1999, the Engineering, Construction and Consulting Business
had $1.14 billion in revenues, and an operating loss of $142.5 million.
Included within the operating loss were contract-related provisions of
approximately $150.1 million required to complete a number of lump- sum
projects. The contract revenue value included in the Company's backlog, as of
December 31, 1999, amounted to $2.6 billion.
2. The Nordic Business
The Company's Nordic Business provided low-cost, energy-efficient
refrigerator and freezer storage facilities, customized material handling
services, and blast freezing capacity. It served primarily two groups of
customers: prepared food manufacturers that require cold storage and logistics
services in their distribution channels, and poultry producers that require
blast freezing and storage capacity. In October of 1999, the Company announced
their intention to sell the Nordic Business, a large part of which was
acquired in the fourth quarter of 1998.
B. Capital Structure of the Debtors
As of the Petition Date, there were approximately 17,731,488 shares
of common stock of SWINC issued, of which 14,226,005 shares were outstanding
with 3,505,483 shares held in treasury. In connection with the Shaw Sale, the
Debtors paid off both their post-petition financing facility and the balance
of their prepetition credit facility.
C. Corporate Structure of the Company
1. Current Corporate Structure
The Debtors, as of the Petition Date, operated two distinct lines of
business, engineering and construction and cold storage with numerous
subsidiary companies within each group. Many of the domestic U.S. companies
are also debtors being administered within the Chapter 11 Cases. The Debtors
also operated various real estate and development companies, which were wholly
owned subsidiaries. Presently, the Debtors are winding up all of their
business operations.
2. Board of Directors
The current Board of Directors of SWINC consists of:
Peter M. Wood, Chairman
Donna Bethell
Frank J. A. Cilluffo
The current Board of Directors for SWE&C, the SWE&C Subsidiaries and
the SWINC Subsidiaries consists of:
Peter M. Wood, Chairman
James P. Carroll
3. Senior Officers
James P. Carroll, President and Chief Restructuring Officer
Patrick Connolly, Secretary
4. Disclosure of Director and Officer Interests
Each of the SWINC Directors is a shareholder of SWINC. Mr. Wood is
the beneficial owner of 6,491 shares of SWINC common stock, of which 1,015
shares are held in a deferred account pursuant to the SWINC's Director
Deferral Plan; Ms. Bethell is the beneficial owner of 2,171 shares of SWINC
common stock; and Mr. Cilluffo, reporting for himself and Cilluffo Associates,
L.P., Zenith Associates, L.P., Frank and Irja Cilluffo Foundation and Edward
C. Myers collectively owns 667,871 shares of SWINC common stock. Mr. Cilluffo
has disclaimed beneficial ownership of the 560,400 shares held by Cilluffo
Associates, L.P. and the 105,800 shares held by Zenith Associates, L.P.,
except to the extent of his pecuniary interests in the securities. He has also
disclaimed beneficial ownership of 10,000 shares held by the Frank and Irja
Cilluffo Foundation, and those shares are not included in the above total.
Each of the Directors has also filed proofs of claim against the Debtors in
the Chapter 11 Cases. Mr. Wood seeks payment of certain director's fees,
recovery of the value of the shares held pursuant to the SWINC Director
Deferral Plan as described above, reimbursement for certain expenses and
indemnification and contribution for certain liabilities in excess of
available insurance. Ms. Bethell and Mr. Cilluffo both seek payment of certain
director's fees, reimbursement for certain expenses and indemnification and
contribution for certain liabilities in excess of available insurance.
Mr. Carroll is the beneficial owner of 10,000 shares of SWINC common
stock. Mr. Carroll has filed a proof of claim in the Chapter 11 Cases in which
he seeks indemnification and contribution for certain liabilities in excess of
available insurance. Mr. Carroll also filed a statement of cure claim against
the Debtors in respect of certain contractual obligations, which claim has
since been withdrawn.
D. Summary of Securities Litigation
SWINC is a defendant in In re Stone & Webster, Inc. Securities
Litigation (00-CV- 10974-RCL), a purported securities class action lawsuit in
the United States District Court for the District of Massachusetts (the
"Massachusetts Court"). The lawsuit began as four purported securities class
action lawsuits filed in or about May 2000: Everson v. Stone & Webster, Inc.
et al. (00-CV- 11008-RCL); Blank v. Stone & Webster, Inc. et al.
(00-CV-10926-RCL); Dubois v. Stone & Webster, Inc. et al. (00-CV-10883-RCL);
and Brody v. Stone & Webster, Inc. et al. (00-CV-10874-RCL) (collectively, the
"Class Action Lawsuits"). In addition, two securities class action lawsuits
which make similar allegations were filed against H. Kerner Smith and Thomas
Langford, but not SWINC: Mandelbaum v. Smith et al. (00-CV-11126-RCL) and
Hanson v. Smith et al. (00-CV-11183-RCL). On or about July 25, 2000, SWINC
notified the Massachusetts Court that, pursuant to Bankruptcy Code section
362, the Class Action Lawsuits are subject to the automatic stay applicable to
proceedings against a debtor in bankruptcy and the assets of the debtor in
bankruptcy.
On September 25, 2000, the Massachusetts Court granted a motion to
consolidate the six lawsuits. On January 4, 2001, a Consolidated and Amended
Class Action Complaint (the "Amended Complaint") was filed. The Amended
Complaint added PricewaterhouseCoopers, LLP as a defendant, and alleged that
SWINC violated federal securities laws pursuant to Sections 10(b) and 18 of
the Securities and Exchange Act of 1934 by, among other things, making
materially false and misleading statements or omissions regarding SWINC's
financial condition prior to SWINC's announcements relating to its decision to
revise its 1999 financial statements. The class period for the Amended
Complaint is January 22, 1998 through May 8, 2000. Plaintiffs seek an
unspecified amount of compensatory damages plus costs and attorney fees. The
defendants other than SWINC filed motions to dismiss the Amended Complaint. On
March 28, 2003, the Massachusetts Court entered its memorandum and order
granting in part and denying in part the defendants' motions to dismiss (the
"Memo and Order"). By the Memo and Order, the court granted the motion of
PricewaterhouseCoopers, LLP to dismiss all counts. With respect to the motions
of H. Kerner Smith and Thomas Langford, the court granted the motions to
dismiss with respect to certain counts, but denied the motions to the extent
the allegations in the Amended Complaint relate to allegedly false or
misleading statements in connection with the Form 10-Q for the fiscal quarter
ending June 30, 1999 and the related earnings release issued on July 26, 1999.
Based on current information, the Debtors believe that Plaintiffs'
claims are without merit and intend to defend against the Class Action
Lawsuits vigorously. Although Plaintiffs have not yet quantified their alleged
damages, the Debtors also believe that a recovery, if any, by Plaintiffs would
likely fall within the limits of applicable insurance coverage. To the extent
the Class Action Lawsuits results in an Allowed Claim in excess of such
insurance, such Allowed Claims would be Class 8A: SWINC Securities Claims.
E. Events Leading to Chapter 11 Filings
Prior to the Petition Date, the Company experienced significant
operating losses, and in the second quarter of 1999, the Company began
experiencing liquidity problems. By the end of the third quarter of 1999, the
Company had fully drawn the cash available under its existing credit facility
(as amended or modified, the "Prepetition Credit Facility"). As a consequence,
the amount of the Company's past due trade payables increased, in turn causing
certain of the Company's vendors and subcontractors to delay work on the
Company's projects.
In October 1999, the Company was notified that it was in violation of
the debt covenants of its Prepetition Credit Facility. In November 1999, the
Company therefore sought and obtained a waiver of these covenants and an
agreement with their principal bank-lending group (the "Prepetition Bank
Group") to expand and extend the Prepetition Credit Facility. Under that
agreement, the borrowing facility was increased by $30 million to a maximum of
$160 million and the maturity of the Prepetition Credit Facility was extended
through May 31, 2000. As part of this agreement, SWINC agreed to market the
Nordic Business and to sell its principal headquarters in Boston, the proceeds
of which were to be used to pay down the fixed debt. As a result, the Company
sold its Boston, Massachusetts headquarters building for $187 million, and
used $140 million of the proceeds of such sale to permanently reduce the
borrowing facility to $20 million. The Company also raised additional capital
through bulk sale of one million shares of SWINC's common stock held in
treasury to the Pension Plan for $15.4 million. As of the end of fiscal 1999,
the entire $20 million available for direct borrowings under the Prepetition
Credit Agreement had been drawn down and nearly $90 million of the $100
million letter of credit facility was used and the borrowing was limited to
the amount not yet utilized. In addition, the Prepetition Bank Group clearly
stated its desire not to extend the facility beyond the May expiration date.
Thus, although the Company had relieved its immediate liquidity
concerns, the Company immediately began the search for a longer term credit
arrangement. During this period, the sale of Nordic did not progress as
planned. As a result, the Company sought and entered into another agreement
with the Prepetition Bank Group, under which agreement the maturity date of
the Prepetition Credit Facility was further extended to January 31, 2001. In
addition to extending the maturity date, that amendment provided, among other
things, that the proceeds from a sale of the Nordic Business would be used to
repay the outstanding direct borrowings and provide support to the Prepetition
Bank Group for the nearly $90 million in outstanding letters of credit.
In mid- to late April 2000, however, the Company discovered a
substantial unanticipated cost overrun on a key construction project, and as a
result was required to restate its 1999 financial statements to record a
provision of $27.5 million to complete work on that project. In conjunction
with that restatement, the Company's independent public accountants issued a
modified opinion raising questions regarding the Company's ability to continue
as a going concern, which in turn slowed customer receipts, further
exacerbating the Company's cash flow problems.
In late April and early May 2000, the Company embarked on an
aggressive strategy under which it sought alternative financing, strategic
mergers and possible additional asset sales. The Company stepped up its
efforts to solicit traditional and nontraditional lenders regarding possible
interim and long-term financing. Additionally, the Company entered into
substantive discussions with possible strategic partners regarding potential
transactions involving the sale of not only the Nordic Business but also all
or part of its Engineering, Construction and Consulting Business.
In early May 2000, these efforts resulted in the Company signing a
letter of intent with Jacobs Engineering Group Inc. ("Jacobs") regarding a
transaction pursuant to which Jacobs would acquire substantially all of the
Company's assets in exchange for $150 million in cash and stock; Jacobs would
immediately provide a $50 million secured revolving credit facility (the
"Jacobs Credit Facility"); and the assumption of substantially all of the
Debtors' balance sheet liabilities (including the new Jacobs Credit Facility).
Subsequent to entering into the letter of intent, the Company negotiated the
final terms of the asset purchase agreement with Jacobs in the early morning
of June 2, 2000.
III. THE CHAPTER 11 CASES
On June 2, 2000 (the "Petition Date"), each of the Debtors filed a
voluntary petition for relief under chapter 11 of the Bankruptcy Code. At that
point, all actions and proceedings against the Debtors and all acts to obtain
property from the Debtors were stayed under Bankruptcy Code section 362. The
Debtors have continued to operate their businesses and manage their properties
as debtors-in-possession pursuant to Bankruptcy Code sections 1107(a) and
1108. The Court has jointly administered the Debtors' bankruptcy cases for
procedural purposes only.
A. First Day Orders
On the first day of the Chapter 11 Cases, the Debtors filed several
motions seeking certain relief by virtue of so-called "first day orders." The
first day orders facilitated the transition between the Debtors' prepetition
and postpetition business operations by approving certain regular business
practices that may not be specifically authorized under the Bankruptcy Code or
as to which the Bankruptcy Code requires prior court approval.
The first day orders in the Chapter 11 Cases authorized, among other
things:
o joint administration of each of the Debtors' bankruptcy cases;
o the employment and compensation of professionals utilized by
the Debtors in the ordinary course of business;
o the retention of bankruptcy-related professionals and
establishment of payment procedures for such professionals;
o the continued maintenance of the Debtors' bank accounts,
continued use of existing business forms and continued use of
the Debtors' existing cash management system;
o payments to employees of accrued prepetition wages, salaries
and benefits;
o continued utility service during the pendency of the Chapter 11
Cases;
o payment of prepetition sales, use and other taxes;
o payment of certain prepetition shipping charges;
o postpetition financing and use of cash collateral;
o the implementation of a program to pay valid prepetition
mechanics', materialmens' or other similar liens filed by
various contractors against the Debtors' properties;
o payment of prepetition claims of critical trade vendors;
o confirmation that the Debtors' undisputed obligations arising
from postpetition delivery of goods will have administrative
expense priority status, administrative expense treatment for
certain holders of valid reclamation claims, and authority to
pay certain expenses in the ordinary course of business; and
o payment of prepetition insurance premium financial obligations.
B. Appointment of Creditors' Committee and Equity Committee
On June 14, 2000, the United States Trustee appointed the Creditors'
Committee in these cases. The current members of the Creditors' Committee are
Canfibre of Riverside, Inc. c/o Canfibre Group, Ltd. ("Canfibre"), MDC
Systems, Inc. ("MDC Systems"), and Harbourview Electric, Ltd. ("Harbourview").
Pursuant to a settlement between the Debtors and Canfibre, Canfibre holds an
allowed general unsecured claim in the amount of $3,500,000 against SWEC. MDC
Systems, Inc. filed Proof of Claim numbers 4524 and 5010, each in the amount
of $447,407.85 against SWINC; no objections have been filed to those claims.
Pursuant to a settlement between the Debtors and Harbourview, Harbourview
holds an allowed general unsecured claim in the amount of $1,200,000 against
SWEC.
On June 26, 2000, the United States Trustee the Equity Committee. The
current members of the Equity Committee and the number of shares of Old Common
Stock they each held as of December 1, 2002 are as follows: (1) Dimensional
Fund Advisors, 220,000 shares of Old Common Stock; (2) Harold Rickles, 6,000
shares of Old Common Stock; and (3) Grace Brothers, LTD, 322,900 shares of Old
Common Stock. An affiliate of Grace Brothers, LTD, Rock Finance, LP, owns an
additional 757,200 shares of Old Common Stock. A fourth member of the Equity
Committee, Gregory Blair, resigned on March 14, 2003. Dimensional Fund
Advisors has since sold its shares of Old Common Stock and has resigned from
the Equity Committee. The United States Trustee may appoint replacements to
serve on the Equity Committee.
No trustee has been appointed in any of these Cases. An order
appointing Stuart Maue Mitchell & James, Ltd. as the fee examiner in these
Cases was entered by the Court on April 8, 2003.
C. Sale of Substantially All of the Debtors' Assets
On June 2, 2000, the Debtors entered into an asset purchase agreement
(the "Jacobs Agreement") with Jacobs. Pursuant to the Jacobs Agreement, Jacobs
agreed to purchase substantially all of the Debtors' assets for (i) $25.0
million in cash, plus (ii) shares of common stock of Jacobs having a market
value of $125.0 million. Jacobs also agreed to assume certain liabilities of
the Debtors and assume certain executory contracts and unexpired leases.
In order to implement the Jacobs Agreement, on June 7, 2000, the
Debtors filed a Motion for Order (I) Approving (A) Asset Purchase Agreement
for Sale Of Substantially all of the Assets of the Debtors, (B) Bidding
Procedures in Connection with the Sale and (C) Termination Fee in Connection
Therewith, (II) Authorizing Sale of Assets Free and Clear of Liens,
Encumbrances, and Interests, (III) Determining that Such Sale is Exempt from
Any Stamp, Transfer, Recording, or Similar Tax, (IV) Authorizing the Rejection
or Assumption and Assignment of Certain Executory Contracts and Unexpired
Leases, and (V) Granting Related Relief (the "Sale Motion"). Through the Sale
Motion, the Debtors sought to sell substantially all of their assets to Jacobs
or another bidder submitting a higher or better bid acceptable to the Debtors
at the auction (the "Auction") scheduled for July 7, 2000. On June 23, 2000,
the Court approved the bidding procedures.
Shaw timely submitted a qualified bid, including an agreement (the
"Shaw Agreement") substantially in the form of the Jacobs Agreement, and an
Auction took place on July 6 and 7, 2000. At the conclusion of the Auction,
the Debtors, the Creditors' Committee and the Equity Committee determined that
Shaw submitted the highest and best bid at the Auction. Under the final terms
of the Shaw Agreement reached at the Auction, Shaw agreed to purchase
substantially all of the Debtors' assets for (i) $37.0 million in cash, plus
(ii) shares of common stock of Shaw having a July 7, 2000 market value of
$105.0 million. Shaw also agreed to assume certain liabilities of the Debtors
and certain executory contracts and unexpired leases. Hearings on the Sale
Motion took place on July 7, 2000 and July 12, 2000. Thereafter, on July 13,
2000, the Court entered an order approving the Shaw Agreement, as modified on
the record at the Auction and the hearings on the Sale Motion. On July 14,
2000, the Company closed the sale of substantially all of its assets to Shaw's
designee, SWINC Acquisition Three, Inc.
D. Chapter 11 Cases Subsequent to the Shaw Sale
Under the Shaw Agreement, Shaw and the Debtors entered into a
registration rights agreement with respect to the Shaw common stock received
by the Debtors as part of the consideration for the sale of substantially all
of the Debtors' assets. After the July 14, 2000 closing, the price of the Shaw
common stock increased dramatically. Shaw therefore determined to access the
markets and sell shares of its common stock in a registered offering. Under
the registration rights agreement, the Debtors were entitled to exercise
"piggy-back" rights in the event Shaw registered its stock. Accordingly, on
September 27, 2000, the Debtors filed the Motion for Order Pursuant to 11
U.S.C. ss. 363(b)(1) Authorizing Debtors to Sell Shaw Group Stock Pursuant to
Asset Purchase Agreement and Registration Rights Agreement (the "Stock Sale
Motion"). Under the Stock Sale Motion, the Debtors sought authority to sell
the Shaw common stock held by the Debtors at a price no less than $50 a share.
Once authorization was obtained and the Shaw common stock registered, the
Debtors sold the Shaw common stock for $131.6 million.
Pursuant to the terms of the Shaw Agreement, the purchase price for
the Debtors' assets was subject to adjustment based on a final determination
of the Debtors' working capital as of the date of the sale (the "Final Working
Capital"). Under the Shaw Agreement, if the Final Working Capital was in
excess of the base working capital set forth in the Shaw Agreement (the "Base
Working Capital"), then Shaw was required to pay the Debtors an additional sum
equal to a percentage of the amount by which the Final Working Capital exceeds
the Base Working Capital. If the Final Working Capital was less than the Base
Working Capital, the Debtors were required to pay Shaw a sum equal to a
percentage of the amount by which the Base Working Capital exceeded the Final
Working Capital. Rather than incur the expense and expend limited resources
preparing the audited closing balance sheet, the Debtors sought approval of a
letter agreement (the "Letter Agreement") among the Debtors and Shaw approving
a settlement of disputes with respect to the Shaw Agreement. By order dated
December 18, 2000, the Court approved the Letter Agreement. Generally, the
Letter Agreement provided that the Debtors were relieved of their obligation
to prepare and provide Shaw with a Closing Balance Sheet, a Purchase Price
Adjustment Schedule or other information required under Section 2.05(c) of the
Shaw Agreement. Both parties were relieved of any obligation to make an
Adjustment Amount payment. The Letter Agreement also established deadlines for
the Debtors and Shaw to review and determine each party's respective liability
with respect to disputed filed cure claims and filed proofs of claim. Saudi
American Bank disputes whether either Shaw or the Debtors met the deadlines
set forth in the Letter Agreement. The Plan Proponents contend that those
deadlines were met.
Under the Shaw Agreement, after taking into account the realized
consideration of the Shaw common stock, Shaw paid: $82.4 million to the
Debtors; $26.7 million to the Debtors' U.K. affiliate; $11 million to the
Debtors' Canadian affiliate; and $48.5 million into various escrows, including
escrows for litigation, letters of credit and indemnification. The Debtors
paid $10 million of their consideration to Jacobs on account of the
court-approved termination fee. Under the Letter Agreement, $22 million of the
indemnification escrow was paid over to Shaw and $9.2 million was paid over to
the Debtors. Accordingly, the final net consideration to the Debtors was $81.6
million. Of these net proceeds, $72.5 million was allocated to Nordic based on
the market value of the Nordic assets with the market value being determined
from a third party independent offer to purchase those assets. The $9.2
million paid over from the indemnity escrow was allocated to SWE&C because the
underlying projects covered by the indemnity escrow were SWE&C and SWE&C
Subsidiary projects.
E. Assets from Non-Debtor U.K. Affiliate
In connection with the recovery of estate assets, the Debtors
received dividends and a return of invested capital from its non-debtor U.K.
affiliate. As a result, on March 25, 2003, the Debtors received $25.5 million
into the estates.
F. Summary of Claims Process and Bar Date
1. Schedules of Statements and Financial Affairs
The Debtors filed Schedules of Assets and Liabilities and Statements
of Financial Affairs (collectively, the "Schedules and Statements") with the
Court on July 14, 2000. Among other things, the Schedules and Statements set
forth the Claims of known creditors against the Debtors as of the Petition
Date, based upon the Debtors' books and records. The Consolidated Schedules
and Statements were filed on a consolidated basis and, thus, scheduled all
Claims against all of the Debtor entities. The Debtors filed amended Schedules
on April 2, 2003 (as amended, the "Amended Schedules").
2. Claims Bar Date and Proofs of Claim
On July 18, 2000, the Court established the general deadline for
filing proofs of claim against the Debtors (the "Bar Date") as August 25,
2000. Additionally, on September 12, 2000, the Court established the deadline
for governmental units to file proofs of claim against the Debtors (the
"Government Bar Date") as November 29, 2000. As of March 14, 2003, 5,177
proofs of claim had been filed asserting approximately $9.8 billion in claims
and 383 statements of cure claims asserting approximately $292 million in
claims. The bar date for creditors scheduled on the Amended Schedules was
April 23, 2003.
3. The Claims Agent
In connection with the commencement of the Chapter 11 Cases, the
Debtors retained Trumbull Services, L.L.C. (the "Claims Agent") for the
purpose of, among other things, maintaining the Claims Registry in the Chapter
11 Cases and providing certain notices to Creditors, Interestholders and other
parties-in-interest. The Claims Agent may be reached at the following address
and phone number:
Stone & Webster Incorporated
c/o Trumbull Services, L.L.C.
P.O. Box 673
Windsor, CT 06095-9718
(860) 687-3917
4. Claims Objections and Claims Reconciliation
The Debtors have been reviewing, analyzing and resolving Claims on an
ongoing basis as part of the Claims reconciliation process. The Debtors filed
eleven (11) omnibus objections to proofs of claim and scheduled amounts,
including omnibus objections to certain Claims that are liabilities of Shaw as
well as objections to numerous Claims, and have also settled various Claims in
reduced allowed amounts. In addition, the Creditors' Committee, the Equity
Committee and Shaw have each filed omnibus objections to proofs of claim and
scheduled amounts, as well as objections to certain individual claims. In the
Debtors' omnibus claims objections, the Debtors objected to certain
duplicative claims, certain procedurally defective or otherwise incorrect or
invalid proofs of claim, certain claims that are no longer liabilities of the
Debtors on the basis that such claims have been assumed by Shaw or do not
appear on the Debtors' books and records, certain claims that have previously
been satisfied or settled, and certain late filed claims. Additionally, the
Creditors' Committee's omnibus claims objections have sought to disallow
certain duplicate, procedurally defective, or otherwise incorrect or invalid
proofs of claim. The Equity Committee's omnibus objections have sought to
disallow certain duplicate, procedurally defective or otherwise incorrect or
invalid proofs of claim, as well as reclassify certain proofs of claim to
proofs of interest as well as certain proofs of claim to other Debtor
entities. In the Shaw objections, Shaw objected to a series of Claims that had
been paid or satisfied by the Debtors during the Chapter 11 Cases, including
mechanics' lien claims, employee wage and benefit claims, claims relating to
real property leases and bank claims. As of March 14, 2003, the Court had
entered orders disallowing approximately 2,900 proofs of claim and statements
of cure claims, thereby eliminating asserted liabilities aggregating
approximately $710 million.
There are additional omnibus and individual objections to Claims
pending, representing an additional approximately 600 claims and representing
several hundred million dollars. The Debtors anticipate that additional
omnibus and individual Claims objections will be filed in the near future,
including in advance of the deadline for holders of Claims to return Ballots
accepting or rejecting the Third Joint Plan, and that the effect of certain
objections could be to prohibit certain Claim holders from voting absent the
Court's temporary allowance of such Claims for voting purposes.
As a result of these efforts, substantial progress has been made in
(a) reconciling the amount and classification of outstanding Claims and (b)
asserting and prosecuting objections to Claims. In addition, the Debtors have,
among other things, (i) identified Claims or categories of Claims for future
resolution and (ii) identified existing or potential claims disputes.
Through these various activities, the Debtors, in consultation with
the Plan Proponents, have developed estimates of Allowed Claims and Interests
in each Class established under the Third Joint Plan. The Debtors have
prepared these estimates based primarily on the following: (a) the outcome of
Claim reconciliations and Claim objections to date, (b) projections based on
anticipated future Claim reconciliations and Claim objections, (c) the
comparison of asserted Claims against the Debtors' books and records, (d) the
Debtors' experience in reconciling Claims prior to and following the
commencement of the Chapter 11 Cases, (e) the historical experience of the
Debtors' professionals in other chapter 11 cases, (f) an analysis of the
litigation risks associated with Disputed Claims, and (g) other legal and
factual analyses unique to particular types of Claims.
Notwithstanding the ongoing Claims reconciliation process, the actual
ultimate aggregate amount of Allowed Claims may differ significantly from the
estimates set forth in Article II, "Overview of the Third Joint Plan."
Accordingly, the amount of the Pro Rata distribution that will ultimately be
received by any particular holder of an Allowed Claim or Interest may be
adversely affected by the outcome of the Claims resolution process.
5. Reclassification of Claims
Throughout the Claims reconciliation process and especially in
connection with formulating procedures for the soliciting of acceptances and
rejections on the Third Joint Plan, the Debtors also undertook an extensive
and thorough review of the Filed and Scheduled Claims to determine whether
they were registered against the Debtor or Debtors who had the underlying
liability. As a result, the Debtors filed the Amended Schedules that, in part,
reclassify Claims previously Scheduled against SWINC as Claims against a SWINC
Subsidiary, SWE&C or a SWE&C Subsidiary (the "Reclassified Scheduled Claims").
Additionally, the Debtors filed a motion (the "Reclassification Motion")
seeking to reclassify for voting purposes only certain Filed Claims as Claims
against a Debtor other than the Debtor listed in the Claims Registry (the
"Reclassified Filed Claims"). The Debtors also filed a motion (the
"Reallocation Motion") seeking to reallocate for voting purposes only certain
Filed Claims that were incorrectly filed as secured or priority to non-
priority unsecured claims (the "Reallocated Filed Claims"). Importantly,
absent a response from the holder of a Claim or Interest, the holder of
Reclassified Scheduled Claims, Reclassified Filed Claims or Reallocated Filed
Claims will receive a Ballot and only be entitled to vote in the Class of
Claims or Interests listed in the Amended Schedules, the Reclassification
Motion or the Reallocation Motion. Additionally, absent a response or
objection, holders of Reclassified Scheduled Claims shall only be entitled to
receive a distribution in the Class of Claims or Interests listed in the
Amended Schedule. Copies of the Reclassification Motion and the Reallocation
Motion can be viewed at www.stonewebinc.com.
G. Summary of Material Claims Litigation Matters
During the Chapter 11 Cases to date, the Debtors commenced or were
involved in a number of lawsuits. An explanation of the material litigation
matters is summarized below.
1. Maine Yankee
The Debtors have been engaged in three litigation matters involving
Maine Yankee. Effective August 1998, Stone & Webster Engineering Corporation
("SWEC") and Maine Yankee entered into a contract for the decommissioning of
Maine Yankee's nuclear power plant in Wiscasset, Maine (the "Decommissioning
Agreement"). The Decommissioning Agreement was priced in excess of $250
million. SWE&C and, later, SWINC executed guarantees of SWEC's performance. On
May 4, 2000, Maine Yankee purported to terminate the Decommissioning Agreement
because of SWEC's alleged insolvency and certain alleged performance-related
defaults. Maine Yankee filed proofs of claim against SWE&C, SWINC, and SWEC in
the amount of $78.2 million. After a series of preliminary matters, which
among other results, yielded a decision that capped Maine Yankee's claims at
$65 million, an eight-day proceeding was held to address the Maine Yankee
claims (the "Claims Litigation"). The Debtors challenged all grounds for
termination, Maine Yankee's interpretation of the scope of work in the
Decommissioning Agreement, and Maine Yankee's calculation of damages. After
post-trial briefing, the Court took the matters under advisement. By order and
opinion issued May 30, 2002, the Court held that Maine Yankee damages
recoverable from SWE&C, SWINC and SWEC, jointly and severally, in the amount
of $20.8 million ($64.8 million less $44 million previously paid by Federal
under Federal's settlement with Maine Yankee). The Court also estimated Maine
Yankee's allowable claim in the SWE&C, SWINC and SWEC bankruptcy cases at a
total of $20.8 million.
Subsequent to the Claims Litigation, SWEC filed suit (the "SWEC
Suit") against Maine Yankee for affirmative recovery of damages for
out-of-scope work that SWEC performed but for which Maine Yankee did not
compensate SWEC, for in-scope work that SWEC performed but for which Maine
Yankee did not compensate SWEC, and for the failure to pay the
termination-for- convenience fees. In total, through the SWEC Suit, SWEC
sought recovery of more than $7 million. SWE&C, SWINC, and SWEC also sued to
subordinate any allowed Maine Yankee claim to all other unsecured claims
because of Maine Yankee's inequitable conduct during and after the performance
of the Decommissioning Agreement.
The litigation between Maine Yankee and the Debtors is being
compromised and settled as part of the Third Joint Plan, and Maine Yankee has
become one of the co-proponents of the Third Joint Plan.
2. Isobord
Isobord Enterprises Inc. ("Isobord") sued Stone & Webster Canada,
Ltd. ("SWCL"), a non-Debtor entity, and SWEC, among other parties, in the
Superior Court of Justice in Ontario, Canada, for CN$150,000,000 in June 2000,
and filed a proof of claim in SWEC's bankruptcy for the same amount in August
2000, alleging breach of contract against SWCL and SWEC as SWCL's guarantor.
Isobord's claims arise out of a December 24, 1996 contract with SWCL in which
SWCL agreed to build by January 10, 1999, a facility to manufacture
straw-based particle board using a process technology developed and patented
by Isobord and another company named Kvaerner Panel Systems GmbH ("Kvaerner").
Although construction of the facility proceeded, the facility was unable to
meet the guarantees SWCL made in its contract with Isobord due to certain
problems with the manufacturing process. Isobord, Kvaerner, and SWCL attempted
to solve these process problems until Isobord terminated SWCL's right to work
at the facility on May 4, 2000. SWCL and SWEC are defending both the Canadian
and bankruptcy proceedings by arguing that the facility failed to meet the
contractual guarantees because of problems with the manufacturing process,
which the contract renders the sole responsibility of Isobord and Kvaerner. In
addition, SWCL and SWEC argue that Isobord did not give proper notice of
alleged defaults before the purported termination and did not properly invoke
SWEC's performance guarantee and that, in any event, the contract caps any
damages at 33% of the guaranteed maximum price, as defined in the contract. On
February 3, 2003, the Bankruptcy Court granted the Debtors partial summary
judgment on the damages cap theory. Under the Debtors' computation of the 33%
damages cap, Isobord's maximum possible claim is CN$36,590,755.41 less unpaid
contract funds due and owing to SWCL of approximately CN $5.9 million.
Recently, the Debtors reached an agreement in principle with Isobord
to settle Isobord's claims against the Debtors. Under the agreement, Isobord
will withdraw all of its claims against SWEC in these bankruptcy cases and in
the Canadian proceedings, without prejudice to Isobord's rights to pursue its
claims against the other parties in the Canadian proceedings, including Chubb
Insurance Company of Canada, an affiliate of Federal, and SWCL. If the
agreement between Isobord and the Debtors is consummated, Isobord will have no
claims against any of the Debtors in these bankruptcy cases. The agreement is
contingent upon the confirmation of the Third Joint Plan, and if the Third
Joint Plan is not confirmed, the agreement may be null and void.
3. CanFibre of Riverside
On or about April 1, 1997, CanFibre of Riverside Inc. ("CanFibre
Riverside") and SWEC entered into a contract (the "EPC Contract") for the
engineering, procurement, and construction of a medium density fibreboard
facility in Riverside, California (the "Facility"). Under the terms of the EPC
Contract, SWEC was to design, engineer, supply, install, construct, start-up,
and commission the Facility. In return, CanFibre was to pay SWEC the fixed
price of $70,000,000. On or about April 1, 1997, CanFibre Riverside and Stone
& Webster Operating Corporation ("SWOC") entered into a contract for the
operation and maintenance of the Facility (the "OM Contract"). Under the terms
of the OM Contract, Stone & Webster Operating Corporation ("SWOC") was to
perform certain operational and maintenance services with respect to the
Facility. In return, CanFibre Riverside was to pay SWOC for certain
reimbursable costs. On January 28, 2000, CanFibre Riverside purported to
terminate the EPC Contract. CanFibre Riverside subsequently purported to
terminate the OM Contract.
On or about August 25, 2000, CanFibre Riverside filed a proof of
claim (the "CanFibre Claim") against SWEC asserting a general unsecured claim
in an amount in excess of $31,500,000 for an alleged breach of the EPC
Contract and various other contract and tort causes of action. On October 24,
2000, CanFibre Riverside filed a petition for bankruptcy protection. On July
3, 2001, SWEC commenced an adversary proceeding in the Chapter 11 Cases
against CanFibre, seeking turnover of estate property and damages arising out
of the EPC Contract. On or about May 8, 2001, SWEC filed a proof of claim
against CanFibre Riverside in the CanFibre Riverside bankruptcy case asserting
a secured claim in the amount of $26,198,138.50 for breach of the EPC
Contract, turnover of estate property, and execution upon a mechanic's lien
SWEC had secured and filed on the Facility, as well as other causes of action
arising out of the EPC Contract. Moreover, on or about October 23, 2001, SWOC
filed a proof of claim against CanFibre Riverside in the CanFibre Riverside
bankruptcy case asserting a general unsecured claim in excess of $2,000,000.00
for CanFibre Riverside's breach of the OM Contract, as well as other causes of
action arising out of the OM Contract.
After extensive negotiations among the Debtors and CanFibre
Riverside, the Debtors and CanFibre Riverside achieved a global settlement of
all of their claims against each other arising out of the EPC Contract, the OM
Contract, and litigation over a proposed sale of CanFibre's assets. The
settlement provided in pertinent part as follows: (i) SWEC made a one-time
cash payment to CanFibre Riverside's bondholders in the amount of $500,000 and
(ii) the CanFibre Claim was allowed in the amount of $3,500,000 against SWEC.
The Bankruptcy Court entered an order approving the settlement on November 20,
2001.
4. CanFibre of Lackawanna
CanFibre of Lackawanna LLC ("CanFibre Lackawanna") filed a proof of
claim against SWEC on August 24, 2000, seeking in excess of $22,500,000,
subsequently informally asserted to be over $27 million (the "CanFibre
Lackawanna Claim"). The CanFibre Lackawanna Claim sought to recover the costs
allegedly incurred by CanFibre Lackawanna to complete the facility (the
"Lackawanna Facility") and for other alleged damages. On June 26, 2001, SWEC
objected to the CanFibre Lackawanna Claim (the "Objection") and filed a
complaint against CanFibre Lackawanna (the "Complaint"). By its Complaint,
SWEC sought declaratory relief and damages in excess of $16,390,197.20 for
unpaid invoices and out-of-scope work performed by SWEC on the Lackawanna
Facility. Additionally, SWEC sought damages due to CanFibre Lackawanna's draw
of a $3.5 million letter of credit posted by SWEC for the benefit of the
Facility as well as damages related to certain unpaid invoices submitted by
SWOC pursuant to the OM Contract entered into between SWOC and CanFibre
Lackawanna..
The CanFibre Lackawanna Claim and the Complaint arose from the EPC
Contract between SWEC and CanFibre Lackawanna. The EPC Contract was originally
executed on December 15, 1997, and was subsequently amended and re-executed on
September 15, 1998. Pursuant to the EPC Contract, SWEC agreed to engineer,
procure, and construct the Lackawanna Facility in Lackawanna, New York. In
consideration, CanFibre Lackawanna agreed to pay SWEC a lump sum price of
$71,500,000. On May 2, 2000, CanFibre Lackawanna purported to terminate the
EPC Contract. According to CanFibre Lackawanna, its decision was based on
SWEC's alleged inability to pay its debts, and SWEC's alleged failure to pay
certain subcontractors and vendors in a timely manner.
SWEC and CanFibre Lackawanna settled the CanFibre Lackawanna Claims,
the Objection, and the Complaint. The Bankruptcy Court approved the settlement
on May 21, 2002. Pursuant to the settlement, (i) CanFibre Lackawanna will have
an allowed bankruptcy Claim in the amount of $2,600,000, (ii) SWEC will make a
one-time cash payment to CanFibre Lackawanna in the amount of $300,000, (iii)
if any mechanics' liens that relate to goods and/or services provided prior to
May 2, 2000, are not expunged by SWEC by the end of September 2002, CanFibre
will have an additional allowed Claim up to $1,000,000 to resolve the
remaining mechanics' liens, and (iii) the Debtors will own a five percent
equity interest in CanFibre Lackawanna. Left unresolved by the Settlement are
certain proofs of claim and adversary proceedings filed against SWEC by
various subcontractors for work related to the Lackawanna Facility. SWEC had
also initiated adversary proceedings against certain of these subcontractors,
the most significant of which are described below. As discussed below, the
claims of CanFibre Lackawanna have been reduced by $1,200,000 in connection
with the Debtors' settlement of claims with Harbourview Electric, Ltd.
("Harbourview").
In addition to litigating with CanFibre Lackawanna, SWEC litigated
with subcontractors and suppliers on the CanFibre Lackawanna project. More
specifically, SWEC brought numerous lawsuits, counterclaims or otherwise
objected to the claims of several dozen subcontractors and suppliers. The
Debtors have resolved all of these claims. Among the largest of these claims
are the claims asserted among SWEC, Harbourview and Maschinenfabrik J.
Dieffenbacher GmbH & Co. ("Dieffenbacher").
Harbourview was an electrical subcontractor for the CanFibre
Lackawanna project. Harbourview filed a proof of claim against SWEC on August
24, 2000, in the amount of $2,528,751.95 asserting that it was a beneficiary
of a trust under New York Lien Law. Following informal discovery, Harbourview
subsequently reduced its proof of claim to $1,897,179.75. On April 27, 2001,
again relying on New York Lien Law, Harbourview initiated a class action
against SWEC and unnamed "John Does" for itself and purportedly all other
unpaid subcontractors. On February 12 and 24, 2002, respectively, Debtors
filed their Answer and then First Amended Answer and Counterclaims denying
liability under New York Lien Law, and seeking recovery of $648,876.61 in
preference payments to Harbourview and reduction or elimination of
Harbourview's claim. After extensive negotiations and formal discovery, SWEC
and Harbourview settled all of their claims. The settlement provides, in
pertinent part, as follows: (i) SWEC will make a one-time cash payment of five
hundred seventy-five thousand dollars ($575,000) to Harbourview; and (ii)
Harbourview will have one allowed claim, deemed filed solely against SWEC, in
the amount of one million two hundred thousand dollars ($1,200,000) to be
contributed by CanFibre Lackawanna from claims previously authorized by the
Bankruptcy Court - $500,000 to be contributed from CanFibre Lackawanna's
general unsecured claim and $700,000 to be contributed from the mechanics'
lien pool. CanFibre Lackawanna's claims are accordingly being reduced by the
full amount of this allowed claim at no net difference to the Debtors'
estates.
Dieffenbacher supplied certain equipment for the CanFibre Lackawanna
Facility. On August 18, 2000, Dieffenbacher filed proofs of claim against
SWINC and SWEC in the amounts of $616,114.21, in connection with the
Riverside, Lackawanna and Isobord Facilities. On October 13, 2000,
Dieffenbacher amended its proofs of claim increasing the amount sought to
$900,811.81. Following informal discovery, this amount was later reduced by
Dieffenbacher to $494,057.08. On November 13, 2001, Dieffenbacher filed a
complaint against SWEC seeking $488,572.53, in connection with the CanFibre
Lackawanna project, which Dieffenbacher asserted was subject to a statutory
trust arising under New York Lien Law. On February 21, 2002, SWEC filed
counterclaims against Dieffenbacher, seeking, among other things, $90,337.86
for expenses allegedly incurred to modify the equipment supplied by
Dieffenbacher for the CanFibre Lackawanna project, $341,629.84 for expenses
allegedly incurred to modify equipment supplied by Dieffenbacher for the
CanFibre Riverside project, and an order declaring that Dieffenbacher must
indemnify SWEC for all costs due to defects in the equipment supplied by
Dieffenbacher for the CanFibre Lackawanna project. After extensive
negotiations, SWEC and Dieffenbacher settled all of their claims. The
settlement provides, in pertinent part, as follows: (i) Dieffenbacher will be
allowed one general unsecured claim against SWEC in the amount of one hundred
thirty thousand dollars ($130,000), and (ii) SWEC will make a one-time cash
payment of two hundred forty-five thousand dollars ($245,000) to
Dieffenbacher. SWEC has already made the payment pursuant to the settlement.
5. Ras Tanura
(a) Abdullah Bugshan. On May 31, 1980, SWEC and Abdullah Said Bugshan
& Brothers ("AB&B") formed Bugshan Stone & Webster Company Limited ("BS&W"), a
Saudi limited liability company, which later entered into an agreement with
the Saudi Arabian Oil Company ("Saudi Aramco") for the engineering,
procurement, and construction of the Ras Tanura Oil Refinery Utilities Upgrade
Package #2 Project (the "Ras Tanura Project") in Saudi Arabia. On August 24,
1994, BS&W subcontracted to Mohammad Al-Mo'jil Group ("MMG") various
construction work relating to the Ras Tanura Project (the "MMG Contract").
During the course of MMG's performance, MMG failed to act in accordance with
approved schedules and other terms of the MMG Contract, and, consequently, in
June and July 1997, BS&W terminated portions of MMG's scope of work under the
MMG Contract. Through arbitration (the "Arbitration"), MMG sought $62 million
in damages from BS&W for added expenses and duties incurred on the Ras Tanura
Project as a result of alleged delays and other wrongdoing attributable to
BS&W. On or about May 21, 2001, the arbitrator entered judgment against BS&W
for approximately $51 million. The Debtors understand that the arbitral award
in favor of MMG was later reversed by a Saudi court. Neither BS&W nor AB&B has
made any payment to MMG.
On August 23, 2000, AB&B filed a contingent Claim for reimbursement
or contribution against SWEC (the "Original AB&B Claim") alleging that SWEC is
liable for at least 50% of any judgment that might result from the
then-pending Arbitration and for costs incurred in defending against the
Arbitration. On or about July 13, 2001, AB&B amended its proof of claim (the
"Amended AB&B Claim"), which supersedes the Original AB&B Claim and contains
specific dollar amounts reflecting the final arbitral award and the costs AB&B
allegedly incurred in the defense of the Arbitration. Neither BS&W nor MMG has
filed a proof of claim against SWEC or any affiliated Debtor. AB&B has not
filed a proof of claim on behalf of MMG pursuant to Bankruptcy Rule 3005.
The Debtors filed an objection to the Original AB&B Claim and to the
Amended AB&B Claim on August 1, 2001. The bases of the Debtors' objection were
that SWEC is not liable to AB&B for contribution to any award in Saudi Arabia
against BS&W in favor of MMG because AB&B had not paid any such award, thus
establishing a right of contribution, and because such an award would not be
enforceable against AB&B or SWEC in any event.
The Debtors and AB&B were in negotiations regarding the settlement of
AB&B's claims against SWEC. These settlement negotiations involved Saudi
Aramco, as described in part 5(c) below. At an omnibus hearing in the Debtors'
bankruptcy cases conducted on October 3, 2002, the Debtors, AB&B, and Saudi
Aramco read the terms of a tentative settlement agreement into the record.
Since that time, the parties' negotiations have not resulted in a final
settlement agreement, and there is no assurance a final settlement agreement
will materialize. As a result, on May 6, 2003, the Debtors moved forward on
their objection to AB&B's claims. On the same day, the Court entered an order
disallowing AB&B's claims in their entirety. If the Debtors are unable to
finalize a settlement agreement with AB&B and Saudi Aramco, litigation among
the parties should be expected.
(b) Saudi American Bank. In order to meet mobilization and general
operating costs for the Ras Tanura Project, BS&W applied to the Saudi American
Bank ("SAMBA") for a credit facility and several letters of credit. In order
to induce SAMBA to extend credit to BS&W, SWEC guaranteed 50% of BS&W's
obligations to SAMBA under a letter of guarantee dated October 11, 1994 (the
"Guarantee"). On or about August 24, 2000, SAMBA filed one proof of claim and
one cure claim (the "SAMBA Claims") against SWEC alleging that under the
Guarantee, SWEC had outstanding financial obligations under certain letter of
credit agreements (the "Letters of Credit") issued to BS&W, and under a
certain promissory note (the "Promissory Note") executed by BS&W in favor of
SAMBA in connection with a $35 million revolving credit facility granted by
SAMBA to BS&W (the "Ras Tanura Loan"). SAMBA further alleged that SWEC had
independently undertaken to pay down a one-half portion of the balance on the
Ras Tanura Loan in a December 22, 1998 letter to SAMBA.
Specifically, the SAMBA Claims purported to state a claim against
SWEC for $6,728,549, allegedly representing the remainder of SWEC's
guaranteed-one-half portion of the balance on the Ras Tanura Loan.
Additionally, the SAMBA Claims purported to state a contingent $140,430 claim
against SWEC based upon an unpaid 1997 presentment of a Letter of Credit
granted by SAMBA to BS&W. Finally, the SAMBA claims purported to state a
contingent $730,843 claim against SWEC based upon the outstanding balances on
expired Letters of Credit granted by SAMBA to BS&W.
The Debtors filed and later amended a complaint against SAMBA to
avoid and recover preferential transfers in the amount of $1.3 million, to
avoid and recover fraudulent transfers in the amount of $6.5 million, to avoid
and recover an unauthorized postpetition transaction in the amount of
$325,000, to avoid and recover improper setoffs in the amount of $975,000, to
recover damages for violations of the automatic stay, to disallow the SAMBA
Claims, to reduce the SAMBA Claims to the present value of $6.4 million as of
the Petition Date, and/or to estimate part of the SAMBA Claims at $0. The
Debtors obtained partial summary judgment disallowing SAMBA's $730,843 claim
against SWEC based upon the outstanding balances on the expired Letters of
Credit.
Recently, the Debtors and SAMBA reached a settlement of their
disputes, subject to appropriate documentation and Court approval. Under this
settlement, the Debtors will make a one- time cash payment of $1 million to
SAMBA, and SAMBA will have an allowed $2.5 million general unsecured claim
against SWEC. Additionally, SAMBA and SWEC will waive all of their claims
against each other. SAMBA, however, will not be waiving its claims against
non-Debtor entities, including BS&W and Saudi Aramco. Additionally, SAMBA will
continue to prosecute its claims against Shaw, which SAMBA asserts assumed
SWEC's liability to SAMBA for the Ras Tanura Loan under the Asset Purchase
Agreement. The Debtors do not believe that Shaw assumed any liability to SAMBA
with respect to the Ras Tanura Loan, and, thus, the Debtors believe that
SAMBA's claims against Shaw are without merit. To the extent that SAMBA
recovers against Shaw, however, any recovery above $3 million shall reduce,
dollar for dollar, SAMBA's claim against SWEC.
(c) Saudi Aramco. On May 31, 2002, the Debtors commenced an adversary
proceeding (the "Aramco Proceeding") against Saudi Aramco related to the Ras
Tanura Project. Specifically, the Debtors sought a declaratory judgment that
SWINC is not liable to Saudi Aramco by virtue of a SWINC guarantee of BS&W's
performance of its contract with Saudi Aramco for the Ras Tanura Project (the
"Ras Tanura Contract"). Additionally, SWEC sought indemnification from Saudi
Aramco for amounts for which SWEC, as a shareholder of BS&W, might become
liable as a result of claims brought against BS&W by MMG, as described in part
5(a) above. SWEC also sought damages for Saudi Aramco's breach of the Ras
Tanura Contract and a turnover of accounts receivable related to the Ras
Tanura Contract by Saudi Aramco. On September 25, 2002, Saudi Aramco filed a
motion to dismiss the Aramco Proceeding, and on September 27, 2002, Saudi
Aramco filed a motion to determine that the Saudi-Aramco Proceeding is a
non-core proceeding and a motion to withdraw the reference.
Settlement negotiations among Saudi Aramco, the Debtors, and AB&B for
the final resolution of all claims among these entities have been pending.
During the pendency of settlement negotiations, the Aramco Proceeding is
stayed by stipulation of the parties. As described in part 5(a) above, the
Debtors, AB&B, and Saudi Aramco read the terms of a tentative settlement
agreement into the record on October 3, 2002. Since that time, the parties'
negotiations have not resulted in a final settlement agreement, and there is
no assurance that a final settlement agreement will materialize. If the
Debtors are unable to finalize a settlement agreement with AB&B and Saudi
Aramco, litigation among the parties should be expected.
6. Environmental Claims
In 1992 and 1994, SWINC, Stone & Webster Management and Consulting,
Inc., ("SWMC") and SWEC were sued in two lawsuits seeking contribution for
response costs under CERCLA based on the disposal of hazardous substances at
manufacturing gas plant sites ("MGP Sites"). One lawsuit was Georgia Power Co.
v. Stone & Webster, Inc., et al., filed in the Middle District of Georgia (the
"Georgia Power Action"). Another lawsuit was Blackstone Valley Electric Co. v.
Stone & Webster, Inc., et al., filed in the District of Massachusetts (the
"Massachusetts Action").
SWINC and SWMC subsequently sued The Travelers Indemnity Company and
the Insurance Company of America (collectively, the "Liability Insurers")
seeking a declaratory judgment (the "Insurance Coverage Action") that the
Liability Insurers had a duty to defend the Georgia Power Action and the
Massachusetts Action (collectively, the "CERCLA Lawsuits"). On April 16, 1996,
the court in the Insurance Coverage Action granted summary judgment in favor
of SWMC and SWINC, requiring the Liability Insurers to defend the CERCLA
Lawsuits. Stone & Webster Management Consultants, Inc., et al. v. The
Travelers Indemnity Company, et al, No. 94 Civ. 6619, 1996 U.S. Dist. Lexis
4852 (S.D.N.Y. April 16, 1996). No appeal was taken from that ruling (the
"Defense Ruling").
As noted in the court's decision in the Defense Ruling, however, the
Liability Insurers have raised defenses to whether they have any obligation to
provide liability coverage for the CERCLA Lawsuits or any environmental damage
claims. No decision is made in the Defense Ruling on whether the Liability
Insurers have any liability for the underlying environmental claims.
The CERCLA Lawsuits and related litigation were stayed upon the
filing of the Chapter 11 Cases as to the Debtors. Certain proofs of claim have
been filed against the Debtors asserting claims for indemnification and
contribution under CERCLA by other entities named as defendants in the CERCLA
Lawsuits and other similar matters pending before the Petition Date. Those
claims include claims asserted by Southern Union Company ("Southern Union"),
as successor in interest to Valley Gas Company, one of the defendants in the
Massachusetts Action (Claim No. 2267) in the amount of $21 million plus an
undetermined amount of future costs, asserted jointly and severally against
SWINC, SWEC and SWMC and other similar claims filed as "unliquidated claims"
(collectively, the "Environmental Claims"). Southern Union has also filed
partially liquidated Environmental Claims as successor in interest to Fall
River Gas Company and Providence Gas Company, and Pennsylvania Gas Company.
Whether there is any insurance coverage for liability on any Environmental
Claim is disputed by insurers, including the Liability Insurers and is the
subject of ongoing analysis.
In the view of the Proponents, the liability of the Debtors, if any,
for the Environmental Claims is also disputed. The Debtors have substantial
defenses to those claims, all of which are preserved under the Third Joint
Plan. No judgments for such claims have been entered against the Debtors and
all litigation against the Debtors seeking indemnification and contribution
has been stayed as of the Petition Date. Further, in the Proponents' view,
while some of the Environmental Claims represent expenditures for past costs
and are therefore liquidated amounts, many of such claims are contingent
claims for indemnification or contribution that should be disallowed under
Bankruptcy Code section 502(e). To the extent any such claims are allowed,
following objections to claims or estimation hearings, as appropriate, they
will be treated as Allowed Class 5A: SWINC General Unsecured Claims against
the Consolidated SWINC Estate if they arise from a claim allowed against the
Consolidated SWINC Estate or Allowed Class 5B: SWE&C General Unsecured Claims
against the Consolidated SWE&C Estate if they arise from a claim allowed
against the Consolidated SWE&C Estate. To the extent such claims are allowed
and there is a determination that there is insurance coverage with respect to
the liability that serves as the basis of such claim, the allowed claim will
be an "Insured Claim" for purposes of the Third Joint Plan.
H. The Creditors' Committee Plan and the Equity Committee Plan
Due to the circumstances surrounding these cases, the Debtors allowed
the exclusive periods to file a plan and solicit acceptances to expire.
1. The Creditors' Committee Plan
On August 11, 2001, the Creditors' Committee filed its Disclosure
Statement with Respect to the Consolidated Liquidation Plan Proposed by
Official Committee of Unsecured Creditors of Stone & Webster, Incorporated and
its Debtor Subsidiaries (the "Creditors' Committee Disclosure Statement"). The
Creditors' Committee filed its Second Amended Creditors' Committee Disclosure
Statement on April 12, 2002. As Exhibit A to the Creditors' Committee
Disclosure Statement, the Creditors' Committee attached its Plan of
Liquidation (the "Creditors' Committee Plan"). The Court held hearings on the
Disclosure Statements filed with respect to the Creditors' Committee Plan, the
Equity Committee Plan and the Debtors' Disclosure Statement with Respect to
Joint Plan of Reorganization of (I) Stone & Webster, Incorporated and Certain
of Its Subsidiaries and Affiliates and (II) Stone & Webster Engineering &
Constructors, Inc. and Certain of Its Subsidiaries and Affiliates (the
"Initial Disclosure Statement Hearings"); however, no order was ever entered
approving the adequacy of any disclosure statement. Subsequent to the Initial
Disclosure Statement Hearings, the Creditors' Committee entered into an
agreement with the Debtors, Federal, and Maine Yankee and is now a
co-proponent of the Third Joint Plan.
2. The Equity Committee Plan
On June 15, 2001, the Equity Committee filed the Plan of
Reorganization of the Official Committee of Equity Holders of Stone & Webster
Incorporated. Subsequently, on September 17, 2001, the Equity Committee filed
a disclosure statement in connection with the Equity Committee Plan (the
"Equity Committee Plan"), which disclosure statement was subsequently modified
on April 5, 2002, April 15, 2002, and March 14, 2003, May 15, 2003, May 20,
2003, June 25, 2003, and July 5, 2003 (the "Equity Committee Disclosure
Statement").
As originally filed in 2001 (and as subsequently amended in April of
2002), the Equity Committee Plan provided for a nonconsolidating plan, in
which all 73 Debtor entities were treated as separate entities and holders of
claims against and interests in each of the 73 Debtor entities would be
required to look solely from the assets of the appropriate Debtor entity for
payment of their claims or interests. In the amended Equity Committee Plan
filed on March 14, 2003, the Equity Committee sought approval of a
consolidating plan that created two estates for voting and distribution
purposes, and, thus, was similar to the Third Joint Plan proposed by the Plan
Proponents. Specifically, the Equity Committee Plan, as subsequently amended
on April 22, 2003, May 15, 2003, May 20, 2003, and June 25, 2003, was premised
upon the partial consolidation of the Debtors into a consolidated SWINC estate
and a consolidated SWE&C estate. The Equity Committee Plan, however, did not
contemplate the sharing of the Pension Plan Reversion between the consolidated
estates.
At a hearing on May 20, 2003, the Court approved both the Disclosure
Statement with respect to the First Joint Plan and the Equity Committee's
disclosure statement with respect to the Equity Committee Plan. The Court,
however, ordered the major parties in these cases, including the Debtors, the
Creditors' Committee, the Equity Committee, Federal and Maine Yankee, to
mediation in an attempt to resolve the disputes among the various parties. A
mediation was conducted before the Honorable Erwin Katz on July 8, 2003. No
global resolution of the disputes was reached at the mediation; however, as a
result of that mediation and subsequent negotiations, Maine Yankee agreed to
settle its claims and become a co-proponent of a further amended
reorganization plan.
Once Maine Yankee agreed to become a co-proponent of a further
amended reorganization plan, the four co-proponents made a settlement offer to
the Equity Committee in the hopes of reaching a global settlement of these
cases. On July 25, 2003, the Equity Committee accepted the settlement offer,
and as a result has agreed to withdraw the plan of reorganization it was
separately pursuing and join as a co-proponent of this Third Joint Plan.
The current Third Joint Plan reflects and explains the compromises
and settlements reached by and among the five Plan Proponents and provides the
means for distributions to Creditors and Interestholders in these cases.
IV. SUMMARY OF THE THIRD JOINT PLAN
THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR
IMPLEMENTATION OF THE THIRD JOINT PLAN, AND OF THE CLASSIFICATION AND
TREATMENT OF CLAIMS AND INTERESTS UNDER THE THIRD JOINT PLAN, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE THIRD JOINT PLAN, WHICH IS ATTACHED TO
THIS DISCLOSURE STATEMENT AS APPENDIX B.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE
SUMMARIES OF THE PROVISIONS CONTAINED IN THE THIRD JOINT PLAN AND IN DOCUMENTS
REFERRED TO THEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO
NOT PURPORT TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND
PROVISIONS OF THE THIRD JOINT PLAN OR DOCUMENTS REFERRED TO THEREIN, AND
REFERENCE IS MADE TO THE THIRD JOINT PLAN AND TO SUCH DOCUMENTS FOR THE FULL
AND COMPLETE STATEMENTS OF SUCH TERMS AND PROVISIONS.
THE THIRD JOINT PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN
CONTROL THE ACTUAL TREATMENT OF CLAIMS AGAINST AND INTERESTS IN THE DEBTORS
UNDER THE THIRD JOINT PLAN AND WILL, ON THE EFFECTIVE DATE, BE BINDING UPON
ALL HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTORS AND THEIR ESTATES,
REORGANIZED SWINC, THE SWINC PLAN ADMINISTRATOR, THE SWE&C LIQUIDATING TRUSTEE
AND OTHER PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT BETWEEN THIS
DISCLOSURE STATEMENT, ON THE ONE HAND, AND THE THIRD JOINT PLAN, THE SWINC
PLAN ADMINISTRATOR AGREEMENT, THE SWE&C LIQUIDATING TRUST AGREEMENT OR ANY
OTHER OPERATIVE DOCUMENT, ON THE OTHER HAND, THE TERMS OF THE THIRD JOINT
PLAN, THE SWINC PLAN ADMINISTRATOR AGREEMENT, THE SWE&C LIQUIDATING TRUST
AGREEMENT, AND SUCH OTHER OPERATIVE DOCUMENTS ARE CONTROLLING.
A. Overall Structure of the Third Joint Plan
By the Third Joint Plan, the Plan Proponents seek to compromise and
settle various disputes and issues raised by, among others, the Debtors, the
Equity Committee and the Creditors' Committee and certain creditors, including
Federal and Maine Yankee, regarding substantive consolidation and the
allocation of the Sale Proceeds, overfunding in the Pension Plan and various
intercompany claims among the Debtors. If approved, such compromises and
settlements will have a significant impact on recoveries to holders of Claims
and Interests, and all parties are urged to read the Third Joint Plan,
Disclosure Statement and all exhibits attached thereto carefully. The primary
dispute the Plan Proponents seek to settle in the Third Joint Plan is the
dispute as to whether the Debtors' individual Estates should be substantively
consolidated and, if so, to what extent. Under the Equity Committee Plan
originally filed by the Equity Committee on June 21, 2001, no consolidation
occurred and each Debtor Estate and its respective assets were separately
liable for Claims against that Debtor's Estate. Under the Creditors' Committee
Plan originally filed on June 15, 2001, all of the Debtors' Estates were
substantively consolidated and, thus, all of the Debtors' assets were
available to satisfy all of the Debtors' liabilities. Under this Third Joint
Plan as well as the Debtors' previously proposed plan of reorganization, (i)
the Estates of SWINC and the SWINC Subsidiaries will be substantively
consolidated into the Consolidated SWINC Estate and (ii) the Estates of SWE&C
and the SWE&C Subsidiaries will be substantively consolidated into the
Consolidated SWE&C Estate. A list of the Debtor entities comprising each of
the Consolidated SWINC Estate and the Consolidated SWE&C Estate is attached
hereto as Appendix A. Moreover, the Third Joint Plan contemplates what the
Plan Proponents believe to be an equitable distribution of the Cash received
by the Debtors and non-Debtor subsidiaries and affiliates from the Shaw Sale
and the subsequent liquidation of their remaining assets and the Reversion of
the overfunded Pension Plan. As a result, distributions on account of Claims
against and Interests in SWINC and the SWINC Subsidiaries will depend only on
the assets and liabilities of the Consolidated SWINC Estate and distributions
on account of Claims against SWE&C and the SWE&C Subsidiaries will depend only
on the assets and liabilities of the Consolidated SWE&C Estate as such assets
and liabilities are determined in accordance with the Third Joint Plan and the
settlements embodied therein.
B. Substantive Consolidation
For administrative, substantive and certain equitable reasons, the
Plan Proponents seek confirmation of the Third Joint Plan which is predicated
upon the substantive consolidation of the Estates of SWINC and the SWINC
Subsidiaries into the Consolidated SWINC Estate and the Estates of SWE&C and
the SWE&C Subsidiaries into the Consolidated SWE&C Estate. Pursuant to
Bankruptcy Rule 9019 and in consideration for the distributions and other
benefits provided under the Third Joint Plan, the Plan Proponents seek Court
approval of the provisions of the Third Joint Plan as a good faith compromise
and settlement of all claims or controversies relating to the issue of
substantive consolidation and the Substantive Consolidation Litigation. The
Third Joint Plan will serve as, and will be deemed to be, a motion for entry
of an order pursuant to Bankruptcy Code section 1123 and Bankruptcy Rule 9019
section (i) substantively consolidating the Estates of SWINC and the SWINC
Subsidiaries and (ii) substantively consolidating the Estates of SWE&C and the
SWE&C Subsidiaries.
1. General Description
Generally, substantive consolidation of the estates of multiple
debtors in a bankruptcy case effectively combines the assets and liabilities
of the multiple debtors for certain purposes under a plan. The effect of
consolidation is the pooling of the assets of, and claims against, the
consolidated debtors; satisfying liabilities from a common fund; and combining
the creditors of the debtors for purposes of voting on reorganization plans.
There is no statutory authority specifically authorizing substantive
consolidation. The authority of a bankruptcy court to order substantive
consolidation is derived from its general equitable powers under Bankruptcy
Code section 105(a), which provides that the court may issue orders necessary
to carry out the provisions of the Bankruptcy Code. Nor are there statutorily
prescribed standards for substantive consolidation. Instead, judicially
developed standards control whether substantive consolidation should be
granted in any given case.
2. Legal Standards for Substantive Consolidation
The propriety of substantive consolidation must be evaluated on a
case-by-case basis. In deciding whether to consolidate, in the past courts
relied on the presence or absence of certain "elements" that are similar to
factors relevant to piercing the corporate veil under applicable state law.
More recent cases, however, while not ignoring these elements, have applied a
less mechanical approach. Thus, the extensive list of elements and factors
frequently cited and relied upon by some courts in determining the propriety
of substantive consolidation are variations of two critical factors, namely
(1) whether creditors dealt with the entities as a single economic unit and
did not rely on their separate identity in extending credit, or (2) whether
the affairs of the debtors are so entangled that consolidation will benefit
all creditors. Under the so-called Eastgroup test, which is an equitable test,
a proponent of substantive consolidation must show that (1) there is
substantial identity between the entities sought to be consolidated and (2)
that consolidation is necessary to avoid some harm or realize some benefit.
Once the proponent of substantive consolidation makes this showing, a
presumption arises that creditors have not relied solely on the credit of one
of the entities involved, and the burden shifts to an objecting creditor to
show that (1) it has relied on the separate credit of one of the entities to
be consolidated and (2) it will be prejudiced by substantive consolidation.
Regardless of which of the two similar but not identical tests are
utilized for determining the propriety of substantive consolidation, the
"elements" enumerated in earlier cases remain relevant, but not necessarily
dispositive, as to whether substantive consolidation should be granted. These
elements include:
o the degree of difficulty in segregating and ascertaining the
individual assets and liabilities of the entities to be
consolidated;
o the presence or absence of consolidated financial statements
among the entities to be consolidated;
o the commingling of assets and business functions among the
entities to be consolidated;
o the unity of interests and ownership among the various
entities;
o the existence of parent and intercorporate guarantees on loans
to the various entities; and
o the transfer of assets to and from the various entities without
formal observance of corporate formalities.
3. The Substantive Consolidation Litigation
(a) The Creditors' Committee Substantive Consolidation Motion
In August 2001, the Creditors' Committee filed a motion seeking
substantive consolidation of the Debtors' estates (the "Substantive
Consolidation Motion"). In support of the Substantive Consolidation Motion and
throughout these Chapter 11 Cases, the Creditors' Committee has maintained
that the facts and circumstances surrounding the historical business
operations of SWINC and the Subsidiary Debtors support combining the Debtors'
assets and liabilities in connection with any plan of liquidation and
distribution to creditors and interest holders.
In the Substantive Consolidation Motion, the Creditors' Committee has
argued that SWINC and most of its 72 Subsidiary Debtors used the same name,
and did not routinely distinguish among themselves when dealing with
creditors, referring to all Debtors as "Stone & Webster" or using SWINC as a
proxy for Subsidiary Debtors. Additionally, in public documents the Debtors
frequently described their various business interests as "divisions" or
"segments" or SWINC, rather than describing them as "subsidiaries." In further
support of substantive consolidation, the Creditors' Committee argued that
SWINC and the Subsidiary Debtors historically had issued consolidated
financial statements and filed consolidated tax returns, and that the Debtors
provided only consolidated financial statements to their largest creditors.
Additionally, the Creditors' Committee contended that SWINC, the
ultimate parent of all other 72 Debtors, and its Subsidiary Debtors maintained
common officers and other employees paid by SWEC during the final years before
the Debtors commenced the Chapter 11 Cases. These shared employees, paid by
SWEC, performed human resources, accounting, legal and risk management
services for the benefit of all of the Debtors. Similarly, the Creditors'
Committee contends, accounting firms, law firms, engineers, consultants and
insurers rendered services to all of the Debtors paid for by SWEC, without
being reimbursed by the other Debtors for their proportionate share for these
services. In that regard, the Creditors' Committee challenged the accuracy of
the Debtors' intercompany accounts. The Creditors' Committee also argued that
the Subsidiary Debtors had common directors consisting largely, if not
entirely, of their common officers, who acted at the behest of SWINC in
carrying out SWINC's policies and directives. In fact, the Creditors'
Committee contended that on at least one occasion, SWINC and its Subsidiary
Debtors implemented a fundamental change in corporate structure and form,
without first fulfilling proper corporate authorization.
The Creditors' Committee also argued that the Debtors' centralized
cash management system provided further support for substantive consolidation.
Under this system, virtually all of each Debtors' funds were moved into and
through centralized accounts on an as-needed basis to meet the short and long
term cash requirements of all of the Debtors. Although the Debtors contend
that as an outgrowth of this centralized cash management system, intercompany
liabilities routinely were recorded by and between SWINC and the Subsidiary
Debtors (and by and between the Subsidiary Debtors themselves) in the ordinary
course of the Debtors' business, the Creditors' Committee challenged the
accuracy of the intercorporate accounts and the Debtors' ability to keep and
reconcile these accounts. Moreover, the Creditors' Committee contended that
the Debtors never disclosed to potential and existing creditors the amount or
identity of any intercorporate liabilities, and that parties considering
extending credit to any particular Stone & Webster entity could not have been
aware of the magnitude of alleged liabilities that the Debtors' books now
reflect.
The Creditors' Committee also asserted that each of the Debtors
transferred product, services or liabilities to other Debtors on a regular
basis, that these transfers were not reflected on the Debtors' books at
arm's-length pricing, and that the Debtors could not then and cannot now
verify that the amounts showing on the Debtors' books and records reflect
balances that would exist if transactions between the Debtors had been
appropriately recorded for purposes of separate company reporting. Due to the
volume of transactions between SWINC and the Subsidiary Debtors, as well as
the significant passage of time, the Creditors' Committee argued that it would
be extraordinarily time consuming and prohibitively expensive to determine on
an Estate by Estate basis the adjustments needed to approximate intercorporate
balances reasonably. Even then there could be no assurance that the end
product would be a fair approximation of such balances due to: (a) numerous
uncertainties with respect to available historical knowledge and support
documentation; and (b) complexities such as extensive acquisition and
disposition activity by the Debtors.
The Creditors' Committee also based its Substantive Consolidation
Motion on the fact that Shaw paid one purchase price for all of the Debtors'
assets, and, at the time of the purchase and sale, there was no allocation of
the purchase price among the various Debtors. In that regard, Shaw acquired
both tangible and intangible assets, and the Creditors' Committee contends
that valuing numerous contracts assumed by Shaw from SWEC and other Subsidiary
Debtors is virtually impossible and, in any event, likely to be a
prohibitively expensive process. Accordingly, the Creditors' Committee argued
that substantive consolidation is required to ensure that the sale proceeds
are distributed equitably among the Debtors' creditors and interest holders.
(b) The Equity Committee Response
The Equity Committee opposed the relief sought by the Creditors'
Committee in the Substantive Consolidation Motion, namely to consolidate all
of the Debtors' estates into one single estate. In opposing the Substantive
Consolidation Motion, the Equity Committee made two basic arguments. First,
that as a matter of law, substantive consolidation as an equitable remedy is
no longer available in chapter 11 bankruptcy proceedings. The Bankruptcy Court
disagreed with that argument in its November 14, 2002 Order at Docket 3564
(the "November 14 Order") holding that substantive consolidation would be
permissible as part of a plan under chapter 11 of the Bankruptcy Code. The
Equity Committee has preserved its right to appeal the November 14, Order at
such time as it becomes a final order.
The Equity Committee also contended that, even if substantive
consolidation were a permissible equitable remedy in chapter 11 proceedings,
there would be no legal or factual basis to order substantive consolidation of
any of the Debtor Subsidiaries. Since the fall of 2001, the Equity Committee
had proposed a plan of liquidation, which treated each of the seventy-three
(73) Debtors as separate corporate entities.
On March 14, 2003, the Equity Committee filed its amended Equity Plan
and related Equity Disclosure Statement. Both the Equity Plan and the First
Joint Plan proposed by the Plan Proponents proposed the creation of two
consolidated estates: the Consolidated SWINC Estate and the Consolidated SWE&C
Estate. The companies allocated to each consolidated estate under the First
Joint Plan and the Equity Plan are identical. Thus, the Equity Committee no
longer contended that there is a dispute regarding whether two separate
consolidated estates should be formed.
The primary difference between the Equity Plan and the First Joint
Plan was that the First Joint Plan provided for a settlement of disputes
concerning whether the Consolidated SWINC Estate should be further
consolidated with the Consolidated SWE&C Estate, including a division of the
Pension Plan Reversion, while the Equity Plan provided for no such settlement.
(c) Debtors' Response
The Debtors also responded to the Substantive Consolidation Motion.
In connection with substantive consolidation, the Debtors argued that the
facts, circumstances and equities do not justify substantive consolidation
into one single estate. Instead, the Debtors contend as a reasonable
compromise and settlement of the dispute over substantive consolidation that,
pursuant to Bankruptcy Code section 1123(a)(5)(C) and upon confirmation of a
plan of reorganization, SWINC and the 72 Subsidiary Debtors should be
substantively consolidated into two estates - the Consolidated SWINC Estate
and the Consolidated SWE&C Estate. The Debtors base their position on at least
three significant facts: (i) the legal sponsor of the Pension Plan is SWINC;
(ii) the Nordic operating division ("Nordic") was marketed separately for
sale; and (iii) at least some significant creditors appeared to rely on the
separate financial wherewithal of SWINC and SWE&C.
With respect to the Pension Plan, the Debtors agree that SWINC is
presently the sole sponsor, however, prior to SWINC becoming the sole legal
sponsor of the Pension Plan, each individual Debtor was a sponsor and, even
after SWINC became the sole legal sponsor, the overfunded Pension Plan was
carried on the books and records of SWEC. Moreover, Mercer Human Resources
Consulting reported on a nonconsolidated basis by operating unit of the
Debtors with respect to the Pension Plan the expenses and assets, in addition
to reporting on a consolidated basis at the SWINC level in accordance with
generally accepted accounting principles.
Additionally, the Debtors believe it is significant that before the
Petition Date, the Debtors separately solicited the sale of the Nordic. During
this solicitation process, the Debtors eventually received bids for the
purchase of Nordic. None of these bids were finalized before the Petition
Date. However, when the Debtors entered into the asset purchase agreement with
Jacobs, Nordic was initially carved out of the transaction, and during the
postpetition sale process, the Debtors received a firm bid in excess of $75
million from a third party. At the auction, Shaw purchased Nordic as part of
the overall transaction with the Debtors. As a consequence of the transaction
with Shaw, substantially, if not all creditors of Nordic were paid in full. It
is for these reasons that the Debtors believe that excess proceeds from the
sale to Shaw could be allocated to the sale of the Nordic operating division
and be made available to SWINC, as the direct parent of Nordic, either as a
payment of outstanding intercompany obligations owed to SWINC or as a
dividend.
Finally, the Debtors also believe that the other significant fact
supporting substantive consolidation into two estates is that major creditors
of the Debtors appeared to rely on the separate financial wherewithal of SWINC
and SWE&C. For example, Maine Yankee contracted with SWEC concerning the
decommission of Maine Yankee's nuclear power plant in Wiscasset, Maine. Main
Yankee sought and obtained from SWE&C, and later SWINC, guaranties with
respect to SWEC's performance. In addition, Federal filed proofs of claim
against SWE&C, S&W Construction and Rocky Flats Engineers and Constructors,
LLC, as primary obligors on various agreements with Federal. In addition,
Federal also asserted a claim directly against SWINC arising out of the direct
claims against the primary obligors pursuant to certain General Indemnity
Agreements executed between Federal and SWINC.
(d) Creditors' Committee Response
The Creditors' Committee argued that, notwithstanding that the Equity
Committee's position that the Pension Plan documents make the overfunded
Pension Plan solely a SWINC asset, the Pension Plan was carried on SWEC's
balance sheets as a SWEC asset, and, thus, to the extent that any creditor
could or did obtain separate financial statements for SWEC, the overfunded
Pension Plan appeared to be a SWEC asset. SWINC's consolidated financial
statements recognized the overfunded Pension Plan as an asset of the
consolidated entities, without disclosing to creditors that SWINC claimed to
have the sole entitlement to the overfunding. Moreover, the Creditors'
Committee has alleged that for the last several years before the Debtors filed
their bankruptcy petitions, SWINC had no employees and did not contribute to
the Pension Plan and Subsidiary Debtors paid all Pension Plan expenses.
Accordingly, the Creditors' Committee has argued that substantive
consolidation is nonetheless required to ensure that the overfunded portion of
the Pension Plan would be distributed to the Debtors' creditors and interest
holders on an equitable basis.
Furthermore, the Creditors' Committee maintained, notwithstanding the
Debtors' marketing efforts with respect to Nordic, that sale proceeds
attributable to the Debtors' cold-storage business, Nordic, should be
consolidated with all other Debtors' assets. In support of its view, the
Creditors' Committee argues that SWINC purported to purchase Nordic in 1998
for approximately $80 million, merging a pre-existing SWINC subsidiary,
Commercial Cold Storage, Inc., into Nordic, and that this purchase and merger
was funded through bank loans obtained with the guarantee of each Subsidiary
Debtor, including SWEC. Thus, the Creditors' Committee contends that all
Subsidiary Debtors bore the responsibility and liability for paying off the
loans, as well as the risk of loss if SWINC, a non-operating entity, were
unable to make payments on the loans. Additionally, the Creditors' Committee
challenged the alleged intercompany loans between Nordic and SWINC. For these
and other reasons, the Creditors' Committee asserted that as a matter of
equity, SWINC cannot then deny the proceeds to the Subsidiary Debtors'
creditors when they bore the risk of the Nordic purchase.
(e) The PBGC's Response
The Pension Benefit Guaranty Corporation ("PBGC") also filed a
response to the Substantive Consolidation Motion. In its response, the PBGC
argued that substantive consolidation, in a plan of reorganization or
otherwise, is not appropriate against parties such as the PBGC who hold joint
and several claims against multiple debtors. As such, the PBGC believes that a
portion of the assets from the Consolidated SWE&C Estates and the Consolidated
SWINC Estates sufficient to cover any potential claims of the PBGC with
respect to the Pension Plan should be excluded from any substantive
consolidation proposed by the Third Joint Plan.
(f) Court Opinion
On November 14, 2002, the Bankruptcy Court issued its memorandum
opinion denying the Equity Committee's motion for summary judgment on the
Substantive Consolidation Motion. The Bankruptcy Court rested its opinion on
two principal grounds. First, the Bankruptcy Court found that long-standing
judicial precedent, including Supreme Court precedent, supports a bankruptcy
court's power to substantively consolidate two or more debtors. The Bankruptcy
Court cited as an example the Supreme Court decision in Sampsell v. Imperial
Paper & Color Corp., 313 U.S. 215 (1941), and further noted that the roots of
substantive consolidation extend back to the Bankruptcy Act of 1898, 11 U.S.C.
ss.ss. 1 et seq. (1976) (repealed 1978) and were acknowledged by the drafters
of the Bankruptcy Code in 1978. Second, the Bankruptcy Court found clear
statutory authority within the Bankruptcy Code itself for substantive
consolidation. Specifically, the Bankruptcy Court held that Bankruptcy Code
section 1123(a)(5)(C) authorizes a plan to substantively consolidate a debtor
with one or more debtors, even where such consolidation is not done in
accordance with state law. Thus, the Court held that it has the statutory
authority to confirm a plan that contains a provision substantively
consolidating the estates of two or more debtors. The Bankruptcy Court made no
determination, however, whether substantive consolidation of the Debtors'
estates is warranted in these cases.
4. The Bases for Two Substantively Consolidated Estates
Based on the above and many other facts and circumstances, the Plan
Proponents have determined that the risks, uncertainty, expense and delay
associated with continued litigation support the settlement embodied in the
Third Joint Plan. The Third Joint Plan recognizes that substantive
consolidation in some form is warranted in light of the criteria established
by the courts in ruling on the propriety of substantive consolidation in other
cases. The Plan Proponents believe that the Third Joint Plan's proposed
substantive consolidation into two entities is a fair and equitable means of
consolidating the Debtors, while protecting the interests of creditors who
bargained for guarantees from SWINC. The compromises and settlements that
comprise the Third Joint Plan allow for a potential return to equity security
holders while accounting for the risk that the Court may not agree with the
position of any party on the grounds for or lack of grounds to support
substantive consolidation. Specifically, the Plan Proponents believe that
substantive consolidation as provided for in the Third Joint Plan is
appropriate under the circumstances because, among other things:
1. The operations, business functions and financial records
of the Debtors were substantially commingled, such that
the assets and liabilities of the Debtors' Estates are
intertwined.
2. A separate winding down of the Debtors' Estates would
entail the segregation of the commingled assets and
liabilities. The exercise of disentangling the prior
transactions of the individual Debtor entities, even if
it could be accomplished, would be an unproductive and
inequitable task that would be harmful to creditors due
to the prohibitive costs and resultant delays associated
with such a task.
3. Substantive consolidation will provide for the most
equitable distribution to Creditors and Interestholders.
There is no identifiable Estate in the Chapter 11 Cases
that has a discrete group of creditors holding Claims
only against that Estate.
4. Substantive consolidation will maximize the overall
return to holders of Allowed Claims and Interests
because it will avoid and eliminate the significant
administrative costs and expenses that otherwise would
be associated with the difficult and potentially
infeasible task of liquidating each of the Debtors'
Estates separately.
In addition, the Third Joint Plan, through its various settlements
and compromises, provides the holders of the Class 9A: SWINC Equity Interests,
if they vote to accept the Third Joint Plan, a possible immediate payment of
up to $.62 per share out of the Equity Settlement Fund. Moreover, holders of
the Class 9A: SWINC Equity Interests could receive additional distributions
once all assets of the Consolidated SWINC Estate are liquidated and holders of
Allowed SWINC Claims and paid in full. Absent the Plan, however, there is no
guarantee that owners of common stock in SWINC would receive any distribution
on account of their equity interests or, if there were to be a distribution,
when such distribution would occur.
5. The Substantive Consolidation Settlement
To avoid continued litigation with respect to Substantive
Consolidation and related issues regarding the Pension Plan Reversion, the
Plan Proponents propose the Third Joint Plan, which provides, among other
things, that upon the Effective Date, two separate consolidated estates will
be created.
(a) The Substantive Consolidation of SWINC and the SWINC Subsidiaries
On the Effective Date, the Estates of SWINC and the SWINC
Subsidiaries shall be substantively consolidated as follows: (i) the SWINC
Subsidiaries shall be merged with and into SWINC, with the surviving
corporation being Reorganized SWINC, (ii) all Intercompany Claims by, between
and among SWINC and the SWINC Subsidiaries shall be forgiven and eliminated,
(iii) all assets and liabilities of the SWINC Subsidiaries shall be merged or
treated as if they were merged with the assets and liabilities of SWINC, (iv)
any obligation of SWINC or one of the SWINC Subsidiaries and all guarantees
thereof by SWINC or one of the SWINC Subsidiaries shall be deemed to be one
obligation of SWINC, and (v) each Claim filed, or to be filed or allocated
against SWINC or a SWINC Subsidiary shall be deemed filed only against SWINC
and shall be deemed a single Claim against and a single obligation of SWINC.
On the Effective Date, and in accordance with the terms of the Third Joint
Plan and the consolidation of the assets and liabilities of SWINC and the
SWINC Subsidiaries, all Claims based upon guarantees of collection, payment or
performance made by SWINC or the SWINC Subsidiaries as to the obligations of
SWINC or one of the SWINC Subsidiaries shall be released and of no further
force and effect.
(b) The Substantive Consolidation of SWE&C and the SWE&C Subsidiaries
The Third Joint Plan contemplates and is also predicated upon the
substantive consolidation of the Estates of SWE&C and the SWE&C Subsidiaries
for the purposes of all actions associated with confirmation and consummation
of the Third Joint Plan. On the Effective Date, the Estates of SWE&C and the
SWE&C Subsidiaries shall be substantively consolidated as follows: (i) all
assets and liabilities of the SWE&C Subsidiaries shall be merged or treated as
if they were merged with the assets and liabilities of SWE&C, (ii) all
Intercompany Claims by, between and among SWE&C and the SWE&C Subsidiaries
shall be forgiven and eliminated, (iii) any obligation of SWE&C or one of the
SWE&C Subsidiaries and all guarantees thereof by SWE&C or one of the SWE&C
Subsidiaries shall be deemed to be one obligation of SWE&C, (iv) each Claim
filed, or to be filed or allocated against SWE&C and/or a SWE&C Subsidiary
shall be deemed filed only against SWE&C and shall be deemed a single Claim
against and a single obligation of SWE&C, and (v) all Interests in SWE&C or
any SWE&C Subsidiary shall be cancelled and the holders thereof shall not be
entitled to any distribution. On the Effective Date, and in accordance with
the terms of the Third Joint Plan and the consolidation of the assets and
liabilities of SWE&C and the SWE&C Subsidiaries, all Claims based upon
guarantees of collection, payment or performance made by SWE&C or one of the
SWE&C Subsidiaries as to the obligations of SWE&C or one of the SWE&C
Subsidiaries shall be released and of no further force and effect.
(c) The Pension Plan Reversion
Pursuant to Bankruptcy Rule 9019, under the Third Joint Plan and as
part of the Substantive Consolidation Settlement, the Proponents also propose
to settle certain disputes regarding the potential reversionary interest
associated with the overfunded Pension Plan. Specifically, the Plan Proponents
believe that the Pension Plan is presently overfunded and that upon
termination of the Pension Plan in a state law dissolution of Reorganized
SWINC, funds in excess of $30 million net of taxes, after all liabilities of
the Pension Plan to Pension Plan participants have been satisfied, will revert
to the Debtors' estates and become available for distribution to holders of
Claims and Interests. As part of the Substantive Consolidation Litigation, the
Equity Committee has asserted that holders of Claims against and Interests in
SWINC (and any successor of SWINC) are entitled to the entire amount of the
Reversion because SWINC is legal sponsor of the Pension Plan and thus has sole
ownership of any Reversion. In response, the Creditors' Committee has asserted
that the Reversion should be available to pay the holders of Claims against
SWE&C and the SWE&C Subsidiaries and only after that would a distribution be
made to holders of Equity Interests in SWINC because, among other things, the
contributions to such Pension Plan were made primarily by SWE&C on behalf of
certain of its employees. To avoid further litigation as to the Reversion, and
as part of the Substantive Consolidation and Federal Settlement, the
Proponents propose to settle all disputes regarding the Pension Plan and the
Reversion as follows:
1. In the event Class 9A: SWINC Equity Interests vote to
accept the Third Joint Plan, the Reversion from the
Pension Plan will be distributed as follows: (i)
two-thirds (2/3) of the Reversion's first $30 million to
the Consolidated SWINC Estate; (ii) one-third (1/3) of
the Reversion's first $30 million to the Consolidated
SWE&C Estate; and (iii) if the Reversion exceeds $30
million, an equal distribution between the Consolidated
SWE&C Estate and the Consolidated SWINC Estate of any
Reversion in excess of $30 million.
2. In the event Class 9A votes to reject the Third Joint
Plan, the Reversion from the Pension Plan will be
distributed as follows: (i) two-thirds (2/3) of the
Reversion's first $30 million to the Consolidated SWINC
Estate; (ii) one-third (1/3) of the Reversion's first
$30 million to the Consolidated SWE&C Estate; and (iii)
if the Reversion exceeds $30 million, a distribution of
seventy-five percent (75%) of any Reversion in excess of
$30 million to the Consolidated SWE&C Estate and
twenty-five percent (25%) of any Reversion in excess of
$30 million to the Consolidated SWINC Estate.
The Proponents believe that such a settlement is fair and equitable
because, among other things, (i) prior to SWINC becoming the sole legal
sponsor of the Pension Plan, each then individual Debtor was a contributing
sponsor within the meaning of section 4001(a)(13) of ERISA and (ii) even after
SWINC became the legal sponsor, the overfunded Pension Plan was carried on the
books and records of SWEC and (iii) Mercer Human Resources Consulting reported
on a nonconsolidated basis by operating unit of the Debtors with respect to
Pension Plan expenses and assets in addition to reporting on a consolidated
basis at the SWINC level in accordance with general accepted accounting
principles.
The PBGC contends that the Third Joint Plan should provide the
following provision with respect to the Pension Plan:
In the event that the Pension Plan does not qualify for
termination in a standard termination under 29 U.S.C. ss.
1341, Reorganized SWINC will execute a commitment under 29
C.F.R. ss. 4021.21(b)(1) to make the Pension Plan sufficient
for all its benefit liabilities. The Disputed Claims Reserve
will be funded sufficiently to meet that commitment.
The Plan Proponents do not agree with the PBGC's contention and do not believe
such a provision would be appropriate as part of the Third Joint Plan.
C. The Federal Settlement
On February 18, 2002, Federal filed numerous proofs of claim in the
Bankruptcy Cases, including proofs of claim 5177 and 5178 amending its prior
claims against SWINC and SWEC in the amount of $371,505,215.90, of which
$55,208,965.23 was liquidated (the "Federal Liquidated Claims"). The balance
of $316,296,205.69 represents unliquidated claims asserted by Federal against,
among others, SWINC and SWEC (the "Federal Unliquidated Claims" and, together
with the Federal Liquidated Claims, the "Federal Claims"). Attached to the
Federal Claim is a schedule with supporting documentation setting forth the
payments made by Federal which comprise the amount of the Federal Claim (the
"Federal Claim Schedule"). As set forth in the Federal Claim Schedule, the
Federal Liquidated Claim arises from six separate agreements, four of which
are between Federal and SWE&C as the primary obligor, one between Federal and
S&W Construction, and the other between Federal and Rocky Flats Engineers and
Constructors, LLC, as the respective primary obligors. In addition to
asserting claims against each of the primary obligors, Federal also asserted a
Claim directly against SWINC pursuant to certain General Indemnity Agreements
executed between Federal and SWINC. A significant portion of the Federal
Liquidated Claim, in the amount of $44 million, arises in connection with
Federal's payment under certain Payment and Performance Bonds between SWEC and
Federal related to Maine Yankee.
Originally, Federal opposed the Substantive Consolidation proposed by
the Creditors' Committee and was in negotiations with the Equity Committee
regarding support for its plan. Subsequent to the Initial Disclosure Statement
Hearing, however, the Debtors reached an agreement with Federal regarding
Substantive Consolidation and the Federal Claims. That settlement provided,
among other things, an opportunity for Class 9A: SWINC Equity Interests that
voted to accept the First Joint Plan an immediate Cash payment of $0.50 per
share. As a result of subsequent events, including, among other things, the
Equity Committee's continued prosecution of a separate plan, part of the
settlement was withdrawn as part of the Second Joint Plan. Under the Third
Joint Plan, however, a similar opportunity exists as under the First Joint
Plan.
Specifically, the terms of the Federal Settlement are as follows:
1. Federal will hold an Allowed Federal Claim in the amount
of $52,113,000 against both the Consolidated SWINC
Estate and the Consolidated SWE&C Estate and will be
permitted to vote such Allowed Federal Claim as an
Allowed Class 5A Claim and an Allowed Class 5B Claim. On
the Effective Date, however, Federal will be deemed to
have elected under Bankruptcy Code Sections 502 and 509
to receive distributions on the Allowed Federal Claim
filed against the Consolidated SWINC Estate only, and
any distribution on such Allowed Federal Claim shall
satisfy and discharge any obligation by the Debtors on
proof of claim No. 5179 filed by Lumbermens in an amount
in excess of $6 million relating to potential losses by
Lumbermens in connection with its issuance of surety
bonds, which claim amended and superseded proofs of
claim Nos. 3300 and 4491.
2. In addition, Chubb Canada will receive a distribution of
the Canadian Cash, which Cash shall be held in trust by
Chubb Canada for its use in defending, settling or
otherwise resolving the Isobord Litigation, as well as a
transfer, conveyance, distribution, or assignment from
Debtor or non-debtor affiliate insured/obligee of all
insurance proceeds in excess of the Canadian Cash
relating to Isobord, including, without limitation,
errors and omission, efficacy, directors and officers
and any other policy or bond that may provide coverage
or indemnification for Isobord claims. Any Canadian Cash
remaining at the conclusion of the Isobord Litigation
shall be paid over to the SWE&C Liquidating Trustee to
be distributed in accordance with the Third Joint Plan.
The Debtors, non-debtor affiliates, the Consolidated
SWINC Estate and/or Reorganized SWINC will not be
permitted to settle any potentially insured Isobord
claim without obtaining Federal's consent.
3. Upon the allowance of the Federal Claims, Federal will
also release any and all Claims for subrogation or other
Claims it has or might have against the Consolidated
SWINC Estate or the Consolidated SWE&C Estate, including
but not limited to, Claims for indemnification,
contribution, reimbursement or subrogation arising out
of the Isobord Litigation in Canada. Federal shall have
complete control of the Isobord Litigation, with
complete authority to settle or otherwise resolve the
Isobord Litigation without the consent or participation
of any of the Debtors. While Federal will waive any
Claim against the Consolidated SWINC and SWE&C Estates
in connection with the Isobord Litigation, Federal is
not agreeing to indemnify SWINC or any other of the
Debtors from liability in connection with the Isobord
Facility. Furthermore, Federal is also not waiving any
of its rights or defenses as surety, either in law, in
equity or under the bonds that it might have against
Isobord with respect to the Isobord Facility or any
related contract, but in no event will the Allowed
Federal Claim exceed $52,113,000 because of the Isobord
Litigation.
4. Federal will also receive the lesser of (i) ten percent
(10%) or (ii) $1,250,000 from the gross proceeds
received from any insurance recovery on the claims
asserted by Maine Yankee by way of transfer, conveyance,
distribution or assignment from the Debtors.
5. Finally, if Class 9A: SWINC Equity Interests vote to
accept the Third Joint Plan, then upon the Consolidated
SWINC Estate having made distributions in the aggregate
amount of $25,000,000 to Federal, on account of the
Allowed Federal Claim in Class 5A, Federal will pay to
the Equity Settlement Fund, which shall be administered
by the Consolidated SWINC Estate Governing Board, an
amount equal to $0.50 per share to Holders of Old Common
Stock as of the Equity Voting Record Date that voted to
accept the Third Joint Plan (the aggregate amount of
such distribution not to exceed $7,113,000). On the
Effective Date, the Cash in the Equity Settlement Fund
shall be distributed to holders of Allowed Class 9A:
SWINC Equity Interests (i.e., holders of Old Common
Stock as of the Equity Voting Record Date) that voted to
accept the Third Joint Plan. Federal will have no right
to recoup from the Consolidated SWINC Estate any portion
of the payment made to the Equity Settlement Fund from
either the Consolidated SWINC Estate or the Consolidated
SWE&C Estate, and the Initial Federal Distribution shall
count towards the payment of the Allowed Federal Claim
in Class 5A.
6. In the event Class 9A does not vote to accept the Third
Joint Plan, Federal will retain all rights against the
Consolidated SWINC Estate on the Allowed Federal Claim
in Class 5A in the amount of $52,113,000 for
distribution purposes.
The Federal Settlement is contingent upon confirmation of the Third
Joint Plan, and will be binding on all interested parties upon approval of the
Third Joint Plan, and absent the Federal Settlement, certain individual
Debtors, including SWINC and SWEC could be liable to Federal in an amount that
exceeds $80 million.
United States Fidelity and Guaranty Company, St. Paul Fire and Marine
Insurance Company and St. Paul Surplus Lines Insurance Company (collectively,
the Non-Settling Insurers) do not consent to and oppose the assignment,
conveyance, distribution or transfer of any rights under their policies,
including the rights to proceeds, if any. The rights of the Non-Settling
Insurers to challenge the validity, effectiveness or enforceability of any
proposed assignments or transfers under their policies or applicable law are
hereby expressly preserved.
D. The Maine Yankee Settlement
As part of the settlements embodied in the Third Joint Plan, the Plan
Proponents also propose to settle disputes between the Debtors and Maine
Yankee. Specifically, Maine Yankee initially filed numerous proofs of claim in
the Bankruptcy Cases in the amount of $78.2 million stemming from alleged
performance defaults under a decommissioning agreement related to Maine
Yankee's nuclear power plant in Wiscasset, Maine. Maine Yankee's claim was
ultimately capped at $64.8 million after an eight-day proceeding to address
the Maine Yankee claims, of which a total of $20.8 million was estimated to be
Maine Yankee's allowable claim in the SWE&C, SWINC and SWEC bankruptcy cases
($64.8 million less $44 million previously paid by Federal).
Subsequent to the mediation conducted in July 2003, the Debtors,
Federal and the Creditors' Committee reached an agreement with Maine Yankee
regarding the Maine Yankee Claims. Thereafter, and as part of resolving
numerous other disputes, the Equity Committee agreed to settle the Maine
Yankee Claims, approval of which settlement is sought pursuant to this Third
Amended Plan.
Specifically, the terms of the Maine Yankee Settlement are as
follows:
1. Maine Yankee will hold an Allowed Maine Yankee Claim in
the amount of $20,300,000 against both the Consolidated
SWINC Estate and the Consolidated SWE&C Estate and will
be permitted to vote such Allowed Maine Yankee Claim as
an Allowed Class 5A Claim and an allowed Class 5B Claim.
On the Effective Date, however, Maine Yankee will be
deemed to have elected under Bankruptcy Code Sections
502 and 509 to receive distributions on the Allowed
Maine Yankee Claim filed against the Consolidated SWINC
Estate.
2. If Class 9A: SWINC Equity Interests vote to accept the
Third Joint Plan, SWINC shall make the Initial Maine
Yankee Distribution to Maine Yankee on account of the
Allowed Maine Yankee Claim in Class 5A out of which
Maine Yankee will pay to the Equity Settlement Fund,
which shall be administered by the Consolidated SWINC
Estate Governing Board, an amount equal to $0.12 per
share to Holders of Old Common Stock as of the Equity
Voting Record Date that voted to accept the Third Joint
Plan (the aggregate amount of any such payment cannot
exceed $1,800,000). On the Effective Date, the Cash in
the Equity Settlement Fund shall be distributed to
holders of Allowed Class 9A: SWINC Equity Interests
(i.e., holders of Old Common Stock as of the Equity
Voting Record Date) that voted to accept the Third Joint
Plan. Maine Yankee will not have the right to recoup
from either the Consolidated SWINC Estate or the
Consolidated SWE&C Estate any portion of the payment
made to the Equity Settlement Fund, and the Initial
Maine Yankee Distribution shall count towards the
payment of the Allowed Maine Yankee Claim in Class 5A.
3. In the event Class 9A does not vote to accept the Third
Joint Plan, Maine Yankee will retain all rights against
the Consolidated SWINC Estate on the Allowed Maine
Yankee Claim in Class 5A in the amount of $20,300,000
for distribution purposes.
4. The Consolidated SWINC Estate will have a contribution/
reimbursement/subrogation claim against the Consolidated
SWE&C Estate in the fixed allowed amount of $16.8
million, regardless of actual cash distributions made by
SWINC on the Allowed Maine Yankee Claim (the "SWINC MY
Contribution Claim"), which claim shall be treated as an
Allowed Class 5B: SWE&C General Unsecured Claim under
the Third Joint Plan; provided, however, that in no
event shall Maine Yankee be entitled to distributions in
excess of $20.3 million (including, without limitation,
amounts received on account of the SWINC MY Contribution
Claim).
5. Maine Yankee will have a first lien on any distributions
from the Consolidated SWE&C Estate on account of the
SWINC MY Contribution Claim for any amount necessary to
"top up" the cash recovery by Maine Yankee against SWINC
to $18.5 million, net of any payment made by Maine
Yankee to the Equity Settlement Fund.
6. Upon Maine Yankee's receipt of $18.5 million in cash
(after giving effect to any payments made to the Equity
Settlement Fund on account of accepting Class 9A: SWINC
Equity Interests), all proceeds payable by the
Consolidated SWE&C Estate on account of the SWINC MY
Contribution Claim will be made to the Consolidated
SWINC Estate for distribution under the Third Joint
Plan.
7. Notwithstanding any contrary provision of Article VII,
Section R of the Third Joint Plan, the Debtors shall
release all claims and causes of action that they or any
one of them have or may have had against Maine Yankee,
as of the Effective Date. Without limiting the
generality of the following, Adversary Proceeding No.
02-02031 (PJW) now pending in the Court, shall be
dismissed, with prejudice and without costs to any
party.
The Maine Yankee Settlement is contingent upon confirmation of the
Third Joint Plan and will be binding.
E. The Equity Settlement Fund
The Equity Settlement Fund shall be Administered by the Consolidated
SWINC Estate for the benefit of all Holders of Old Common Stock, as of the
Equity Voting Record Date, who voted to accept the Third Joint Plan. The cost
of administering the Equity Settlement Fund shall be paid by the Consolidated
SWINC Estate. Holders of Old Common Stock as of the Equity Voting Record Date
that voted to accept the Third Joint Plan shall be deemed to hold a pro rata
beneficial interest in the Equity Settlement Fund, determined by the number of
shares held by each Holder in relation to the total number of shares that
voted to accept the Third Joint Plan.
F. The Asbestos Trust
As part of the Third Joint Plan, the Proponents propose a settlement
of disputes between the Debtors and the Asbestos Insurance Carriers. The
Asbestos Insurance Carriers have contended that they hold certain claims
against the Debtors arising from the Debtors' obligations under certain
insurance policies and claims handling agreements. Specifically, the Asbestos
Insurance Carriers note that the Asbestos Insurance Carriers issued, before
the Petition Date, liability insurance policies to one or more of the Debtors
that relate to, among other things, potential liability for exposure of third
parties to asbestos. The Asbestos Insurance Carriers also contend that SWEC is
party to a number of pre-petition claims handling agreements, including, but
not limited to the Weitz & Luxenberg Agreements, under which SWEC undertook
certain obligations with respect to lawsuits brought against SWEC for personal
injury based upon exposure to asbestos. The Asbestos Insurance Carriers argue
that they hold claims against the Debtors because, under the insurance
policies and the claims handling agreements, the Debtors promised to (i) pay
certain amounts relating to defense costs, (ii) cooperate with the Asbestos
Insurance Carriers in the defense of claims, and (iii) to pay certain amounts
with respect to any settlements or judgments. The Asbestos Insurance Carriers
finally contend that unless the Debtors provide adequate means for performance
of the Debtors' ongoing obligations under the insurance policies and the
claims handling agreements, such as cooperating on the defense of claims,
receipt of service of process and maintaining corporate records, the Asbestos
Insurance Carriers would no longer have a duty to defend or indemnify. The
Debtors dispute these contentions of the Asbestos Insurance Carriers.
In order to resolve the insurance coverage disputes, the Proponents
and the Asbestos Insurance Carriers reached an agreement regarding ongoing
obligations to defend and indemnify. The substance of the agreement is set
forth in the Asbestos Trust Agreement.
If and to the extent the Non-Settling Insurers - United States
Fidelity and Guaranty Company, St. Paul Fire and Marine Insurance Company and
St. Paul Surplus Lines Insurance Company - are Asbestos Insurance Carriers (as
defined in the Third Joint Plan), they have not entered into a compromise
agreement relating to Asbestos Claims. Accordingly, the terms of the Third
Joint Plan and Asbestos Trust that implement compromises with certain
insurers, including without limitation, Article VII(N(6) of the Third Joint
Plan, do not apply to or affect the claims or rights of the Non-Settling
Insurers.
G. Reorganized SWINC and the SWE&C Liquidating Trust
The Third Joint Plan provides that on the Effective Date, (a) each of
the SWINC Subsidiaries shall be merged or deemed merged with and into SWINC
and (b) the Chapter 11 Cases of the SWINC Subsidiaries shall be closed,
following which any and all proceedings that were brought or could have been
brought or otherwise commenced in the Chapter 11 Case of any of the SWINC
Subsidiaries shall be prosecuted, brought or otherwise commenced in SWINC's
Chapter 11 Case.
Furthermore, under the Third Joint Plan, SWINC will emerge from
bankruptcy and shall continue to exist as Reorganized SWINC after the
Effective Date in accordance with the laws of the State of Delaware and
pursuant to the certificate of incorporation and by-laws of SWINC in effect
prior to the Effective Date, as amended under the Third Joint Plan.
Reorganized SWINC will be authorized to engage in any lawful act for which
corporations may be organized under the DGCL. Reorganized SWINC's business
operations will consist of the management of the Pension Plan, including any
efforts in which Reorganized SWINC may terminate the Pension Plan or transfer
its sponsorship in accordance with applicable law. Although Reorganized SWINC
will be fully authorized to engage in other business operations and management
intends to evaluate opportunities as, when, and if they arise, Reorganized
SWINC has no present intention to engage in business operations and likely
will dissolve under DCGL ss.ss. 275-282 of the Delaware General Corporations
Law.
The Third Joint Plan also provides that on the Effective Date, (a)
each of the SWE&C Subsidiaries shall be merged or deemed merged with and into
SWE&C and (b) the Chapter 11 Cases of the SWE&C Subsidiaries shall be closed,
following which any and all proceedings that were brought, could have been
brought or otherwise commenced in the Chapter 11 Case of any of the SWE&C
Subsidiaries shall be prosecuted, brought or otherwise commenced in SWE&C's
Chapter 11 Case.
Furthermore, under the Third Joint Plan, on the Effective Date or as
soon thereafter as the SWE&C Liquidating Trustee determines is appropriate,
SWE&C and the SWE&C Subsidiaries shall be dissolved. If necessary or
appropriate, the SWE&C Liquidating Trustee shall file a certificate of
dissolution for SWE&C and/or the SWE&C Subsidiaries and shall take all other
actions necessary or appropriate to effect the dissolution of SWE&C and the
SWE&C Subsidiaries under applicable state law.
SWE&C and the SWE&C Subsidiaries are liquidating, and they will not
be conducting any business operations following confirmation and consummation
of the Third Joint Plan. In connection with the liquidation of SWE&C and the
SWE&C Subsidiaries, the SWE&C Liquidating Trust will be formed for the benefit
of holders of Claims against the Consolidated SWE&C Estate. Upon confirmation
and consummation of the Third Joint Plan, Claims against the Consolidated
SWE&C Estate will receive beneficial interests in the SWE&C Liquidating Trust,
entitling the holder thereof to receive distributions, as, when and if
available, of funds or other assets held by the SWE&C Liquidating Trust. The
SWE&C Liquidating Trust will distribute any amounts available for distribution
to the holders of Claims against the Consolidated SWE&C Estate in accordance
with the Third Joint Plan. Beneficial interests in the SWE&C Liquidating Trust
will not be certificated and will be non-transferrable, except by operation of
law. The SWE&C Liquidating Trust will terminate on the earlier of (i) the
tenth (10) anniversary of the Confirmation Date or (ii) the distribution of
all property in accordance with the terms of the SWE&C Liquidating Trust
Agreement.
Under the Third Joint Plan, Reorganized SWINC will issue three
classes of securities. First, Reorganized SWINC will issue 100 shares of
Reorganized SWINC New Common Stock to the SWE&C Liquidating Trustee to be held
for the benefit of holders of Claims against the Consolidated SWE&C Estate.
Under Article VIII.B of the Third Joint Plan, the SWE&C Liquidating Trustee
has granted an irrevocable proxy to the Board of Directors of Reorganized
SWINC for the limited purpose of permitting the Board to vote the shares of
Reorganized SWINC New Common Stock, at its discretion, in favor of the
dissolution of Reorganized SWINC. The SWE&C Liquidating Trustee will not be
entitled to transfer or otherwise distribute the Reorganized SWINC New Common
Stock, including to the beneficiaries of the SWE&C Liquidating Trust. Second,
Reorganized SWINC will issue one share of Reorganized SWINC New Series A
Preferred Stock to the Consolidated SWINC Estate to be held for the benefit of
holders of certain Claims against and Interests in the Consolidated SWINC
Estate. The Reorganized SWINC New Series A Preferred Stock will have a
liquidation preference equal to (i) from the Reversion either (x) two-thirds
(2/3) of the first $30 million of funds generated from the Reversion of the
Pension Plan plus 50% of any funds generated from the Reversion in excess of
$30 million or (y) in the event that Class 9A: SWINC Equity Interests vote to
reject the Third Joint Plan, twenty-five percent (25%) of any funds generated
from the Reversion in excess of $30 million; and (ii) 100% of the funds
generated from the liquidation of any additional assets, other than the
Reversion, of Reorganized SWINC. Finally, Reorganized SWINC will issue one
share of Reorganized SWINC New Series B Preferred Stock to the SWE&C
Liquidating Trustee to be held for the benefit of holders of Claims against
SWE&C. The Reorganized SWINC New Series B Preferred Stock will have an
aggregate liquidation preference equal to either (i) one-third (1/3) of the
first $30 million in proceeds generated from the Reversion plus 50% of any
funds generated from the Reversion in excess of $30 million or (ii) in the
event Class 9A: SWINC Equity Interests vote to reject the Third Joint Plan,
seventy-five percent (75%) of any funds generated from the Reversion in excess
of $30 million.
Upon the anticipated dissolution of Reorganized SWINC pursuant to the
DGCL, any amounts available for distribution will be distributed in accordance
with the liquidation preferences set forth in New Series A and B Preferred
Stock. There can be no assurance, however, that the amounts available for
distribution upon any dissolution of Reorganized SWINC will be sufficient to
fully satisfy these obligations.
H. Classification and Treatment of Claims and Interests
Bankruptcy Code section 1122 requires that a plan of reorganization
classify the claims of a debtor's creditors and the interests of its equity
holders. The Bankruptcy Code also provides that, except for certain claims
classified for administrative convenience, a plan of reorganization may place
a claim of a creditor or an interest of an equity holder in a particular class
only if such claim or interest is substantially similar to the other claims or
interests in such class.
The Bankruptcy Code also requires that a plan of reorganization
provide the same treatment for each claim or interest of a particular class
unless the holder of a particular claim or interest agrees to a less favorable
treatment of its claim or interest. The Plan Proponents believe that they have
complied with such standard. If the Court finds otherwise, however, it could
deny confirmation of the Third Joint Plan if the Claimholders and
Interestholders affected do not consent to the treatment afforded them under
the Third Joint Plan.
The Proponents believe that they have classified all Claims and
Interests in compliance with the requirements of Bankruptcy Code section 1122,
and that the Third Joint Plan provides the best and most prompt possible
recovery to the holders of Claims and Interests. If a Claimholder or
Interestholder challenges such classification of Claims or Interests and the
Court finds that a different classification is required for the Third Joint
Plan to be confirmed, the Proponents, to the extent permitted by the Court,
intend to make such modifications to the classifications of Claims or
Interests under the Third Joint Plan to provide for whatever classification
might be required by the Court for confirmation. UNLESS SUCH MODIFICATION OF
CLASSIFICATION ADVERSELY AFFECTS THE TREATMENT OF A HOLDER OF A CLAIM OR
INTEREST AND REQUIRES RESOLICITATION, ACCEPTANCE OF THE THIRD JOINT PLAN BY
ANY HOLDER OF A CLAIM OR INTEREST PURSUANT TO THIS SOLICITATION WILL BE DEEMED
TO BE A CONSENT TO THE THIRD JOINT PLAN'S TREATMENT OF SUCH HOLDER OF A CLAIM
OR INTEREST REGARDLESS OF THE CLASS AS TO WHICH SUCH HOLDER IS ULTIMATELY
DEEMED TO BE A MEMBER.
Procedures for the distribution of Cash pursuant to the Third Joint
Plan, including matters that are expected to affect the timing of the receipt
of distributions by holders of Claims in certain Classes and that could affect
the amount of distributions ultimately received by such holders, are described
in Article IV.G - "SUMMARY OF THE THIRD JOINT PLAN - Distributions Under the
Third Joint Plan."
In accordance with Bankruptcy Code section 1123(a)(1), Administrative
Claims (including Professional Fee Claims) and Priority Tax Claims have not
been classified.
1. General Administrative Claims
General Administrative Claims are Claims that are incurred in the
ordinary course of business during the Chapter 11 Cases that are not allocated
to either the Consolidated SWINC Estate or the Consolidated SWE&C Estate shall
be paid in the ordinary course of business in accordance to the terms and
conditions of any agreements relating thereto out of available funds prior to
distributions being made to the Consolidated SWINC Estate and the Consolidated
SWE&C Estate.
(a) General Professional Fee Claims
General Professional Fee Claims are Administrative Claims for
compensation of Professionals or other entities for professional services
rendered or expenses incurred in the Chapter 11 Cases on or before the
Effective Date. All payments to Professionals for Professional Fee Claims will
be made in accordance with the procedures established in the Bankruptcy Code,
the Bankruptcy Rules, the United States Trustee Guidelines and the Bankruptcy
Court relating to the payment of interim and final compensation for services
rendered and reimbursement of expenses. The Bankruptcy Court will review and
determine all applications for compensation for services rendered and
reimbursement of costs.
2. Treatment of Claims Against and Interests in the Consolidated
SWINC Estate
(a) Unclassified Claims
(i) SWINC Administrative Claims
The Third Joint Plan provides that SWINC Administrative Claims, if
any, are unimpaired.
SWINC Administrative Claim means a Claim against SWINC or a SWINC
Subsidiary for payment of an administrative expense of a kind specified in
Bankruptcy Code sections 503(b) or 1114(e)(2) and entitled to priority
pursuant to Bankruptcy Code section 507(a)(1), including, but not limited to,
(a) the actual, necessary costs and expenses incurred after the Petition Date
of preserving the SWINC Estates and operating the businesses of the Debtors,
including wages, salaries or commissions for services rendered after the
commencement of the Chapter 11 Cases, (b) Professional Fee Claims, (c) all
fees and charges assessed against the Estates under 28 U.S.C. ss. 1930 and (d)
all Allowed Claims pursuant to a Final Order of the Court under Bankruptcy
Code section 546(c)(2)(A).
As of June 30, 2003, the books and records of SWINC and the SWINC
Subsidiaries reflected unpaid SWINC Administrative Claims in the approximate
amount of $5.3 million, consisting of primarily accrued but unpaid
professional fees (the total amount of the professional fees already paid
total $16.8 million and includes fees paid to professionals retained under
Bankruptcy Code sections 327(a) and (e) and professionals retained in the
ordinary course pursuant to court order). Assuming confirmation in October of
2003, SWINC and the SWINC Subsidiaries estimate that the aggregate amount of
Allowed SWINC Administrative Claims in their Chapter 11 Cases, including,
among other things, professional fees previously paid pursuant to the
Professional Fee Order, will be approximately $27.8 million.
Each holder of an Allowed SWINC Administrative Claim shall receive in
full satisfaction, settlement, release and discharge of and in exchange for
such Allowed SWINC Administrative Claim (a) Cash equal to the unpaid portion
of such Allowed SWINC Administrative Claim or (b) such other treatment as to
which the SWINC Plan Administrator and such holder shall have agreed upon in
writing.
(ii) SWINC Priority Tax Claims
SWINC Priority Tax Claim means a Claim against SWINC or a SWINC
Subsidiary that is entitled to priority pursuant to Bankruptcy Code section
507(a)(8).
The Third Joint Plan provides that Priority Tax Claims, if any, are
unimpaired. Each holder of an Allowed SWINC Priority Tax Claim shall be
entitled to receive on account of such Allowed SWINC Priority Tax Claim, in
full satisfaction, settlement, release and discharge of and in exchange for
such Allowed SWINC Priority Tax Claim, (i) equal Cash payments made on the
last Business Day of every three-month period following the Effective Date,
over a period not exceeding six years after the assessment of the tax on which
such Claim is based, totaling the principal amount of such Claim plus simple
interest on any outstanding balance from the Effective Date calculated at the
interest rate available on ninety (90) day United States Treasuries on the
Effective Date, (ii) a single Cash payment to be made on the Effective Date or
as soon as practicable thereafter in an amount equivalent to the amount of
such Allowed Priority Tax Claim, or (iii) such other treatment as to which
SWINC or the SWINC Plan Administrator and such holder shall have agreed upon
in writing.
(b) Unimpaired Classes
(i) Class 1A: Secured Claims
(1) Class 1A.1: SWE&C Setoff Claim
SWE&C Setoff Claim means the Intercompany Claim of the Consolidated
SWE&C Estate against the Consolidated SWINC Estate. Under the Third Joint
Plan, on the Effective Date the Class 1A.1: SWE&C Setoff Claim held by the
Consolidated SWE&C Estate shall be deemed offset against the Class 7B: SWINC
Intercompany Claim by the Consolidated SWINC Estate, resulting in a net
Allowed Class 7B: SWINC Intercompany Claim in the approximate amount of $20
million As a result, the Allowed Class 1A.1: SWE&C Setoff Claim shall be
deemed satisfied in full.
(2) Class 1A.2: Miscellaneous Secured Claims
Miscellaneous Secured Claims means all Secured Claims against SWINC
or any SWINC Subsidiary other than the SWE&C Setoff Claim. Under the Third
Joint Plan, on the Effective Date, each holder of an Allowed Class 1A.2: SWINC
Miscellaneous Secured Claims shall receive in full satisfaction, settlement,
release and discharge of and in exchange for such Allowed Class 1A.2: SWINC
Miscellaneous Secured Claim either (a) Cash equal to the unpaid portion of
such Allowed Class 1A.2: SWINC Miscellaneous Secured Claim or (b) such other
treatment as the SWINC Plan Administrator and such holder shall have agreed
upon in writing.
(ii) Class 2A: SWINC Other Priority Claims
SWINC Other Priority Claim means a Claim against SWINC or any SWINC
Subsidiary entitled to priority pursuant to Bankruptcy Code section 507(a)
other than a SWINC Administrative Claim or SWINC Priority Tax Claim. Under the
Third Joint Plan, each holder of such an Allowed Class 2A: SWINC Other
Priority Claim shall receive in full satisfaction, settlement, release and
discharge of and in exchange for such Allowed Class 2A: SWINC Other Priority
Claim (a) Cash equal to the unpaid portion of such Allowed Class 2A: SWINC
Other Priority Claim or (b) such other treatment as to which the SWINC Plan
Administrator and such holder shall have agreed upon in writing.
(c) Impaired Classes of Claims and Interests
(i) Class 3A: SWINC Asbestos Claims
SWINC Asbestos Claims means all Asbestos Claims asserted against
SWINC or the SWINC Subsidiaries. Under the Third Joint Plan, as of the
Effective Date, liability, if any, for all Asbestos Claims against SWINC or
the SWINC Subsidiaries shall be automatically and without further act or deed
be deemed assumed by and shall be the sole responsibility of the Asbestos
Trust. Each holder of an Allowed Class 3A: SWINC Asbestos Claim shall receive
in full satisfaction, settlement, release and discharge of and in exchange for
such Allowed Class 3A: SWINC Asbestos Claim (a) its Pro Rata share of the
Asbestos Trust Assets (set forth in Article VII.L of the Third Joint Plan),
subject to the terms and conditions of the Asbestos Trust Agreement or (b)
such other treatment as to which the Asbestos Trustee and the holder of such
Allowed Class 3A: Asbestos Claim shall have agreed upon in writing.
Under the Third Joint Plan, Allowed Class 3A: SWINC Asbestos Claims
are characterized as impaired because the Proponents are unable to determine
whether the Available Asbestos Trust Cash plus any Insurance Proceeds with
respect to a specific Allowed Class 3A: SWINC Asbestos Claim will be adequate
to pay all Allowed Class 3A: SWINC Asbestos Claims in full. In over 15 years
of liquidating Asbestos Claims, the Asbestos Insurance Coverage available to
the Debtors has been more than adequate to satisfy such claims. Under a
pre-petition arrangement with the Asbestos Insurance Carriers, the Debtors
also agreed to contribute a certain percentage towards the liquidation and
indemnification of Asbestos Claims. In addition, SWEC entered into two
pre-petition settlement agreements (as more specifically defined in the Third
Joint Plan, the "Weitz & Luxenberg Agreements") with the law firm of Weitz &
Luxenberg, P.C., that provide the basis for resolving pending asbestos-related
personal injury claims that have been filed and future asbestos- related
personal injury claims that were filed since January 11, 1995 or may be filed
in the future. The Debtors will assume the Weitz & Luxenberg Agreements in
connection with the Third Joint Plan. To date, the amount of cash funds paid
out by the Debtors in connection with Asbestos Claims is less than the amount
to be contributed by the Debtors to the Asbestos Trust. The Proponents also
believe that Asbestos Claims, if any, are Claims properly asserted only
against the Debtors in the Consolidated SWE&C Estate and that there will be no
Allowed Asbestos Claims at the Consolidated SWINC Estate. Out of an abundance
of caution, however, the Proponents have provided a class for treatment of
asbestos claims against SWINC, Class 3A: SWINC Asbestos Claims, in the event
that any such claims are eventually Allowed. The Proponents believe,
therefore, based on the Debtors' historical liability for Asbestos Claims and
an understanding of the Asbestos Insurance Coverage, that the holder of Class
3A Allowed Asbestos claims will receive from the Available Asbestos Trust Cash
and the Insurance Proceeds at least the same percentage recovery as they would
receive if they held Allowed Claims in Class 5A: SWINC General Unsecured
Claims and as much as the holder would be entitled to under the Weitz &
Luxenberg Agreements. Weitz & Luxenberg, counsel for certain of the Asbestos
Claimants, believes that the Asbestos Claims may be understated and that the
recovery to Class 3A: SWINC Asbestos Claims actually may be less than what the
Asbestos Claimants would receive as Class 5A: SWINC General Unsecured Claims,
however, a determination cannot be made at this time because Weitz & Luxenberg
has not been able to review all of the Asbestos Insurance Policies.
Accordingly, the Proponents of the Third Joint Plan have characterized the
Class 3A: SWINC Asbestos Claims as impaired and seek a vote of the Class 3A to
bind all members of Class 3A: SWINC Asbestos Claims to the treatment of such
Claims proposed in the Third Joint Plan. In the event that the Proponents are
unable to confirm the Third Joint Plan with the Class 3A: SWINC Asbestos
Claims, the Proponents reserve their right to modify the Third Joint Plan to
seek confirmation of a Third Joint Plan wherein the Class 3A: SWINC Asbestos
Claims are combined with and treated the same as Class 5A: SWINC General
Unsecured Claims.
(ii) Class 4A: SWINC Convenience Claims
SWINC Convenience Claims are Allowed SWINC General Unsecured Claims
that elect to receive in full satisfaction, release and discharge of and in
exchange for such Allowed Class 5A: SWINC General Unsecured Claim, the lesser
of $1,000 or 50% of their Allowed Class 5A: SWINC General Unsecured Claims.
Under the Third Joint Plan, on the Effective Date, each holder of an Allowed
Class 5A: SWINC General Unsecured Claim that elects to be treated as a holder
of a Class 4A: SWINC Convenience Class Claim shall receive in full
satisfaction, release and discharge of and in exchange for such Allowed Class
5A: SWINC General Unsecured Claim, the lesser of $1,000 or 50% of its Allowed
Class 5A: SWINC General Unsecured Claim. Only holders of Class 5A: SWINC
General Unsecured Claims who vote in favor of the Third Joint Plan may elect
to have their claim treated as a Class 4A: SWINC Convenience Claim.
(iii) Class 5A: SWINC General Unsecured Claims
SWINC General Unsecured Claim means a Claim against SWINC that is not
a SWINC Administrative Claim, SWINC Priority Tax Claim, SWINC Other Priority
Claim, SWINC Secured Claim, SWINC Securities Claim, SWINC Asbestos Claim,
SWINC Convenience Claim, SWINC Intraestate Claim, or SWINC Subordinated Claim.
Under the Third Joint Plan, on the Effective Date, each holder of an Allowed
Class 5A: SWINC General Unsecured Claim shall receive its Pro Rata share of
the Initial Class 5A Distribution Amount. On each ensuing Semi-Annual
Distribution Date, each holder of an Allowed Class 5A: SWINC General Unsecured
Claim shall receive its Pro Rata share of the Semi-Annual Class 5A
Distribution Amount.
(iv) Class 6A: SWINC Intraestate Claims
SWINC Intraestate Claim means an Intercompany Claim between SWINC and
any SWINC Subsidiary. Under the Third Joint Plan, in connection with, and as a
result of, the substantive consolidation of SWINC and the SWINC Subsidiaries
into the Consolidated SWINC Estate, all Class 6A: SWINC Intraestate Claims
shall be forgiven and cancelled as of the Effective Date and the holders of
Class 6A: SWINC Intraestate Claims shall not be entitled to and shall not
receive or retain any property or interest on account of such Claims.
(v) Class 7A: SWINC Subordinated Claims
Subordinated SWINC Claim means a Subordinated Claim against SWINC or
any SWINC Subsidiary subordinated pursuant to a Final Order under Bankruptcy
Code section 510(c). Under the Third Joint Plan, upon the payment in full of
the Allowed Class 4A: SWINC Convenience Class Claims and the Allowed Class 5A:
SWINC General Unsecured Claims or as soon thereafter as is practicable, each
holder of an Allowed Class 7A: SWINC Subordinated Claim shall receive its Pro
Rata share of the Initial Class 7A Distribution Amount, if any. On each
ensuing Semi-Annual Distribution Date, each holder of an Allowed Class 7A:
SWINC Subordinated Claim shall receive its Pro Rata share of the Semi-Annual
Class 7A Distribution Amount.
(vi) Class 8A: SWINC Securities Claims
SWINC Securities Claim means (a) any claim or demand whenever and
wherever arising or asserted against SWINC or any SWINC Subsidiary, their
predecessors, successors, or their present or former officers, directors or
employees and (b) any debt, obligation or liability (whether or not reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, bonded, secured, or unsecured),
whenever and wherever arising or asserted, of SWINC or any SWINC Subsidiary,
their predecessors, successors, or their present or former officers, directors
or employees (including, but not limited to, all thereof in the nature of or
sounding in tort, contract, warranty, or any other theory of law, equity or
admiralty); in either case (a) and (b) for, relating to, or arising by reason
of, directly or indirectly, the ownership of Old Securities, including, but
not limited to, any Claim subject to subordination under Bankruptcy Code
section 510(b).
Under the Third Joint Plan, upon the payment in full of Allowed Class
4A: SWINC Convenience Class Claims, Allowed Class 5A: SWINC General Unsecured
Claims, and Allowed Class 7A: SWINC Subordinated Claims, each holder of an
Allowed Class 8A: SWINC Securities Claim (less any insurance proceeds actually
received and retained by such holder in respect of such Allowed Class 8A:
SWINC Securities Claim) shall receive its Pro Rata share (as diluted by
Allowed Class 9A: SWINC Equity Interests) of (i) the remaining Available Cash
in the SWINC Disputed Claims Reserve and (ii) any amounts remaining that were
paid to the SWINC Plan Administrator as a liquidation preference with respect
to the SWINC New Series A Preferred Stock after all Allowed Class 4A: SWINC
Convenience Class Claims, Allowed Class 5A: SWINC General Unsecured Claims and
Allowed Class 7A: SWINC Subordinated Claims have been satisfied. On each
ensuing Semi-Annual Distribution Date, each holder of an Allowed Class 8A:
SWINC Securities Claim shall receive its Pro Rata share (as diluted by Allowed
Class 9A: SWINC Equity Interests) of the remaining Available Cash in the SWINC
Disputed Claims Reserve and remaining Available Cash paid to the Consolidated
SWINC Estate as the liquidation preference with respect to the SWINC New
Series A Preferred Stock. Upon receipt by the holder of an Allowed Class 8A:
SWINC Securities Claim of any amounts distributed under the Third Joint Plan
in respect of such claim, such holder shall be deemed to have assigned to the
Consolidated SWINC Estate all rights of the holder to recover such amounts
from the applicable insurer.
(vii) Class 9A: SWINC Equity Interests
In the event that Class 9A: SWINC Equity Interests vote to accept the
Third Joint Plan, then on the Effective Date, each holder of an Allowed SWINC
Equity Interest that votes to accept the Third Joint Plan shall receive $0.12
per share of Old Common Stock held by such holder from the Equity Settlement
Fund on account of Maine Yankee's contribution to the Equity Settlement Fund
from the Initial Maine Yankee Distribution, as provided in Article XIII.G of
the Third Joint Plan. In addition, once Federal has received the Minimum
Federal Distribution, Federal shall make its contribution to the Equity
Settlement Fund, as provided in Article XIII.G of the Joint Plan, and as soon
thereafter as is practicable, each holder of an Allowed SWINC Equity Interest
that votes to accept the Third Joint Plan shall receive $.50 per share of Old
Common Stock held by such holder from the Equity Settlement Fund on account of
Federal's contribution to the Equity Settlement Fund from the Minimum Federal
Distribution. The Equity Settlement Fund shall be administered by the
Consolidated SWINC Estate Governing Board. In addition, upon the payment in
full of the Allowed Class 5A: SWINC General Unsecured Claims, the Allowed
Class 4A: SWINC Convenience Class Claims, and the Allowed Class 7A: SWINC
Subordinated Claims, each holder of an Allowed Class 9A: SWINC Equity Interest
shall receive its Pro Rata share (as may be diluted by Allowed Class 8A: SWINC
Securities Claims) of (i) the remaining Available Cash in the SWINC Disputed
Claims Reserve and (ii) any amounts remaining that were paid to the
Consolidated SWINC Estate as a liquidation preference with respect to the
SWINC New Series A Preferred Stock after all Allowed Class 4A: SWINC
Convenience Class Claims, Allowed Class 5A: SWINC General Unsecured Claims and
Allowed Class 7A: SWINC Subordinated Claims have been satisfied. On each
ensuing Semi- Annual Distribution Date, each holder of an Allowed Class 9A:
SWINC Equity Interest shall receive its Pro Rata share (as may be diluted by
Allowed Class 8A: SWINC Securities Claims) of the remaining Available Cash
paid to the Consolidated SWINC Estate as the remaining liquidation preference
with respect to the SWINC New Series A Preferred Stock.
In the event that Class 9A: SWINC Equity Interests vote to reject the
Third Joint Plan, then, upon the payment in full of the Allowed Class 5A:
SWINC General Unsecured Claims, the Allowed Class 4A: SWINC Convenience Class
Claims, and the Allowed Class 7A: SWINC Subordinated Claims, each holder of an
Allowed Class 9A: SWINC Equity Interest shall receive its Pro Rata share (as
may be diluted by Allowed Class 8A: SWINC Securities Claims) of (i) the
remaining Available Cash in the SWINC Disputed Claims Reserve and (ii) any
amounts remaining that were paid to the Consolidated SWINC Estate as a
liquidation preference with respect to the SWINC New Series A Preferred Stock
after all Allowed Class 4A: SWINC Convenience Class Claims, Allowed Class 5A:
SWINC General Unsecured Claims and Allowed Class 7A: SWINC Subordinated Claims
have been satisfied.. On each ensuing Semi-Annual Distribution Date, each
holder of an Allowed Class 9A: SWINC Equity Interest shall receive its Pro
Rata share (as may be diluted by Allowed Class 8A: SWINC Securities Claims) of
the and remaining Available Cash paid to the Consolidated SWINC Estate as the
liquidation preference with respect to the SWINC New Series A Preferred Stock.
On the Effective Date, all Old Common Stock and Old Common Stock
Options will be canceled. Holders of Allowed Class 9A Equity Interests as of
the Effective Date shall be deemed to hold a pro rata beneficial interest in
the assets of the Consolidated SWINC Estate after payment in full of the
Allowed Class 5A: SWINC General Unsecured Claims, the Allowed Class 4A: SWINC
Convenience Class Claims, and the Allowed Class 7A: SWINC Subordinated Claims,
as provided in the Third Joint Plan. Only Holders of Old Common Stock as of
the Equity Voting Record Date that voted to accept the Third Joint Plan shall
be deemed to hold a pro rata beneficial interest in the Equity Settlement
Fund.
(viii) Class 10A: SWINC Subsidiary Interests
SWINC Subsidiary Interest means any and all Interests in a SWINC
Subsidiary. Under the Third Joint Plan, in connection with, and as a result
of, the substantive consolidation of SWINC and the SWINC Subsidiaries into the
Consolidated SWINC Estate, all Interests in the SWINC Subsidiaries shall be
deemed cancelled as of the Effective Date and the holders of Class 10A: SWINC
Subsidiary Interests shall not be entitled to and shall not receive or retain
any property or interest on account of such Interests.
3. Treatment of Claims Against and Interests in the Consolidated
SWE&C Estates
(a) Unclassified Claims
(i) SWE&C Administrative Claims
SWE&C Administrative Claim means a Claim against SWE&C or any SWE&C
Subsidiary for payment of an administrative expense of a kind specified in
Bankruptcy Code sections 503(b) or 1114(e)(2) and entitled to priority
pursuant to Bankruptcy Code section 507(a)(1), including, but not limited to,
(a) the actual, necessary, costs and expenses, incurred after the Petition
Date, of preserving the SWE&C Estates and operating the businesses of the
Debtors, including wages, salaries or commissions for services rendered after
the commencement of the Chapter 11 Cases, (b) Professional Fee Claims, (c) all
fees and charges assessed against the Estates under 28 U.S.C. ss. 1930 and (d)
all Allowed Claims pursuant to a Final Order of the Court under Bankruptcy
Code section 546(c)(2)(A).
As of June 30, 2003, the books and records of SWE&C and the SWE&C
Subsidiaries reflected unpaid SWE&C Administrative Claims in the approximate
amount of $4.2 million, consisting of primarily accrued but unpaid
professional fees (the total amount of professional fees already paid total
$21.5 million and includes fees paid to professionals retained under
Bankruptcy Code sections 327(a) and (e) and professionals retained in the
ordinary course pursuant to court order). Assuming confirmation in October of
2003, SWE&C and the SWE&C Subsidiaries estimate that the aggregate amount of
Allowed SWE&C Administrative Claims in their Chapter 11 Cases, including,
among other things, professional fees previously paid pursuant to the
Professional Fee Order, will be approximately $38.1 million.
Under the Third Joint Plan, on, or as soon as reasonably practicable
after, the later of (i) the Effective Date or (ii) the first Semi-Annual
Distribution Date after the date an Administrative Claim becomes an Allowed
SWE&C Administrative Claim, each holder of an Allowed SWE&C Administrative
Claim shall receive a beneficial interest in the SWE&C Liquidating Trust
entitling such holder to receive in full satisfaction, release and discharge
of and in exchange for such Allowed SWE&C Administrative Claim (a) Cash equal
to the unpaid portion of such Allowed SWE&C Administrative Claim or (b) such
other treatment as to which SWE&C and/or the SWE&C Liquidating Trustee and
such holder shall have agreed upon in writing.
(ii) SWE&C Priority Tax Claims
SWE&C Priority Tax Claim means a Claim against SWE&C or a SWE&C
Subsidiary that is entitled to priority pursuant to Bankruptcy Code section
507(a)(8).
Under the Third Joint Plan, each holder of an Allowed SWE&C Priority
Tax Claim, at the sole option of the SWE&C Liquidating Trustee, shall be
entitled to receive a beneficial interest in the SWE&C Liquidating Trust
entitling such holder to receive in full satisfaction, release and discharge
of and in exchange for such Allowed Priority Tax Claim, (i) equal Cash
payments made on the last Business Day of every three-month period following
the Effective Date, over a period not exceeding six years after the assessment
of the tax on which such Claim is based, totaling the principal amount of such
Claim plus simple interest on any outstanding balance from the Effective Date
calculated at the interest rate available on ninety (90) day United States
Treasuries on the Effective Date, (ii) a single Cash payment to be made on the
Effective Date or as soon as practicable thereafter in an amount equivalent to
the amount of such Allowed SWE&C Priority Tax Claim, or (iii) such other
treatment as to which the SWE&C Liquidating Trustee and such holder shall have
agreed upon in writing.
(b) Unimpaired Classes of Claims and Interests
(i) Class 1B: SWE&C Miscellaneous Secured Claims
SWE&C Miscellaneous Secured Claims means all Secured Claims against
SWE&C or any SWE&C Subsidiary. The Third Joint Plan provides that on the
Effective Date, each holder of Allowed Class 1B: SWE&C Miscellaneous Secured
Claims shall receive either (a) Cash equal to the unpaid portion of such
Allowed SWE&C Miscellaneous Secured Claim or (b) such other treatment as to
which the SWE&C Liquidating Trustee and the holder of such Allowed Class 1B:
SWE&C Miscellaneous Secured Claim agree to in writing.
(ii) Class 2B: SWE&C Other Priority Claims
SWE&C Other Priority Claim means a Claim against SWE&C or any SWE&C
Subsidiary entitled to priority pursuant to Bankruptcy Code section 507(a)
other than a SWE&C Administrative Claim or SWE&C Priority Tax Claim. Under the
Third Joint Plan, each holder of an Allowed Class 2B: SWE&C Other Priority
Claim shall receive in full satisfaction, settlement, release and discharge of
and in exchange for such Allowed Class 2B: SWE&C Other Priority Claim either
(a) Cash equal to the unpaid portion of such Allowed Class 2B: SWE&C Other
Priority Claim or (b) such other treatment as to which the SWE&C Liquidating
Trustee and the holder of such Allowed SWE&C Other Priority Claim shall have
agreed upon in writing.
(c) Impaired Classes of Claims and Interests
(i) Class 3B: SWE&C Asbestos Claims
SWE&C Asbestos Claim means all Asbestos Claims asserted against SWE&C
or any SWE&C Subsidiary. Under the Third Joint Plan, as of the Effective Date,
liability, if any, for all Asbestos Claims against SWE&C or the SWE&C
Subsidiaries shall be automatically and without further act or deed assumed by
and shall be the sole responsibility of the Asbestos Trust. Each holder of an
Allowed Class 3B: SWE&C Asbestos Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed Class
3B: SWE&C Asbestos Claim (a) its Pro Rata share of the Asbestos Trust Assets
(set forth in Article VII.L. of the Third Joint Plan), subject to the terms
and conditions of the Asbestos Trust Agreement or (b) or such other treatment
as to which the Asbestos Trustee and such holder shall have agreed upon in
writing.
Under the Third Joint Plan, Allowed Class 3B: SWE&C Asbestos Claims
are characterized as impaired because the Proponents are unable to determine
whether the Available Asbestos Trust Cash plus any Insurance Proceeds with
respect to a specific Allowed Class 3B: SWE&C Asbestos Claim will be adequate
to pay all Allowed Class 3B: SWE&C Asbestos Claims in full. In over 15 years
of liquidating Asbestos Claims, the Asbestos Insurance Coverage available to
the Debtors has been more than adequate to satisfy such claims. Under a
pre-petition arrangement with the Asbestos Insurance Carriers, the Debtors
also agreed to contribute a certain percentage towards the liquidation and
indemnification of Asbestos Claims. In addition, SWEC entered into two
pre-petition settlement agreements (as more specifically defined in the Third
Joint Plan, the "Weitz & Luxenberg Agreements") with the law firm of Weitz &
Luxenberg, P.C., that provide the basis for resolving pending asbestos-related
personal injury claims that have been filed and future asbestos- related
personal injury claims that were filed since January 11, 1995 or may be filed
in the future. The Debtors will assume the Weitz & Luxenberg Agreements in
connection with the Third Joint Plan. To date, the amount of cash funds paid
out by the Debtors in connection with Asbestos Claims is less than the amount
to be contributed by the Debtors to the Asbestos Trust. The Proponents
believe, therefore, based on the Debtors' historical liability and an
understanding of the Asbestos Insurance Coverage, that the holder of Class 3B:
SWE&C Allowed Asbestos claims will receive from the Available Asbestos Trust
Cash and the Insurance Proceeds at least the same percentage recovery as they
would receive if they held Allowed Claims in Class 5B: SWE&C General Unsecured
Claims and as much as the holder would be entitled to under the Weitz &
Luxenberg Agreements. Weitz & Luxenberg, counsel for certain of the Asbestos
Claimants, believes that the Asbestos Claims may be understated and that the
recovery to Class 3B: SWE&C Asbestos Claims actually may be less than what the
Asbestos Claimants would receive as Class 5B: SWE&C General Unsecured Claims,
however, a determination cannot be made at this time because Weitz & Luxenberg
has not been able to review all of the Asbestos Insurance Policies.
Accordingly, the Proponents of the Third Joint Plan have characterized the
Class 3B: SWE&C Asbestos Claims as impaired and seek a vote of the Class 3B to
bind all members of Class 3B: SWE&C Asbestos claims to the treatment of such
Claims proposed in the Third Joint Plan. In the event that the Proponents are
unable to confirm the Third Joint Plan with the Class 3B: SWE&C Asbestos
Claims, the Proponents reserve their right to modify the Third Joint Plan to
seek confirmation of a Third Joint Plan wherein the Class 3B: SWE&C Asbestos
Claims are combined with and treated the same as Class 5B: SWE&C General
Unsecured Claims.
(ii) Class 4B: SWE&C Convenience Claims
SWE&C Convenience Claims are Allowed SWE&C General Unsecured Claims
that elect to receive in full satisfaction, release and discharge of and in
exchange for such Allowed Class 5B: SWE&C General Unsecured Claim, the lesser
of $1,000 or 50% of their Allowed Class 5B: SWE&C General Unsecured Claims.
Under the Third Joint Plan, on the Effective Date, each holder of an Allowed
Class 5B: SWE&C General Unsecured Claim that elects to be treated in Class 4B
shall receive a beneficial interest in the SWE&C Liquidating Trust entitling
such holder to receive in full satisfaction, release and discharge of and in
exchange for such Allowed Class 5B: SWE&C General Unsecured Claim, the lesser
of $1,000 or 50% of its Allowed Class 5B: SWE&C General Unsecured Claim. Only
holders of Class 5B: SWE&C General Unsecured Claims who vote in favor of the
Third Joint Plan may elect to have their claim treated as a Class 4B: SWE&C
Convenience Claim.
(iii) Class 5B: SWE&C General Unsecured Claims
SWE&C General Unsecured Claim means a Claim against SWE&C that is not
a SWE&C Administrative Claim, SWE&C Priority Tax Claim, SWE&C Other Priority
Claim, SWE&C Miscellaneous Secured Claim, SWE&C Asbestos Claim, SWE&C
Intraestate Claim, SWE&C Intercompany Claim, SWE&C Convenience Claim, SWE&C
Securities Claim, or SWE&C Subordinated Claim, and includes the Allowed SWINC
Subrogation Claim.
The Third Joint Plan provides that on, or as soon as reasonably
practicable after, the later of (i) the Effective Date or (ii) the first
Semi-Annual Distribution Date after such Class 5B: SWE&C General Unsecured
Claim becomes an Allowed Class 5B: SWE&C General Unsecured Claim, each holder
of an Allowed Class 5B: SWE&C General Unsecured Claim shall receive a
beneficial interest in the SWE&C Liquidating Trust entitling such holder to
receive in full satisfaction, release and discharge of and in exchange for
such Allowed Class 5B: SWE&C General Unsecured Claim its Pro Rata share of the
Semi-Annual Class 5B Distribution Amount.
(iv) Class 6B: SWE&C Intraestate Claims
SWE&C Intraestate Claim means an Intraestate Claim between SWE&C and
any SWE&C Subsidiary. Under the Third Joint Plan, in connection with and as a
result of the substantive consolidation of SWE&C and the SWE&C Subsidiaries
into the Consolidated SWE&C Estates, all Class 6B: SWE&C Intraestate Claims
shall be eliminated and the holders of Class 6B: SWE&C Intraestate Claims
shall not be entitled to and shall not receive or retain any property or
interest on account of such Claims.
(v) Class 7B: SWINC Intercompany Claims
Class 7B consists of the Intercompany Claims of SWINC or any SWINC
Subsidiaries against the Consolidated SWE&C Estate after giving effect to the
SWE&C Setoff Claim. Such Intercompany Claims do not include claims based upon
contribution, reimbursement or subrogation based on distribution by the
Consolidated SWINC Estate under the terms of the Third Joint Plan. Such claims
also do not include the SWINC MY Contribution Claim.
Under the Third Joint Plan, holders of Class 7B: SWINC Intercompany
Claims shall not receive or retain any distribution on account of such Allowed
Class 7B: SWINC Intercompany Claim.
(vi) Class 8B: SWE&C Subordinated Claims
Subordinated SWE&C Claim means a claim against SWE&C or any SWE&C
Subsidiary subordinated pursuant to a Final Order under Bankruptcy Code
section 510(c). The Third Joint Plan provides that holders of Allowed Class
8B: SWE&C Subordinated Claims shall not receive or retain any distribution on
account of such Class 8B: SWE&C Subordinated Claim.
(vii) Class 9B: SWE&C Subsidiary Interests
SW&C Subsidiary Interest means any and all Interests in a SWE&C
Subsidiary. Under the Third Joint Plan, in connection with, and as a result
of, the substantive consolidation of SWE&C and the SWE&C Subsidiaries, on the
Effective Date or such other date set by an order of the Court, all Interests
in the SWE&C Subsidiaries shall be eliminated and the holders of Class 9B:
SWE&C Subsidiary Interests shall not be entitled to and shall not receive or
retain any property or interest on account of such Interests.
(viii) Class 10B: SWE&C Interests
SWE&C Interest means(a) the legal, equitable, contractual and other
rights of any Person with respect to the Old Common Stock, Old Common Stock
Options or any other equity or membership interest in SWE&C or any SWE&C
Subsidiary and (b) the legal, equitable, contractual or other rights of any
Person to acquire or receive any of the foregoing. Under the Third Joint Plan,
in connection with, and as a result of, the substantive consolidation of SWE&C
and the SWE&C Subsidiaries, on the Effective Date or such other date set by an
order of the Court, all Interests in SWE&C shall be eliminated and the holders
of Class 10B: SWE&C Interests shall not be entitled to and shall not receive
or retain any property or interest on account of such Interests.
I. Distributions Under the Third Joint Plan
The SWINC Disbursing Agent shall make all distributions required
under the Third Joint Plan on account of Claims against and Interests in the
Consolidated SWINC Estate. If the SWINC Disbursing Agent is an independent
third party designated by the SWINC Plan Administrator to serve in such
capacity, then the SWINC Disbursing Agent shall receive, without further Court
approval, reasonable compensation for distribution services rendered pursuant
to the Third Joint Plan and reimbursement of reasonable out-of-pocket expenses
incurred in connection with such services from SWINC on terms acceptable to
the SWINC Plan Administrator. The SWINC Disbursing Agent shall not be required
to give any bond or surety or other security for the performance of its duties
unless otherwise ordered by the Court.
The SWE&C Disbursing Agent shall make all distributions required
under the Third Joint Plan on account of Claims against the Consolidated SWE&C
Estate. If the SWE&C Liquidating Trust Disbursing Agent is an independent
third party designated by the SWE&C Liquidating Trust to serve in such
capacity, then the SWE&C Liquidating Trust Disbursing Agent shall receive,
without further Court approval, reasonable compensation for distribution
services rendered pursuant to the Third Joint Plan and reimbursement of
reasonable out-of-pocket expenses incurred in connection with such services
from the SWE&C Liquidating Trust on terms acceptable to the SWE&C Liquidating
Trust. The SWE&C Liquidating Trust Disbursing Agent shall not be required to
give any bond or surety or other security for the performance of its duties
unless otherwise ordered by the Court.
Cash payments made pursuant to the Third Joint Plan shall be in U.S.
funds, by the means agreed to by the payor and the payee, including by check
or wire transfer or, in the absence of an agreement, such commercially
reasonable manner as the payor shall determine in its sole discretion.
1. Sources of Cash for Plan Distributions
Except as otherwise provided in the Third Joint Plan or the
Confirmation Order, all Cash necessary for the SWINC Plan Administrator and
the SWINC Disbursing Agent, as the case may be, to make payments pursuant to
the Third Joint Plan to holders of the Claims against and Interests in SWINC,
the SWINC Subsidiaries or the Consolidated SWINC Estates shall be obtained
from (i) the Cash balances of SWINC and the SWINC Subsidiaries, including Cash
from the market value allocation of the Sale Proceeds, and (ii) the
liquidation of the remaining non-Cash assets, if any, of SWINC, the SWINC
Subsidiaries and the Consolidated SWINC Estates and (iii) the liquidation of
the remaining non-Cash assets, if any, of SWINC and the SWINC Subsidiaries.
Except as otherwise provided in the Third Joint Plan or the
Confirmation Order, all Cash necessary for the SWE&C Liquidating Trustee and
the SWE&C Liquidating Trust Disbursing Agent, as the case may be, to make
payments pursuant to the Third Joint Plan to holders of Claims against SWE&C,
the SWE&C Subsidiaries or the SWE&C Liquidating Trust shall be obtained from
(i) the Cash balances of SWE&C and the SWE&C Subsidiaries, including Cash from
the market value allocation of the Sale Proceeds, (ii) proceeds derived from
the repayment of the Reorganized SWINC Note, and (iii) the liquidation of the
remaining non-Cash assets, if any, of SWE&C and the SWE&C Subsidiaries.
2. Distributions for Claims or Interests Allowed as of the Effective
Date
Except as otherwise provided in the Third Joint Plan or as ordered by
the Court, distributions to be made on account of Claims or Interests that are
Allowed Claims or Allowed Interests as of the Effective Date shall be made on
the Effective Date. Any distribution to be made on the Effective Date pursuant
to the Third Joint Plan shall be deemed as having been made on the Effective
Date if such distribution is made on the Effective Date. Any payment or
distribution required to be made under the Third Joint Plan on a day other
than a Business Day shall be made on the next succeeding Business Day.
Distributions on account of Claims or Interests that first become Allowed
Claims or Allowed Interests after the Effective Date shall be made on the
first Semi-Annual Distribution Date following the date on which the Claim or
Interest was Allowed unless otherwise provided in the terms and conditions of
the SWINC Plan Administrator Agreement, the SWE&C Liquidating Trust Agreement,
the Asbestos Trust Agreement, Articles IV, VII and IX of the Third Joint Plan,
or any contract, instrument or other agreement created in connection with the
Third Joint Plan.
(a) Interest on Claims or Interests
Postpetition interest shall not accrue or be paid on any Claims or
Interests, and no holder of a Claim or Interest shall be entitled to interest
accruing on or after the Petition Date on any Claim or Interest. Interest
shall not accrue or be paid upon any Disputed Claim or Disputed Interest in
respect of the period from the Petition Date to the date a final distribution
is made thereon if and after such Disputed Claim or Disputed Interest becomes
an Allowed Claim or Allowed Interest.
(b) Notification Date for Distributions to Holders of Equity
Interests
At the close of business on the Confirmation Date, the transfer
ledgers for the Old Securities shall be closed, and there shall be no further
changes in the record holders of the Old Securities. Neither the SWINC Plan
Administrator nor the SWINC Disbursing Agent shall have any obligation to
recognize any transfer of such Old Securities occurring after the Confirmation
Date and shall be entitled instead to recognize and deal for all purposes
hereunder with only those record holders as of the close of business on the
Confirmation Date.
(c) Fractional Dollars; De Minimus Distributions
Notwithstanding any other provision of the Third Joint Plan, the
SWINC Disbursing Agent and the SWE&C Liquidating Trust Disbursing Agent shall
(i) not be required to make distributions or payments of fractions of dollars,
and whenever any payment of a fraction of a dollar under the Third Joint Plan
would otherwise be called for, the actual payment made shall reflect a
rounding of such fraction to the nearest whole dollar (up or down), with half
dollars being rounded down; and (ii) have no obligation to make a distribution
on account of an Allowed Claim from any Reserve or account (a) to any holder
of an Allowed Claim if the aggregate amount of all distributions authorized to
be made from all such Reserves or accounts on the particular Distribution Date
in question is less than $1,000,000 or (b) to a specific holder of an Allowed
Claim if the amount to be distributed to that holder on the particular
Distribution Date (1) does not constitute a final distribution to such holder
and (2) is less than $100.00.
(d) Delivery of Distributions
Distributions to holders of Allowed Claims or Allowed Interests shall
be made at the addresses set forth in the Amended Schedules unless such
addresses are superseded by proofs of claim or interest or transfers of claim
filed pursuant to Bankruptcy Rule 3001 (or at the last known addresses of such
holders if the SWINC Disbursing Agent or the SWE&C Liquidating Trust
Disbursing Agent as the case may be, has been notified in writing of a change
of address).
If the distribution to any holder of an Allowed Claim or Allowed
Interest is returned to the SWINC Disbursing Agent or the SWE&C Liquidating
Trust Disbursing Agent as undeliverable or is otherwise unclaimed, no further
distributions shall be made to such holder unless and until the SWINC
Disbursing Agent or the SWE&C Liquidating Trust Disbursing Agent is notified
in writing of such holder's then-current address. Undeliverable and unclaimed
distributions shall be set aside or, in the case of a Cash distribution,
deposited in a segregated, interest-bearing account, designated as an
"unclaimed distribution reserve" (the "Unclaimed Distribution Reserve"), for
the benefit of all such similarly situated Persons until such time as a
distribution becomes deliverable or is claimed.
(e) Surrender of Securities or Instruments
On or before the Effective Date, or as soon as practicable
thereafter, each holder of an instrument evidencing an Interest on account of
Old Securities (as to each, a "Certificate") shall surrender such Certificate
to the SWINC Disbursing Agent and such Certificate shall be cancelled;
provided, however, that the surrender and cancellation of such Certificates
pursuant to or under the Third Joint Plan shall in no way impair or affect the
right of any holder to pursue any claims against non-Debtors in any of the
Securities Actions. No distribution of property shall be made to or on behalf
of any such holder unless and until such Certificate is received by the SWINC
Disbursing Agent or the unavailability of such Certificate is reasonably
established to the satisfaction of the SWINC Disbursing Agent. Any such holder
who fails to surrender or cause to be surrendered such Certificate or fails to
execute and deliver an affidavit of loss and indemnity reasonably satisfactory
to the SWINC Disbursing Agent prior to the second (2nd) anniversary of the
Effective Date, shall be deemed to have forfeited all rights and interests in
respect of such Certificate and shall not participate in any distribution and
all property in respect of such forfeited distribution, including interest
accrued thereon, shall revert to the Consolidated SWINC Estate for the benefit
of the Claimholders and Interestholders of SWINC notwithstanding any federal
or state escheat laws to the contrary.
3. Resolution and Treatment of Disputed, Contingent and
Unliquidated Claims and Disputed Interests
(a) Prosecution of Objections
Except as otherwise provided in the Third Joint Plan or any contract,
instrument or other agreement created in connection with the Third Joint Plan,
from the Effective Date through SWINC Claims Objection Deadline (which may be
extended by an order of the Court), the SWINC Plan Administrator shall have
the exclusive authority to file objections to Claims against or Interests in
the Consolidated SWINC Estate with the Court and serve such objections upon
the holders of each of the Claims or Interests to which objections are made.
Nothing contained in the Third Joint Plan, however, shall limit the right of
the SWINC Plan Administrator to object to Claims against or Interests in the
Consolidated SWINC Estate, if any, filed, amended or reclassified after the
SWINC Claims Objection Deadline. Subject to the limitations set forth in the
SWINC Plan Administrator Agreement and Article VII.K of the Third Joint Plan,
the SWINC Plan Administrator shall be authorized to, and shall, resolve all
Disputed Claims solely against or Disputed Interests in the Consolidated SWINC
Estate by withdrawing or settling such objections thereto, or by litigating to
judgment in the Court or such other court having jurisdiction the validity,
nature and/or amount thereof.
Except as otherwise provided in the Third Joint Plan or any contract,
instrument or other agreement created in connection with the Third Joint Plan,
from the Effective Date through the SWE&C Claims Objection Deadline (which may
be extended by an order of the Court), the SWE&C Liquidating Trustee shall
have the exclusive authority to file objections to Claims against or Interests
in the Consolidated SWE&C Estate with the Court and serve such objections upon
the holders of each of the Claims against or Interests in the Consolidated
SWE&C Estate to which objections are made. Nothing contained in the Third
Joint Plan, however, shall limit the right of the SWE&C Liquidating Trustee to
object to Claims against or Interests in the Consolidated SWE&C Estate, if
any, filed or amended after the SWE&C Claims Objection Deadline. Subject to
the limitations set forth in the SWE&C Liquidating Trust Agreement and Article
VII.N of the Third Joint Plan, the SWE&C Liquidating Trustee shall be
authorized to, and shall, resolve all Disputed Claims solely against or
Disputed Interests in the Consolidated SWE&C Estate by withdrawing or settling
such objections thereto, or by litigating to judgment in the Court or such
other court having jurisdiction the validity, nature and/or amount thereof.
Except as otherwise provided in the Third Joint Plan or any contract,
instrument or other agreement created in connection with the Third Joint Plan,
from the Effective Date through the later of (i) the SWE&C Claims Objection
Deadline or (ii) the SWINC Claims Objection Deadline (which may be extended by
an order of the Court), the Interestate Oversight Board shall have the
exclusive authority to file objections to Claims with respect to Claims or
Interests asserted against both the Consolidated SWE&C Estate and the
Consolidated SWINC Estate and serve such objections upon the holders of each
of the Claims or Interests to which objections are made. Subject to the
limitations set forth in the Third Joint Plan, the Interestate Oversight Board
shall be authorized to, and shall, resolve all Disputed Claims against or
Disputed Interests in both the Consolidated SWE&C Estate and the Consolidated
SWINC Estate by withdrawing or settling such objections thereto, or by
litigating to judgment in the Court or such other court having jurisdiction
the validity, nature and/or amount thereof.
(b) No Distributions Pending Allowance
Notwithstanding any other provision of the Third Joint Plan, no
payments or distributions shall be made with respect to all or any portion of
a Disputed Claim or Disputed Interest unless and until all objections to such
Disputed Claim or Disputed Interest have been settled or withdrawn or have
been determined by Final Order, and the Disputed Claim or the Disputed
Interest, or some portion thereof, has become an Allowed Claim or Allowed
Interest.
(c) Reserves
On the Effective Date, the following Reserves will be established and
funded:
(i) General Administrative Claims Reserve
On the Effective Date, there shall be created and funded with Cash, a
General Administrative Claims Reserve in the amount of $13.9 million, to be
used to pay under the Third Joint Plan Allowed General Administrative Claims
including General Professional Fee Claims. In the event that any Cash remains
in the General Administrative Claims Reserve after the payment in full of
General Administrative Claims, such amount shall be distributed 50% to the
SWINC Disputed Claims Reserve and 50% to the SWE&C Disputed Claims Reserve.
(ii) The SWINC Professional Fee Reserve
On the Effective Date, there shall be created and funded with Cash,
the SWINC Professional Fee Reserve in the amount of $2 million to be used to
pay Allowed Professional Fee Claims held by (i) counsel and any advisers to
the Equity Committee and (ii) any professionals working exclusively on behalf
of SWINC or any SWINC Subsidiary. In the event that any Cash remains in the
SWINC Professional Fee Reserve after payment of the Allowed SWINC Professional
Fee Claims, such Cash shall be distributed to the SWINC Disputed Claims
Reserve.
(iii) SWINC Operating Reserve
On the Effective Date, there shall be created and funded with Cash, a
SWINC Operating Reserve in the amount of $1.8 million, which amount shall be
used to pay the administrative and other costs and expenses associated with
the Consolidated SWINC Estate, including all fees and expenses of the SWINC
Plan Administrator and its professionals.(1) In the event that Cash in the
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(1) Included in the SWINC Operating Reserve is $150,000, which represents
one-half of the severance package for James Carroll. The full severance
package of $300,000 shall be deemed to have been earned by Mr. Carroll
upon confirmation of the Third Joint Plan, but such payment will be
deferred until Mr. Carroll's employment is terminated, whether voluntary
or not.
SWINC Operating Reserve is exhausted, the SWINC Plan Administrator, in his or
her sole discretion, has the right to obtain such additional Cash from the
SWINC Disputed Claims Reserve so as to replenish the SWINC Operating Reserve.
In the event that any Cash remains in the SWINC Operating Reserve after the
final resolution of all Claims Against or Interests in the Consolidated SWINC
Estate, such Cash shall be distributed to the SWINC Disputed Claims Reserve
for distributions under the Third Joint Plan.
(iv) The SWINC Disputed Claims Reserve
On the Effective Date, there shall be created and funded with Cash, a
SWINC Disputed Claims Reserve from Cash in the amount of $42.9 million, which
amount will be used to pay (i) the holders of Allowed Class 4A: SWINC
Convenience Claims in full, (ii) the holders of Allowed Class 5A: SWINC
General Unsecured Claims their Pro Rata share of the Disputed Claims Reserve
until all such Claims are paid in full, (iii) the holders of Allowed Class 7A:
SWINC Subordinated Claims their Pro Rata Share of the Disputed Claims Reserve
remaining after holders in Class 4A and Class 5A have been paid in full, and
(iv) the holders of Allowed Class 8A: SWINC Securities Claims and Allowed
Class 9A: SWINC Equity Interests their Pro Rata share of the Disputed Claims
Reserve remaining after holders in Allowed Class 7A: SWINC Subordinated Claims
have been paid in full. The SWINC Disputed Claims Reserve shall be
supplemented from time to time with Cash or other property received by the
SWINC Plan Administrator from recoveries on claims or causes of action,
dispositions of property or receipt of unused funds in Reserves distributable
to the SWINC Disputed Claim Reserve.
(v) The SWE&C Professional Fee Reserve
On the Effective Date, there shall be created and funded with Cash,
the SWE&C Professional Fee Reserve in the amount of $1.5 million to be used to
pay Allowed SWE&C Professional Fee Claims held by (i) counsel and any advisers
to the Creditors' Committee and (ii) any professionals working exclusively on
behalf of SWE&C or any SWE&C Subsidiary. In the event that any Cash remains in
the SWE&C Professional Fee Reserve after payment of all Allowed SWE&C
Professional Fee Claims, such Cash shall be distributed to the SWE&C Disputed
Claims Reserve.
(vi) SWE&C Operating Reserve
On the Effective Date, there shall be created and funded with Cash, a
SWE&C Operating Reserve in the amount of $2.2 million, which amount shall be
used to pay the administrative and other costs and expenses associated with
the Consolidated SWE&C Estate, including all fees and expenses of the SWE&C
Liquidating Trustee and its professionals(2). In the event that Cash in the
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(2) Included in the SWE&C Operating Reserve is $150,000, which represents
one-half of the severance package for James Carroll. The severance full
package of $300,000 shall be deemed to have been earned by Mr. Carroll
upon confirmation of the Third Joint Plan, but such payment will be
deferred until Mr. Carroll's employment is terminated, whether voluntary
or not.
SWE&C Operating Reserve is exhausted, the SWE&C Liquidating Trustee, in his or
her sole discretion, has the right to obtain such additional Cash from the
SWE&C Disputed Claims Reserve so as to replenish the SWE&C Operating Reserve.
In the event that any Cash remains in the SWE&C Operating Reserve after the
final resolution of all Claims Against of Interests in the Consolidated SWE&C
Estate, such Cash shall be distributed to the SWE&C Disputed Claims Reserve
for distributions under the Third Joint Plan.
(vii) The SWE&C Disputed Claims Reserve
On the Effective Date, there shall be created and funded with Cash, a
SWE&C Disputed Claims Reserve in the amount of $2.9 million, which amount will
be used as follows: (i) first, to pay the holders of Allowed Class 4B: SWE&C
Convenience Claims in full, and (ii) second, to pay the holders of Allowed
Class 5B: SWE&C General Unsecured Claims their Pro Rata share of the SWE&C
Disputed Claims Reserve until all such Claims are paid in full. The SWE&C
Disputed Claims Reserve shall be supplemented from time to time with Cash and
other property received by the SWE&C Liquidating Trustee from recoveries on
claims or causes of action, dispositions of property, the receipt of unused
funds from Reserves established under the Third Joint Plan and distributable
to the SWE&C Disputed Claims Reserve.
(viii) The Reorganized SWINC Operating Reserve
On the Effective Date, there shall be created and funded with Cash, a
Reorganized SWINC Operating Reserve in the amount of $2.0 million, funded
sixty percent (60%) by the Consolidated SWINC Estate and forty percent (40%)
by the Consolidated SWE&C Estate, which amount shall be used to pay the
administrative and other costs and expenses associated with Reorganized SWINC,
including all fees and expenses of Reorganized SWINC and its professionals. In
the event that any Cash remains in the Reorganized SWINC Operating Reserve
upon completion of all of its obligations under the Third Joint Plan, such
Cash shall be reimbursed in the same proportion to the SWINC Disputed Claims
Reserve (60%) and the SWE&C Disputed Claims Reserve (40%) for further
distribution under the Third Joint Plan. In the event that the Reorganized
SWINC Board determines that the Reorganized SWINC Operating Reserve needs to
be replenished, the Consolidated SWINC Estate and the Consolidated SWE&C
Estate shall replenish said reserve in the same proportional amounts.
(d) Distributions After Allowance
The SWINC Disbursing Agent and the SWE&C Liquidating Trust Disbursing
Agent shall make payments and distributions from the appropriate Reserves to
the holder of any Disputed Claim that has become an Allowed Claim or Allowed
Interest, on the first Semi- Annual Distribution Date following the date that
such Disputed Claim becomes an Allowed Claim. Such distributions shall be made
in accordance with the Third Joint Plan, the SWINC Plan Administrator
Agreement, or the SWE&C Liquidating Trust Agreement, as the case may be.
J. Means for Implementation of the Third Joint Plan
1. Merger of Entities
On the Effective Date, (a) each of the SWINC Subsidiaries shall be
merged or deemed merged with and into SWINC and (b) the Chapter 11 Cases of
the SWINC Subsidiaries shall be closed, following which any and all
proceedings that could have been brought or otherwise commenced in the Chapter
11 Case of any of the SWINC Subsidiaries shall be brought or otherwise
commenced in SWINC's Chapter 11 Case.
On the Effective Date, (a) each of the SWE&C Subsidiaries shall be
deemed merged with and into SWE&C and (b) the Chapter 11 Cases of the SWE&C
Subsidiaries shall be closed, following which any and all proceedings that
could have been brought or otherwise commenced in the Chapter 11 Case of any
of the SWE&C Subsidiaries shall be brought or otherwise commenced in SWE&C's
Chapter 11 Case.
The foregoing merger of entities shall be exempt from any tax under
applicable state of federal law as set forth in Article VII.U of the Third
Joint Plan.
2. Continued Corporate Existence; Dissolution of SWE&C and the SWE&C
Subsidiaries
Reorganized SWINC shall emerge on the Effective Date out of the
Consolidated SWINC Estate, in accordance with the laws of the State of
Delaware and pursuant to the certificate of incorporation and by-laws of SWINC
in effect prior to the Effective Date, as amended under the Third Joint Plan.
Pursuant to the Amended Certificate of Incorporation and By-Laws of
Reorganized SWINC, Reorganized SWINC will be authorized to engage in any
lawful activity for which corporations may be organized under the DGCL. After
emerging from bankruptcy, Reorganized SWINC's business operations will consist
of the management of the Pension Plan, including any efforts in which
Reorganized SWINC may terminate the Pension Plan or transfer its sponsorship
in accordance with applicable law. Although Reorganized SWINC will be fully
authorized to engage in other business operations and management intends to
evaluate opportunities as, when and if they arise, Reorganized SWINC has no
present intention of engaging in business operations and will likely dissolve
pursuant to the DGCL within two years following confirmation set forth herein.
On the Effective Date or as soon thereafter as the SWE&C Liquidating
Trustee determines is appropriate, SWE&C and the SWE&C Subsidiaries shall be
dissolved. If necessary or appropriate, the SWE&C Liquidating Trustee shall
file a certificate of dissolution for SWE&C and/or the SWE&C Subsidiaries and
shall take all other actions necessary or appropriate to effect the
dissolution of SWE&C and the SWE&C Subsidiaries under applicable state law.
3. Certificate of Incorporation and By-laws of Reorganized SWINC
The certificate of incorporation and by-laws of SWINC shall be
amended as necessary to satisfy the provisions of the Third Joint Plan and the
Bankruptcy Code. The certificate of incorporation of Reorganized SWINC shall
be amended to, among other things: (a) authorize 1,000 shares of Reorganized
SWINC New Common Stock, $0.01 par value per share, (b) authorize 100 shares of
Reorganized SWINC New Series A Preferred Stock, $0.01 par value per share, (c)
authorize 100 shares of Reorganized SWINC New Series B Preferred Stock, $0.01
par value per share, and (d) pursuant to Bankruptcy Code section 1123(a)(6),
add (i) a provision prohibiting the issuance of non- voting equity securities,
and, if applicable, (ii) a provision setting forth an appropriate distribution
of voting power among classes of equity securities possessing voting power,
including, in the case of any class of equity securities having a preference
over another class of equity securities with respect to dividends, adequate
provisions for the election of directors representing such preferred class in
the event of default in the payment of such dividends. The forms of the
documents relating to the Amended Certificate of Incorporation and By-laws of
Reorganized SWINC shall be in substantially the form annexed to the Third
Joint Plan as Exhibits E and F, respectively.
4. Directors and Officers of Reorganized SWINC
On the Effective Date, the members of the board of directors and
executive officers of SWINC and each of the SWINC Subsidiaries shall be deemed
to have resigned. From and after the Effective Date, the board of directors of
Reorganized SWINC shall consist of three (3) directors: (1) Mr. James Carroll,
who will serve as Chairman and President of Reorganized SWINC; (2) a director
designated by the Equity Committee; and (3) a director designated by the SWE&C
Liquidating Trust Advisory Board. The Directors of Reorganized SWINC will
receive no compensation but shall be paid their reasonable out-of-pocket
expenses for serving on the Reorganized SWINC board.
5. Corporate Action
Each of the matters provided for under the Third Joint Plan involving
the corporate structure of the Debtors or corporate action to be taken by or
required of the Debtors shall, as of the Effective Date, be deemed to have
occurred and be effective as provided herein, and shall be authorized and
approved in all respects without any requirement or further action by
stockholders, creditors, or directors of the Debtors.
6. Cancellation of Securities, Instruments and Agreements Evidencing
Claims and Interests
Except as otherwise provided in the Third Joint Plan and in any
contract, instrument or other agreement or document created in connection with
the Third Joint Plan, on the Effective Date (a) the Old Securities and any
other note, bond, indenture, or other instrument or document evidencing or
creating any indebtedness or obligation of a Debtor shall be deemed cancelled,
and, in the case of the Old Securities, shall be retired and shall cease to
exist and (b) the obligations of the Debtors under any agreement, indenture or
certificate of designations governing the Old Securities and any other note,
bond, indenture or other instrument or document evidencing or creating any
indebtedness or obligation of a Debtor shall be deemed released.
7. Issuance of Reorganized SWINC New Common Stock and Preferred Stock
On the Effective Date, Reorganized SWINC shall issue for distribution
in accordance with the terms of the Third Joint Plan, (i)(A) the Reorganized
SWINC New Series A Preferred Stock to the Consolidated SWINC Estate to be held
for the benefit of Holders of Allowed Claims and Interests in accordance with
the terms of the Third Joint Plan and (B) the Reorganized SWINC New Series B
Preferred Stock to the SWE&C Liquidating Trustee to be held for the benefit of
Holders of Allowed Claims and Interests in accordance with the terms of the
Third Joint Plan and the SWE&C Liquidating Trust Agreement and (ii) the
Reorganized SWINC New Common Stock to the SWE&C Liquidating Trustee. The
issuance of Reorganized SWINC New Common Stock, Reorganized SWINC New Series A
Preferred Stock and Reorganized SWINC New Series B Preferred Stock shall be
exempt from registration under applicable securities laws pursuant to Section
4(2) of the Securities Act. All such shares of Reorganized SWINC New Common
Stock, Reorganized SWINC New Series A Preferred Stock and Reorganized SWINC
New Series B Preferred Stock shall be, when issued pursuant to and in
accordance with the terms of the Third Joint Plan, duly authorized, validly
issued, fully paid and nonassessable.
Pursuant to the terms of the SWE&C Liquidating Trust Agreement, the
SWINC Plan Administrator Agreement and the securities themselves, the SWE&C
Liquidating Trustee and the SWINC Plan Administrator have agreed not to
transfer or otherwise dispose of the Reorganized SWINC New Common Stock, the
Reorganized SWINC New Series A Preferred Stock and the Reorganized SWINC New
Series B Preferred Stock, respectively. In no event will the Reorganized SWINC
New Common Stock be distributed to the beneficial owners of the SWE&C
Liquidating Trust and the shares of Reorganized SWINC New Common Stock will
not be deemed to be assets of the SWE&C Liquidating Trust. Accordingly, none
of the securities to be issued by Reorganized SWINC under the Third Joint Plan
will be transferrable.
Set forth below are the material terms of the securities to be issued
by Reorganized SWINC under the Third Joint Plan, including the Reorganized
SWINC New Common Stock, the Reorganized SWINC New Series A Preferred Stock,
and the Reorganized SWINC New Series B Preferred Stock.
(a) Reorganized SWINC New Common Stock
The principal terms of the Reorganized SWINC New Common Stock to be
issued by Reorganized SWINC under the Third Joint Plan are as follows:
Authorization........................ 1,000 shares.
Initial
Issuance............................. 100 shares.
Par Value............................ $.01 per share.
Listing.............................. None.
Voting Rights........................ One vote per share on all matters
submitted to a vote of the stockholders
of Reorganized SWINC; votes together as
a single class with the Reorganized
SWINC New Series A Preferred Stock and
Reorganized SWINC New Series B
Preferred Stock. The SWE&C Liquidating
Trustee has granted an irrevocable
proxy to the Board of Directors of
Reorganized SWINC for the limited
purpose of permitting the Board to vote
the shares of Reorganized SWINC New
Common Stock, at its discretion, in
favor of the dissolution of Reorganized
SWINC.
Transfer
Restrictions......................... Not transferable.
Preemptive
Rights............................... None.
(b) Reorganized SWINC New Series A Preferred Stock
The principal terms of the Reorganized SWINC New Series A Preferred
Stock to be issued by Reorganized SWINC under the Third Joint Plan are as
follows:
Authorization........................ 100 shares.
Initial Issuance..................... 1 share.
Par Value............................ $.01 per share.
Listing.............................. None.
Ranking.............................. Senior to the Reorganized SWINC New
Common Stock and all other series of
Preferred Stock that subsequently may
be issued by Reorganized SWINC. Except
as to the liquidation preference, the
Reorganized SWINC New Series A
Preferred Stock and Reorganized SWINC
New Series B Preferred Stock rank
equally.
Liquidation
Preference........................... Upon termination of the Pension Plan
and the liquidation, dissolution and
winding up of Reorganized SWINC, and in
accordance with the terms of the Third
Joint Plan, holders of Series A
Preferred Stock shall be entitled to
receive a liquidating distribution
calculated as follows: (i) from the
Reversion either (x) two-thirds of the
first $30 million of funds generated
from the Reversion of the Pension Plan
plus, if the Reversion exceeds $30
million, 50% of any funds generated
from the Reversion in excess of $30
million or (y) in the event Class 9A
votes to reject the Third Joint Plan,
two-thirds of the first $30 million of
funds generated from the Reversion of
the Pension Plan plus, if the Reversion
exceeds $30 million, twenty-five
percent (25%) of any funds generated
from the Reversion in excess of $30
million; and (ii) 100% of the funds
generated from the liquidation of any
additional assets, other than the
Reversion, of Reorganized SWINC (the
"Series A Liquidation Preference"). The
Consolidated SWINC Estate will
distribute the Series A Liquidation
Preference to the Holders of Allowed
SWINC Claims and Interests in
accordance with the terms of the Third
Joint Plan and the SWINC Plan
Administrator Agreement.
Dividends............................ Holders of Series A Preferred Stock are
entitled to participate ratably in any
dividends declared on the Reorganized
SWINC New Common Stock, when, as and if
declared by the Board of Directors of
Reorganized SWINC.
Redemption........................... Non-Redeemable.
Board
Designations......................... None.
Voting Rights........................ One vote per share on all matters
submitted to a vote of the stockholders
of Reorganized SWINC; votes together as
a single class with the Reorganized
SWINC New Common Stock and Reorganized
SWINC New Series B Preferred Stock.
Transfer
Restrictions......................... Not transferable.
Preemptive
Rights............................... None.
(c) Reorganized SWINC New Series B Preferred Stock
The principal terms of the Reorganized SWINC New Series B Preferred
Stock to be issued by Reorganized SWINC under the Third Joint Plan are as
follows:
Authorization........................ 1,000 shares.
Initial
Issuance............................. 1 share.
Par Value............................ $.01 per share.
Listing.............................. None.
Ranking.............................. Senior to the Reorganized SWINC New
Common Stock and all other series of
Preferred Stock that subsequently may
be issued by Reorganized SWINC. Except
as to the liquidation preference, the
Reorganized SWINC New Series A
Preferred Stock and Reorganized SWINC
New Series B Preferred Stock rank
equally.
Liquidation
Preference........................... Upon termination of the Pension Plan
and the liquidation, dissolution and
winding up of Reorganized SWINC, and in
accordance with the terms of the Third
Joint Plan, holders of Series B
Preferred Stock shall be entitled to
receive a liquidating distribution
calculated from the Reversion as
follows: either (i) one-third of the
first $30 million of funds generated
from the Reversion plus, if the
Reversion exceeds $30 million, 50% of
any funds generated from the Reversion
in excess of $30 million or (ii) in the
event Class 9A votes to reject the
Third Joint Plan, one-third of the
first $30 million of funds generated
from the Reversion of the Pension Plan
plus, if the Reversion exceeds $30
million, seventy-five percent (75%) of
any funds generated from the Reversion
in excess of $30 million (the "Series B
Liquidation Preference"). The SWE&C
Liquidating Trustee will distribute the
Series B Liquidation Preference to the
Holders of Allowed SWE&C Claims and
Interests in accordance with the terms
of the Third Joint Plan and the SWE&C
Liquidating Trust Agreement.
Dividends............................ Holders of Reorganized SWINC New Series
B Preferred Stock are entitled to
participate ratably in any dividends
declared on the Reorganized SWINC New
Common Stock, when, as and if declared
by the Board of Directors of
Reorganized SWINC.
Redemption........................... Non-Redeemable.
Board
Designations......................... None.
Voting Rights........................ One vote per share on all matters
submitted to a vote of the stockholders
of Reorganized SWINC; votes together as
a single class with the Reorganized
SWINC New Common Stock and Reorganized
SWINC New Series A Preferred Stock.
Transfer
Restrictions......................... Not transferable.
Preemptive
Rights............................... None.
8. Effectuating Documents; Further Transactions
The chairman of the Reorganized SWINC board of directors, president,
chief financial officer, or any other appropriate officer of Reorganized SWINC
shall be authorized to execute, deliver, file, or record such contracts,
instruments, release, and other agreements or documents, and to take such
actions as may be necessary or appropriate to effectuate and further evidence
the terms and conditions of the Third Joint Plan. The secretary or assistant
secretary of Reorganized SWINC shall be authorized to certify or attest to any
of the foregoing actions.
The SWE&C Liquidating Trustee shall be authorized to execute,
deliver, file, or record such contracts, instruments, release, and other
agreements or documents, and to take such actions as may be necessary or
appropriate to effectuate and further evidence the terms and conditions of the
Third Joint Plan. The secretary or assistant secretary appointed by the SWE&C
Liquidating Trustee shall be authorized to certify or attest to any of the
foregoing actions.
9. No Revesting of Assets
On or following the Effective Date, the property of the Estates of
SWINC and the SWINC Subsidiaries (except for any obligations and/or
reversionary interest in the Pension Plan and the rights to Cash contributed
to the Reorganized SWINC Operating Reserve in accordance with the Third Joint
Plan) shall remain or become the property of the Consolidated SWINC Estate and
shall continue to be subject to the jurisdiction of the Court following
confirmation of the Third Joint Plan until distributed to holders of Allowed
Claims and Allowed Interests in accordance with the provisions of the Third
Joint Plan, the SWINC Plan Administrator Agreement and the Confirmation Order.
Reorganized SWINC shall succeed SWINC as the "contributing sponsor" of the
Pension Plan for all purposes, including under ERISA section 4001(a)(13), and
shall succeed SWINC as the "employer" maintaining the Pension Plan for all
purposes, including under ERISA section 4044(d).
On or following the Effective Date, the property of the Estates of
SWE&C and the SWE&C Subsidiaries (except for the rights to Cash contributed to
the Reorganized SWINC Operating Reserve in accordance with the Third Joint
Plan) shall remain or become the property of the SWE&C Liquidating Trust and
shall continue to be subject to the jurisdiction of the Court following
confirmation of the Third Joint Plan until distributed to holders of Allowed
Claims in accordance with the provisions of the Third Joint Plan, the SWE&C
Liquidating Trust Agreement and the Confirmation Order.
10. Preservation of Rights of Action
Except as otherwise provided in the Third Joint Plan or the
Confirmation Order, or in any contract, instrument, release, indenture or
other agreement entered into in connection with the Third Joint Plan, in
accordance with Bankruptcy Code section 1123(b), the Consolidated SWINC Estate
and the SWE&C Liquidating Trust shall retain the Litigation Claims, including
but not limited to: (1) any claims against any person, company or entity that
provided or provides insurance to the Debtors for any failure to provide
contractual coverage, including, but not limited to: ACE Insurance Company
Ltd.; AIG; Genesis Insurance Company; Greenwich Insurance Company; Indian
Harbor Insurance Company; Kemper Insurance Company; Lloyd's of London;
National Union; Reliance Insurance; Royal; St. Paul Fire and Marine Insurance
Company; The Travelers Indemnity Company & Affiliates; XL Insurance Company
Ltd.; (2) any and all claims under the Arizona Missions insurance policies;
(3) any and all claims under the Debtors' excess coverage insurance policies,
including those relating to Isobord and Maine Yankee; (4) any and all claims,
including claims for contribution, reimbursement or indemnification under any
of the Debtors' directors and officers liability policies; (5) any and all
claims, including claims for contribution, reimbursement or indemnification
under any other policy of insurance, including the Debtors' general liability
insurance policies; (6) any claims for acts or omissions of the Debtors'
present and former officers and directors; and (7) any claims against the U.S.
Department of Energy and/or NAC International or other subcontractors for
indemnification or contribution concerning claims by Maine Yankee, as well as
those Litigation Claims listed on Exhibit B annexed to the Third Joint Plan
and those Litigation Claims against any Person or Entity hereinafter arising
or discovered and regardless of when the facts giving rise to such Litigation
Claims arose or existed. The Debtors further reserve any and all claims
against any and all insurance companies that have in the past provided or
continue to provide insurance coverage to the Debtors with respect to all
policies of insurance and all coverage, including, but not limited to, those
policies of insurance listed on the Exhibit I to the Third Joint Plan.
Unless otherwise provided in a Court order entered after entry of the
Confirmation Order, no Claim against the Debtors shall be considered finally
Allowed (whether by Court order or operation of Bankruptcy Code section
502(a)) for the purpose of preventing the SWINC Plan Administrator or the
SWE&C Liquidating Trustee from enforcing, suing on, settling or compromising
any Litigation Claims against Claimholders by reason of res judicata,
collateral estoppel, or similar doctrine. Unless otherwise provided in a Court
order entered after entry of the Confirmation Order, the doctrines of res
judicata and collateral estoppel shall not be a defense to any Litigation
Claims against any Claimholders enforced or sued on after the Confirmation
Date by the SWINC Plan Administrator or the SWE&C Liquidating Trustee, whether
or not such Claimholders' Claim have been Allowed. The SWINC Plan
Administrator and the SWE&C Liquidating Trustee may enforce, sue on, settle or
compromise any Litigation Claims against Claimholders, whether or not such
Claimholders' Claims have been Allowed, after the Confirmation Date.
The Proponents have attached a preliminary list of the Litigation
Claims to be retained as part of the Third Joint Plan and reserve the right to
amend that list up to and prior to the deadline for objections to the Third
Joint Plan, October 20, 2003. The SWINC Plan Administrator, on behalf of
SWINC, the SWINC Subsidiaries and the Consolidated SWINC Estate, shall retain
and may enforce, sue on, settle or compromise (or decline to do any of the
foregoing) any and all of the Litigation Claims that SWINC, the SWINC
Subsidiaries, their Estates or the Consolidated SWINC Estate may hold against
any Person or Entity. The SWE&C Liquidating Trustee, on behalf of SWE&C, the
SWE&C Subsidiaries, and the SWE&C Liquidating Trust shall retain and may
enforce, sue on, settle or compromise (or decline to do any of the foregoing)
any and all of the Litigation Claims that SWE&C, the SWE&C Subsidiaries, their
Estates or the SWE&C Liquidating Trust may hold against any Person or Entity.
The failure of the Debtors to list a claim, right of action, suit or
proceeding on Third Joint Plan Exhibit B shall not constitute a waiver or
release by the Debtors or their Estates of such claim, right of action, suit
or proceeding all such claims, rights of action, suits or proceedings are
being expressly reserved.
11. Creditors' Committee and Equity Committee
(a) Dissolution of Creditors' Committee
The Creditors' Committee shall continue in existence until the
Effective Date to exercise those powers and perform those duties specified in
Bankruptcy Code section 1103, and shall perform such other duties as it may
have been assigned by the Court prior to the Effective Date. On the Effective
Date, the Creditors' Committee shall be dissolved and its members shall be
deemed released of all their duties, responsibilities and obligations in
connection with the Chapter 11 Cases or the Third Joint Plan and its
implementation, and the retention or employment of the Creditors' Committee's
attorneys, accountants and other agents shall terminate, except with respect
to (i) all Professional Fee Claims and (ii) any appeals of the Confirmation
Order. All expenses of Creditors' Committee members and the fees and expenses
of their professionals through the Effective Date shall be paid in accordance
with the terms and conditions of the Fee Order and the Confirmation Order and
the Third Joint Plan.
(b) Dissolution of Equity Committee
The Equity Committee shall continue in existence until the Effective
Date to exercise those powers and perform those duties specified in Bankruptcy
Code section 1103 and shall perform such other duties as it may have been
assigned by the Court prior to the Effective Date. On the Effective Date, the
Equity Committee shall be dissolved and its members shall be deemed released
of all their duties, responsibilities and obligations in connection with the
Chapter 11 Cases or the Third Joint Plan and its implementation, and the
retention or employment of the Equity Committee's attorneys, accountants and
other agents shall terminate, except with respect to (i) all Professional Fee
Claims and (ii) any appeals of the Confirmation Order. All expenses of Equity
Committee members and the fees and expenses of their professionals through the
Effective Date shall be paid in accordance with the terms and conditions of
the Fee Order the Confirmation Order and the Third Joint Plan.
12. Special Provisions Regarding Insured Claims
Distributions under the Third Joint Plan to each holder of an Allowed
Insured Claim against SWINC, a SWINC Subsidiary, SWE&C or a SWE&C Subsidiary,
shall be in accordance with the treatment provided under the Third Joint Plan
for the Class in which such Allowed Insured Claim is classified; provided,
however, that the maximum amount of any distribution under the Third Joint
Plan on account of an Allowed Insured Claim (except for Allowed Asbestos
Claims) shall be limited to an amount equal to the amount of Allowed Insured
Claim minus any insurance proceeds actually received and retained by such
holder in respect of such Allowed Insured Claim. Nothing in Article VII of the
Third Joint Plan shall (x) constitute a waiver of any claim, right, or cause
of action the Debtors may hold against any Person, including the Debtors'
insurance carriers or (y) is intended to, shall, or shall be deemed to
preclude any holder of an Allowed Insured Claim from seeking and/or obtaining
a distribution or other recovery from any insurer of the Debtors in addition
to any distribution such holder may receive pursuant to the Third Joint Plan;
provided, however, that the Debtors do not waive, and expressly reserve their
rights to assert that any insurance coverage is property of the estate to
which they are entitled, with the exception of the provisions contained in the
stipulated agreement between SWINC and the Secretary of Labor, United States
Department of Labor, filed by the Debtors on or about February 26, 2002. Upon
receipt by the holder of an Allowed Insured Claim of any amounts distributed
under the Third Joint Plan in respect of such claim, such holder shall be
deemed to have assigned to the SWINC Plan Administrator all rights of the
holder to recover such amounts from the applicable insurer.
The Third Joint Plan will not expand the scope of or alter in any
other way the insurers' obligations under their policies, and the insurers
shall retain any and all defenses to coverage that they may have. The Third
Joint Plan shall not operate as a waiver of any other claims the insurers have
asserted or may assert in proofs of claim filed in the Debtors' bankruptcy
cases or the Debtors' rights as to those claims.
The Third Joint Plan does not prejudice or impair any rights of a
holder of a contingent claim, if any, under the Bankruptcy Code or any other
applicable law, including, but not limited to, Bankruptcy Code section 502, to
name a Debtor as a nominal defendant under appropriate circumstances to seek
recovery under any policy of insurance under which a Debtor is an insured or
beneficiary, and/or the right to be an Insured Claim, after such contingent
claim becomes liquidated.
Each of the insurers retains any and all of its rights, at its own
expense, to commence and participate in any contested matters and other
related proceedings concerning asbestos claims, including objections to and
requests for relief from the automatic stay with respect to any such claims,
until the Debtors' bankruptcy cases are closed.
Any insurance proceeds received on account of an Insured Claim or as
a result of a buy-out of an insurance policy under which a Debtor is an
insured or beneficiary will be used first to satisfy Allowed Insured Claims.
13. Consolidated SWINC Estate Governing Board
From and after the Effective Date, the Consolidated SWINC Estate
shall be governed by the Consolidated SWINC Estate Governing Board. The
Consolidated SWINC Estate Governing Board shall consist of three (3)
directors: (1) a director designated by Federal; (2) a director designated by
Maine Yankee; and (3) a director designated by the Equity Committee. The
Consolidated SWINC Estate Governing Board will, among other things, choose the
SWINC Plan Administrator, approve counsel for the resolution of claims that
are solely against the Consolidated SWINC Estate, and determine reasonable
compensation, if any, for directors to serve on the Consolidated SWINC Estate
Governing Board.
K. The SWINC Plan Administrator
1. Appointment
From and after the Effective Date, a Person appointed by the
Consolidated SWINC Estate Governing Board shall serve as the SWINC Plan
Administrator pursuant to the SWINC Plan Administrator Agreement and the Third
Joint Plan, until death, resignation, discharge or the appointment of a
successor SWINC Plan Administrator in accordance with the SWINC Plan
Administrator Agreement.
2. Rights, Powers and Duties of the SWINC Estate and the SWINC Plan
Administrator
The Consolidated SWINC Estate shall retain and have all the rights,
powers and duties necessary to carry out its responsibilities under the Third
Joint Plan. Except as otherwise provided in the Third Joint Plan, the
Confirmation Order, or in any document, instrument, release or other agreement
entered into in connection with the Third Joint Plan, such rights, powers and
duties, which shall be exercisable by the SWINC Plan Administrator on behalf
of the Consolidated SWINC Estate pursuant to the Third Joint Plan and the
SWINC Plan Administrator Agreement, shall include, among others:
(a) investing the Cash of the Consolidated SWINC Estate, including,
but not limited to, the Cash held in the Reserves in (i) direct
obligations of the United States of America or obligations of
any agency or instrumentality thereof which are guaranteed by
the full faith and credit of the United States of America; (ii)
money market deposit accounts, checking accounts, savings
accounts or certificates of deposit, or other time deposit
accounts that are issued by a commercial bank or savings
institution organized under the laws of the United States of
America or any state thereof; or (iii) any other investments
that may be permissible under (a) Bankruptcy Code section 345
or (b) any order of the Court entered in the Debtors' Chapter
11 cases;
(b) calculating and paying all distributions to be made under the
Third Joint Plan, the SWINC Plan Administrator Agreement and
other orders of the Court to holders of Allowed Claims against
and Interests in the Consolidated SWINC Estate;
(c) employing, supervising and compensating professionals retained
to represent the interests of and serve on behalf of the
Consolidated SWINC Estate;
(d) objecting to Claims or Interests filed against the Consolidated
SWINC Estate;
(e) seeking estimation under Bankruptcy Code section 502(c) of
contingent or unliquidated claims filed against the
Consolidated SWINC Estate;
(f) seeking determination of tax liability of the Consolidated
SWINC Estate under Bankruptcy Code section 505;
(g) exercising all powers and rights, and taking all actions,
contemplated by or provided for in the SWINC Plan Administrator
Agreement;
(h) voting the shares of Reorganized SWINC New Series A Preferred
Stock in connection with any matter submitted to a vote of the
stockholders of Reorganized SWINC, as directed by the
Consolidated SWINC Estate Governing Board;
(i) pursuing any and all rights under the insurance policies of a
Debtor providing coverage with respect to Insured Claims; and
(j) taking any and all other actions necessary or appropriate to
implement or consummate the Third Joint Plan and the provisions
of the SWINC Plan Administrator Agreement.
3. Compensation
The SWINC Plan Administrator shall be compensated from the SWINC
Operating Reserve pursuant to the terms of the SWINC Plan Administrator
Agreement, as it may be modified from time to time by the Consolidated SWINC
Estate Governing Board. Any professionals retained by the SWINC Plan
Administrator shall be entitled to reasonable compensation for services
rendered and reimbursement of expenses incurred from the SWINC Operating
Reserve. The payment of the fees and expenses of the SWINC Plan Administrator
and its retained professionals shall be made in the ordinary course of
business and shall not be subject to the approval of the Court.
4. Indemnification
SWINC, the SWINC Subsidiaries, the Consolidated SWINC Estates and
Reorganized SWINC shall, to the fullest extent permitted by the applicable
laws of the jurisdiction in which each such entity is incorporated or
otherwise organized, indemnify and hold harmless the SWINC Plan Administrator
(in his capacity as such) and the agents, representatives, professionals and
employees of the SWINC Plan Administrator (collectively the "Indemnified
Parties"), from and against and with respect to any and all liabilities,
losses, damages, claims, costs and expenses, including but not limited to
attorneys' fees arising out of or due to their actions or omissions, or
consequences of such actions or omissions, with respect to SWINC, the SWINC
Subsidiaries and their Estate(s) or the implementation or administration of
the Third Joint Plan and the Reorganized SWINC Plan Administrator Agreement if
the Indemnified Party acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of SWINC, the SWINC Subsidiaries
and their Estate(s), as the case may be, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe its conduct was
unlawful. To the extent SWINC, the SWINC Subsidiaries, their Estate(s) or
Reorganized SWINC indemnifies and holds harmless the Indemnified Parties as
provided above, the legal fees and related costs incurred by counsel to the
SWINC Plan Administrator in monitoring and participating in the defense of
such claims giving rise to the right of indemnification shall be paid out of
the SWINC Operating Reserve. The indemnification provisions of the SWINC Plan
Administrator Agreement shall remain available to and be binding upon any
future SWINC Plan Administrator or the estate of any decedent SWINC Plan
Administrator and shall survive the termination of the SWINC Plan
Administrator Agreement.
5. Insurance
The SWINC Plan Administrator shall be authorized to obtain all
reasonably necessary insurance coverage for itself, its agents,
representatives, employees or independent contractors, SWINC, the SWINC
Subsidiaries, and the Consolidated SWINC Estate including, but not limited to,
coverage with respect to (i) any property that is or may in the future become
the property of the Consolidated SWINC Estate and (ii) the liabilities, duties
and obligations of the SWINC Plan Administrator and its agents,
representatives, employees or independent contractors under the SWINC Plan
Administrator Agreement (in the form of an errors and omissions policy or
otherwise), the latter of which insurance coverage may, at the sole option of
the SWINC Plan Administrator, remain in effect for a reasonable period (not to
exceed seven years) after the termination of the SWINC Plan Administrator
Agreement.
6. Authority to Object to Claims and Interests and to Settle Disputed
Claims
Pursuant to Bankruptcy Rule 9019(a), the Debtors may compromise and
settle various Claims against them and/or claims that they may have against
other Persons. The Debtors expressly reserve the right (with Court approval,
following appropriate notice and opportunity for a hearing) to compromise and
settle Claims against them and claims that they may have against other Persons
up to and including the Effective Date. After the Effective Date, such right
shall pass to (i) the SWINC Plan Administrator pursuant to Articles VII.K of
the Third Joint Plan, or (ii) the SWE&C Liquidating Trustee pursuant to
Articles VII.N of the Third Joint Plan.
L. The Asbestos Trust
The Asbestos Trust is the result of a settlement and compromise of
disputes between the Proponents and the Asbestos Insurance Carriers. On the
Effective Date, and pursuant to the terms of the Asbestos Trust Agreement, the
Debtors shall transfer to the Asbestos Trust Cash in the amount of $4.5
million and an Allowed Class 5B Claim in the amount of $1.0 million for
distribution to holders of Allowed Asbestos Claims and to pay the reasonable
and necessary costs and expenses associated with administering the Asbestos
Trust, any litigation related to the liquidation, resolution, settlement or
compromise of the Asbestos Claims or any litigation related to the resolution,
settlement or compromise regarding Asbestos Insurance Issues. On the Effective
Date, and pursuant to the terms of the Asbestos Trust Agreement, the Debtors
shall transfer to the Asbestos Trustee all of their rights with respect to,
among other things, indemnification, contribution or reimbursement under the
insurance policies issued by the Asbestos Insurance Carriers (but not the
policies themselves) and all of their rights under any other policies that
provide coverage for Asbestos Claims (but not those policies themselves), but
only to the extent of such coverage under those policies. Notwithstanding
anything to the contrary herein, the Debtors or their respective successors
and assigns under the Third Joint Plan shall retain any and all rights under
policies issued by the Asbestos Insurance Carriers or the policies providing
coverage for Asbestos Claims with respect to coverage for any Claims other
than Asbestos Claims. The Asbestos Trust shall remain in existence until
dissolved by the Asbestos Trustee, and upon termination, any remaining assets
of the Asbestos Trust shall revert and be paid over to the SWE&C Liquidating
Trust.
M. The Asbestos Trustee
1. Appointment
From and after the Effective Date, Mr. James Carroll shall serve as
the Asbestos Trustee pursuant to the Third Joint Plan, until death,
resignation, discharge or the appointment of a successor Asbestos Trustee. The
Asbestos Trustee shall have and perform all duties, responsibilities, rights
and obligations set forth in the Asbestos Trust Agreement.
2. Rights, Powers and Duties of the Asbestos Trustee
The Asbestos Trustee shall retain and have all the rights, powers and
duties necessary to carry out his or her responsibilities under the Third
Joint Plan and the Asbestos Trust Agreement. Such rights, powers and duties,
which shall be exercisable by the Asbestos Trustee on behalf of the Debtors
pursuant to the Third Joint Plan and the Asbestos Trust Agreement, shall
include, among others:
(a) maintaining any Unclaimed Distribution Reserve for the benefit of
the holders of Allowed Asbestos Claims;
(b) investing Cash in the Asbestos Trust in (i) direct obligations of
the United States of America or obligations of any agency or instrumentality
thereof which are guaranteed by the full faith and credit of the United States
of America; (ii) money market deposit accounts, checking accounts, savings
accounts, certificates of deposit, or other time deposit accounts that are
issued by a commercial bank or savings institution organized under the laws of
the United States of America or any state thereof; or (iii) any other
investments that may be permissible under (x) Bankruptcy Code section 345 or
(y) any order of the Court entered in the Debtors' Chapter 11 Cases;
(c) calculating and paying of all distributions to be made under the
Third Joint Plan, the Asbestos Trust Agreement, and other orders of the Court,
to holders of Allowed Asbestos Claims that have become undisputed,
non-contingent, and liquidated claims;
(d) employing, supervising and compensating professionals, if any,
necessary to represent the interests of and serve on behalf of the Asbestos
Trust;
(e) objecting to, defending against and settling Asbestos Claims, and
seeking estimation of contingent or unliquidated Asbestos Claims under
Bankruptcy Code section 502(c);
(f) dissolving the Asbestos Trust;
(g) exercising all powers and rights, and taking all actions,
contemplated by or provided for in the Asbestos Trust Agreement;
(h) taking any and all other actions necessary or appropriate to
implement the provisions of the Asbestos Trust Agreement;
(i) making and filing any tax returns for the Asbestos Trust;
(j) taking any actions necessary to ensure that the Asbestos
Insurance Carriers will receive timely notice of any Asbestos Claim or demand
including, without limitation, taking action to maintain the corporate
existence of one or more of the Debtors;
(k) entering into one or more coverage in place agreements with the
Asbestos Insurance Carriers on terms satisfactory to the Asbestos Trustee or
take other appropriate action with respect to insurance provided by the
Asbestos Insurance Carriers; and
(l) taking any actions necessary to ensure the preservation of the
Debtors' documents to the extent such documents may be necessary to the
defense of Asbestos Claims, including, without limitation, the entry into
long-term storage agreements with respect to such documents.
3. Compensation of the Asbestos Trustee
The Asbestos Trustee will be compensated at a rate of $300 per hour.
Any professionals retained by the Asbestos Trust shall be entitled to
reasonable compensation for services rendered and reimbursement of expenses
incurred from the Asbestos Trust. The payment of the fees and expenses of the
Asbestos Trustee and his retained professionals, if any, shall be made in the
ordinary course of business and shall not be subject to the approval of the
Court.
4. Indemnification
The Asbestos Trust shall, to the fullest extent permitted by the laws
of the State of Delaware, indemnify and hold harmless the Asbestos Trustee (in
his capacity as such) and the Asbestos Trustee's and the Asbestos Trust's
agents, representatives, professionals, and employees (collectively, the
"Indemnified Parties"), from and against and in respect to any and all
liabilities, losses, damages, claims, costs, and expenses, including but not
limited to attorneys' fees, arising out of or due to their actions or
omissions, or consequences of such actions or omissions, with respect to the
Asbestos Trust or the implementation or administration of the Third Joint Plan
and the Asbestos Trust Agreement, if the Indemnified Party acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the Asbestos Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe its conduct was unlawful. To
the extent that the Asbestos Trust must indemnify and hold harmless the
Indemnified Parties as provided above, the legal fees and related costs
incurred by counsel to the Asbestos Trustee in monitoring and participating in
the defense of such claims giving rise to the right of indemnification shall
be paid out of the Asbestos Trust. The indemnification provisions of the
Asbestos Trust Agreement shall remain available to and be binding upon any
future Asbestos Trustee or the estate of any decedent Asbestos Trustee and
shall survive the termination of the Asbestos Trust Agreement.
5. Insurance
The Asbestos Trustee shall be authorized to obtain all reasonably
necessary insurance coverage for himself, his agents, representatives,
employees and independent contractors, including, but not limited to, coverage
with respect to (i) any property that is or may in the future become the
property of the Asbestos Trust and (ii) the liabilities, duties, and
obligations of the Asbestos Trustee and his agents, representatives,
employees, independent contractors under the Asbestos Trust Agreement (in the
form of an errors and omissions policy or otherwise), the latter of which
insurance coverage may, at the sole option of the Asbestos Trustee, remain in
effect for a reasonable period (not to exceed five years) after the
termination of the Asbestos Trust Agreement.
6. Asbestos Insurance Policies
The Third Joint Plan shall not expand the scope of, the amount of, or
alter in any other way the Asbestos Insurance Carriers' obligations under
their policies. The Third Joint Plan shall not operate as a waiver of certain
proofs of claim filed by the Asbestos Insurance Carriers in the Chapter 11
Cases, provided, however, that to the extent such Claims relate to Asbestos
Claims, the Asbestos Insurers' Claims are deemed satisfied in full, except for
claims by Travelers Insurance Company and its affiliates for premiums under
retrospectively rated insurance policies issued to the Debtors.
N. The SWE&C Liquidating Trust
1. Appointment of Trustee
From and after the Effective Date, a Person appointed by the SWE&C
Liquidating Trust Advisory Board shall serve as the SWE&C Liquidating Trustee
pursuant to the SWE&C Liquidating Trust Agreement and the Third Joint Plan,
until death, resignation, discharge or the appointment of a successor SWE&C
Liquidating Trustee in accordance with the SWE&C Liquidating Trust Agreement.
The SWE&C Liquidating Trustee shall have and perform all duties,
responsibilities, rights and obligations set forth in the SWE&C Liquidating
Trust Agreement, including resolving claims solely against the Consolidated
SWE&C Estate.
2. Transfer of SWE&C Liquidating Trust Assets to the SWE&C
Liquidating Trust
On the Effective Date, SWE&C, the SWE&C Subsidiaries and their
Estates shall transfer and shall be deemed to have irrevocably transferred to
the SWE&C Liquidating Trust, for and on behalf of the beneficiaries of the
SWE&C Liquidating Trust, the SWE&C Liquidating Trust Assets.
3. The SWE&C Liquidating Trust
(a) Without any further action of the directors of SWE&C or
the SWE&C Subsidiaries, on the Effective Date, the SWE&C
Liquidating Trust Agreement, substantially in the form
annexed to the Third Joint Plan as Exhibit C, shall
become effective. The SWE&C Liquidating Trustee shall
accept the SWE&C Liquidating Trust and sign the SWE&C
Liquidating Trust Agreement on the Effective Date and
the SWE&C Liquidating Trust will then be deemed created
and effective.
(b) The SWE&C Liquidating Trustee shall have full authority
to take any steps necessary to administer the SWE&C
Liquidating Trust Agreement, including, without
limitation, the duty and obligation (i) to liquidate
SWE&C Liquidating Trust Assets, (ii) to make
distributions therefrom to holders of Allowed Claims
against SWE&C and the SWE&C Subsidiaries, (iii) to
maintain any Reserves on behalf of and for the benefit
of the beneficiaries of the SWE&C Liquidating Trust,
(iv) to vote the shares of Reorganized SWINC New Common
Stock in connection with any matter submitted to a vote
of the stockholders of Reorganized SWINC, as directed by
the SWE&C Liquidating Trust Advisory Board, and (v) if
authorized by the SWE&C Liquidating Trust Advisory
Board, to pursue and settle any Disputed Claims filed
solely against or Disputed Interests solely in the
Consolidated SWE&C Estate in accordance with and subject
to the provisions of the Third Joint Plan. The SWE&C
Liquidating Trustee shall not at any time, whether on
behalf of the SWE&C Liquidating Trust, SWE&C, the SWE&C
Subsidiaries, or their Estates, continue or engage in
the conduct of trade or business, and no part of the
SWE&C Liquidating Trust or the proceeds, revenue or
income therefrom shall be used or disposed of by the
SWE&C Liquidating Trustee in the furtherance of any
business.
(c) All costs and expenses associated with the
administration of the SWE&C Liquidating Trust, including
those rights, obligations and duties described in
Article VII.O of the Third Joint Plan, shall be the
responsibility of and paid by the SWE&C Liquidating
Trust from the SWE&C Liquidating Trust Assets.
(d) The SWE&C Liquidating Trustee may retain such law firms,
accounting firms, experts, advisors, consultants,
investigators, appraisers, auctioneers or other
professionals as it may deem necessary (collectively,
the "SWE&C Liquidating Trustee Professionals"), in its
sole discretion, to aid in the performance of its
responsibilities pursuant to the terms of the Third
Joint Plan including, without limitation, the
liquidation and distribution of SWE&C Liquidating Trust
Assets.
(e) The Debtors intend that the SWE&C Liquidating Trust will
be treated as a "liquidating trust" within the meaning
of Section 301.7701-4(d) of the Tax Regulations.
Accordingly, it is intended that the transfer of the
SWE&C Liquidating Trust Assets to the SWE&C Liquidating
Trust shall be treated, for federal income tax purposes,
as a deemed transfer of the SWE&C Liquidating Trust
Assets to the beneficiaries of the SWE&C Liquidating
Trust for all purposes of the IRC, followed by a deemed
transfer of such assets by such beneficiaries to the
SWE&C Liquidating Trust. The SWE&C Liquidating Trust
shall be considered a "grantor" trust, and the
beneficiaries of the SWE&C Liquidating Trust shall be
treated as the grantors and the deemed owners of the
SWE&C Liquidating Trust.
(f) The SWE&C Liquidating Trustee shall be responsible for
filing all federal, state and local tax returns for the
SWE&C Liquidating Trust.
(g) The SWE&C Liquidating Trustee shall retain any and all
rights under any insurance policies of a Debtor
providing coverage with respect to Insured Claims.
(h) The SWE&C Liquidating Trust shall terminate on the later
of (i) the tenth (10) anniversary of the Confirmation
Date or (ii) the distribution of all property in
accordance with the terms of the SWE&C Liquidating Trust
Agreement.
4. Compensation of the SWE&C Liquidating Trustee
The SWE&C Liquidating Trustee shall be compensated from the SWE&C
Operating Reserve pursuant to the terms of the SWE&C Liquidating Trust
Agreement. Any professionals retained by the SWE&C Liquidating Trustee shall
be entitled to reasonable compensation for services rendered and reimbursement
of expenses incurred from the SWE&C Operating Reserve, subject to the prior
approval of the SWE&C Liquidating Trust Advisory Board. The payment of the
fees and expenses of the SWE&C Liquidating Trustee and its retained
professionals shall be made in the ordinary course of business and shall not
be subject to the approval of the Court.
5. The SWE&C Liquidating Trust Advisory Board
The SWE&C Liquidating Trust Advisory Board shall be comprised of
three (3) members selected by the Creditors' Committee prior to the
Confirmation Hearing. The SWE&C Liquidating Trustee shall consult regularly
with the SWE&C Liquidating Trust Advisory Board when carrying out the purpose
and intent of the SWE&C Liquidating Trust. The members of the SWE&C
Liquidating Trust Advisory Board shall receive compensation as determined by
the SWE&C Liquidating Trust Advisory Board, in its discretion from time to
time for their services on the SWE&C Liquidating Trust Advisory Board, in
carrying out the purpose of the SWE&C Liquidating Trust Advisory Board.
Reimbursement of the reasonable and necessary expenses of the members of the
SWE&C Liquidating Trust Advisory Board shall be payable by the SWE&C
Liquidating Trust.
(a) In the case of an inability or unwillingness of any
member of the SWE&C Trust Advisory Board to serve, such
member shall be replaced by designation of the remaining
members of the SWE&C Trust Advisory Board. If any
position on the SWE&C Trust Advisory Board remains
vacant for more than thirty (30) days, such vacancy
shall be filled within fifteen (15) days thereafter by
the designation of the SWE&C Liquidating Trustee without
the requirement of a vote by the other members of the
SWE&C Trust Advisory Board.
(b) Upon the certification by the SWE&C Liquidating Trustee
that all SWE&C Liquidating Trust Assets have been
distributed, abandoned or otherwise disposed of, the
members of the SWE&C Liquidating Trust Advisory Board
shall resign their positions, whereupon they shall be
discharged from further duties and responsibilities.
(c) The SWE&C Liquidating Trust Advisory Board may, by
majority vote, authorize the SWE&C Liquidating Trustee
to invest the corpus of the SWE&C Liquidating Trust in
prudent investments other than those described in
Bankruptcy Code section 345.
(d) The SWE&C Liquidating Trust Advisory Board may remove
the SWE&C Liquidating Trustee in its discretion. In the
event the requisite approval is not obtained, the SWE&C
Liquidating Trustee may be removed by the Court for
cause shown. In the event of the resignation or removal
of the SWE&C Liquidating Trustee, the SWE&C Liquidating
Trust Advisory Board shall, by majority vote, designate
a person to serve as successor SWE&C Liquidating
Trustee.
(e) Notwithstanding anything to the contrary in the Third
Joint Plan, neither the SWE&C Liquidating Trust Advisory
Board nor any of its members, designees, counsel,
financial advisors or any duly designated agent or
representative of any such party shall be liable for the
act, default or misconduct of any other member of the
SWE&C Liquidating Trust Advisory Board, nor shall any
member be liable for anything other than such members'
own gross negligence or willful misconduct. The SWE&C
Liquidating Trust Advisory Board may, in connection with
the performance of its duties, and in its sole and
absolute discretion, consult with its counsel,
accountants or other professionals, and shall not be
liable for anything done or omitted or suffered to be
done in accordance with such advice or opinions. If the
SWE&C Liquidating Trust Advisory Board determines not to
consult with its counsel, accountants or other
professional, it shall not be deemed to impose any
liability on the SWE&C Liquidating Trust Advisory Board,
or its members and/or designees.
(f) The SWE&C Liquidating Trust Advisory Board shall govern
its proceedings through the adoption of by-laws, which
the SWE&C Liquidating Trust Advisory Board may adopt by
majority vote. No provision of such by-laws shall
supersede any express provision of the Third Joint Plan.
O. Interestate Oversight Board
From and after the Effective Date, a three (3) member board shall be
appointed to resolve Interestate Disputes. The Interestate Oversight Board
shall consist of: (1) a director designated by the Consolidated SWINC Estate
Governing Board, who shall not be the SWINC Plan Administrator (the "SWINC
Designee"); (2) a director designated by the SWE&C Liquidating Trust Advisory
Board, who shall not be the SWE&C Liquidating Trustee (the "SWE&C Designee);
and (3) a director agreed to by the SWINC Designee and the SWE&C Designee (the
"Joint Designee"). In the event that the SWINC Designee and the SWE&C Designee
cannot agree as to the appointment of the Joint Designee, each will recommend
two (2) independent nominees (i.e., individuals who hold no interest in or
claims against any of the Debtors or their affiliates) and the Court shall
appoint the Joint Designee.
The SWINC and SWE&C Designees on the Interestate Oversight Board
shall not receive compensation for their service on the Interestate Oversight
Board, although they shall be entitled to reimbursement of the reasonable and
necessary expenses incurred by them in carrying out the purpose of the
Interestate Oversight Board. The Joint Designee shall be entitled to
compensation at such amounts agreed to by the Joint Designee and the other
Interestate Oversight Board members. Reimbursement of the reasonable and
necessary expenses of the members of the Interestate Oversight Board shall be
payable one-half from the Consolidated SWINC Estate and one-half from the
Consolidated SWE&C Estate. The Interestate Oversight Board shall have the
authority to resolve all Interestate Disputes. In the event that there is no
unanimity as to the resolution of any interestate dispute after 30 days, the
Joint Designee shall issue a final and binding resolution based on the facts,
equities and legal authorities. The Interestate Oversight Board shall have the
authority to choose counsel to defend against or pursue claims that affect
both estates, including, among other things, environmental litigation,
insurance matters., and assets.
P. Other Matters
1. Treatment of Executory Contracts and Unexpired Leases
Under Bankruptcy Code section 365, the Debtors have the right,
subject to court approval, to assume or reject any executory contract or
unexpired lease. If the Debtors reject an executory contract or unexpired
lease that was entered into before the Petition Date, the contract or lease
will be treated as if it had been breached on the date immediately preceding
the Petition Date, and the other party to the agreement will have a General
Unsecured Claim for damages incurred as a result of the rejection. In the case
of rejection of employment severance agreements and real property leases,
damages are subject to certain limitation imposed by Bankruptcy Code sections
365 and 502.
(a) Rejected Contracts and Leases
Except as otherwise provided in the Third Joint Plan, the
Confirmation Order, or in any contract, instrument, release or other agreement
or document entered into in connection with the Third Joint Plan, each of the
prepetition executory contracts and unexpired leases to which any Debtor is a
party, to the extent such contracts or leases are executory contracts or
unexpired leases, shall be deemed rejected by the applicable Debtor effective
on the Confirmation Date and subject to the occurrence of the Effective Date,
unless such contract or lease (i) previously (a) shall have been assumed or
rejected by the Debtors (including, but not limited to, those executory
contracts and unexpired leases assumed and assigned to Shaw) or (b) shall have
expired or terminated pursuant to its own terms, or (ii) is listed on the
schedule of assumed contracts and leases attached as Exhibit H to the Third
Joint Plan; provided, however, that neither the inclusion by the Debtors of a
contract or lease in Third Joint Plan Exhibit H nor anything contained in
Article X of the Third Joint Plan shall constitute an admission by any Debtor
that such contract or lease is an executory contract or unexpired lease or
that any Debtor or its successors and assigns has any liability thereunder.
The Confirmation Order shall constitute an order of the Court approving the
rejections described in Article X of the Third Joint Plan, pursuant to
Bankruptcy Code section 365, as of the Confirmation Date.
(b) Rejection Damages Bar Date
If the rejection of an executory contract or unexpired lease pursuant
to Article X.A of the Third Joint Plan gives rise to a Claim by the other
party or parties to such contract or lease, such Claim shall be forever barred
and shall not be enforceable against the applicable Debtor or its Estate, the
SWINC Plan Administrator, the SWE&C Liquidating Trust or their respective
successors or properties unless a proof of Claim is filed and served on the
Debtors and counsel for the Debtors within thirty (30) days after service of a
notice of entry of the Confirmation Order or such other date as prescribed by
the Court.
(c) Assumed Contracts and Leases
Except as otherwise provided in the Third Joint Plan, or in any
contract, instrument, release, or other agreement or document entered into in
connection with the Third Joint Plan, the Debtors shall assume (and assign, as
the case may be) each of the executory contracts and unexpired leases listed
on Third Joint Plan Exhibit H. The Proponents have attached a preliminary list
of the executory contracts and unexpired leases as part of the Third Joint
Plan and reserve the right to amend that list up to and prior to the deadline
for objections to the Third Joint Plan, October 20, 2003. Any monetary amounts
by which each executory contract and unexpired lease to be assumed under the
Third Joint Plan may be in default shall be satisfied, under Bankruptcy Code
section 365(b)(1), by Cure on the Effective Date. In the event of a dispute
regarding (i) the nature or amount of any Cure, (ii) the ability of the
Debtors or any assignee of the Debtors to provide "adequate assurance of
future performance" (within the meaning of Bankruptcy Code section 365) under
the contract or lease to be assumed, or (iii) any other matter pertaining to
assumption or assignment, Cure shall occur following the entry of a Final
Order resolving the dispute and approving the assumption and, as the case may
be, assignment. The Confirmation Order shall constitute an order of the Court
approving the assumptions (as assignments, as the case may be) described in
Article X.C of the Third Joint Plan, pursuant to Bankruptcy Code section 365,
as of the Effective Date.
(d) Pension Plan
The Pension Plan shall be assumed pursuant to Bankruptcy Code
sections 365(a) and 1123(b)(2), to the extent it is executory. The Third Joint
Plan does not purport to release or affect any causes of action pursuant to
ERISA concerning the Pension Plan, the Employee Stock Ownership Plan of Stone
& Webster, Incorporated and Participating Subsidiaries, the Group Life
Insurance and Spouses Insurance Plan of Stone & Webster and the Employee
Investment Plan of Stone & Webster, Incorporated and Participating
Subsidiaries, or limit any potential claim of the Secretary of Labor, United
States Department of Labor, pursuant to the stipulated agreement between SWINC
and the Secretary of Labor, United States Department of Labor, filed by the
Debtors on or about February 26, 2002.
(e) Indemnification Obligations
Except as otherwise provided in the Third Joint Plan, or in any
contract, instrument, release, or other agreement or document entered into in
connection with the Third Joint Plan, any and all indemnification obligations
that the Debtors have pursuant to a contract, instrument, agreement,
certificate of incorporation, by-law, comparable organizational document or
any other document or applicable law shall be rejected as of the Effective
Date of the Third Joint Plan, to the extent executory.
2. Bar Dates for Certain Claims
(a) Administrative Claims
The Confirmation Order will establish an Administrative Claims Bar
Date for filing Administrative Claims, which date will be sixty (60) days
after the Confirmation Date (the "Administrative Claims Bar Date"). Holders of
asserted Administrative Claims, except for Professional Fee Claims, not paid
prior to the Effective Date shall submit requests for payment of
Administrative Claim on or before such Administrative Claims Bar Date or
forever be barred from doing so. The notice of the Confirmation Date to be
delivered pursuant to Bankruptcy Rules 3020(c) and 2002(f) will set forth such
date and constitute notice of this Administrative Claims Bar Date. The
Debtors, the SWINC Plan Administrator and the SWE&C Liquidating Trustee, as
the case may be, shall have ninety (90) days (or such longer period as may be
allowed by order of the Court) following the Administrative Claims Bar Date to
review and object to such Administrative Claims.
(b) Professional Fee Claims; Substantial Contribution Claims
All Persons requesting compensation or reimbursement of Professional
Fee Claims pursuant to Bankruptcy Code section 327, 328, 330, 331, 503(b) or
1103 for services rendered to the Debtors prior to the Effective Date
(including requests under Bankruptcy Code section 503(b)(4) by any
Professional or other entity for making a substantial contribution in the
Chapter 11 Cases) shall file and serve on the SWINC Plan Administrator and the
SWE&C Liquidating Trustee an application for final allowance of compensation
and reimbursement of expenses no later than ninety (90) days after the
Confirmation Date, unless otherwise ordered by the Court (the "Professional
Fee Bar Date"). Objections to applications of such Professionals or other
entities for compensation or reimbursement of expenses must be filed and
served on the SWINC Plan Administrator, the SWE&C Liquidating Trustee and the
requesting Professional or other entity no later than sixty (60) days after
the Professional Fee Bar Date (or such longer period as may be allowed by
order of the Court).
3. Withholding and Reporting Requirements
In connection with the Third Joint Plan and all distributions
thereunder, the SWINC Disbursing Agent and the SWE&C Liquidating Trust
Disbursing Agent shall comply with all withholding and reporting requirements
imposed by any federal, state, local or foreign taxing authority, and all
distributions shall be subject to any such withholding and reporting
requirements. The SWINC Disbursing Agent and the SWE&C Liquidating Trust
Disbursing Agent shall be authorized to take any and all actions that may be
necessary or appropriate to comply with such withholding and reporting
requirements.
4. Setoffs
The SWINC Plan Administrator and the SWE&C Liquidating
Trustee may, pursuant to Bankruptcy Code section 553 or applicable
nonbankruptcy laws, but shall not be required to, set off against any Claim,
and the payments or other distributions to be made pursuant to the Third Joint
Plan in respect of such Claim, claims of any nature whatsoever that the
Debtors may have against the holder of such Claim; provided, however, that
neither the failure to do so nor the allowance of any Claim shall constitute a
waiver or release by the SWINC Plan Administrator or the SWE&C Liquidating
Trustee, as the case may be, of any such claim that the Debtors may have
against such holder.
Unless otherwise authorized by a Final Order, any holder of
a Claim must assert any setoff rights against a Claim by a Debtor against such
entity by filing an appropriate motion seeking authority to setoff on or
before the Confirmation Date or will be deemed to have waived and be forever
barred from asserting any right to setoff against a Claim by a Debtor
notwithstanding any statement to the contrary in a proof of claim or any other
pleading or document filed with the Bankruptcy Court or delivered to the
Debtors.
5. Payment of Statutory Fees
All fees payable pursuant to section 1930 of title 28 of the
United States Code, as determined by the Court at the Confirmation Hearing,
shall be paid on the Effective Date, and neither the Debtors, their Estates,
the SWINC Plan Administrator nor the SWE&C Liquidating Trustee shall
thereafter be liable for the payment of any additional fees under 28 U.S.C.
ss. 1930, other than with respect to the Chapter 11 Cases of SWINC and SWE&C.
6. Amendment or Modification of the Third Joint Plan
The Plan Proponents may alter, amend, or modify the Third
Joint Plan or any Third Joint Plan Exhibits under section 1127(a) of the
Bankruptcy Code at any time prior to the Confirmation Hearing, provided all
Plan Proponents have agreed to such alteration, amendment or modification.
After the Confirmation Date and prior to substantial consummation of the Third
Joint Plan as defined in section 1101(2) of the Bankruptcy Code, the Plan
Proponents may, under section 1127(b) of the Bankruptcy Code, institute
proceedings in the Court to remedy any defect or omission or reconcile any
inconsistencies in the Third Joint Plan, the Disclosure Statement, or the
Confirmation Order, and such matters as may be necessary to carry out the
purposes and effects of the Third Joint Plan.
7. Severability of Plan Provisions
If, prior to the Confirmation Date, any term or provision of
the Third Joint Plan is determined by the Court to be invalid, void or
unenforceable, the Court, at the request of any Debtor, will have the power to
alter and interpret such term or provision to make it valid or enforceable to
the maximum extent practicable, consistent with the original purpose of the
term or provision held to be invalid, void or unenforceable, and such term or
provision will then be applicable as altered or interpreted. Notwithstanding
any such holding, alteration or interpretation, the remainder of the terms and
provisions of the Third Joint Plan will remain in full force and effect and
will in no way be affected, impaired or invalidated by such holding,
alteration or interpretation. The Confirmation Order will constitute a
judicial determination and will provide that each term and provision of the
Third Joint Plan, as it may have been altered or interpreted in accordance
with the foregoing, is valid and enforceable pursuant to its terms.
8. Successors and Assigns
The rights, benefits and obligations of any entity named or referred
to in the Third Joint Plan shall be binding on, and shall inure to the benefit
of any heir, executor, administrator, successor or assign of such entity.
9. Plan Supplement
Any and all exhibits, lists or schedules not filed with the Third
Joint Plan shall be contained in the Plan Supplement and filed with the Clerk
of the Bankruptcy Court no later than the deadline for objection to the Third
Joint Plan, October 20, 2003. Upon its filing, the Plan Supplement may be
inspected in the office of the Clerk of the Bankruptcy Court or its designee
during normal business hours. Claimholders and Interestholders may obtain a
copy of the Plan Supplement upon written request to Debtor in accordance with
Article XIII.H of the Third Joint Plan. The Plan Proponents explicitly reserve
the right to modify or make additions to or subtractions from any schedule to
the Third Joint Plan and to modify any exhibit to the Third Joint Plan prior
to the Confirmation Hearing.
10. Revocation, Withdrawal or Non-Consummation
The Plan Proponents reserve the right, to revoke or withdraw the Third
Joint Plan at any time prior to the Confirmation Date and to file subsequent
plans of reorganization. If the Plan Proponents revoke or withdraw the Third
Joint Plan or if Confirmation or Consummation does not occur, then, (i) the
Third Joint Plan shall be null and void in all respects, (ii) any settlement or
compromise embodied in the Third Joint Plan (including the fixing or limiting
to an amount certain any Claim or Class of Claims), assumption or rejection of
executory contracts or leases affected by the Third Joint Plan, and any
document or agreement executed pursuant to the Third Joint Plan, shall be
deemed null and void, and (iii) nothing contained in the Third Joint Plan shall
(a) constitute a waiver or release of any Claims by or against, or any
Interests in, such Debtors or any other Person, (b) prejudice in any manner the
rights of such Debtors or any other Person, or (c) constitute an admission of
any sort by the Debtors or any other Person.
Q. Retention of Jurisdiction
Pursuant to Bankruptcy Code sections 105(a) and 1142 and
notwithstanding entry of the Confirmation Order and the occurrence of the
Effective Date, the Court will retain exclusive jurisdiction over all matters
arising out of, and related to, the Chapter 11 Cases and the Third Joint Plan
to the fullest extent permitted by law, including, among other things,
jurisdiction to:
(a) Allow, disallow, determine, liquidate, classify,
estimate or establish the priority or secured or
unsecured status of any Claim or Interest,
including the resolution of any request for payment
of any Administrative Claim and the resolution of
any objections to the allowance or priority of
Claims or Interests;
(b) Hear and determine all suits or adversary
proceedings to recover assets of the Debtors and
property of their Estates, wherever located;
(c) Hear and determine all matters related to the
assumption, assumption and assignment, or rejection
of any executory contract or unexpired lease to
which any Debtor may be liable, including, if
necessary, the nature or amount of any required
Cure of the liquidation or allowance of any Claims
arising therefrom;
(d) Ensure that distributions to holders of Allowed
Claims and Allowed Interests are accomplished
pursuant to the provisions of the Third Joint Plan;
(e) Hear and determine any and all adversary
proceedings, motions, applications, and contested
or litigated matters arising out of, under, or
related to, the Chapter 11 Cases;
(f) Enter such orders as may be necessary or
appropriate to execute, implement or consummate the
provisions of the Third Joint Plan and all
contracts, instruments, releases and other
agreements or documents created in connection with
the Third Joint Plan, the Disclosure Statement or
the Confirmation Order;
(g) Resolve any cases, controversies, suits or disputes
that may arise in connection with the consummation,
interpretation or enforcement of the Third Joint
Plan or any contract, instrument, release or other
agreement or document that is executed or created
pursuant to the Third Joint Plan, or any entity's
rights arising from or obligations incurred in
connection with the Third Joint Plan or such
documents;
(h) Consider any modifications of the Third Joint Plan,
cure any defect or omission, or reconcile any
inconsistency in any order of the Court including,
without limitation, the Confirmation Order;
(i) Hear and determine all applications for
compensation and reimbursement of expenses of
Professionals under the Third Joint Plan or under
Bankruptcy Code sections 330, 331 503(b), 1103 and
1129(a)(4), provided, however, that from and after
the Effective Date the payment of fees and expenses
of the Professionals of Reorganized SWINC shall be
made in the ordinary course of business and shall
not be subject to the approval of the Court;
(j) Issue injunctions, enter and implement other orders
or take such other actions as may be necessary or
appropriate to restrain interference by any Entity
with consummation, implementation or enforcement of
the Third Joint Plan or the Confirmation Order;
(k) Hear and determine matters concerning state, local
and federal taxes in accordance with Bankruptcy
Code sections 346, 505 and 1146;
(l) Enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any
reason or in any respect modified, stayed,
reversed, revoked or vacated or distributions
pursuant to the Third Joint Plan are enjoined or
stayed;
(m) Enforce all orders, judgments, injunctions,
releases, exculpations, indemnifications and
rulings entered in connection with the Chapter 11
Cases;
(n) Hear and determine all disputes or other matters
arising in connection with the interpretation,
implementation or enforcement of the Asset Purchase
Agreement and the Sale Order;
(o) Hear and determine disputes with respect to
compensation of the SWE&C Liquidating Trustee and
his professional advisors;
(p) Hear and determine disputes with respect to
compensation of the SWINC Plan Administrator and
his professional advisors;
(q) Hear and determine such other matters as may be
provided in the Confirmation Order or as may be
authorized under, or not inconsistent with,
provisions of the Bankruptcy Code; and
(r) Enter a final decree closing the Chapter 11 Cases.
R. Conditions To Confirmation and Consummation
1. Conditions to Confirmation
The following are conditions precedent to the occurrence of
the Confirmation Date: (a) the entry of an order finding that the Disclosure
Statement contains adequate information within the meaning of Bankruptcy Code
section 1125 and (b) the proposed Confirmation Order shall be in a form and
substance reasonably acceptable to the Plan Proponents.
2. Conditions to Effective Date
The following are conditions precedent to the occurrence of
the Effective Date, each of which must be satisfied or waived in accordance
with Article XII.C of the Third Joint Plan:
(a) The Confirmation Order shall have been entered and
become enforceable pursuant to Bankruptcy Rule 7052
and not the subject of a stay under Bankruptcy Rule
7062 and shall:
(i) authorize and direct the Plan Proponents to take
all actions necessary or appropriate to enter into, implement, and consummate
the instruments, releases, and other agreements or documents created in
connection with the Third Joint Plan;
(ii) authorize the issuance of Reorganized SWINC New
Common Stock, Reorganized SWINC New Series A Preferred Stock and Reorganized
SWINC New Series B Preferred Stock; and
(iii) provide that the Reorganized SWINC New Common
Stock, the Reorganized SWINC New Series A Preferred Stock and the Reorganized
SWINC New Series B Preferred Stock issued under the Third Joint Plan are exempt
from registration under the Securities Act 1933, as amended, pursuant to
Section 4(2) of the Securities Act.
(b) All Plan Exhibits shall be in form and substance
reasonably acceptable to the Plan Proponents and
shall have been executed and delivered.
(c) All actions, documents and agreements necessary to
implement the Third Joint Plan shall have been
effectuated or executed.
3. Waiver of Conditions
Each of the conditions set forth in Articles XII.A and XII.B
of the Third Joint Plan, may be waived in whole or in part by the Plan
Proponents, without any other notice to parties in interest or the Court and
without a hearing. The failure to satisfy or waive any condition to the
Confirmation or the Effective Date may be asserted by the Debtors or
Reorganized SWINC regardless of the circumstances giving rise to the failure
of such condition to be satisfied (including any action or inaction by the
Debtors or Reorganized SWINC). The failure of the Debtors or Reorganized SWINC
to exercise any of the foregoing rights shall not be deemed a waiver of any
other rights, and each such right shall be deemed an ongoing right that may be
asserted at any time.
S. Effect of Third Joint Plan Confirmation
1. Binding Effect
The Third Joint Plan shall be binding upon and inure to the
benefit of the Debtors, all present and former holders of Claims and
Interests, and their respective successors and assigns.
2. Releases
(a) Releases by the Debtors
On the Effective Date, each of the Debtors shall
release unconditionally (i) the SWE&C Liquidating Trustee, (ii) the SWE&C
Liquidating Trust Disbursing Agent, (iii) the SWINC Disbursing Agent, (iv) the
SWINC Plan Administrator, (v) their respective directors and officers,
advisors, accountants, investment bankers, consultants, and attorneys, (vi) the
Interestate Oversight Board, and (vii) the respective advisors, accountants,
investment bankers, and attorneys of any of the foregoing, solely in their
respective capacities as such, from any and all claims, obligations, suits,
judgments, damages, rights, causes of action and liabilities whatsoever (other
than the right to enforce the performance of their respective obligations, if
any, to the Debtors or Reorganized SWINC under the Third Joint Plan and the
contracts, instruments, releases and other agreements delivered under the Third
Joint Plan), whether liquidated or unliquidated, fixed or contingent, matured
or unmatured, known or unknown, foreseen or unforeseen, then existing or
thereafter arising, in law, equity or otherwise that are based in whole or in
part on any act or omission, transaction, event or other occurrence taking
place on or after the Petition Date and prior to or on the Effective Date and
in any way relating to the Debtors, the Chapter 11 Cases, the Third Joint Plan
or the Disclosure Statement.
On the Effective Date, each of the Debtors and their
Estates shall release unconditionally those present and former directors, which
directors served only as directors and not as officers of any of the Debtors,
in their respective capacities as such, from any and all claims, obligations,
suits, judgments, damages, rights, causes of action and liabilities whatsoever
(other than the right to enforce the performance of their respective
obligations, if any, to the Debtors or Reorganized SWINC under the Third Joint
Plan and the contracts, instruments, releases and other agreements delivered
under the Third Joint Plan), whether liquidated or unliquidated, fixed or
contingent, matured or unmatured, known or unknown, foreseen or unforeseen,
then existing or thereafter arising, in law, equity or otherwise that are based
in whole or in part on any act or omission, transaction, event or other
occurrence taking place prior to or on the Effective Date that could have been
asserted by or on behalf of any of the Debtors or their Estates against such
current and former directors.
(b) Releases by Holders of Claims and Interests
On the Effective Date, to the fullest extent
permissible under applicable law, as such law may be extended or interpreted
subsequent to the Effective Date, in consideration for the obligations of the
Debtors and Reorganized SWINC under the Third Joint Plan and the Cash and other
contracts, instruments, releases, agreements or documents to be delivered in
connection with the Third Joint Plan, each entity (other than a Debtor) that
has held, holds or may hold a Claim or Interest (except for holders of Asbestos
Claims), as applicable, will be deemed to forever release, waive and discharge
all claims, demands, debts, rights, causes of action or liabilities (other than
the right to enforce the Debtors' or Reorganized SWINC's obligations under the
Third Joint Plan and the contracts, instruments, releases, agreements and
documents delivered under the Third Joint Plan), whether liquidated or
unliquidated, fixed or contingent, matured or unmatured, known or unknown,
foreseen or unforeseen, then existing or thereafter arising, in law, equity or
otherwise that are based in whole or in part on any act or omission,
transaction, event or other occurrence taking place at any time on or prior to
the Effective Date in any way relating to the Debtors, the Chapter 11 Cases,
the Third Joint Plan or the Disclosure Statement that such entity has, had or
may have against (i) the Debtors, and, solely in their respective capacities as
such: (ii) the SWE&C Liquidating Trustee, (iii) the SWE&C Liquidating Trust
Disbursing Agent, (iv) the SWINC Disbursing Agent, (v) the SWINC Plan
Administrator, and (vi) the Interestate Oversight Board; provided, however,
that the Third Joint Plan does not release or otherwise affect any pre or post
Effective Date Claim, except as to the Debtors, that any person may have
against the fiduciaries of the Pension Plan, the Employee Stock Ownership Plan
of Stone & Webster, Incorporated and Participating Subsidiaries, the Group Life
Insurance and Spouses Insurance Plan of Stone & Webster or the Employee
Investment Plan of Stone & Webster Incorporated and Participating Subsidiaries
solely in their capacity as fiduciaries of the Pension Plan or such other plan,
and provided, further, however, that the Third Joint Plan does not release,
enjoin, or otherwise affect in any way the Claims held by purchasers of the
Stone & Webster, Incorporated securities before the Petition Date against any
and all present and former directors and officers of the Debtors and any other
non-Debtor third party.
(c) Injunction Related to Releases
The Confirmation Order will permanently enjoin the
commencement or prosecution by any entity, whether directly, derivatively or
otherwise, of any claims, obligations, suits, judgments, damages, demands,
debts, rights, causes of action or liabilities released pursuant to the Third
Joint Plan, including, but not limited to the claims, obligations, suits,
judgments, damages, demands, debts, rights, causes of action or liabilities
released in Article XIII.B of the Third Joint Plan, provided, however, that the
Third Joint Plan does not release or otherwise affect any pre or post Effective
Date Claim, except as to the Debtors, that any person may have against the
fiduciaries of the Pension Plan, the Employee Stock Ownership Plan of Stone &
Webster, Incorporated and Participating Subsidiaries, the Group Life Insurance
and Spouses Insurance Plan of Stone & Webster or the Employee Investment Plan
of Stone & Webster Incorporated and Participating Subsidiaries solely in their
capacity as fiduciaries of the Pension Plan or such other plan, and provided,
further, however, that the Third Joint Plan does not release, enjoin, or
otherwise affect in any way the Claims held by purchasers of the Stone &
Webster, Incorporated securities before the Petition Date against any and all
present and former directors and officers of the Debtors and any other
non-Debtor third party.
3. Discharge of Claims and Termination of Interests
Pursuant to Bankruptcy Code section 1141(d)(1), Confirmation
will discharge Claims against and Interests in SWINC and the SWINC
Subsidiaries and no holder of a Claim against or Interest in SWINC or any
SWINC Subsidiary may, on account of such Claim or Interest, seek or receive
any payment or other distribution from, or seek recourse against Reorganized
SWINC, SWINC, a SWINC Subsidiary, their respective successors or their
respective property, except as expressly provided in the Third Joint Plan.
Pursuant to Bankruptcy Code section 1141(d)(3), Confirmation
will not discharge Claims against SWE&C and the SWE&C Subsidiaries; provided,
however, that no holder of a Claim against SWE&C or the SWE&C Subsidiaries
may, on account of such Claim or Interest, seek or receive any payment or
other distribution from, or seek recourse against, SWE&C, the SWE&C
Subsidiaries, the Consolidated SWE&C Estate, their respective successors or
their respective property, except as expressly provided in the Third Joint
Plan.
4. Exculpation and Limitation of Liability
None of the Debtors, Federal, Maine Yankee, the Creditors'
Committee, past and present members of the Creditors' Committee in their
capacities as such, the Equity Committee, past and present members of the
Equity Committee in their capacities as such, nor any of their respective
present or former officers and directors (who were officers and directors on
the Petition Date), advisors or attorneys shall have or incur any liability to,
or be subject to any right of action by, any holder of a Claim or an Interest,
or any other party in interest, or any of their respective agents,
shareholders, employees, representatives, financial advisors, attorneys or
affiliates, or any of their successors or assigns, for any act or omission
occurring on or after the Petition Date in connection with, relating to, or
arising out of, the Debtors' Chapter 11 Cases, the pursuit of confirmation of
the Third Joint Plan, the consummation of the Third Joint Plan or the
administration of the Third Joint Plan or the property to be distributed under
the Third Joint Plan, except for their willful misconduct or gross negligence
and except with respect to any claim against a fiduciary of the Pension Plan,
the Employee Stock Ownership Plan of Stone & Webster, Incorporated and
Participating Subsidiaries, the Group Life Insurance and Spouses Insurance Plan
of Stone & Webster or the Employee Investment Plan of Stone & Webster
Incorporated and Participating Subsidiaries with respect to the Pension Plan or
such other plan, and in all respects shall be entitled to rely reasonably upon
the advice of counsel with respect to their duties and responsibilities under
the Third Joint Plan, provided, however, that the Third Joint Plan does not
release or otherwise affect any pre or post Effective Date Claim, except as to
the Debtors, that any person may have against the fiduciaries of the Pension
Plan, the Employee Stock Ownership Plan of Stone & Webster, Incorporated and
Participating Subsidiaries, the Group Life Insurance and Spouses Insurance Plan
of Stone & Webster or the Employee Investment Plan of Stone & Webster
Incorporated and Participating Subsidiaries solely in their capacity as
fiduciaries of the Pension Plan or such other plan.
5. Injunction
Except as otherwise provided in the Third Joint Plan or the
Confirmation Order, as of the Confirmation Date, all entities that have held,
hold or may hold a Claim or other debt or liability against SWINC, a SWINC
Subsidiary or the Consolidated SWINC Estate or an Interest in SWINC or a SWINC
Subsidiary or the Consolidated SWINC Estate are (a) permanently enjoined from
taking any of the following actions against the Estate of SWINC, the Estates
of the SWINC Subsidiaries, the SWINC Plan Administrator (solely in his/her
capacity as such), the Consolidated SWINC Estates, Reorganized SWINC, or any
of their property on account of any such Claims or Interests and (b)
preliminarily enjoined from taking any of the following actions against SWINC,
a SWINC Subsidiary, the Consolidated SWINC Estate, Reorganized SWINC, or their
property on account of such Claims or Interests: (i) commencing or continuing,
in any manner or in any place, any action or other proceeding; (ii) enforcing
attaching, collecting or recovering in any manner any judgment, award, decree
or order; (iii) creating, perfecting or enforcing any lien or encumbrance;
(iv) asserting a setoff, right of subrogation or recoupment of any kind
against any debt, liability or obligation due to the SWINC or the SWINC
Subsidiaries; and (v) commencing or continuing, in any manner or in any place,
any action that does not comply with or is inconsistent with the provisions of
the Third Joint Plan; provided, however, that nothing contained herein shall
preclude such persons from exercising their rights pursuant to and consistent
with the terms of the Third Joint Plan, and provided, further, however, that
the Third Joint Plan does not release or otherwise affect any pre or post
Effective Date Claim, except as to the Debtors, that any person may have
against the fiduciaries of the Pension Plan, the Employee Stock Ownership Plan
of Stone & Webster, Incorporated and Participating Subsidiaries, the Group
Life Insurance and Spouses Insurance Plan of Stone & Webster or the Employee
Investment Plan of Stone & Webster Incorporated and Participating Subsidiaries
solely in their capacity as fiduciaries of the Pension Plan or such other
plan. In addition, nothing in this provision will affect or impair the rights,
if any, that a non-debtor entity has to take direct actions to recover under
policies of insurance where such non-debtor entity is a "co-insured" or
"additional insured" with a Debtor.
Except as otherwise provided in the Third Joint Plan or the
Confirmation Order, as of the Confirmation Date, all entities that have held,
hold or may hold a Claim or other debt or liability against SWE&C or the SWE&C
Subsidiaries or an Interest in SWE&C or the SWE&C Subsidiaries are (a)
permanently enjoined from taking any of the following actions against the
Estate of SWE&C, the Estates of the SWE&C Subsidiaries, the SWE&C Liquidating
Trustee, or any of their property on account of any such Claims or Interests
and (b) preliminarily enjoined from taking any of the following actions
against SWE&C, the SWE&C Subsidiaries or their property on account of such
Claims or Interests: (i) commencing or continuing, in any manner or in any
place, any action or other proceeding; (ii) enforcing attaching, collecting or
recovering in any manner any judgment, award, decree or order; (iii) creating,
perfecting or enforcing any lien or encumbrance; (iv) asserting a setoff,
right of subrogation or recoupment of any kind against any debt, liability or
obligation due to the SWE&C or the SWE&C Subsidiaries; and (v) commencing or
continuing, in any manner or in any place, any action that does not comply
with or is inconsistent with the provisions of the Third Joint Plan; provided,
however, that nothing contained herein shall preclude such persons from
exercising their rights pursuant to and consistent with the terms of the Third
Joint Plan, and provided, further, however, that the Third Joint Plan does not
release or otherwise affect any pre or post Effective Date Claim, except as to
the Debtors, that any person may have against the fiduciaries of the Pension
Plan, the Employee Stock Ownership Plan of Stone & Webster, Incorporated and
Participating Subsidiaries, the Group Life Insurance and Spouses Insurance
Plan of Stone & Webster or the Employee Investment Plan of Stone & Webster
Incorporated and Participating Subsidiaries solely in their capacity as
fiduciaries of the Pension Plan or such other plan. In addition, nothing in
this provision will affect or impair the rights, if any, that a non-debtor
entity has to take direct actions to recover under policies of insurance where
such non-debtor entity is a "co-insured" or "additional insured" with a
Debtor.
By accepting distributions pursuant to the Third Joint Plan,
each holder of an Allowed Claim or Allowed Interest receiving distributions
pursuant to the Third Joint Plan will be deemed to have specifically consented
to the injunctions set forth in Article XIII.E of the Third Joint Plan.
6. Treatment of Indemnification Claims
Notwithstanding DGCL ss. 145 or any other state or local
statute or rule, all existing indemnification and other similar obligations of
any of the Debtors to its officers and directors relating to actions or
inactions as of the Petition Date are rejected, to the extent executory, as of
the Effective Date as provided for in the Third Joint Plan.
On August 24, 2000, H. Kerner Smith, the former President,
Chief Executive Officer and Director of SWINC filed a proof of claim against
the Debtors' estates seeking indemnification, contribution and reimbursement
from SWINC (the "Smith Indemnification Claim") for certain expenses and
contingent liabilities arising as a result of claims made against Mr. Smith as
an officer and director of SWINC (the "D&O Claims").
On December 18, 2001, the Debtors filed their Second Omnibus
Objection to Claims, which seeks, in part, to disallow and expunge the Smith
Indemnification Claim on the grounds that it is contingent and unliquidated.
On February 1, 2002, Mr. Smith filed a Response to the
Debtors' Second Omnibus Objection to Claims (the "Smith Response"), requesting
that the Bankruptcy court allow the Smith Indemnification Claim unless and
until the D&O Claims are resolved and Mr. Smith has in fact been indemnified
fully through insurance. Alternatively, Mr. Smith requested that the Bankruptcy
Court defer ruling on the Debtors' objection to the Smith Indemnification Claim
pending final resolution of the D&O Claims. The Bankruptcy Court has not yet
heard argument on the Debtors' Second Omnibus Objection to Claims or the Smith
Response thereto.
Mr. Smith objects to the characterization and proposed
treatment of the Smith Indemnification Claim under the Third Joint Plan, and
the parties reserve all rights and remedies they may have in regard to the
Smith Indemnification Claim and any objections thereto.
7. Term of Injunction or Stays
With respect to SWINC, the SWINC Subsidiaries, SWE&C and the
SWE&C Subsidiaries all injunctions or stays provided for in the Chapter 11
Cases under section 105, 362 or 524 of the Bankruptcy Code or otherwise, and
in existence on the Confirmation Date, shall remain in full force and effect
until all property of the Estate(s) of SWINC and the SWINC Subsidiaries, SWE&C
and the SWE&C Subsidiaries has been distributed.
V. CERTAIN RISK FACTORS TO BE CONSIDERED
Holders of Impaired Claims and Interests who are entitled to
vote on the Third Joint Plan should read and carefully consider the following
factors, as well as the other information set forth in this Disclosure
Statement (and the documents delivered together herewith and/or incorporated
by reference herein), before deciding whether to vote to accept or to reject
the Third Joint Plan.
A. Certain Bankruptcy Considerations
Even if all Impaired voting classes vote to accept the Third
Joint Plan, and with respect to any Impaired Class deemed to have rejected the
Third Joint Plan, the requirements for "cramdown" are met, the Court may
exercise substantial discretion and may choose not to confirm the Third Joint
Plan. Bankruptcy Code section 1129 requires, among other things, that the
value of distributions to dissenting holders of Claims and Interests may not
be less than the value such holders would receive if the Debtors were
liquidated under chapter 7 of the Bankruptcy Code. See Article IX. Although
the Debtors believe that the Third Joint Plan will meet such a test, there can
be no assurance that the Court will reach the same conclusion. See Appendix
C-1 annexed hereto for a liquidation analysis of the Consolidated SWINC Estate
and the Consolidated SWE&C Estate and Appendix C-2 for a liquidation analysis
of each of the Debtors.
B. Claims Estimations
There can be no assurance that the estimated amount of
Claims and Interests set forth herein are correct, and the actual allowed
amounts of Claims and Interests may differ from the estimates. The estimated
amounts are subject to certain risks, uncertainties and assumptions, including
the assumption that the distribution to Federal will be no less than $25
million, which will enable Class 9A: SWINC Equity Interests to receive a
distribution of at least $.62 per share. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
the actual allowed amounts of Claims and Interests may vary from those
estimated herein.
C. Certain Litigation
Although the Debtors believe that the Litigation Claims are
valid, if the Debtors are unsuccessful in prosecuting such claims the SWINC
Plan Administrator or the SWE&C Liquidating Trustee may not recover any assets
for distribution under the Third Joint Plan. Litigation is inherently
uncertain and there can be no guarantee of any outcome. The SWINC Plan
Administrator or the SWE&C Liquidating Trustee may decide that the best hope
for recovery lies in settling the Litigation Claims. Such settlements may be
significantly less than the damages which were caused and/or the transfers to
be recovered. For these reasons, the recoveries in connection with the
Litigation Claims could change materially over time.
In addition, there are other claims, lawsuits, disputes with
third parties, investigations and administrative proceedings against the
Debtors relating to matters in the ordinary course of their business
activities which could materially adversely affect the Debtors'
reorganization.
D. Income Taxes
Income tax liability with respect to the transactions
contemplated by the Third Joint Plan may materially reduce the recovery to
holders of Claims and Interests. The Debtors anticipate that they will
recognize a significant amount of income as a result of the Third Joint Plan,
including as a result of the Reversion. In general, income may be offset by
net operating loss carryforwards ("NOLs"). Whether the Debtors and Reorganized
SWINC will have sufficient NOLs to offset the income recognized, and whether
any such NOLs would be available to offset such income, is subject to
substantial uncertainty. Claims in bankruptcy by the IRS are given priority
over all unsecured Claims, and any income not offset by NOLs will be subject
to income taxation, materially reducing the recovery to holders of unsecured
Claims and Interests.
The Debtors believe that they and Reorganized SWINC will under go an
"ownership change" (within the meaning of IRC ss. 382), which, but for the
exception described below, would substantially eliminate their ability to
offset income and gains recognized after the Effective Date with NOLs
generated before the Effective Date. Under an exception to this "section 382
limitation," items of built- in income (i.e., economically accrued but
unrealized income) may be generally be offset by pre-change losses without
limitation, if (i) such items are attributable to pre-change periods but
recognized after an ownership change and (ii) the corporation undergoing an
ownership change has a net unrealized built-in gain (generally, if the fair
market value of its qualifying assets exceeds its basis in those assets) (a
"NUBIG"). It is uncertain, however, whether the Debtors and Reorganized SWINC
will have a NUBIG on the Effective Date. If they do not have a NUBIG, and if,
as anticipated, the Debtors and Reorganized SWINC are treated as incurring an
ownership change, they would be unable to use any pre-change NOLs to offset
income recognized as a result of the Third Joint Plan, including as a result
of the Reversion. No assurances can be made in this regard, and even if the
Debtors and Reorganized SWINC take the position that they are entitled to use
pre-change NOLs to offset income recognized as a result of the Third Joint
Plan (including the Reversion), the IRS may assert, and a court may sustain, a
different position. If Reorganized SWINC is unable to utilize pre-change NOLs
to offset income from Third Joint Plan (including the Reversion), the recovery
by holders of unsecured Claims and Interests would be materially reduced or
eliminated.
The Debtors or Reorganized SWINC may also be treated as having
constructively liquidated, for federal income tax purposes, prior to the dates
of their actual liquidations, eliminating their NOLs and causing holders of
Claims and Interests to recognize taxable gain or loss at the time of such
constructive liquidation. Holders of Claims and Interests may also be treated
as directly receiving and recognizing income recognized after the date of
constructive liquidation (including as a result of the Reversion) that
otherwise would have been treated as accruing to the Debtors or Reorganized
SWINC. Such income would not be offset by the Debtors' or Reorganized SWINC's
NOLs. In addition, some aspects of the Third Joint Plan could cause holders of
Claims and Interests to recognize income without a corresponding receipt of
cash with which to pay the associated tax liability and may prevent holders
from using deductions to which the Debtors or Reorganized SWINC would have been
entitled. Certain income may be recognized by holders of Claims and Interests
regardless of their tax basis in their Claims and Interests, and regardless of
whether a holder otherwise recognizes an overall loss as a result of the Third
Joint Plan. For a fuller discussion of the income tax risks associated with the
Third Joint Plan, see the section entitled "Certain Federal Income Tax
Consequences of the Third Joint Plan."
No opinion of counsel has been or will be sought or obtained, and no
rulings or determinations of the IRS or any other taxing authorities have been
sought or obtained, with respect to any income tax matters relating to the
Third Joint Plan. Accordingly, no assurances may be made that the income tax
consequences of the Third Joint Plan could not have material adverse effects
on holders of Claims and Interests.
E. Pension Plan
After the Effective Date, Reorganized SWINC intends to
commence a dissolution proceeding in the Chancery Court of Delaware under DGCL
ss.ss. 275-282. Reorganized SWINC then intends to undertake to terminate the
Pension Plan with a date of plan termination ("DOPT") that falls during the
pendency of the Delaware dissolution proceeding. After satisfying all
liabilities of the Pension Plan to Pension Plan participants and
beneficiaries, Reorganized SWINC may take a distribution of any residual
assets, defined as the Reversion in the Third Joint Plan, of the Pension Plan.
As of December 31, 2002, the Pension Plan's enrolled actuary
estimated that the Pension Plan had a substantial Reversion. Whether the
Reversion will exist at a future date, and, if so, in what amount, will be
determined by the appreciation or depreciation of Pension Plan assets,
prevailing market annuity purchase rates, interest rates used to determine
various benefits under the Pension Plan, mortality and other demographic
experience, Pension Plan provisions and the interpretation of those
provisions, and other factors. Accordingly, no assurances can be given
regarding the existence or amount of the Reversion. Moreover, termination of
the Pension Plan is subject to governmental review and approval. No assurance
is given that approval will be obtained.
If Reorganized SWINC receives the Reversion, in addition to
any income tax consequences that may result, the amount of the reversion will
be subject to taxation under IRC ss. 4980. Unless one of the exceptions set
forth in IRC ss. 4980 applies, IRC ss. 4980 imposes a tax of 50 percent of the
amount of any employer reversion from a tax-qualified plan. If one of the
exceptions applies, then the IRC ss. 4980 tax rate is 20 percent.
One of the exceptions that results in a 20 percent IRC ss.
4980 tax rate applies in the case of "an employer who, as of the termination
date of the qualified plan, is in bankruptcy liquidation under chapter 7 of
title 11 of the United States Code or in similar proceedings under State law."
A dissolution proceeding in the Chancery Court of Delaware under DGCL ss.ss.
275-282 should constitute such a "similar" proceeding under state law and,
therefore, termination of the Pension Plan with a DOPT that falls during the
Delaware dissolution proceeding should result in a 20 percent tax rate under
IRC ss. 4980. There can be no assurance that the IRS will agree with this
position, however. The IRS could conclude that a dissolution proceeding in the
Chancery Court of Delaware under DGCL ss.ss. 275-282 is not sufficiently
"similar" to a bankruptcy liquidation under chapter 7 of title 11 of the United
States Code to warrant a 20 percent tax rate under IRC ss. 4980. Or, the IRS
could disregard the form of the Delaware dissolution proceeding because it
follows a Chapter 11 reorganization, which, unlike a Chapter 7 liquidation or
similar state law dissolution proceeding, does not qualify for the exception
noted above to the 50 percent IRC ss. 4980 tax.
The Debtors may seek a private letter ruling from the IRS
regarding the IRC ss. 4980 tax rate that would apply to Reorganized SWINC's
receipt of the Reversion. No assurances are given, however, that the IRS will
rule favorably or in advance of the date that holders of a Claim or Interest
must vote on the proposed Third Joint Plan. In particular, the IRS could rule
unfavorably, could decline to rule, could insist that any such ruling request
be submitted only by Reorganized SWINC as the affected taxpayer (and therefore
after the Effective Date), or could otherwise not rule until after the
Effective Date.
VI. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
No registration statement will be filed under the Securities
Act or any state securities laws with respect to the issuance or subsequent
transfer of the Reorganized SWINC New Series A Preferred Stock, the
Reorganized SWINC New Series B Preferred Stock or the Reorganized SWINC New
Common Stock under the Third Joint Plan. The Debtors believe that Section 4(2)
of the Securities Act and various provisions of state securities law exempt
from federal and state securities registration requirements the offer and sale
of such securities pursuant to the Third Joint Plan. Section 4(2) of the
Securities Act provides an exemption from the registration requirements of the
Securities Act for transactions by an issuer not involving any public
offering. Given that Reorganized SWINC will be issuing securities to only
three holders, each of whom is sophisticated and familiar with the operations
of Reorganized SWINC and the terms of the Third Joint Plan, the Debtors
believe that the issuance of securities contemplated by the Third Joint Plan
will not constitute a public offering and will therefore be exempt from
registration pursuant to Section 4(2) of the Securities Act. Subsequent
transfers of the securities to be issued under the Third Joint Plan are not
permitted.
It is not currently expected that Reorganized SWINC will
become subject to the periodic reporting and other requirements of the
Exchange Act as a result of the consummation of the Third Joint Plan.
Reorganized SWINC intends to assess facts and circumstances, including the
amount of assets held by Reorganized SWINC and the number of holders of its
securities, as they exist following consummation of the Third Joint Plan and,
with the advice of counsel, will make a determination regarding whether
compliance with the periodic reporting and other requirements of the Exchange
Act is necessary or appropriate. In the event that Reorganized SWINC
determines that compliance is required, Reorganized SWINC will file with the
SEC a Registration Statement on Form 10 or another appropriate registration
statement form and otherwise comply with the requirements of the Exchange Act.
VII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE THIRD JOINT PLAN
A summary description of certain material United States
federal income tax consequences of the Third Joint Plan is provided below. This
description is for informational purposes only and, due to a lack of definitive
judicial or administrative authority or interpretation, substantial
uncertainties exist with respect to various tax consequences of the Third Joint
Plan as discussed herein. Only the principal consequences of the Third Joint
Plan for holders of Claims or Interests who are entitled to vote to accept or
reject the Third Joint Plan are described below. No opinion of counsel has been
or will be sought or obtained with respect to any tax consequences of the Third
Joint Plan. Except possibly with respect to the IRC ss. 4980 consequences
discussed below, no rulings or determinations of the IRS or any other tax
authorities have been or will be sought or obtained with respect to any tax
consequences of the Third Joint Plan, and the discussion below is not binding
upon the IRS or such other authorities. No representations are being made
regarding the particular tax consequences of the confirmation or implementation
of the Third Joint Plan as to any holder of a Claim or Interest. No assurance
can be given that the IRS would not assert, or that a court would not sustain,
a different position from any discussed herein.
The discussion of United States federal income tax
consequences below is based on the IRC, Treasury Regulations, judicial
authorities, published positions of the IRS, and other applicable authorities,
all as in effect on the date hereof and all of which are subject to differing
interpretations or change (possibly with retroactive effect).
Except to a limited extent, the following discussion does
not address foreign, state or local tax consequences of the Third Joint Plan,
nor does it purport to address the United States federal income tax
consequences of the Third Joint Plan to special classes of taxpayers (e.g.,
banks and certain other financial institutions, insurance companies,
tax-exempt organizations, holders of Claims or Interests that are, or hold
their Claims or Interests through, pass-through entities, persons whose
functional currency is not the United States dollar, foreign persons, dealers
in securities or foreign currency, persons who received their Stock pursuant
to the exercise of an employee stock option or otherwise as compensation and
persons holding certificates that are a hedge against, or that are hedged
against, currency risk or that are part of a straddle, constructive sale or
conversion transaction). Furthermore, the following discussion does not
address United States federal taxes other than income taxes. Finally, the
following discussion does not address the tax consequences of the Third Joint
Plan to Federal and to Maine Yankee. Each holder of a Claim or Interest is
strongly urged to consult its own tax advisor regarding the United States
federal, state, local and any foreign tax consequences of the transactions
described herein or in the Third Joint Plan.
A. Tax Consequences to the Debtors
It is anticipated that, for federal income tax purposes,
Reorganized SWINC will recognize substantial income as a result of the
reversion of the residual assets of the Pension Plan. This income may,
however, generally be offset by net operating losses and net operating loss
carryovers ("NOLs"). The Debtors hope that they and Reorganized SWINC will
each have sufficient NOLs available, for federal income tax purposes, to
offset all or substantially all of their anticipated income from the
transactions contemplated by the Third Joint Plan (although some liability for
federal alternative minimum tax may remain, as discussed below). This belief
is, however, subject to substantial uncertainty, as described below. If any of
the Debtors or Reorganized SWINC do not have sufficient NOLs available to
offset the income recognized, any remaining income will be subject to income
taxation, which may materially reduce the recovery to holders of Claims and
Interests.
It is possible that any of the Debtors or Reorganized SWINC
could be treated as having constructively liquidated, for federal income tax
purposes, prior to its actual liquidation. Under this treatment, the
constructively liquidated corporation's NOLs would be eliminated and any gain
recognized in the constructive liquidation of a subsidiary would reduce its
parent's NOLs. A premature constructive liquidation could therefore reduce or
eliminate the ability of the Debtors or Reorganized SWINC to offset taxable
income with such NOLs, thereby materially reducing or eliminating the amounts
available for distribution to holders of Claims and Interests.
It is also possible that the ability of the Debtors or
Reorganized SWINC to utilize NOLs could be substantially reduced or eliminated
as a result of an ownership change. When a corporation undergoes an ownership
change, the IRC generally limits its (and its subsidiaries') ability to
utilize historic NOLs and net unrealized built-in losses ("NUBILs"). An
"ownership change" is generally defined as a more than 50 percentage point
change in equity ownership, measured by value, during the shorter of (1) the
three-year period ending on each date on which such change in ownership is
tested or (2) the period beginning on the day after the corporation's most
recent ownership change. As a general rule, the limit on a corporation's
ability to use its pre-change NOLs and NUBILs equals the product of the value
of the stock of the corporation (with certain adjustments) immediately before
the ownership change and the applicable "long-term tax-exempt rate" (4.35% for
August, 2003). As a result, an ownership change would, except as described
below, substantially eliminate the Debtors' and Reorganized SWINC's ability to
use pre-change NOLs to offset income realized after an ownership change. There
is an exception, however, under which items of built-in income (i.e.,
economically accrued but unrealized income) may be offset by pre-change losses
without limitation, if (i) such items are attributable to pre- change periods
but recognized after an ownership change and (ii) the corporation undergoing
an ownership change has a NUBIG on the date of the ownership change. A
corporation generally has a NUBIG if on the date of an ownership change the
fair market value of its qualifying assets exceeds its basis in those assets.
The Debtors believe that they will likely incur an ownership change as a
result of the Third Joint Plan. Nevertheless, the Debtors also believe that
any income from the reversion of the Pension Plan assets attributable to
pre-change periods should qualify as built-in income for purposes of the
exception described above. It is uncertain, however, whether the Debtors and
Reorganized SWINC will have a NUBIG on the Effective Date. If they do not have
a NUBIG, and if, as anticipated, the Debtors and Reorganized SWINC are treated
as incurring an ownership change, they would be unable to use any pre-change
NOLs to offset income recognized as a result of the Third Joint Plan,
including as a result of the Reversion. The Debtors and Reorganized SWINC will
continue to analyze these issues and decide whether to take the position that
it can use pre-change NOLs to offset income recognized as a result of the
Third Joint Plan, including as a result of the Reversion. No assurances can be
made in this regard, and even if the Debtors and Reorganized SWINC take the
position that they are entitled to use pre-change NOLs to offset income
recognized as a result of the Third Joint Plan (including the Reversion), the
IRS may assert, and a court may sustain, a different position. If Reorganized
SWINC is unable to utilize pre-change NOLs to offset income from Third Joint
Plan (including the Reversion), the recovery by holders of unsecured Claims
and Interests would be materially reduced or eliminated.
A corporation may incur alternative minimum tax liability
even where NOLs and other tax attributes are sufficient to eliminate its
taxable income as computed under the regular corporate income tax. It is
possible that the Debtors and Reorganized SWINC will be liable for the
alternative minimum tax.
B. Tax Consequences to Holders of Claims and Interests
The United States federal income tax consequences of the
transactions contemplated by the Third Joint Plan to holders of Allowed Claims
and Interests (including the character, timing and amount of income, gain or
loss or deduction recognized) will depend upon, among other things, (1) the
manner in which a holder acquired a Claim or Interest; (2) the length of time
the Claim or Interest has been held; (3) whether the Claim or Interest was
acquired at a discount; (4) whether the holder has taken a bad debt or other
deduction with respect to the Claim (or any portion thereof) in the current or
prior years; (5) whether the holder has previously included accrued but unpaid
interest with respect to the Claim; (6) the holder's method of tax accounting;
and (7) whether the Claim is an installment obligation for United States
federal income tax purposes. Therefore, holders of Claims or Interests should
consult their own tax advisors for information that may be relevant to their
particular situations and circumstances and the particular tax consequences to
them of the transactions contemplated by the Third Joint Plan.
Amounts treated as interest or dividend income (and certain
other types of ordinary income) for federal income tax purposes will generally
constitute taxable, ordinary income to a holder, regardless of whether the
holder otherwise recognizes an overall loss as a result of the Third Joint
Plan. In addition, a holder may be required to recognize certain types of
income, including as a result of accrued but unpaid dividends or interest,
imputed interest or "original issue discount" without a corresponding receipt
of cash.
For purposes of the following discussion, a "United States
holder" is a holder of an Allowed Claim or Interest that is (1) a citizen or
individual resident of the United States, (2) a partnership or corporation
created or organized in the United States or under the laws of the United
States or any political subdivision thereof, (3) an estate the income of which
is subject to United States federal income taxation regardless of its source,
or (4) a trust if (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States fiduciaries have the authority to control all substantial
decisions of the trust or (ii) the trust was in existence on August 20, 1996
and properly elected to be treated as a United States person. A "Non-United
States holder" is a holder that is not a United States holder.
Also for purposes of the following discussion, the "Initial
Distribution Amount" and the "Semi-Annual Distribution Amount" are, as
applicable, the Pro-Rata share of amount of cash and the fair market value
(determined as of the date of receipt) of the Reorganized SWINC New Series A
Preferred Stock or Reorganized SWINC New Series B Preferred Stock received by
a holder of a Claim or Interest, in each case at the time of the Effective
Date, Initial Distribution, Semi-Annual Distribution or receipt of the
Reorganized SWINC New Series A Preferred Stock or Reorganized SWINC New Series
B Preferred Stock, as applicable. For federal income tax purposes and for
purposes of the discussion below, the SWINC Claims Administrator's receipt of
Reorganized SWINC New Series A Preferred Stock and the Liquidating Trustee's
receipt of Reorganized SWINC New Series B Preferred Stock will be treated as a
receipt by the holder of a Claim or Interest for whose benefit such stock is
received.
i. Allocation of Plan Distributions Between Principal and
Interest
To the extent that any Allowed Claim entitled to a
distribution under the Third Joint Plan comprises indebtedness and accrued but
unpaid interest thereon, the Debtors intend to take the position that, for
income tax purposes, such distribution shall be allocated (to the extent
permitted) first to the principal amount of the Claim and then, to the extent
the consideration exceeds the principal amount of the Claim, to the portion of
such Claim representing accrued but unpaid interest. No assurances can be made
in this regard. If, contrary to the Debtors' intended position, such a
distribution were treated as being allocated first to accrued but unpaid
interest, a holder of such an Allowed Claim would realize ordinary income with
respect to the distribution in an amount equal to the accrued but unpaid
interest not already taken into income under the holder's method of
accounting.
ii. Consequences to Holders of Allowed SWINC Asbestos Claims
and SWE&C Asbestos Claims (Classes 3A and 3B) ("Asbestos Claims")
Depending on the nature and origin of an Asbestos Claim, its
character in the hands of the holder, and whether the holder has already
claimed a deduction or loss with respect to such Claim, any gain or loss with
respect to the receipt of Cash and Insurance Proceeds in respect of such Claim
pursuant to the Third Joint Plan will generally be treated as capital gain or
loss or ordinary income or deduction or excluded from gross income under Code
section 104. Capital losses may generally offset only capital gains, although
individuals may, to a limited extent, offset ordinary income with capital
losses. A holder of an Asbestos Claim may be subject to taxation, under the
"open transaction" or "closed transaction" methods described below, on its Pro
Rata share of the Asbestos Claims. In addition, holders may be subject to other
special tax rules that affect the character, timing and amount of any income,
gain, loss or deduction. Accordingly, holders of Asbestos Claims are urged to
consult their own tax advisors regarding the tax consequences of the Third
Joint Plan to them.
iii. Consequences to Holders of Allowed SWINC and SWE&C
Convenience Claims, SWINC and SWE&C General Unsecured Claims, SWINC
Subordinated Claims and SWINC Securities Claims (Classes 4A, 4B, 5A, 5B, 7A
and 8A)
A holder of an Allowed Class 4A: SWINC Convenience Claim or
an Allowed Class 4B: SWE&C Convenience Claim (i.e., a holder of an Allowed
Class 5A: SWINC General Unsecured Claim or an Allowed Class 5B: SWE&C General
Unsecured Claim that elects to be treated in Class 4A or 4B, respectively)
will generally recognize a taxable gain or loss, in the taxable year of the
Effective Date, equal to the difference, if any, between (1) the amount
received in respect of its Claim, and (2) the holder's adjusted tax basis in
its Claim.
The receipt by a holder of its Pro-Rata share of
Distribution Amounts, Reorganized SWINC New Series A Preferred Stock or
Reorganized SWINC New Series B Preferred Stock in respect of the holder's
Class 5A or 5B General Unsecured Claim, Class 7A: SWINC Subordinated Claim or
Class 8A: SWINC Securities Claim will generally be a taxable transaction for
United States federal income tax purposes, and may also be a taxable
transaction for applicable state, local and foreign income tax purposes. The
timing and amount of taxable gain or loss are, however, subject to some
uncertainty.
Under the "closed transaction" method, a holder of a Class
5A or 5B General Unsecured Claim, a Class 7A: SWINC Subordinated Claim or
Class 8A: SWINC Securities Claim should generally recognize gain or loss in
the taxable year of the Effective Date equal to the difference, if any,
between (1) the sum of (a) such holder's Pro-Rata share of any Initial
Distribution Amount, (b) such holder's Pro-Rata share of any Semi-Annual
Distribution Amounts received in the taxable year of the Effective Date and
(c) the fair market value, determined on the Effective Date, of such holder's
Pro-Rata share of all Semi-Annual Distribution Amounts to be received in
subsequent taxable years, over (2) such holder's adjusted tax basis in its
Claim.
Under the "open transaction" method, such a holder should
generally recognize gain (but not loss) with respect to such Claim, in each
taxable year, beginning with the Effective Date, equal to the difference, if
any, between (1) the cumulative total of any Initial and Semi-Annual
Distribution Amounts received through the end of such taxable year, over (2)
the sum of (a) such holder's tax basis in its Claim and (b) the cumulative
total of the Initial and Semi-Annual Distribution Amounts already taken into
account with respect to such Claim under the holder's method of accounting.
Under this method, a holder should generally be required to defer its
recognition of any loss with respect to its Claim until the taxable year in
which it receives its final Semi-Annual Distribution Amount or shares of
Reorganized SWINC New Series A Preferred Stock or Reorganized SWINC New Series
B Preferred Stock. Under Regulations issued by the Treasury Department, the
"open transaction" method should be employed only if the fair market value of
the deferred Semi-Annual Distribution Amounts cannot be reasonably
ascertained. The Regulations caution that the fair market value of future
payments would generally not be ascertainable only in "rare and extraordinary
cases."
Under both the "closed transaction" and "open transaction"
methods, a portion of each deferred payment received more than six months
after the Effective Date may be treated as imputed interest, and a holder of
an Allowed Class 5A or 5B General Unsecured Claim, Class 7A: SWINC
Subordinated Claim or Class 8A: SWINC Securities Claim may be required to
include such interest as taxable ordinary income, under such holder's method
of accounting, regardless of whether the holder otherwise realizes an overall
loss as a result of the Third Joint Plan. A holder whose Claim represents a
debt Claim and that recognizes a loss as a result of the Third Joint Plan may
be entitled to a bad debt deduction, either in the taxable year of the
Effective Date, the taxable year in which it receives its final Semi-Annual
Distribution Amount or in a prior taxable year.
As discussed above, the character of income or loss with
respect to a Claim as ordinary or capital will depend on a number of factors,
including the origin and nature of such Claim. Generally, if the Claim is a
capital asset in the hands of a holder, the gain or loss will be capital gain
or loss, and will be long-term capital gain or loss if the holder's holding
period with respect to its Claim is more than one year on the Effective Date.
However, any gain recognized will generally be treated as ordinary income to
the extent that Initial or Semi-Annual Distribution Amounts or Reorganized
SWINC New Series A Preferred Stock or Reorganized SWINC New Series B Preferred
Stock are received in respect of accrued interest, market discount or
dividends that have not previously been taken into account under such holder's
method of accounting. The holding period for Reorganized SWINC New Series A
Preferred Stock and Reorganized SWINC New Series B Preferred Stock received by
a holder of a Claim pursuant to the Third Joint Plan will generally begin on
the day after the Effective Date.
It is possible that any of the Debtors or Reorganized SWINC
may be treated as having constructively liquidated, for federal income tax
purposes, before the date of its actual liquidation. In such a case, any
income or gain recognized after the date of the constructive liquidation would
be treated as received and recognized directly by holders of Claims and
Interests. Such holders would not be entitled to offset such income or gain
with the Debtors' or Reorganized SWINC's NOLs. Such holders could also
recognize income without a corresponding receipt of cash with which to satisfy
their income tax liability. In addition, such holders may not be able to
offset any such income or gains with deductions or losses that otherwise would
have accrued to the Debtors or Reorganized SWINC after the date of a
constructive liquidation, and may recognize taxable income or gain regardless
of whether they otherwise recognize an overall loss as a result of the Third
Joint Plan.
iv. Consequences to Holders of SWINC Equity Interests (Class
9A)
Although not free from doubt, SWINC believes that the receipt
of Reorganized SWINC New Series A Preferred Stock and Available Cash in respect
of SWINC Equity Interests pursuant to the Third Joint Plan should generally be
treated as a "recapitalization" for United States federal income tax purposes.
If the receipt is so treated, then, except as discussed below, a holder of a
SWINC Equity Interest should recognize gain (but not loss) with respect to the
SWINC Equity Interest surrendered pursuant to the Third Joint Plan, in an
amount equal to the lesser of (1) the amount of gain realized (i.e., the excess
of the amount of Available Cash and the fair market value of the Reorganized
SWINC New Series A Preferred Stock treated as received by the holder, over the
holder's adjusted tax basis in its SWINC Equity Interest) or (2) the amount of
Cash received by the holder of the SWINC Equity Interest. Except as discussed
below, any such gain recognized should generally be treated as capital gain,
and taken into account under either the "closed transaction" or the "open
transaction" method described above. In addition, except as discussed below,
such a holder's aggregate tax basis in the Reorganized SWINC New Series A
Preferred Stock received pursuant to the Third Joint Plan should be equal to
the aggregate tax basis in its SWINC Equity Interests surrendered in exchange
therefor, decreased by the amount of Available Cash received and increased by
the amount of any gain recognized. A holder's holding period for its
Reorganized SWINC New Series A Preferred Stock received pursuant to the Third
Joint Plan should generally include the holding period of its SWINC Equity
Interests surrendered in exchange therefor.
If the receipt of Reorganized SWINC New Series A Preferred
Stock and Available Cash in respect of SWINC Equity Interests pursuant to the
Third Joint Plan is not treated as a recapitalization, then such receipt would
be treated as a taxable transaction for federal income tax purposes.
Accordingly, a holder of SWINC Equity Interests would generally recognize gain
or loss, if any, on the fair market value of the Reorganized SWINC New Series
A Preferred Stock and the amount of Available Cash received, under either the
"closed transaction" or the "open transaction" method described above. A
holder's holding period with respect to Reorganized SWINC New Series A
Preferred Stock would begin on the day after the Effective Date.
A holder who receives its Pro-Rata share of Reorganized
SWINC New Series A Preferred Stock or Available Cash in respect of accrued but
unpaid dividends, if any, will recognize ordinary income upon such receipt in
an amount equal to the fair market value of such Reorganized SWINC New Series
A Preferred Stock (determined on the Effective Date) and the amount of
Available Cash not previously taken into account under the holder's method of
accounting with respect to such accrued but unpaid dividend, regardless of
whether such holder otherwise recognizes a taxable loss as a result of the
Third Joint Plan. The holding period for Reorganized SWINC New Series A
Preferred Stock received in respect of such accrued but unpaid dividends will
begin on the day after the Effective Date.
If holders of Allowed Class 9A: SWINC Equity Interests vote
to accept the Third Joint Plan, holders of Reorganized SWINC Series A
Preferred Stock will receive a greater amount than if they had voted to reject
the Third Joint Plan (the "Overage") and holders of Class 9A: SWINC Equity
Interests will receive an interest in, and distributions from, the Equity
Settlement Fund. Any Overage received by a holder of a SWINC Equity Interest
should be treated as either (i) additional consideration received in respect
of such SWINC Equity Interest pursuant to the Third Joint Plan or (ii) a
separate payment in the nature of a fee for accepting the Third Joint Plan. If
the Overage is treated as additional consideration received in respect of the
SWINC Equity Interest, the Overage will be added to the amount realized in
computing gain or loss in the manner described above. If the Overage or income
from the Settlement Fund is treated as a separate fee, a holder of a SWINC
Equity Interest would likely recognize ordinary income in an amount equal to
the Overage and/or its Pro Rata share of income from the Settlement Fund,
regardless of whether such holder otherwise recognizes an overall loss as a
result of the Third Joint Plan. No assurances can be made in this regard.
If any of the Debtors or Reorganized SWINC is treated as
having constructively liquidated, for federal income tax purposes, before the
date of its actual liquidation, a Pro Rata share of any income or gain
recognized after the date of the constructive liquidation would be treated as
received and recognized directly by holders Class 9A: SWINC Equity Interests.
Such holders would not be entitled to offset such income or gain with the
Debtors' or Reorganized SWINC's NOLs. Such holders could also recognize income
without a corresponding receipt of cash with which to satisfy their income tax
liability. In addition, such holders may not be able to offset any such income
or gains with deductions or losses that otherwise would have accrued to the
Debtors or Reorganized SWINC after the date of a constructive liquidation, and
may recognize taxable income or gain regardless of whether they otherwise
recognize an overall loss as a result of the Third Joint Plan.
A portion of the consideration received on each Semi-Annual
Distribution Date that is more than six months after the Effective Date may be
treated as imputed interest, taxable as ordinary income under the holder's
method of accounting.
v. Consequences of Liquidation of Reorganized SWINC
Upon the liquidation of Reorganized SWINC, each beneficial
holder of Reorganized SWINC New Series A Preferred Stock or Reorganized SWINC
New Series B Preferred Stock will generally recognize gain or loss equal to
the difference, if any, between (1) such holder's Pro Rata share of the
liquidation proceeds of Reorganized SWINC and (2) such holder's aggregate
adjusted tax basis in its beneficial interest in the stock surrendered in
exchange therefor. Any such gain or loss will generally be capital gain or
loss, and will be long-term capital gain or loss if the holder's holding
period for its shares (including a tacked holding period relating to a share
of SWINC Equity Interests, as discussed above) is more than one year on the
date of liquidation.
As discussed above in Section IV.G, it is possible that
SWINC or Reorganized SWINC could be treated as having constructively
liquidated, for federal income tax purposes, prior the actual liquidation of
Reorganized SWINC. In that case, a beneficial holder of SWINC Equity
Interests, Reorganized SWINC New Series A Preferred Stock or Reorganized SWINC
New Series B Preferred Stock would be subject to the treatment described in
the preceding paragraph with respect to shares of Reorganized SWINC New Series
A Preferred Stock and Reorganized SWINC New Series B Preferred Stock at the
time of such constructive liquidation. In addition, if SWINC or Reorganized
SWINC is treated as having constructively liquidated before receiving the
reversion of the Pension Plan assets, holders of Claims and Interests may be
treated as having received the reversion directly and would be taxable on such
receipt. In such a case, holders receiving such amounts would not be entitled
to utilize Reorganized SWINC's NOLs to offset income from such receipt. In
addition, such income would likely be treated as ordinary and thus would
generally not be offset by capital losses (except to a limited extent in the
case of individuals) or basis.
vi. Consequences of the SWE&C Liquidating Trust, the
Asbestos Trust, and the Equity Settlement Fund
Under the IRC, amounts earned by an escrow account,
settlement fund or similar fund must be subject to current tax. Although
certain Treasury regulations have been issued, no Treasury regulations have
been promulgated to address the tax treatment of such funds in a bankruptcy
context. Accordingly, the proper tax treatment of such funds is uncertain.
Depending on the facts and the relevant law, such funds could be treated as
grantor trusts, separately taxable trusts, or otherwise.
The Debtors presently intend to treat (1) the assets held in
the Asbestos Trust and SWE&C Liquidating Trust, respectively, (the "Liquidating
Trust Assets") as held by a grantor trust with respect to which the holders of
SWE&C Claims are treated as the grantors, and (2) the assets held in the Equity
Settlement Fund (the "Equity Settlement Fund Assets") as held by a grantor
trust with respect to which holders of Class 9A: SWINC Equity Interests are
treated as the grantors. Accordingly, it is anticipated that holders of SWE&C
Claims will be subject to current taxation on any earnings generated by the
Liquidating Trust Assets and that holders of Class 9A: SWINC Equity Interests
will be subject to current taxation on any earnings generated by the Equity
Settlement Fund Assets. There can be no assurance that the IRS will respect the
foregoing treatment. For example, the IRS may characterize any or all of the
trusts as grantor trusts for the benefit of holders of Claims, the Debtors or
Reorganized SWINC, or as otherwise owned by and taxable to holders of Claims or
the Debtors or Reorganized SWINC. Alternatively, the IRS could characterize any
or all of the trusts as so-called "complex trusts" subject to a separate entity
level tax on its earnings, except to the extent that such earnings are
distributed during the taxable year. Due to the possibility that the amounts of
the consideration received by a holder of a SWE&C Claim may increase or
decrease, a holder of a SWE&C Claim could be prevented from recognizing a loss
until the time at which there are no assets remaining in the Liquidating Trust
or the Liquidating Trust is terminated.
If the amounts held in Asbestos Trust are treated as held by
a grantor trust with respect to which holders of SWE&C Claims are treated as
the grantors, then they will recognize additional gain as a result of the
transfer of funds to the Asbestos Trust, either under the "open transaction"
or "closed transaction" methods described above. Under the closed transaction
method, holders of SWE&C Claims would recognize ordinary income or capital
gain as a result of the transfer, in the taxable year of the Effective Date,
without a corresponding receipt of cash. Holders of SWE&C Claims may be
entitled to a deduction or capital loss in the year in which amount are paid
to holders of Asbestos Claims, but the ability to claim such a deduction or
capital loss is uncertain.
As discussed above under the heading "Consequences of
Liquidation of Reorganized SWINC," if any of the Debtors is treated as
constructively liquidated before the date of its actual liquidation, or if the
Reversion is treated as received directly by the SWE&C Liquidating Trust, the
amounts distributable to holders of Claims and Interests could be materially
reduced or eliminated or such holders themselves could be taxable on the
deemed receipt by the SWE&C Liquidating Trust. In such a case, holders
receiving such amounts would not be entitled to utilize the Debtors' NOLs to
offset income from such receipt. In addition, such income would likely be
treated as ordinary and thus would generally not be offset by capital losses
(except to a limited extent in the case of individuals) or basis.
Holders of Asbestos Claims and SWE&C Claims are urged to
consult their own tax advisors regarding the potential United States federal
income tax treatment of the Trusts and the consequences to them of such
treatment (including the effect on the computation of a holder's income, gain
or loss in respect of its Claim, the subsequent taxation of any distributions
from the Trusts, and the possibility of taxable income without a corresponding
receipt of cash or property with which to satisfy the tax liability).
vii. Consequences to Non-United States Holders
The United States federal income tax consequences of the
Third Joint Plan for a Non-United States holder generally depend on the nature
and origin of the holder's Claim or Interest. Except as discussed below, a
Non-United States holder that holds its Claim or Interest as a capital asset
should generally not be subject to United States federal income tax with
respect to Reorganized SWINC New Series A Preferred Stock, Reorganized SWINC
New Series B Preferred Stock, cash or an interest in the SWE&C Liquidating
Trust received in respect of its Claim or Interest pursuant to the Third Joint
Plan unless, among other things, (a) such holder is engaged in a trade or
business in the United States to which income, gain or loss from the exchange
is "effectively connected" for United States federal income tax purposes, or
(b) in the case of an individual, such holder is present in the United States
for 183 days or more during the taxable year of the Effective Date and certain
other requirements are met. A Non-United States holder may, however, be
subject to United States federal withholding tax and information reporting
with respect to cash and the fair market value of Reorganized SWINC New Series
A Preferred Stock or Reorganized SWINC New Series B Preferred Stock received
in respect of accrued interest, market discount, accrued but unpaid dividends
or the portion of Semi-Annual Distributions treated as interest.
viii. Information Reporting and Backup Withholding
Certain payments, including payments of interest, payments
of cash in respect of Claims, SWINC Equity Interests and other payments and
distributions pursuant to the Third Joint Plan, are generally subject to
information reporting by the payor to the IRS. Moreover, such reportable
payments are subject to backup withholding under certain circumstances. Under
the IRC's backup withholding rules, a United States holder may be subject to
backup withholding at the applicable rate with respect to certain
distributions or payments pursuant to the Third Joint Plan, unless the holder
(a) comes within certain exempt categories (which generally include
corporations) and, when required, demonstrates this fact or (b) provides a
correct United States taxpayer identification number and certifies under
penalty 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 dividend and interest income.
A Non-United States holder that receives payments or
distributions pursuant to the Third Joint Plan will generally not be subject
to backup withholding, provided that such holder furnishes certification of
its status as a Non-United States holder (and any other required
certifications), or is otherwise exempt from backup withholding. Generally,
such certification is provided on IRS Form W-8BEN. Information reporting may
apply to amounts received by a Non- United States holder.
Backup withholding is not an additional tax. Amounts
withheld under the backup withholding rules may be credited against a holder's
United States federal income tax liability, and a holder may obtain a refund
of any excess amounts withheld under the backup withholding rules by filing an
appropriate claim for refund with the IRS.
C. Consequences to Pension Plan
After the Effective Date, Reorganized SWINC intends to
commence a dissolution proceeding in the Chancery Court of Delaware under DGCL
ss.ss. 275-282. Reorganized SWINC then intends to undertake to terminate the
Pension Plan with a DOPT that falls during the pendency of the Delaware
dissolution proceeding. After satisfying all liabilities of the Pension Plan
to Pension Plan participants and beneficiaries, Reorganized SWINC may take a
distribution of any Reversion.
As of December 31, 202, the Pension Plan's enrolled actuary
estimated that the Pension Plan had a substantial Reversion. Whether the
Reversion will exist at a future date, and, if so, in what amount, will be
determined by the appreciation or depreciation of Pension Plan assets,
prevailing market annuity purchase rates, interest rates used to determine
various benefits under the Pension Plan, mortality and other demographic
experience, Pension Plan provisions and the interpretation of those
provisions, and other factors. Accordingly, no assurances can be given
regarding the existence or amount of the Reversion.
If Reorganized SWINC receives the Reversion, in addition to
any income tax consequences that may result, the amount of the reversion will
be subject to taxation under IRC section 4980. Unless one of the exceptions
set forth in IRC ss. 4980 applies, IRC ss. 4980 imposes a tax of 50 percent of
the amount of any employer reversion from a tax-qualified plan. If one of the
exceptions applies, then the IRC ss. 4980 tax rate is 20 percent.
One of the exceptions that results in a 20 percent IRC ss.
4980 tax rate applies in the case of "an employer who, as of the termination
date of the qualified plan, is in bankruptcy liquidation under chapter 7 of
title 11 of the United States Code or in similar proceedings under State law."
A dissolution proceeding in the Chancery Court of Delaware under DGCL ss.ss.
275-282 should constitute such a "similar" proceeding under State law and,
therefore, termination of the Pension Plan with a DOPT that falls during the
Delaware dissolution proceeding should result in a 20 percent tax rate under
IRC ss. 4980. There can be no assurance that the IRS will agree with this
position, however. The IRS could conclude that a dissolution proceeding in the
Chancery Court of Delaware under DGCL ss.ss. 275-282 is not sufficiently
"similar" to a bankruptcy liquidation under chapter 7 of title 11 of the United
States Code to warrant a 20 percent tax rate under IRC ss. 4980. Or, the IRS
could disregard the form of the Delaware dissolution proceeding because it
follows a Chapter 11 reorganization, which, unlike a Chapter 7 liquidation or
similar state law dissolution proceeding, does not qualify for the exception
noted above to the 50 percent IRC ss. 4980 tax.
The Debtors may seek a private letter ruling from the IRS
regarding the IRC ss. 4980 tax rate that would apply to Reorganized SWINC's
receipt of the Reversion. No assurances are given, however, that the IRS will
rule favorably or in advance of the date that holders of a claim or interest
must vote on the proposed Third Joint Plan. In particular, the IRS could rule
unfavorably, could decline to rule, could insist that any such ruling request
be submitted only by Reorganized SWINC as the affected taxpayer (and therefore
after the Effective Date), or could otherwise not rule until after the
Effective Date.
D. Importance of Obtaining Professional Tax Assistance
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF
CERTAIN INCOME TAX CONSEQUENCES OF THE THIRD JOINT PLAN AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE ABOVE
DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX
CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY VARY DEPENDING ON A HOLDER'S
PARTICULAR CIRCUMSTANCES. ACCORDINGLY, HOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS ABOUT THE UNITED STATES FEDERAL, STATE, AND LOCAL, AND APPLICABLE
FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE THIRD JOINT PLAN.
E. Importance of Obtaining Professional Tax Assistance
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF
CERTAIN INCOME TAX CONSEQUENCES OF THE THIRD JOINT PLAN AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE ABOVE
DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX
CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY VARY DEPENDING ON A HOLDER'S
PARTICULAR CIRCUMSTANCES. ACCORDINGLY, HOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS ABOUT THE UNITED STATES FEDERAL, STATE, AND LOCAL, AND APPLICABLE
FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE THIRD JOINT PLAN.
VIII. CONFIRMATION OF THE THIRD JOINT PLAN
The Court may confirm the Third Joint Plan only if it
determines that the Third Joint Plan complies with the technical requirements
of Chapter 11, including, among other things, that (a) the Third Joint Plan has
properly classified Claims and Interests, (b) the Third Joint Plan complies
with applicable provisions of the Bankruptcy Code, (c) the Plan Proponents have
complied with applicable provisions of the Bankruptcy Code, (d) the Plan
Proponents have proposed the Third Joint Plan in good faith and not by any
means forbidden by law, (e) disclosure of "adequate information" as required by
Bankruptcy Code section 1125 has been made, (f) the Third Joint Plan has been
accepted by the requisite votes of all classes of creditors (except to the
extent that "cramdown" is available under Bankruptcy Code section 1129(b)), (g)
the Third Joint Plan is in the "best interests" of all holders of Claims or
Interests in an Impaired Class, (h) all fees and expenses payable under 28
U.S.C. ss. 1930, as determined by the Court at the Confirmation Hearing, have
been paid or the Third Joint Plan provides for the payment of such fees on the
Effective Date, and (i) the Third Joint Plan provides for the continuation
after the Effective Date of all retiree benefits, as defined in Bankruptcy Code
section 1114, at the level established at any time prior to Confirmation
pursuant to Bankruptcy Code sections 1114(e)(1)(B) or 1114(g), for the duration
of the period that the Debtors have obligated themselves to provide such
benefits.
A. Acceptance of the Third Joint Plan
As a condition to confirmation, the Bankruptcy Code requires
that each Class of Impaired Claims and Interest vote to accept the Third Joint
Plan, under certain circumstances.
Bankruptcy Code section 1126(c) defines acceptance of a plan
by a class of impaired claims as acceptance by holders of at least two-thirds
in dollar amount and more than one- half in number of claims in that class,
but forth that purpose only counts those who actually vote to accept or reject
the Third Joint Plan. Thus, a Class of Claims will have voted to accept the
Third Joint Plan only if two-thirds in amount and a majority in number
actually voting cast their Ballots in favor of acceptance. Under Bankruptcy
Code section 1126(d), a Class of Interest has accepted the Third Joint Plan if
holders of such Interests holding at least two-thirds in amount actually
voting have voted to accept the Third Joint Plan.
B. Feasibility
Bankruptcy Code section 1129(a)(11) requires that
confirmation of the Third Joint Plan not be likely to be followed by the
liquidation, or the need for further financial reorganization, of the Debtors
or any successors to the Debtors under the Third Joint Plan, unless such
liquidation or reorganization is proposed in the Third Joint Plan. Since SWINC
and the SWINC Subsidiaries intend to liquidate their remaining assets pursuant
to the Third Joint Plan, the ability of SWINC to make the distributions
described in the Third Joint Plan does not depend on its future earnings.
Since SWE&C and the SWE&C Subsidiaries intend to liquidate their remaining
assets pursuant to the Third Joint Plan, the ability of SWE&C to make the
distributions described in the Third Joint Plan does not depend on its future
earnings. Accordingly, the Plan Proponents believe that the Third Joint Plan
is feasible and meets the requirements of Bankruptcy Code section 1129(a)(11).
C. Best Interests Test
Even if a plan is accepted by the holders of each class of
claims and interests, the Bankruptcy Code requires that a bankruptcy court
find that the plan is in the "best interests" of all holders of claims or
interests that are impaired by the plan and that have not accepted the plan.
The "best interests" test, as set forth in Bankruptcy Code section 1129(a)(7),
requires a bankruptcy court to find either that (i) all members of an impaired
class of claims or interest have accepted the plan or (ii) the plan will
provide a member who has not accepted the plan with a recovery of property of
a value, as of the effective date of the plan, that is not less than the
amount that such holder would receive or retain if the debtor were liquidated
under chapter 7 of the Bankruptcy Code on such date.
To calculate the probable distribution to holders of each
impaired class of claims and interests if a debtor were liquidated under
chapter 7, a court must first determine the aggregate dollar amount that would
be generated from a debtor's assets if its chapter 11 case was converted to a
chapter 7 case under the Bankruptcy Code. This "liquidation value" would
consist primarily of the proceeds from a forced sale of the debtor's assets by
a chapter 7 trustee.
The amount of liquidation value available to unsecured
creditors would be reduced by, first, the claims of secured creditors to the
extent of the value of their collateral, and, second, by the costs and
expenses of liquidation, as well as by other administrative expenses and costs
of both the chapter 7 case and the chapter 11 case. Costs of liquidation under
chapter 7 of the Bankruptcy Code would include the compensation of a trustee,
as well as counsel and other professionals retained by the trustee, asset
disposition expenses, all unpaid expenses incurred by the debtor in its
chapter 11 case (such as compensation of attorneys, financial advisors and
accountants) that are allowed in the chapter 7 case, litigation costs, and
claims arising from the operations of the debtor during the pendency of the
chapter 11 case. The liquidation itself would trigger certain priority
payments that otherwise would be due in the ordinary course of business. Those
priority claims would be paid in full from the liquidation proceeds before the
balance would be made available to pay general claims or to make any
distribution in respect of their equity interests. The liquidation would also
prompt the rejection of a large number of executory contracts and unexpired
leases and thereby significantly enlarge the total pool of unsecured claims by
reason of resulting rejection claims.
Once the court ascertains the recoveries in liquidation of
the secured creditors and priority claimants, it must determine the probable
distribution to general unsecured creditors and equity security holders from
the remaining available proceeds in liquidation. If such probable distribution
has a value greater than the distribution to be received by such creditors and
equity security holders under a debtor's plan, then such plan is not in the
best interest of creditors and equity security holders.
D. Liquidation Analysis
In order to determine the amount of liquidation value
available to creditors, the Debtors, with the assistance of their financial
advisor, FTI Consulting Services, prepared a liquidation analysis, annexed
hereto as Appendix C (the "Liquidation Analysis"). The Liquidation Analysis
does not reflect the compromises and settlements that are provided for in the
Third Joint Plan.
E. Application of the "Best Interests" Test to the Liquidation Analysis
and the Valuation
It is impossible to determine with any specificity the value
each creditor or interestholder will receive as a percentage of its Allowed
Claim or Allowed Interest. This difficulty in estimating the value of
recoveries is due to, among other things, the inherent uncertainty with
respect to recoveries on Litigation Claims, the net amount of the reversionary
interest in the Pension Plan and the claims reconciliation process.
Notwithstanding the difficulty in quantifying recoveries to
holders of Allowed Claims and Allowed Interests with precision, the Plan
Proponents believe that the financial disclosures and projections contained
herein imply a greater or equal recovery to holders of Claims and Interests in
Impaired Classes than the recovery available in a chapter 7 liquidation.
Accordingly, the Plan Proponents believe that the "best interests" test of
Bankruptcy Code section 1129 is satisfied.
F. Confirmation Without Acceptance Of All Impaired Classes: The "Cramdown"
Alternative
Bankruptcy Code section 1129(b)provides that a plan can be
confirmed even if it is not accepted by all impaired classes of Claims and
Interests, as long as at least one impaired Class of Claims has accepted it.
The Court may confirm the Third Joint Plan notwithstanding the rejection of an
Impaired Class of Claims or Interests if the Third Joint Plan "does not
discriminate unfairly" and is "fair and equitable" as to each Impaired Class
that has rejected, or is deemed to have rejected the Third Joint Plan.
A plan does not discriminate unfairly within the meaning of
the Bankruptcy Code if a rejecting impaired class is treated equally with
respect to other classes of equal rank. A plan is fair and equitable as to a
class of unsecured claims that rejects a plan, if, among other things, the
plan provides (a) that each holder of a claim in the rejecting class will
receive or retain on account of that claim property that has a value, as of
the effective date of the plan, equal to the allowed amount of such claim; or
(b) that no holder of a claim or interest that is junior to the claims of such
rejecting class will receive or retain under the Third Joint Plan any property
on account of such junior claim or interest.
A plan is fair and equitable as to a class of equity
interests that rejects a plan if the plan provides (a) that each holder of an
interest included in the rejecting class receive or retain on account of that
interest property that has a value, as of the effective date of the plan,
equal to the greatest of the allowed amount of any fixed liquidation
preference to which such holder is entitled, any fixed redemption price to
which such holder is entitled, or the value of such interest; or (b) that no
holder of an interest that is junior to the interest of such rejecting class
will receive or retain under the Third Joint Plan any property on account of
such junior interest.
Because holders of Class 6A: SWINC Intraestate Claims, Class
10A: SWINC Subsidiary Interest, Class 6B: SWE&C Intraestate Claims, Class 7B:
Intercompany Claims of SWINC or any SWINC Subsidiaries, Class 8B: SWE&C
Subsidiary Claims, Class 9B: SWE&C Subsidiary Interests, and Class 10B: SWE&C
Equity Interests are receiving no distribution on account of such Claims and
Interest under the Third Joint Plan, their votes are not being solicited and
they are deemed to have rejected the Third Joint Plan pursuant to Bankruptcy
Code section 1126(g). Accordingly, the Plan Proponents are seeking
confirmation of the Third Joint Plan pursuant to Bankruptcy Code section
1129(b) with respect to such Classes and may seek confirmation pursuant
thereto as to other Classes if such Classes vote to reject the Third Joint
Plan.
IX. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION
OF THE THIRD JOINT PLAN
The Plan Proponents believe that the Third Joint Plan
affords holders of Claims and Interests the potential for the greatest
realization of the Debtors' assets and, therefore, is in the best interest of
such holders.
If the Third Joint Plan is not confirmed, the theoretical
alternatives include: (a) continuation of the pending Chapter 11 Cases, (b)
formulation of an alternative plan or plans of reorganization, or (c)
liquidation under chapter 7 of the Bankruptcy Code.
A. Continuation of the Bankruptcy Cases
If the Debtors remain in chapter 11, they could continue to
operate their business and manage their properties as debtors-in-possession,
but they would remain subject to the restrictions imposed by the Bankruptcy
Code. The Debtors are not a going concern.
B. Alternative Plan(s)
If the Third Joint Plan is not confirmed, the Debtors could
attempt to formulate and propose a different plan or plans of reorganization.
Such a plan or plan(s) might involve a reorganization and continuation of the
Debtors' business.
The Plan Proponents believe that the Third Joint Plan, as
described herein enables holders of Claims and Interests to realize the
greatest possible value under the circumstances, and that as compared to any
alternative plan of reorganization, the Third Joint Plan as the greatest
chance to be confirmed and consummated.
C. Liquidation under Chapter 7
If no plan is confirmed, the Chapter 11 Cases may be
converted to cases under chapter 7 of the Bankruptcy Code, pursuant to which a
trustee would be elected or appointed to liquidate the Debtors' assets for
distribution to creditors in accordance with the priorities established by the
Bankruptcy Code. It is impossible to predict precisely how the proceeds of the
liquidation would be distributed to the respective holders of Claims against
and Interests in the Debtors.
The Plan Proponents believe that a liquidation in chapter 7
would result in (i) significant delay in distributions to all creditors who
would have received a distribution under the Third Joint Plan and (ii)
diminished recoveries for certain classes of creditors.
X. RECOMMENDATION AND CONCLUSION
THE DEBTORS, THE CREDITORS' COMMITTEE, THE EQUITY COMMITTEE, FEDERAL,
AND MAINE YANKEE BELIEVE THAT CONFIRMATION OF THE THIRD JOINT PLAN IS IN THE
BEST INTERESTS OF THE DEBTORS, THEIR ESTATES, AND THEIR
CREDITORS. The Third Joint Plan provides for an equitable and early
distribution to creditors. The Debtors, the Creditors' Committee, the Equity
Committee, Federal, and Maine Yankee believe that any alternative confirmation
of the Third Joint Plan, such as liquidation under Chapter 7, could result in
significant delays, litigations, and costs, as well as a reduction in the
distributions to holders of certain Classes of Claims and Interests. FOR THESE
REASONS, THE DEBTORS, THE CREDITORS' COMMITTEE, FEDERAL, MAINE YANKEE, AND THE
EQUITY COMMITTEE URGE YOU TO RETURN YOUR BALLOT AND VOTE TO ACCEPT THE THIRD
JOINT PLAN.
Dated: Wilmington, Delaware
August 27, 2003
STONE & WEBSTER, INCORPORATED, et al.
Debtors and Debtors-in-Possession
By: /s/ James P. Carroll
Name: James P. Carroll
Title: President & Chief Restructuring Officer
FEDERAL INSURANCE COMPANY
By: /s/ Wayne Walton
Name: Wayne Walton
Title:
MAINE YANKEE ATOMIC POWER COMPANY
By: /s/ Joseph D. Fay
Name: Joseph D. Fay
Title: General Counsel, Clerk, and Assistant Secretary
OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF
STONE & WEBSTER, INC., et al., Debtors and Debtors-in-
Possession
By: /s/ Bayard Graf
Name: Bayard Graf
Company: MDC Systems
Title: Chairperson, Official Committee of Unsecured Creditors
OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS OF
STONE & WEBSTER, INCORPORATED
By: Grace Brothers Limited
By: /s/ Brian D. Brookover
Name: Brian D. Brookover
Title: Portfolio Manager
/s/ Gregg M. Galardi
Gregg M. Galardi (I.D. No. 2991)
Eric M. Davis (I.D. No. 3621)
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
(302) 651-3000
Attorneys for Debtors and
Debtors-in-Possession
Anthony Princi, Esq.
Lorraine S. McGowen, Esq.
ORRICK, HERRINGTON & SUTCLIFFE LLP
666 Fifth Avenue
New York, New York 10103
- and -
/s/ Adam G. Landis
Adam G. Landis (I.D. No. 3407)
LANDIS RATH & COBB LLP
919 Market Street, Suite 600
P.O. Box 2087
Wilmington, Delaware 19801
Attorneys for the Official Committee
of Unsecured Creditors
J. Michael Franks, Esq.
Sam H. Poteet, Jr., Esq.
Thomas T. Pennington, Esq.
MANIER & HEROD
150 4th Avenue North, Suite 2200
Nashville, Tennessee 37219
(615) 244-0030
-and-
/s/ Michael R. Lastowski
Michael R. Lastowski (I.D. No. 3892)
DUANE MORRIS LLP
1100 North Market Street, Suite 1200
Wilmington, Delaware 19801-1246
(302) 657-4900
Attorneys for Federal Insurance
Company
William J. Kayatta, Jr., Esq.
PIERCE ATWOOD
One Monument Square
Portland, Maine 04101
-and-
George J. Marcus, Esq.
MARCUS, CLEGG & MISTRETTA, P.A.
100 Middle Street, East Tower
Portland, Maine 04101-4102
-and-
/s/ George J. Marcus
Michael B. Joseph (I.D. No. 392)
Theodore J. Tacconelli (I.D. No. 2678)
FERRY, JOSEPH & PEARCE, P.A.
824 Market Street, Suite 904
P.O. Box 1351
Wilmington, Delaware 19899-1351
(302) 575-1555
Attorneys for Maine Yankee Atomic
Power Company
David F. Heroy, Esq.
Carmen H. Lonstein, Esq.
BELL, BOYD & LLOYD LLC
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
- and -
/s/ Ian Connor Bifferato
BIFFERATO, BIFFERATO &
GENTILOTTI
Ian Connor Bifferato (I.D. No. 3273)
1308 Delaware Avenue
Wilmington, Delaware 19806
(302) 429-1900
Attorneys for Official Committee of Equity
Security Holders of Stone & Webster,
Incorporated
APPENDIX A
LIST OF DEBTOR ENTITIES COMPRISING THE CONSOLIDATED SWINC
ESTATE AND THE CONSOLIDATED SWE&C ESTATE
APPENDIX B
THIRD AMENDED JOINT PLAN OF REORGANIZATION OF THE DEBTORS IN
POSSESSION, OFFICIAL COMMITTEE OF UNSECURED CREDITORS, FEDERAL
INSURANCE COMPANY, MAINE YANKEE ATOMIC POWER COMPANY, AND THE
OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS WITH RESPECT TO
(I) STONE & WEBSTER, INCORPORATED AND CERTAIN OF ITS
SUBSIDIARIES AND AFFILIATES AND(II) STONE & WEBSTER ENGINEERS
AND CONSTRUCTORS, INC.
AND CERTAIN OF ITS SUBSIDIARIES AND AFFILIATES
APPENDIX C
LIQUIDATION ANALYSIS
APPENDIX C-1
LIQUIDATION ANALYSES FOR CONSOLIDATED SWINC ESTATE
AND CONSOLIDATED SWE&C ESTATE
APPENDIX C-2
LIQUIDATION ANALYSES FOR EACH DEBTOR ENTITY
APPENDIX D
SUBSTANTIVE CONSOLIDATION SETTLEMENT
CASH FUNDING ANALYSIS`
APPENDIX E
INCURRED PROFESSIONAL FEE SUMMARY BY ESTATE