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SUPERIOR TELECOM INC
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8-K
Sep 12, 4:51 PM ET
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SUPERIOR TELECOM INC 8-K
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Contents
231
I. INTRODUCTION AND SUMMARY
A. Overview
B. Summary of the Overall Structure of the Plan
C. Summary of Classification and Treatment of Claims and Equity Interests Under the Plan
D. Voting and Confirmation Procedures
(1) Accompanying this Disclosure Statement are copies of the following:
(a) the Plan, which is annexed to this Disclosure Statement as Exhibit A;
(b) Financial Projections, which are annexed to this Disclosure Statement as Exhibit B;
(c) a Liquidation Analysis, which is annexed to this Disclosure Statement as Exhibit C;
(d) an Organizational Chart of the Debtors and their non-debtor affiliates as of the Petition Date, which is annexed to this Disclosure Statement as Exhibit D;
(e) an Organizational Chart of the Reorganized Debtors and their affiliates as of the Effective Date, which is annexed to this Disclosure Statement as Exhibit E;
(f) a list of documents to be included in the Plan Supplement, which is annexed to the Disclosure Statement as Exhibit F;
(g) a discussion on valuation, which is annexed to this Disclosure Statement as Exhibit G;
(h) the forms of Ballots and the related materials, which are included with this Disclosure Statement, that are to be used for the purpose of soliciting votes on the Plan by Holders of (a) Class S-3 Existing Lender Claims, (b) Class U-2A Personal Injury Claims, (c) Class U-2B General Unsecured Claims and (d) Class U-3 Senior Subordinated Note Claims,(6) which are the Classes of Claims and Equity Interests that are Impaired and entitled to vote on the Plan (this Disclosure Statement is also being provided to Holders of Secured Tax Claims
in Class S-1, Holders of Other Secured Claims in Class S-2 and Holders of Priority Wage Claims in Class P-1, which Holders are not Impaired and therefore are deemed to have accepted the Plan, and to Holders of Trust Debenture Claims in Class U-4, Holders of Alpine Claims in Class U-5 and Holders of Equity Interests in Superior in Class E-1, which Holders are not receiving Distributions under the Plan and therefore are deemed to have rejected the Plan, and certain other entities, solely for informational purposes);
(i) the Disclosure Statement Approval Order, a copy of which is included with this Disclosure Statement, approving this Disclosure Statement and granting the Debtors’ motion for an order establishing voting procedures and scheduling the Confirmation Hearing for the Debtors’ Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code; and
(j) the Notice of the Confirmation Hearing for approval of the Debtors’ Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code.
II. DESCRIPTION OF THE DEBTORS AND EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES
A. The Debtors
B. Organizational History, Acquisitions and Pre-Petition Equity Structure
C. Pre-Petition Sale of the Debtors’ Electrical Business
D. Pre-Petition Debt Structure
(1) Existing Credit Facility
(2) The Pre-Petition Accounts Receivable Securitization Facility
(3) Subordinated Notes and Other Pre-Petition Debt
E. Asbestos Claims
F. Pre-Petition Defined Benefit Pension Plans
(1) The Hourly Plan
(2) The Salaried Plan
G. Supplemental Executive Retirement Plan
H. Deferred Compensation Plan
I. Environmental Matters
J. Events Precipitating the Chapter 11 Cases
III. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASES
A. Chapter 11 in General and Commencement of the Chapter 11 Cases
B. First Day Orders
C. Essential Trade Creditors
D. Professional Retentions
E. Appointment of Official Committee of Unsecured Creditors and Its Professionals
F. DIP Financing
(1) Financing and Cash Collateral Issues
G. The Key Employee Retention Motion
H. The Committee’s Objections to the Final DIP Order, the Amended Shipping Order and the Severance Plan; the Committee’s Motion to Reconsider the Essential Trade Order
(1) The Committee’s Objection to Entry of the Final DIP Order
(3) The Committee’s Objection to the Severance Plan
I. Extensions of Time to Assume or Reject Leases
J. Claims Process and Bar Date
IV. OVERVIEW OF THE PLAN
A. General
B. Classification of Claims and Equity Interests
C. Treatment of Claims and Equity Interests Under the Plan
(1) Unclassified Categories of Claims.
(2) Unimpaired Classes of Claims.
(3) Impaired Classes of Claims.
D. Description of Means of Execution and Transactions to Be Implemented in Connection with the Plan
(1) Exit Facility and Sources of Cash for Plan Distribution
(a) In order to fund the Reorganized Debtors’ working capital requirements and the payment of amounts required under the Plan to be paid in Cash including the repayment of all outstanding obligations under DIP Facility, the Reorganized Debtors will obtain the Exit Facility, substantially on the terms and conditions set forth in the term sheet annexed to the Plan as Exhibit A. The Exit Facility is comprised of a senior secured revolving credit facility of $120 million with a $25 million sublimit for letters of credit and a $20 million sublimit for swingline loans. Reorganized STI-LLC will constitute the borrower under the Exit Facility (the “Borrower”).(14) The obligations under the Exit Facility will be (i) guaranteed by the remaining Debtors, the New Parent and the New Subsidiary (collectively, the “Exit Facility Guarantors”) and (ii) secured by (A) a first priority, perfected security interest in and a lien upon substantially all tangible and intangible assets of the Borrower and the Exit Facility Guarantors, whether now owned or hereafter acquired, (B) a pledge of the stock of the domestic subsidiaries and (C) a pledge of 65% of the stock of any foreign subsidiaries so as not to cause any material adverse tax implications to the Borrower or the Exit Facility Guarantors. The final maturity date of the Exit Facility is four years from the closing date of the Exit Facility.
(b) All Cash necessary for the Reorganized Debtors to make payments pursuant to the Plan will be obtained from existing Cash, the operations of the Debtors or Reorganized Debtors, or post-Effective Date borrowings and/or financing, including the Exit Facility. The Reorganized Debtors may also make such payments using Cash received from their direct or indirect subsidiaries through the Reorganized Debtors’ consolidated cash management system and from advances or dividends from such subsidiaries in the ordinary course.
(2) Effective Date Transactions; Post-Effective Date Transactions
(a) The Plan provides that on the Effective Date, the following transactions (collectively, the “Effective Date Transactions”) will occur in the following order:
(i) New Parent will be organized.
(ii) New Subsidiary will be organized as a new wholly-owned subsidiary of New Parent and New Parent will contribute the New Common Stock and the New Warrants to New Subsidiary in exchange for the common stock of New Subsidiary.
(iii) STI will be converted into a limited liability company (“STI-LLC”).
(iv) Superior will sell all of the membership interests in STI-LLC to New Subsidiary in exchange for the New Common Stock, the New Warrants, the New Subsidiary Preferred Stock and the New Senior Notes (which will be issued by STI-LLC), in each case, at the fair market value thereof.
(v) Superior will distribute the New Common Stock, the New Subsidiary Preferred Stock and the New Senior Notes to the Holders of Existing Lender Claims and the New Warrants to the Holders of Senior Subordinated Note Claims.
(vi) Superior and New Subsidiary will elect, pursuant to Section 338(h)(10) of the Internal Revenue Code, to treat certain subsidiaries of STI as having sold their assets to a new subsidiary of New Subsidiary.
(vii) Superior will be dissolved.
(b) The Plan further provides that on or after the Effective Date, the applicable Reorganized Debtors may enter into such transactions and may take such actions as may be necessary or appropriate to effect a corporate restructuring of their respective businesses, to otherwise simplify the overall corporate structure of the Reorganized Debtors or to reincorporate certain of the Debtors under the laws of jurisdictions other than the laws of which the applicable Debtors are presently incorporated. Such restructurings may include one or more mergers, consolidations, restructures, dispositions, liquidations or dissolutions, as may be determined by the Debtors or the Reorganized Debtors to be necessary or appropriate. The actions to effectuate these transactions may include (i) the execution and delivery of appropriate agreements or other documents of merger, consolidation, restructuring,
disposition, liquidation or dissolution containing terms that are consistent with the terms of the Plan and that satisfy the application requirements of applicable state law and such other terms to which the applicable entities may agree, (ii) the execution and delivery of appropriate instruments of transfer, assignment, assumption or delegation of any asset, property, right, liability, duty or obligation on terms consistent with the terms of the Plan and having such other terms to which the applicable entities may agree, (iii) the filing of appropriate certificates or articles of merger, consolidation or dissolution pursuant to applicable state law and (iv) all other actions that the applicable entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable state law in connection with such transactions.
(3) Dissolution of Certain Debtors, Continued Corporate Existence and Vesting of Assets in Surviving Reorganized Debtors
(a) The Plan provides that on the Effective Date, each of Superior and any other entities determined by the Debtors or Reorganized Debtors will be deemed dissolved and will have no continuing corporate existence, subject only to each such Debtor’s imposed obligations under the Plan to satisfy Allowed Claims. With respect to each such Debtor, upon either (i) the final payment and satisfaction of the last of such Plan imposed obligations or (ii) the assumption of the last of such Plan imposed obligations by another Debtor or a Reorganized Debtor, such Debtor (A) will be deemed to have been discharged as of the Effective Date and immediately thereafter deemed to have dissolved for all purposes and withdrawn its business operations from any state or country in which it was previously conducting, or is registered or licensed to conduct, its business operations, and will not be required to file any document, pay any sum or take any other action in order to effectuate such dissolution and withdrawal, (B) will be deemed to have had all of its Equity Interests cancelled pursuant to the Plan and (C) will not be liable in any manner to any taxing authority for franchise, business, capital, license or similar taxes that otherwise would have accrued on or after the Effective Date, all without the necessity for any other or further actions to be taken on behalf of such Debtor; provided, however, that the Reorganized Debtors may, if they so elect, and any officer of a Reorganized Debtor will be an authorized signatory for such purpose, prepare and file all corporate resolutions, statements, notices, tax returns or certificates of dissolution in such Debtor’s jurisdiction of incorporation or organization or other jurisdiction. The Reorganized Debtors and their directors and officers will not have or incur any liability for any actions taken or not taken under Section 5.3 of the Plan.
(b) Each surviving Debtor will, as a Reorganized Debtor, continue to exist after the Effective Date as a separate corporate entity, with all the powers of a corporation or limited liability company, as applicable, under the laws of the state in which such Debtor is currently organized, as applicable, and without prejudice to any right to alter or terminate such existence (whether by merger or otherwise) under such applicable state law. Except as otherwise provided in the Plan, the Exit Facility or any agreement, instrument or indenture relating thereto, on or after the Effective Date, all property of each Estate and any property acquired by each of the Debtors under the Plan, shall vest in each respective Reorganized Debtor, free and clear of all Liens, Claims, charges or other encumbrances. On and after the Effective Date, each Reorganized Debtor may operate its respective businesses and may use,
acquire or dispose of property and compromise or settle any Claims or Equity Interests, without supervision or approval by the Bankruptcy Court and free and clear of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan or the Confirmation Order. All Intercompany Claims shall be disposed of under Class U-1 of the Plan.
(c) Except as otherwise provided in the Plan or in any contract, instrument, release, indenture or other agreement entered into in connection with the Plan, in accordance with Section 1123(b)(3) of the Bankruptcy Code, any claims, rights and Retained Causes of Action that the respective Debtors may hold against any Entity, will vest in each respective Reorganized Debtor, and each respective Reorganized Debtor will retain and may exclusively enforce any and all such claims, rights or Retained Causes of Action, as appropriate, in accordance with the best interests of the Reorganized Debtor and the Holders of Allowed Claims entitled to Distributions under the Plan. Each respective Reorganized Debtor will have the exclusive right, authority and discretion to institute, prosecute, abandon, settle or compromise any and all such claims, rights and Retained Causes of Action without the consent or approval of any third party and subject only to orders of the Bankruptcy Court.
(5) Cancellation of All Debt and Equity Instruments
(6) New Senior Notes, New Common Stock and New Subsidiary Preferred Stock
(a) On the Effective Date, Reorganized STI-LLC will issue $145 million of New Senior Notes pursuant to the New Senior Note Indenture to the Holders of Existing Lender Claims, the terms of which are set forth in the term sheet annexed to the Plan as Exhibit B. The New Senior Notes will bear interest at a rate of 9.5% payable semi-annually in Cash provided, however, that with respect to the first two interest payments, if the Reorganized Debtors do not meet certain EBITDA thresholds (as set forth in the New Senior Note Indenture), the Reorganized Debtors, at their option, may make those interests payments as follows (i) Cash interest at a rate of 4.75% and (ii) PIK interest notes (of the same tenor as the New Senior Notes, including the same maturity date), at the rate of 4.75%, provided that in the event that the Company elects to issue such PIK interest notes it shall pay a cash fee in an amount of 0.50% on the date of issuance. All interest payments on the New Senior Notes following the first two payments will be paid in Cash. The New Senior Notes will mature five years from the date of issuance. The obligations under the New Senior Notes will be guaranteed by the New Parent, the New Subsidiary and all of Reorganized STI-LLC’s direct and indirect domestic subsidiaries (collectively, the “New Note Guarantors”) and secured by second priority liens on all of the assets of Reorganized STI-LLC and the New Note Guarantors. The New Senior Notes will also contain covenants that are consistent with similar current high-yield secured debt issuances, including certain limitations on the Reorganized Debtors’ ability to (i) pay dividends, redeem capital stock or make certain other restricted payments, (ii) sell assets without offering to retire indebtedness with the net proceeds of such sale and (iii) engage in transactions with affiliates.
(b) On the Effective Date, the New Parent will issue 16.5 million shares of New Common Stock. For purposes of the Plan, based upon the Debtors’ reorganization value and the pro forma capitalization of the New Parent, each share of New Common Stock will be deemed to have a value of $10.00 as of the Effective Date. On the Effective Date, 100% of the New Common Stock will be issued to the Holders of the Existing Lender Claims subject to dilution from shares issued (i) upon the exercise of the options issued under the Stock Incentive Plan, and (ii) pursuant to the New Warrants to be issued to the Holders of Senior Subordinated Note Claims, provided that such Class votes in favor of the Plan, and (iii) as otherwise provided in the New Parent’s certificate of incorporation and/or by-laws.
(c) On the Effective Date, the New Subsidiary will issue 5,000,000 shares of New Subsidiary Preferred Stock, the terms of which are set forth on the term sheet annexed to the Plan as Exhibit E. The New Subsidiary Preferred Stock will consist of Series A non-convertible preferred stock, with a par value of $1.00 per share. The New Subsidiary Preferred Stock will be entitled to receive cumulative Cash dividends at a rate of 9.5% per annum per share, payable semi-annually; provided, however, if on any dividend payment date during the first year of issuance, STI-LLC issues PIK notes in lieu of Cash interest on the New
Senior Notes in accordance with the terms thereof, then New Subsidiary shall issue PIK dividends, in lieu of Cash dividends on the New Subsidiary Preferred Stock. The New Subsidiary Preferred Stock will rank junior to all other classes of preferred stock of the New Subsidiary. The New Subsidiary Preferred Stock will contain certain mandatory and optional redemption provisions, but will not be entitled to any voting rights unless otherwise required by applicable law.
(7) New Warrants
(8) Effectiveness of Related Documents
(9) Release of Liens and Perfection of Liens
(10) Corporate Governance, Directors and Officers and Corporate Action
(a) Certificates of Incorporation and By-Laws. The Plan provides that on or as soon as reasonably practicable after the Effective Date, the certificate of incorporation, by-laws and other governing documents of each Debtor will be amended and/or restated as necessary to satisfy the provisions of the Plan and the Bankruptcy Code and will include, among other things, pursuant to Section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-voting equity securities, but only to the extent required by section 1123(a)(6) of the Bankruptcy Code. The New Parent’s certificate of incorporation will, among other things, authorize the issuance of the New Common Stock in accordance with the Plan and the New Subsidiary’s certificate of incorporation will, among other things, authorize the issuance of the New Subsidiary Preferred Stock in accordance with the Plan. From and after the Effective Date, subject to the right of the stockholders to amend the certificates of incorporation of the New Parent and the New Subsidiary after the Effective Date, the New Common Stock, the New Subsidiary Preferred Stock and any common stock interests of the New Subsidiary (which will be held by the New Parent) will be the only outstanding classes and series of stock of the New Parent and the New Subsidiary and the certificates of incorporation, by-laws and other governing documents of the New Parent and the New Subsidiary will include, among other things, pursuant to Section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-voting equity securities, but only to the extent required by Section 1123(a)(6) of the Bankruptcy Code. A term sheet setting forth certain provisions of the New Parent’s certificate of incorporation and by-laws is annexed to the Plan as Exhibit H.
(b) Directors and Officers of the Reorganized Debtors. Subject to any requirement of Bankruptcy Court approval, pursuant to Section 1129(a)(5) of the Bankruptcy Code, the Debtors will disclose, on or prior to the 10th calendar day before the Confirmation Hearing, the identity and affiliations of any Person proposed to serve as an initial manager or officer or on the initial boards of directors, as applicable, of the Reorganized Debtors, the New Parent and the New Subsidiary. To the extent any such Person is an Insider (as defined in Section 101(31) of the Bankruptcy Code), the nature of any compensation for such Person will also be disclosed. The classification and composition of the boards of directors will be consistent with each Reorganized Debtor’s certificate of incorporation, as applicable. Each such director, officer or manager will serve from and after the Effective Date pursuant to the terms of the certificates of incorporation or other constituent documents of the Reorganized Debtors, the New Parent and the New Subsidiary and applicable state corporation law. The New Parent’s New Board will be comprised of seven directors, including (if appointed by the Effective Date) the Chief Executive Officer (the “CEO”) of the New Parent. Until the time at
which the CEO is selected, the Chief Restructuring Officer of the Debtors will serve in place of the CEO.
(c) Corporate Action. On the Effective Date, all actions contemplated by the Plan will be authorized and approved in all respects (subject to the provisions of the Plan) by virtue of the entry of the Confirmation Order, in accordance with the Bankruptcy Code and applicable state law (including, but not limited to, Section 303 of the Delaware General Corporations Law, to the extent applicable, and any analogous provision of the business corporation law or code of each other state in which the Reorganized Debtors, the New Parent and the New Subsidiary are incorporated or organized) and without any requirement of further action by the stockholders, directors or members of the Debtors or the Reorganized Debtors. On the Effective Date, all matters provided for in the Plan involving the corporate structure of the Debtors or the Reorganized Debtors, and any corporate action required by the Debtors or the Reorganized Debtors in connection with the Plan, will be deemed to have occurred and will be in effect, without any requirement of further action by the security holders or directors of the Debtors or the Reorganized Debtors. On the Effective Date, the appropriate officers of the Reorganized Debtors, the New Parent and the New Subsidiary and members of the boards of directors of the Reorganized Debtors, the New Parent and the New Subsidiary are authorized and directed in the name of and on behalf of the Reorganized Debtors, the New Parent and the New Subsidiary to issue, execute, deliver, file or record the agreements, documents, contracts, securities, instruments, releases and other agreements, and take such other actions as may be necessary to effectuate and further evidence the terms and conditions of the Plan.
(11) Escrows
(12) Employee Matters
(a) As of the Effective Date, the Reorganized Debtors will implement the Stock Incentive Plan. The Stock Incentive Plan will provide for the issuance of stock options and/or restricted stock for up to 9% of the New Common Stock with the allocations of awards under the Stock Incentive Plan to be effected by the New Board following the Effective Date. Options issued during a reasonable period after the Effective Date will be priced at no greater than the Effective Date value (as determined by the New Board). Options issued thereafter will be priced at fair value on date of issuance (or as otherwise determined by the New Board).
(b) As of the Effective Date, as part of the Stock Incentive Plan, the Reorganized Debtors will implement equity awards to be granted to outside (i.e., non-management, non-affiliated) directors. The Stock Incentive Plan will also provide for the
grant of up to 1% of the New Common Stock for the purpose of attracting and compensating outside directors.
(c) On the Effective Date, all outstanding obligations of the Debtors under the Key Employee Retention Plan approved by the Bankruptcy Court will be assumed by the Reorganized Debtors.
(13) Substantive Consolidation for Limited Purposes
E. Treatment of Executory Contracts and Unexpired Leases
(1) Assumption of Executory Contracts and Unexpired Leases
(2) Claims Based on Rejection of Executory Contracts or Unexpired Leases
(3) Cure of Defaults for Assumed Executory Contracts and Unexpired Leases
(4) Indemnification of Directors, Officers and Employees
(5) Compensation and Benefit Programs
F. Provisions Governing Distributions
(1) Distribution for Claims Allowed as of the Effective Date
(a) Except as otherwise provided in Section VII of the Plan or as may be ordered by the Bankruptcy Court, Distributions to be made on the Effective Date on account of Allowed Claims that are due and owing as of the Effective Date, and entitled to receive Distributions under the Plan, will be made on the Effective Date or as soon as reasonably practicable thereafter. Pursuant to the Plan, to the extent otherwise permitted, all Distributions in respect of any Claim will be allocated first to the principal amount of such Claim, as determined for federal income tax purposes, and thereafter to the remaining portion of such Claim, if any.
(b) Any payment in Cash to be made by the Debtors will be made, at the election of the Debtors, by check drawn on a domestic bank or by wire transfer from a domestic bank.
(2) Delivery of Distributions and Unclaimed Distributions
(a) Delivery of Distributions in General. Distributions to Holders of Allowed Claims will be made at the address of the Holder of such Claim as indicated in the records of the Debtors. Distributions will be made in accordance with the provisions of the applicable indenture, participation agreement, loan agreement or analogous instrument or agreement, if any, and the provisions of the Plan. Distributions will be made only to the Holders of record as of the Distribution Record Date.
(b) No fractional shares or applicable units of New Common Stock, New Warrants, New Senior Notes or New Subsidiary Preferred Stock will be issued under the Plan and each Person otherwise entitled to receive an amount of said instruments that includes fractional amounts will receive an amount of said instruments as shall reflect a rounding down of such fraction to the nearest whole unit; provided further with respect to any fractional amount rounded down, the Reorganized Debtors will pay a Cash adjustment to the Person in respect of such fractional amount.
(c) With respect to any Claims that receive Cash, whenever payment of a fraction of a cent would otherwise be called for, the actual payment will reflect a rounding down of such fraction to the nearest whole cent. To the extent any Cash remains undistributed as a result of the rounding of such fraction to the nearest whole cent, such Cash will be treated as an Unclaimed Distribution under the Plan.
(d) Notwithstanding any other provision of the Plan, no Cash payment of less than ten dollars will be made on account of any Allowed Claim, including any Cash adjustments described in the Plan, nor will any of the Reorganized Debtors be obligated to make any such de minimus Cash payment, unless a specific request for payment is made in writing by the Holder of such Claim to the Reorganized Debtors.
(e) Unclaimed Distributions.
(i) Holding of Unclaimed Distributions. Under the Plan, if any Distribution to a Holder of an Allowed Claim is returned to the Reorganized Debtors as undeliverable, no further Distributions will be made to such Holder unless and until the Reorganized Debtors are notified in writing of such Holder’s then current address. Unclaimed Distributions will remain in the possession of the Reorganized Debtors pursuant to Section VII of the Plan. An Unclaimed Distribution that constitutes Cash will not be entitled to any interest, dividends or other accruals of any kind.
(ii) Failure to Claim Unclaimed Distributions. The Plan provides that, except with respect to Distributions made to Holders of Existing Lender Claims, any Holder of an Allowed Claim that does not assert an entitlement to an Unclaimed Distribution within one
(iii) Compliance with Tax Requirements. Any federal, state or local withholding taxes or amounts required to be withheld under applicable law will be deducted from Distributions under the Plan. All Entities holding Claims will be required to provide any information necessary to effect the withholding of such taxes.
(iv) Time Bar to Cash Payments. Checks issued by the Reorganized Debtors on account of Allowed Claims will be null and void if not negotiated within ninety days from and after the date of issuance thereof. Requests for reissuance of any check must be made directly to the Reorganized Debtors by the Holder of the Allowed Claim with respect to which the check was originally issued. Any Claim in respect of such a voided check must be made on or before the second anniversary of the Effective Date. After such date, all Claims and respective voided checks will be discharged and forever barred and the Reorganized Debtors will retain all monies related thereto.
(3) Distribution Record Date
(4) Timing and Calculation of Amounts to be Distributed
(5) Setoffs and Recoupments
(6) Fractional Shares
(7) Rounding and De Minimus Amounts
G. Procedures for Resolving Disputed Claims
(1) Characterization of Disputed Claims
(2) Prosecution of Objections to Claims and Equity Interests
(3) Estimation of Claims
(4) Payments and Distributions of Disputed Claims
(5) Disputed Claims Reserve
H. Conditions Precedent to Confirmation and Consummation of the Plan
(1) Conditions Precedent to Confirmation
(a) the Confirmation Order, in form and substance reasonably acceptable to the Debtors and the Administrative Agent (acting on instructions of the Existing Lender Plan Committee), will have been signed by the Bankruptcy Court and duly entered on the docket for the Chapter 11 Cases by the Clerk of the Bankruptcy Court;
(b) the Administrative Agent shall be reasonably satisfied that existing insurance arrangements regarding Personal Injury Claims will remain available following the Effective Date; and
(c) a commitment letter respecting the Exit Facility, in form and substance reasonably acceptable to the Debtors and the Administrative Agent (acting on instructions of the Existing Lender Plan Committee) shall have been filed as an Exhibit to the Plan.
(2) Conditions Precedent to Plan Consummation
(a) ten days will have passed since the entry of the Confirmation Order, and the Confirmation Order will have become a Final Order;
(b) the closing of the Exit Facility in a form that, among other things, satisfies the Minimum Availability Condition, will have occurred and all obligations under the DIP Facility shall have been satisfied in full in Cash and the DIP Facility shall have been terminated;
(c) all authorizations, consents and regulatory approvals required (if any) in connection with the effectiveness of the Plan will have been obtained; and
(d) the Plan Documents shall have been finalized and fully executed, in form and substance satisfactory to the Debtors and the Administrative Agent and the Existing Lender Plan Committee.
(3) Waiver of Conditions
(4) Effect of Non-Occurrence of Conditions to Consummation
I. Discharge, Release, Injunction and Related Provisions
(1) Discharge
(2) Releases
(a) Mutual Releases by Debtors, Reorganized Debtors, Affiliates and Releasees. The Plan provides that as of the Effective Date, for good and valuable consideration, the Debtors and the Reorganized Debtors in their individual capacities and as Debtors-in-Possession and the Releasees, will be deemed to have mutually between and/or among themselves (i) forever released, waived and discharged all Claims, Causes of Action and any and all other Liabilities (other than the rights of the Debtors, the Reorganized Debtors, or other applicable parties to enforce the Plan and the contracts, instruments, releases, indentures and other agreements or documents delivered under the Plan or assumed by the Debtors) whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter existing, in law, equity or otherwise that are based in whole or in part on (A) any act, omission, transaction, condition, event or other occurrence taking place or existing on or prior to the Effective Date since the beginning of time in any way directly, indirectly or derivatively arising from or related to the Debtors, the Reorganized Debtors, their respective operations or their securities, (B) any act or omission related to service with or for or on behalf of the Debtors, the Chapter 11 Cases, the Disclosure Statement, the Plan, the negotiation, formulation and preparation of the Disclosure Statement and the Plan or any reorganization documents (including the Plan Documents and/or any of the terms, settlements, and compromises reflected in any of the foregoing and any orders of the Bankruptcy Court related thereto) and (C) any act taken pursuant or in
(b) Releases by Holders of Claims and Equity Interests. The Plan also provides that as of the Effective Date, for good and valuable consideration (i) each Holder of a Claim or Equity Interest that has voted to accept the Plan and (ii) to the fullest extent permissible under applicable law, as such law may be extended or interpreted subsequent to the Effective Date, all other Holders of Claims and Equity Interests who are members of a Class consolidated for voting purposes which consolidated Class has voted to accept the Plan (and, except as otherwise provided herein, expressly excepting those who are conclusively presumed to have rejected the Plan pursuant to Section 1126(g) of the Bankruptcy Code and are not entitled to vote to accept or reject the Plan), in consideration for the obligations of the Debtors and the Reorganized Debtors under the Plan or any reorganization documents (including any of the Plan Documents and/or any of the terms, settlements or compromises reflected in any of the foregoing and any orders of the Bankruptcy Court related thereto), and other contracts, instruments, releases, agreements or documents to be delivered in connection with the Plan, each Holder that has held, holds or may hold a Claim or Equity Interest, as applicable, shall be deemed to have (A) forever released, waived and discharged all Released Liabilities against any of the Debtors and the Reorganized Debtors in their individual capacities and as Debtors-in-Possession and the Releasees (other than in cases of willful misconduct) and (B) forever covenanted with each of the Debtors and the Reorganized Debtors in their individual capacities and as Debtors-in-Possession and the Releasees not to sue, assert any Claims, Causes of Action or Liabilities against or otherwise seek recovery from any of the Debtors or the Reorganized Debtors in their individual capacities and as Debtors-in-Possession (except in accordance with the Plan) or any Releasee, whether based on tort, contract or otherwise (other than in cases of willful misconduct) in connection with any of the foregoing.
(c) As of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtors and the Reorganized Debtors in their individual capacities and as Debtors-in-Possession shall be deemed to have forever released, waived and discharged the Released Causes of Action (other than the rights of the Debtors, the Reorganized Debtors, or other applicable parties to enforce the Plan and the contracts, instruments, releases, indentures and other agreements or documents delivered under the Plan or assumed by the Debtors).
(d) The term “Releasees” is defined under the Plan to mean “the Confirmation Date Management, the Holders of Existing Lender Claims, the Administrative Agent, the DIP Agent, the Syndication Agent, the DIP Lenders, Alpine, the Debtors’
Affiliates, such parties’ respective professionals, officers, directors and/or agents and the professionals retained by the Debtors or at the expense of the Debtors’ Estates.”
(3) Exculpation
(4) Injunction
(a) (i) asserting, commencing or continuing in any manner any action against the Debtors or the Reorganized Debtors in their individual capacities and as Debtors-in-Possession, the New Parent, the New Subsidiary, the Releasees, the Committee or any of its members or any of their respective professionals, to the extent of any release granted in Section 10.2 of the Plan or any Person or Entity exculpated pursuant to Section 10.3 of the Plan, any action against any of their respective assets, and any other or further Claim or Equity Interest based upon any document, instrument or act, omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, (ii) the enforcement, attachment, collection or recovery, by any manner or means of any judgment, award or decree or order against the Debtors or the Reorganized Debtors in their individual capacities and as Debtors-in-Possession, the New Parent, the New Subsidiary, the Releasees, the Committee or any of its members or any of their respective professionals to the extent of any release pursuant to Section 10.2 of the Plan, or any Person or entity exculpated pursuant to Section 10.3 of the Plan with respect to any such action referred to in Section 10.4(a)(i) of the Plan, (iii) creating,
perfecting or enforcing any Lien of any kind against the Debtors or the Reorganized Debtors in their individual capacities and as Debtors-in-Possession, the New Parent, the New Subsidiary, the Releasees, the Committee or any of its members or any of their respective professionals to the extent of any release pursuant to Section 10.2 of the Plan, or any Person or entity exculpated pursuant to Section 10.3 of the Plan, with respect to any such action referred to in Section 10.4(a)(i) of the Plan, (iv) asserting any setoff or right of subrogation of any kind against any obligation due the Debtors or the Reorganized Debtors in their individual capacities and as Debtors-in-Possession, the New Parent, the New Subsidiary, the Releasees, the Committee or any of its members or any of their respective professionals to the extent of any release pursuant to Section 10.2 of the Plan, or any Person or entity exculpated pursuant to Section 10.3 of the Plan, with respect to any such action referred to in Section 10.4(a)(i) of the Plan and (v) any action, in any manner, in any place whatsoever, that does not conform or comply with the Plan;(15) and
(b) commencing or continuing in any manner, any suit, action or other proceeding, on account of or respecting any Claim, Equity Interest, interest, obligation, debt, right, remedy or liability released or to be released pursuant to the Plan.
J. Retention of Jurisdiction
K. Other Provisions
(1) Dissolution of Committees
(2) Payment of Statutory Fees
(3) Modification of Plan
(4) Revocation or Withdrawal of Plan
(5) Successors and Assigns
(6) Reservation of Rights
(7) Section 1145 Exemption
(8) Headings
(9) Governing Law
(10) Severability
(11) Implementation
(12) Inconsistency
(13) Further Assurances
(14) Service of Documents
(15) Exemption from Certain Transfer Taxes
(16) Compromise of Controversies
(17) No Admissions
(18) Filing of Additional Documents
V. MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A. Effective Date Transactions
B. Material United States Federal Income Tax Consequences to the Debtors
(1) Regular United States Federal Income Tax Consequences
(a) Effective Date Transactions.
(i) Conversion of STI to STI-LLC. The conversion of STI from a corporation to a limited liability company wholly-owned by Superior should be treated as a transfer by STI of all of its assets to Superior. Superior should not recognize any gain or loss upon this transfer.
(ii) Deemed Purchases of Assets of STI-LLC and Subsidiaries. The purchase by New Subsidiary of all the membership interests in STI-LLC (the “Purchase”) should be treated as a taxable purchase of all of the assets of STI-LLC. The section 338(h)(10) elections to be made by Superior and New Subsidiary with respect to certain STI-LLC subsidiaries, which will have been acquired as part of the STI-LLC assets, should be treated as purchases of the assets of the affected subsidiaries in taxable transactions.
(iii) Dissolution of Superior. The Debtors believe that no material tax consequences will result from the dissolution of Superior.
(iv) Tax Attributes of Reorganized Debtor. Because New Subsidiary will treat the Purchase as if New Subsidiary and its subsidiaries purchased all of the assets of STI-LLC (including a deemed purchase of the assets of certain STI-LLC subsidiaries with respect to which section 338(h)(10) elections are made), as discussed above, New Subsidiary and its subsidiaries should obtain an aggregate tax basis in the acquired assets equal to their fair market value as of the Effective Date and will not succeed to any tax attributes of the Superior Group. Thus, New Subsidiary and its subsidiaries should have no NOLs or NOL carryforwards and no accumulated earnings and profits as of the Effective Date.
(2) Alternative Minimum Tax
C. Material United States Federal Income Tax Consequences to U.S. Holders of Claims
(1) U.S. Holders of Existing Lender Claims
(a) New Senior Notes. Under the terms of the New Senior Notes if New Parent and its subsidiaries do not meet certain EBITDA thresholds, the issuer of the New Senior Notes has the option with respect to the first two semi-annual interest payments to pay regular cash interest of 4.75% on half of the outstanding principal amount of the New Senior Notes and to pay the interest on the other half of the outstanding principal amount of the New Senior Notes in the form of PIK notes at an interest rate of at the rate of 4.75%, provided that in the event that the Company elects to issue such PIK interest notes it shall pay a cash fee in an amount of 0.50% on the date of issuance. Under the Code and Regulations, there is included in the gross income for each taxable year of a holder of a debt instrument that is issued with original issue discount (“OID”), a ratable amount of the OID, regardless of whether cash is received with respect to the OID amount. Although the right of the issuer of a debt instrument to defer payments of interest on the instrument (including deferral through the issuance of PIK notes) usually creates OID, where, as in the instant situation, the effect of the issuer electing such deferral would be to increase the yield on the debt instrument, the right to defer payment is not taken into account, and no OID is created.
(b) New Subsidiary Preferred Stock. Generally, under the Code and Regulations the excess of the redemption price of preferred stock over its issue price is treated as constructive distributions to the holders of that stock, which are includible in their gross income over the expected term of the stock. The Debtors believe that the issue price of the New Subsidiary Preferred Stock will be its fair market value on the Effective Date, which may be less than the redemption price of that stock. If New Subsidiary determines, or if the IRS successfully asserts, that the fair market value of the New Subsidiary Preferred Stock is less than its redemption price, there will be included in the gross income of holders of that stock,
as constructive distributions received over the expected term of the stock under a constant yield method, the amount of that difference (without a corresponding receipt of Cash by the holders).
(2) U.S. Holders of Senior Subordinated Note Claims
(3) Holders of Equity Interests in Superior
(4) Market Discount
(5) Allocation Between Principal and Interest
D. Information Reporting and Backup Withholding
VI. ACCEPTANCE AND CONFIRMATION OF THE PLAN
A. Acceptance of the Plan
B. Confirmation Hearing
C. Certain Statutory Requirements for Confirmation of the Plan
D. Confirmation Without Acceptance by All Impaired Classes
VII. VALUATION
VIII. RISK FACTORS
A. Dependence on Key Personnel
B. Copper Related Risks
C. Technological Factors
D. Telephone Industry Spending Reductions
E. Migration of Magnet Wire Demand to China
F. Competitive Conditions
G. Debtors’ Use of Derivative Financial Instruments
H. General Market and Economic Risks
I. Material United States Federal Income Tax Considerations
J. Projected Financial Information
K. Lack of Market for Securities Issued Pursuant to Plan
L. Extended Stay in Chapter 11
M. Risks Associated with Exit Facility
N. Claim Estimates
O. Satisfaction of Certain Conditions Precedent to Confirmation and Consummation of the Plan
(a) the Confirmation Order in form and substance reasonably acceptable to the Debtors and the Administrative Agent (acting on instructions of the Existing Lender Plan Committee), will have been signed by the Bankruptcy Court and duly entered on the docket for the Chapter 11 Cases by the Clerk of the Bankruptcy Court;
(b) the Administrative Agent shall be reasonably satisfied that existing insurance arrangements regarding Personal Injury Claims will remain available following the Effective Date; and
(c) a commitment letter respecting the Exit Facility, in form and substance reasonably acceptable to the Administrative Agent (acting on instructions of the Existing Lender Plan Committee), and the Debtors, which, among other things, satisfies the Minimum Availability Condition, will have been filed as an Exhibit to the Plan.
(a) ten days will have passed since the entry of the Confirmation Order, and the Confirmation Order will have become a Final Order;
(b) the closing of the Exit Facility in a form that, among other things, satisfies the Minimum Availability Condition, will have occurred and all obligations under the DIP Facility will have been satisfied in full in Cash and the DIP Facility will have been terminated;
(c) all authorizations, consents and regulatory approvals required (if any) in connection with the effectiveness of the Plan will have been obtained; and
(d) the Plan Documents will have been finalized and fully executed, in form and substance satisfactory to the Debtors and the Administrative Agent and the Existing Lender Plan Committee.
P. Certain Other Bankruptcy Related Considerations
(1) Risk of Non-Confirmation of the Plan
(2) Nonconsensual Confirmation
(3) Objections to Classifications
IX. ALTERNATIVES TO THE PLAN AND CONSEQUENCES OF REJECTION
A. Alternative Plans
B. Chapter 7 Liquidation
X. RECOMMENDATION AND CONCLUSION
Liquidation Analysis
EXHIBIT G
Valuation Discussion
Contents
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