Document/Exhibit Description Pages Size
1: 10-K Annual Report 84± 410K
2: EX-2 Plan of Acquisition, Reorganization, Arrangement, 388± 1.56M
Liquidation or Succession
3: EX-10 Material Contract 2 12K
4: EX-10 Material Contract 2 10K
5: EX-10 Material Contract 3 8K
6: EX-10 Material Contract 45± 188K
7: EX-10 Material Contract 7± 28K
8: EX-10 Material Contract 10± 42K
9: EX-21 Subsidiaries of the Registrant 1 7K
10: EX-23 Consent of Experts or Counsel 1 6K
11: EX-27 Financial Data Schedule (Pre-XBRL) 1 8K
EX-2 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
EXHIBIT 2.1
Third Amended Second Disclosure Statement pursuant to section
1125 of the Bankruptcy Code in respect of Debtors' Third Amended
Second Joint Plan of Reorganization and exhibits thereto
Smith Corona Corporation
c/o Donlin, Recano & Company, Inc.
P.O. Box 2034
Murray Hill Station
New York, NY 10156-0701
Smith Corona Corporation
c/o Donlin, Recano & Company, Inc.
P.O. Box 2034
Murray Hill Station
New York, NY 10156-0701
Pre-Addressed Ballot
IMPORTANT
Remove Ballot from inside
pocket
ATTENTION
Your Immediate reply is requested
FIRST CLASS MAIL ENCLOSED
IMPORTANT -- Open Promptly
Dated Material Enclosed
From:
____________________________________________________________
____________________________________________________________
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
____________________________________________________________
In re
Chapter 11
SMITH CORONA CORPORATION,
Case No. 95-788 (HSB)
SCM OFFICE SUPPLIES, INC.,
SCC LI CORP. and HULSE
MANUFACTURING COMPANY,
JOINTLY ADMINISTERED
Debtors.
____________________________________________________________
TO: Creditors of Smith Corona Corporation,
SCM Office Supplies, Inc., SCC LI Corp.
and Hulse Manufacturing Company
RE: Smith Corona Corporation, et al.
Chapter 11 Case No. 95-788 (HSB)
Dear Creditor:
On July 5, 1995, Smith Corona Corporation, and on August 18,
1995, SCM Office Supplies, Inc., SCC LI Corp. and Hulse
Manufacturing Company filed voluntary petitions for relief under
chapter 11 of the Bankruptcy Code. On July 19, 1995, an Official
Committee of Unsecured Creditors was formed in the Smith Corona
Corporation case. The Creditors' Committee has been actively
involved in all aspects of the Debtors' chapter 11 cases on
behalf of the unsecured creditors of Smith Corona Corporation,
and has been actively involved in the negotiation and drafting of
the Debtors' Third Amended Second Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code dated September 6, 1996,
as amended (the "Plan"). The Creditors' Committee strongly
advocates approval of the Plan. The Plan is attached as Exhibit
"A" to the Debtors' Disclosure Statement, which is being provided
to you along with a ballot for voting on the Plan.
In summation, the Plan provides for the distribution to holders
of allowed general unsecured claims of, generally:
(a) Cash in the amount of $10,780,000; plus
(b) Net proceeds to be received from the prosecution of
certain actions held by or in the name of the Debtors;
plus
(c) Up to an additional $167,000 in additional funds if
there are no valid reclamation claims against the Debtors;
plus
(d) Interest on all Cash described in clauses (a) through
(c) until its distribution; plus
(e) Shares equal to 85% of the common stock of the
reorganized company on a fully-diluted basis (without
giving effect to any warrants issued pursuant to the
Plan).
Although the Creditors' Committee has considered many
alternatives to the Plan, we have come to the conclusion that
the Plan represents the best reorganization structure and
offers the best recovery to holders of allowed general
unsecured claims. As a result, the Creditors' Committee
supports approval of the Plan and urges you to execute and
return the enclosed ballot accepting the Plan.
Very truly yours,
The Official Committee of Unsecured Creditors of Smith Corona
Corporation
By: /s/ PETER PARTS
Peter Parts
President, Peter Parts Electronics
Chairman of The Official Committee of Unsecured
Creditors of Smith Corona Corportation
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
________________________________________________________________________________
In re
Chapter 11
SMITH CORONA CORPORATION,
Case No. 95-788 (HSB)
SCM OFFICE SUPPLIES, INC.,
SCC LI CORP. and HULSE
MANUFACTURING COMPANY,
JOINTLY ADMINISTERED
Debtors.
________________________________________________________________________________
THIRD AMENDED SECOND DISCLOSURE STATEMENT PURSUANT
TO SECTION 1125 OF THE BANKRUPTCY CODE IN RESPECT OF
DEBTORS' THIRD AMENDED SECOND JOINT PLAN OF REORGANIZATION
James L. Patton, Jr.
Laura Davis Jones
YOUNG, CONAWAY, STARGATT & TAYLOR
P.O. Box 391
11th Floor, Rodney Square North
Wilmington, Delaware 19801
(302) 571-6600
Counsel to the Debtors and Debtors-In-Possession
Richard L. Epling
Robin L. Spear
WINTHROP, STIMSON, PUTNAM & ROBERTS
One Battery Park Plaza
New York, New York 10004
(212) 858-1000
Special Counsel to the Debtors and
Debtors-In-Possession
Dated: September 6, 1996
TABLE OF CONTENTS
Page
ARTICLE 1
INTRODUCTION
A. General 1
B. Overview of the Debtors and the Plan 2
1. Pre- and Post-Petition Marketing of SCC. 2
a. First Bidding Process 3
b. Other Bidders 3
c. Second Bidding Process 3
d. Continued Discussions 4
2. Development of the Plan 4
3. New Products, Manufacturing and Marketing
Strategies 5
4. Sources of Recovery Under the Plan 5
5. Distributions Under the Plan 6
6. Substantive Consolidation 7
Summary of the Classification and Treatment of
Allowed Claims and Interests and
Recoveries that Might Be Available to Certain
Creditors 8
C.. Creditors Entitled to Vote 14
D.. Cramdown and Withdrawal of Plan 14
E.. Instructions Regarding Voting, Confirmation and
Objections to Confirmation 14
1. Voting Instructions 14
a. Ballots 14
b. Returning Ballots 14
2. Objections to Confirmation 15
3. Confirmation Hearing 15
ARTICLE 2 . . . . . . . . . . . . . . . . . .
BACKGROUND INFORMATION REGARDING DEBTORS. . .
A.. History of the Debtors' Businesses 15
B.. Description of SCC 16
1. Corporate Structure of SCC 16
2. Capital Structure of SCC 16
a. Equity 16
b. Debt 16
3. SCC's Operations 16
a. Capsule View of Intracompany Operations 16
b. Manufacturing and Distribution Operations 17
c. Marketing, Sales and Distribution 18
d. Competition 18
e. Patents, Trademarks and Licenses 19
f. Research and Development 19
g. Raw Materials 19
h. Employees 19
i. Officers and Directors 19
(I) Recent Changes in Management 19
(II) Directors and Executive Officers 20
4. Products 23
5. Properties 23
C. Pre-Petition Litigation 24
D. . Events Leading up to Chapter 11 Filings 25
E. . Significant Events During Chapter 11 Case 25
1. Continuation of Business After Filing 25
2. Formation of Creditors' Committee 26
3. Retention of Professionals 26
4. DIP Financing 27
5. Administration of SCC Australia 28
6. Transfer of Venue Motion 28
7. Employee Litigation Regarding Severance
Benefits 28
8. Rejection of Certain Leases and Executory
Contracts 29
9. Sale of Certain Assets 30
10. Presentation of Business Plan 31
11. Payment of Accrued Bonuses to Certain
Employees 31
12. Motion Regarding Retention of Ordinary Course
Professionals 31
13. Filing of Schedules 32
14. Appointment of Claims Agent 32
15. Last Day for Filing Claims 32
16. Stipulations and Settlements 32
a. Settlement Regarding Sex Discrimination
Complaint 32
b. Settlement Regarding Company Cars 33
c. Stipulation with J.M. Murray 33
d. Settlement of Potential Claim on Software
Maintenance Contract 33
e. Defective Goods Reserve Agreement With Sears,
Roebuck and Co 34
f. Stipulation With New York State Department of
Finance and Taxation 34
g. Stipulation With Nu-kote International, Inc 34
h. Stipulation With PBGC and With SCC's Hourly
and Salaried Retirement Plans 34
(i) Minimum Funding Contributions 35
(ii) Unfunded Benefit Liabilities 35
(iii) Premiums 35
i. Termination Agreement With Acer America
Corporation 36
17. Rejection of Employment/Severance Agreements
and Approval of Incentive Compensation
Program 36
18. Attempts to Locate Third-Party Investors 37
19. Extensions of Debtors' Exclusive Periods To
File Plans of Reorganization and To
Solicit Acceptances 37
20. Claim Objections 37
21. Environmental Claims 39
a. SCC-Owned Sites (Groton, New York and
Cortlandville, New York) 39
b. PAS and Miscellaneous Sites (Oswego, Fulton
Terminals, Clothier, Envirotek II/Roblin
Steel, Envirotek I, South Hill Dump,
Genoa, Tri-City Barrel, Butler Tunnel) 40
c. Rosen Site 41
d. Melville Site 42
e. Fisher Kalo 42
f. Onondaga Lake 43
g. Quanta Resources 43
22. Suspension and Delisting of SCC Common Stock 43
23. Litigation Against Cannon Group 43
24. Stock Purchase Agreement with MaraFund 44
25. SCC's Notice of Intent to Terminate the
Defined Benefit Plans 44
ARTICLE 3 . . . . . . . . . . . . . .
THE PLAN OF REORGANIZATION. . . . . .
A..General 45
B..Summary of Designation of Classes 45
. .Claims Under the Chemical DIP Loan Agreement 45
. .Allowed Administrative Claims 45
. .Allowed Priority Tax Claims 46
. .Class 1 (Allowed Priority Wage Claims) 46
. .Class 2 (Allowed Secured Claims) 46
. .Class 3 (Allowed Environmental Claims) 46
. .Class 4 (Pension Plan Claims) 46
. .Class 5 (Retiree Health and Insurance Claims) 46
. .Class 6 (Warranty and Contract Claims) 46
. .Class 7 (Allowed Reclamation Claims) 46
. .Class 8 (Allowed General Unsecured Claims) 47
. .Class 9 (Allowed Convenience Class Claims) 47
. .Class 10 (SCC Common Stock) 47
. .Class 11 (Other Equity Interests) 47
C..Summary of Payment Provisions of the Plan 47
. .1. Impairment of Claims and Interests 47
. .2. Treatment of Claims and Equity Interests 47
. .Classified Claims and Interests 47
. .Claims Under the Chemical DIP Loan Agreement 47
. .Allowed Administrative Claims 48
. .Allowed Priority Tax Claims 49
. .Class 1 (Allowed Priority Wage Claims) 49
. .Class 2 (Allowed Secured Claims) 49
. .Class 3 (Environmental Claims) 50
. .Class 4 (Pension Plan Claims) 50
. .Class 5 (Retiree Health and Insurance Claims) 51
. .Class 6 (Warranty and Contract Claims) 51
. .Class 7 (Allowed Reclamation Claims) 51
. .Class 8 (Allowed General Unsecured Claims) 51
. .Class 9 (Allowed Convenience Class Claims) 52
. .Class 10 (SCC Common Stock) 52
. .Class 11 (Other Equity Interests) 53
. .Position of the PBGC With Respect to Class 4
(Pension Plan Claims) 53
D..Other Provisions of Plan 55
1. Substantive Consolidation 55
2. Executory Contracts 56
a. Assumed Agreements 56
b. Rejected Agreements 56
3. Creditors' Committee After the Effective Date 57
4. Distribution Agent 57
5. Avoidance Actions 57
6. Administrative Bar Date 58
7. Subsequent and Final Distributions 58
8. Objections to Claims 59
9. Estimation of Unliquidated Claims 59
10. Retention of Jurisdiction 59
11. Discharge 60
12. Miscellaneous 60
a. Consummation -- Retention of Jurisdiction 60
b. Cancellation and Surrender of Equity Interests 61
c. Release of Certain Claims and Actions 61
d. Conditions Precedent to Confirmation of the
Plan 62
e. Conditions Precedent to Effectiveness of
the Plan 63
f. Filing Claims 63
g. Revesting of Assets of the Debtors 63
h. Payment of Certain Post-Effective Date
Expenses 63
i. Rounding 64
E.. Means of Consummating and Effectuating the Plan 64
ARTICLE 4 . . . . . . . . . . . . .
CONFIRMATION OF THE PLAN. . . . . .
A.. Feasibility 64
B.. Acceptance 65
C.. Post-Confirmation Financing 65
D.. Non-acceptance and Cramdown 65
1. Best Interests Test -- Liquidation Analysis 66
ARTICLE 5 . . . . . . . . . . . . .
CERTAIN FEDERAL INCOME TAX. . . . .
CONSEQUENCES OF THE JOINT PLAN. . .
A.. Federal Income Tax Consequences to the Debtors 67
1. In General 67
2. Utilization by NewSCC of Debtors' Existing Tax
Attributes 67
a. Effect of Sections 382 and 383 of the Tax Code 67
b. The Bankruptcy Exception 68
c. Discharge of Indebtedness Income 69
3. Alternative Minimum Tax 70
B.. Federal Income Tax Consequences to Creditors 70
1. Generally 70
2. Creditors Who Receive Solely Cash 70
3. Creditors Who Receive Cash and Stock 71
a. Generally 71
b. Tax Consequences of an Exchange 71
4. Receipt of Interest 72
C.. Federal Income Tax Consequences to Holders of
Equity Interests 72
1. Holders of SCC Common Stock 72
a. Exchange 72
b. Exercise 72
c. Sale of Warrants 73
d. Lapse 73
e. Adjustments 73
2. Holders of Other Equity Interests 73
D.. Importance of Obtaining Professional Tax Assistance 73
ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . .
NEWSCC SECURITIES; CORPORATE GOVERNANCE . . . . . . .
A. Description of NewSCC Securities 74
1. Description of NewSCC Common Stock 74
a. Dividends 74
b. Market and Trading Information 75
c. Restriction on Transfer of Shares 75
2. The NewSCC Warrants 77
B. Corporate Governance 78
1. Certificate of Incorporation and By-Laws 78
2. Summary of the Rights Agreement 79
3. Delaware Anti-Takeover Statute 82
4. Limitation of Liability; Indemnification of
Directors, Officers and Others 82
a. Charter Provisions 82
b. Director and Officer Insurance 83
C. Registrar and Transfer Agent 83
ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . .
SECURITIES LAW CONSIDERATIONS . . . . . . . . . . . .
A.. Initial Issuance of NewSCC Common Stock, NewSCC
Warrants and NewSCC Warrant Shares 83
B.. Subsequent Transfers of NewSCC Common Stock, NewSCC
Warrants and NewSCC Warrant Shares
Under Federal Securities Laws 84
ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . .
MATERIAL UNCERTAINTIES AND RISK FACTORS . . . . . . .
A.. Certain Disputed Claims 85
B.. Conditions to Confirmation and Effective Date 85
C.. Certain Tax Matters 86
D.. Lack of Trading Market for NewSCC Common Stock
and NewSCC Warrants 86
E.. Restrictions on Resale of NewSCC Common Stock,
NewSCC Warrants and NewSCC Warrant Shares 86
F.. Restrictions on Dividends 87
G.. Risks Associated With NewSCC Warrants 87
H.. New Products and Business Strategies 87
I.. Working Capital 87
J.. Competition 87
K.. Management 87
LIST OF EXHIBITS
Exhibit A. . Plan of Reorganization
Exhibit B. . Historical and Projected Consolidated Balance
Sheets, Consolidated Income Statements,
Consolidated Cash Flow Statements and
Supplemental Projected Pro Forma Financial
Information
Exhibit C. . Audited Consolidated Financial Statements of
SCC for Fiscal 1995 and Fiscal 1994
Exhibit D. . Smith Corona Preference Analysis
Exhibit E. . Best Interests Test
ARTICLE 1
INTRODUCTION
A. General
Voluntary petitions for relief (collectively, the
"Petitions") under Chapter 11 of Title 11 of the United States
Code, 11 U.S.C. sec. 101 et seq. (the "Bankruptcy Code"), were
filed with the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court") on July 5, 1995 (the
"Petition Date") by Smith Corona Corporation, a Delaware
corporation ("SCC" or the "Company"), and on August 18, 1995
by SCM Office Supplies, Inc. and Hulse Manufacturing Company,
each a Delaware corporation ("OSI" and "Hulse," respectively)
and by SCC LI Corp., a New York corporation ("SCC LI") (SCC,
OSI, SCC LI and Hulse collectively, the "Debtors").
United States Bankruptcy Judge Helen S. Balick has presided
over the cases, which have been jointly administered under
Case No. 95-788 (HSB) (the "Chapter 11 Case") since their
inception. Pursuant to section 1102 of the Bankruptcy Code, on
July 25, 1995, the Official Committee of Unsecured Creditors
(the "Creditors' Committee") was appointed in SCC's Chapter 11
Case. On September 9, 1996, the Debtors filed their Third
Amended Second Joint Plan of Reorganization, as the same may
be amended from time to time (the "Joint Plan" or "Plan"). The
Plan sets forth the proposal of the Debtors for the
distribution of their assets.
A copy of the Plan appears as Exhibit A to this Third
Amended Second Disclosure Statement (this "Disclosure
Statement"). The Plan specifies the classes of the Debtors'
creditors and equity security holders and the treatment of the
claims and interests of such creditors and equity security
holders, respectively. Pursuant to section 1126 of the
Bankruptcy Code, the Debtors are soliciting acceptances of the
Plan from the classes of creditors entitled to vote on the
Plan. This Disclosure Statement is submitted pursuant to
section 1125 of the Bankruptcy Code and its purpose is to
provide information of the kind necessary to enable a
hypothetical reasonable investor to make an informed judgment
in the exercise of his, her or its right to vote on the Plan.
Unless otherwise defined in this Disclosure Statement, defined
terms utilized in this Disclosure Statement shall have the
same meanings ascribed to them in the Plan.
THE PURPOSE OF THIS DISCLOSURE STATEMENT IS TO PROVIDE ALL
SUCH CLAIM HOLDERS WITH INFORMATION THAT MAY BE DEEMED
MATERIAL, IMPORTANT AND NECESSARY IN ALLOWING SUCH CLAIM
HOLDERS TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN AND TO
ARRIVE AT AN INFORMED DECISION IN EXERCISING THEIR RIGHT TO
VOTE FOR ACCEPTANCE OR REJECTION OF THE PLAN.
THIS DISCLOSURE STATEMENT AND THE ATTACHED PLAN SHOULD BE
READ IN THEIR ENTIRETY. THE DESCRIPTIONS OF THE PLAN IN THIS
DISCLOSURE STATEMENT ARE SUMMARIES ONLY AND ARE QUALIFIED BY
REFERENCE TO THE TERMS AND CONDITIONS OF THE PLAN ITSELF.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER
ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL
NOT BE CONSTRUED AS AN ADMISSION OR STIPULATION, BUT RATHER AS
A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS.
HOLDERS OF IMPAIRED CLAIMS AND IMPAIRED INTERESTS SHOULD NOT
CONSTRUE THE CONTENTS OF THIS DISCLOSURE STATEMENT AS
PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. EACH
SUCH HOLDER SHOULD, THEREFORE, CONSULT WITH ITS OWN LEGAL,
BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY SUCH MATTERS
CON- CERNING THE SOLICITATION, THE PLAN AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
THE DEBTORS AND THE CREDITORS' COMMITTEE SUPPORT
CONFIRMATION OF THE PLAN AND URGE ALL HOLDERS OF CLAIMS IN
IMPAIRED CLASSES ENTITLED TO VOTE TO ACCEPT THE PLAN.
ACCORDINGLY, ALL CREDITORS ARE URGED TO VOTE IN FAVOR OF THE
PLAN BY NOT LATER THAN THE VOTING DEADLINE OF 4:30 P.M.,
PREVAILING EASTERN TIME, ON OCTOBER 18, 1996.
The requirements for confirmation of the Plan, including the
vote of creditors to accept the Plan and certain of the
statutory findings that must be made by the Bankruptcy Court,
are set forth under the caption "The Plan of Reorganization --
Other Provisions of Plan -- Miscellaneous -- Conditions
Precedent to Confirmation of the Plan." Confirmation and the
occurrence of the effective date of the Plan (the "Effective
Date") are subject to a number of significant conditions
precedent, which are also summarized in "The Plan of
Reorganization -- Other Provisions of Plan -- Miscellaneous --
Conditions Precedent to Confirmation of the Plan" and "--
Conditions Precedent to Effectiveness of the Plan."
B. Overview of the Debtors and the Plan
SCC is engaged in the design, manufacturing and sale of
portable and compact electronic typewriters, personal word
processors ("PWPs"), printers and related accessories and
supplies. SCC's products are generally used in the home, at
school and in small offices. See "Background Information
Regarding Debtors -- History of the Debtors' Businesses" and
"Background Information Regarding Debtors -- Description of
SCC."
Sales of SCC's products and corresponding revenues have
declined, largely due to intense competition from foreign
producers and partly due to the lack of a highly diversified
product base. To conserve resources, SCC has, since the
Petition Date, confined expenditures to those manufacturing
and operating costs that are necessary to preserve and
maintain going-concern value. In light of its financial
condition, SCC has also implemented and continues to implement
a planned reduction in its workforce and a consolidation of
its manufacturing and distribution operations. See "Background
Information Regarding Debtors -- Description of SCC -- SCC's
Operations -- Manufacturing and Distribution Operations."
Additionally, as part of a major restructuring plan announced
by SCC on May 8, 1995, SCC has relocated its typewriter
manufacturing operations to its Mexico facility from
facilities in Singapore and Batam Island, Indonesia.
Despite these largely successful efforts to lower SCC's
production costs, SCC believes that prolonged operations in
Chapter 11 would likely yield continued deterioration in the
value of its assets and business operations. It is essential,
therefore, for the Debtors to emerge from the Chapter 11
proceedings as soon as possible.
The Debtors believe that the most viable means of emerging
successfully from Chapter 11 would be through the payment or
assumption of outstanding claims and the issuance of stock in
reorganized SCC to the Debtors' existing unsecured creditors
pursuant to a plan of reorganization and the confirmation of
such a plan under an expedited timetable.
1. Pre- and Post-Petition Marketing of SCC
Prior to the Petition Date, SCC recognized the need to
consider new strategic directions. On April 7, 1994, SCC
engaged Goldman, Sachs & Co. ("Goldman, Sachs") as its
financial advisor to assist it in evaluating the feasibility
and the financial impact of various strategic alternatives
available to SCC, including a merger or sale, joint ventures,
investments, acquisitions, divestitures or a financial
restructuring. In the ensuing months, Goldman, Sachs
identified and held discussions with both foreign and domestic
companies with respect to potential strategic alternatives.
These efforts, however, did not result in any additional
investments in SCC or any viable strategic opportunities,
whether through the potential sale of SCC or otherwise.
Goldman, Sachs' efforts ceased as of the Petition Date.
During the period of Goldman, Sachs' marketing efforts, SCC
remained under constant financial pressure and was continually
forced to adjust its business strategies. Rapidly changing
industry conditions in both the typewriter and PWP markets
sharply reduced overall sales and lowered margins on existing
sales. Ultimately, SCC's declining resources and cash flow
could not satisfy maturing debts and other obligations, nor
accommodate the volume of restructuring charges needed to
fully restructure the Company. A potential purchaser did
inform SCC of its interest in the Company in late June, 1995
but then later declined to pursue further discussions with SCC
on the eve of the Petition Date. Unable to consummate a
transaction with such purchaser (or with any other purchaser
or investor) on terms satisfactory to SCC, SCC was forced to
commence its Chapter 11 proceeding on July 5, 1995.
In the weeks immediately following the Petition Date, SCC
received unsolicited expressions of interest from various
parties. Approximately 20 interested parties contacted SCC and
its advisors during the summer and fall of 1995 regarding
their interest in various transactions. Several of these
parties had engaged in discussions with SCC in the year
leading up to the Petition Date. In evaluating such
expressions of interest, SCC proceeded without the assistance
of Goldman, Sachs and instead worked through its interim
management and financial and legal advisors, all of whom had
significant prior experience in marketing financially troubled
companies in and outside of Chapter 11. As part of its
evaluation process, SCC reviewed publicly available
information on each interested party or obtained information
directly from such interested parties and immediately imposed
a uniform due diligence process for all such parties. Of the
20 initial parties, 12 signed confidentiality agreements with
SCC, enabling them to obtain material non-public information
about the Debtors, as well as frequent access to key members
of SCC's management. Of these 12 parties, six engaged in an
extended due diligence process. SCC subsequently determined
that, given the amount of apparent interest in SCC by third
parties, it was appropriate to establish a set of formal
bidding procedures.
a. First Bidding Process
On or about September 18, 1995, SCC informed potential
bidders that they should submit written proposals to SCC not
later than September 29, 1995. SCC and its advisors thereafter
were actively involved in discussions with a number of the
potential purchasers. Four written bids were received by the
bidding deadline and evaluated by SCC.
On October 3, 1995, SCC determined that it would be
advisable to request a second round of bids in an effort to
maximize the potential recovery to the Company's creditors
through the solicitation of higher and better offers for SCC.
Interested bidders were therefore informed: (i) that the
second round of bids, due not later than October 6, 1995,
would be the final round before the Debtors selected a
preferred or "stalking horse" bidder; (ii) that there would be
an opportunity to make a higher and better offer prior to the
confirmation hearing but that such an offer would have to be
in the same form as the contract with the preferred bidder,
but for more or better consideration; and (iii) that SCC's
Board of Directors would meet on October 7, 1995 to select a
preferred bidder from the bids submitted on or before October
6, 1995. At a meeting on October 7, 1995, SCC's Board of
Directors selected ECC Acquisition Corporation ("ECC"), a
group formed by Empire Capital Corporation which included
certain members of management of SCC as well as certain
strategic product partners, as the preferred bidder, subject
to receipt of higher and better offers.
On October 24, 1995, ECC and SCC executed a certain Stock
Purchase Agreement (the "ECC Stock Purchase Agreement"), which
formed the basis of SCC's first proposed plan of
reorganization ("First Joint Plan") filed with the Bankruptcy
Court on the same date, pursuant to which ECC would acquire
all of the common equity of reorganized SCC pursuant to a
court-approved plan of reorganization. Under the First Joint
Plan, ECC would have become the owner of all of SCC's newly
issued common equity and all previously existing common equity
of SCC would have been canceled. The ECC Stock Purchase
Agreement was subject to receipt of higher and better offers,
the procedures for which were approved pursuant to a
Termination Fee and Bidding and Auction Procedures Order
("Auction Procedures Order") approved by the Bankruptcy Court
on November 6, 1995.
On or about November 20, 1995, SCC terminated the ECC Stock
Purchase Agreement because ECC did not fulfill certain
contractual requirements necessary for the transaction to be
completed, including providing to SCC evidence of committed
financing and equity commitments.
b. Other Bidders
Shortly after SCC terminated the ECC Stock Purchase
Agreement, two of the interested parties which had conducted
due diligence activities in preparation for the September 29,
1995 bidding process (one of which had been an unsuccessful
bidder) contacted SCC for the purpose of conducting further
discussions. From late November, 1995 through late January,
1996, SCC conducted, separately, extensive negotiations with
the two interested parties on an acquisition agreement upon
which SCC could propose an amended plan of reorganization. SCC
was unable to conclude these negotiations on terms acceptable
to it or to the Creditors' Committee.
c. Second Bidding Process
In the period early October, 1995 through late January,
1996, interest in acquiring the Company by third parties
remained high. SCC was contacted by approximately 20
additional interested parties, of which 16 signed
confidentiality agreements, and 10 conducted at least initial
due diligence activities. Because of the continuing high
interest in SCC, SCC determined to conduct a second formal
bidding process for its businesses. Consequently, on February
1, 1996, SCC informed potential bidders that they should
submit written proposals to SCC not later than March 6, 1996.
SCC and its advisors thereafter were actively involved in
discussions with the potential purchasers. Four written
proposals were received by the bidding deadline, but only two
of these qualified as bids under the rules previously
announced to potential bidders by SCC.
In evaluating the qualified bids, SCC and its advisors
determined that such bids: (i) contemplated the acquisition of
portions of the Debtors' business rather than the continuation
of the Debtors' business as a going concern; (ii) essentially
reflected the then current liquidation value of SCC; (iii)
were likely to trigger large contingent liabilities; and (iv)
would not result in the ability to maintain SCC as a going
concern. As a result, on or about March 11, 1996, SCC (in
conjunction with the Creditors' Committee) decided that none
of the bids received were likely to result in a satisfactory
recovery for the Debtors' estates and their creditors.
Qualified bidders were thereafter informed that their bids
were rejected, but that SCC would be willing to consider
higher and better bids pending a determination as to whether
SCC should move forward with a revised business plan and a
plan of reorganization.
d. Continued Discussions
During the remainder of March and throughout the Spring and
Summer of 1996, SCC had discussions with two potential
bidders. SCC and its advisors spent considerable time and
effort in an attempt to negotiate a potential sale transaction
-- a transaction which was never ultimately consummated due to
the inability of the interested parties either to secure
sufficient financing for the proposed transaction or to commit
sufficient capital or present a viable business plan to
satisfy SCC and the Creditors' Committee of the financial
strength of the reorganized company. Concurrently with these
discussions, SCC was developing a business plan for its
emergence from Chapter 11, and negotiating a plan of
reorganization with the Creditors' Committee.
2. Development of the Plan
As the attempts to locate purchasers for the Debtors'
business both prior to and during the Debtors' bankruptcy
proceedings discussed above (see "-- Pre- and Post-Petition
Marketing of SCC") did not yield offers which would provide
sufficient recoveries to SCC's various creditor
constituencies, SCC began to consider the terms and conditions
of a cash and stock-for-debt plan of reorganization.
As discussed above, the offers received by the Debtors from
qualified bidders in the second bidding process contemplated
the acquisition of portions of the Debtors' business, rather
than the continuation of the Debtors' business as a going
concern. A resulting effect of such an acquisition, if
consummated, would have been that a substantial amount of the
Debtors' contingent liabilities (such as pension,
post-retirement medical and environmental claims) would have
become
due, each of which would have severely diminished the
recoveries to SCC's unsecured creditors. On the other hand,
those parties which had expressed a willingness to purchase
the Debtors as a whole and assume SCC's contingent liabilities
proposed to pay the existing creditors primarily with the
Debtors' cash on hand, rather than through the contribution of
new funds, leaving the reorganized SCC without the necessary
working capital to meet its operating needs over the next
several years.
After carefully examining the possibility of a cash and
stock-for-debt plan of reorganization as an alternative to any
of the possible sale options, the Debtors determined that such
a plan offered unsecured creditors the greatest and most
certain potential recovery. Such a plan would provide for
reorganized SCC's continuing obligation for contingent
liabilities (thereby preventing diminution of creditor
recoveries), and would provide for substantially all of the
equity in the new company to be issued to the unsecured
creditors, thereby increasing their potential recoveries.
Consequently, the Debtors formulated a cash and stock-for-debt
plan of reorganization, and entered into negotiations
with the Creditors' Committee regarding such a plan. After
such discussions, the Debtors finalized such plan as the Joint
Plan, which SCC and its management believe offers the best
prospect for a consensual plan of reorganization with
recoveries regarded as acceptable to representatives of all
the major creditor constituencies in the Chapter 11 Case. SCC
continues to hold discussions with potential purchasers and
reserves the right, but has no obligation, to amend the Plan
to include the terms of any offers that SCC decides to accept
from any such purchaser.
The Creditors' Committee has included a letter with these
disclosure materials strongly supporting the Joint Plan and
urging holders of Allowed General Unsecured Claims (as
hereinafter defined) to vote in favor of the Joint Plan.
Creditors are urged to consult the Creditors' Committee's
letter for further information.
3. New Products, Manufacturing and Marketing Strategies
In the decades preceding the Petition Date, SCC became a
leading producer of typewriters and PWPs for the home and
office market, after initially establishing itself as a
leading producer of office typewriters. Following the end of
the Second World War, SCC pioneered the development of the
portable electric typewriter, millions of which became
standard features in modern homes and offices throughout the
United States and around the world. The Company established an
expansive network of sales offices, and manufacturing and
distribution facilities to meet the demand for its typewriters
and related supplies. SCC repeated this pattern of success
with the development of the first PWP in the early 1980's.
During the late 1980's and the early 1990's, the home and
office information technology industry evolved swiftly and
underwent a period of fundamental change. The advent of the
personal desktop and laptop computers ("PCs") drastically
altered the marketplace for non-PC based products and related
supplies. Increasingly versatile PCs, often sold at discounted
prices directly to the public, began to cut into the market
for SCC's main product line of typewriters and PWPs, resulting
in falling revenues and declining margins. Initially, both
prior and subsequent to the Petition Date, in response to
these industry trends, SCC focused on lowering its
manufacturing costs for its primary products, typewriters and
PWPs, by reducing its worldwide employment and consolidating
certain of its manufacturing and distribution operations.
Additionally, in 1994 SCC sold the businesses of two of its
wholly-owned subsidiaries, primarily consisting of the
manufacturing and distribution of certain office supplies and
customized printed products.
In the current market, vendors of information technology
like SCC have been forced to make major changes in their
product lines and marketing strategies to adjust to rapidly
shifting market environments. Since the future of the
information technology industry appears from all indications
to be increasingly PC-based, SCC intends to expand its current
product line substantially to include PC accessories,
telecommunications equipment, and other home and office
related products. In its First Joint Plan, pursuant to which
SCC would have been acquired by ECC, such an expansion was
contemplated, whereby the reorganized SCC would enter into new
key strategic alliances for products and technologies with
several foreign manufacturers in order to introduce new PC and
telecommunications product lines.
Under the current Plan, reorganized SCC ("NewSCC") would
significantly expand its product line, primarily by sourcing
new products from outside manufacturers. Such sourcing may,
over time, include entering into strategic alliances with
third parties to provide products or services. In that
respect, NewSCC would focus its efforts on forging alliances
with foreign companies with technologically advanced office
products that presently do not have a substantial United
States market share or market presence and which are intent on
building or increasing market share by selling their products
under the well known "Smith Corona" name. SCC intends to rely
on one of its most valued assets -- its existing distribution
network -- to become a leading vendor of technologically
advanced office products manufactured abroad. Further, SCC
intends to continue to focus on its core business of
manufacturing and distributing its current product line of
typewriters and PWPs to satisfy continuing worldwide demand
for these products.
On an operational level, initially NewSCC will continue its
business on a global basis with manufacturing operations in
Mexico and sales and marketing operations in the United States
and certain international markets. NewSCC's Mexico facility
will also provide contract manufacturing services to other
equipment manufacturers ("OEMs") on a cost plus basis thereby
providing a contribution towards manufacturing overhead
expenses. Ideally, prospective OEMs may also form the basis
for new product strategic alliances.
Attached hereto as Exhibit B to this Disclosure Statement
are SCC's unaudited historical, pro forma and projected
Consolidated Balance Sheets, Consolidated Income Statements
and Consolidated Cash Flow Statements and supplemental
projected pro forma financial information for the periods set
forth therein. Attached hereto as Exhibit C to this Disclosure
Statement are audited consolidated financial statements of SCC
for the fiscal years ended June 30, 1995 ("Fiscal 1995") and
June 30, 1994 ("Fiscal 1994").
4. Sources of Recovery Under the Plan
The proposed payment of general unsecured claims against SCC
("Allowed General Unsecured Claims") will be accomplished
through the distribution of certain consideration to holders
of such Claims consisting of the following:
(i) Cash (the "Unsecured Class Cash") consisting of:
(A) $10,780,000 less the aggregate amount of Cash paid to
holders of Allowed Convenience Class Claims (as defined
below);
(B) the net proceeds of all Avoidance Actions (as defined
below in "The Plan of Reorganization -- Other Provisions
of Plan -- Avoidance Actions"), if any ("Net Avoidance
Action Proceeds"), consisting of Cash or other proceeds
received by judgment or settlement from any Avoidance
Action commenced by the Debtors, NewSCC or the Creditors'
Committee, after first deducting certain amounts retained
by the recipient on account of any resulting Allowed
General Unsecured Claim equal to the Cash distributions
such Person would have received if such Claim had been
Allowed as of the Effective Date, and then deducting
amounts for all expenses incurred with respect thereto;
(C) the difference between (i) $167,000 and (ii) the total
aggregate amount of Cash paid to holders of Allowed Claims
in Class 7 (see "The Plan of Reorganization -- Summary of
Designation of Classes" below) (the "Excess Reclamation
Funds"); and
(D) any interest accrued on all such Cash prior to its
distribution to holders of Allowed General Unsecured
Claims; and
(ii) 85% of the shares of new common stock of NewSCC
("NewSCC Common Stock") determined on a fully-diluted
basis, not including the effect of the exercise of any of
the NewSCC Warrants (as defined below).
In addition, all Allowed General Unsecured Claims of $1,500
or less, and those Allowed General Unsecured Claims
voluntarily reduced to $1,500 ("Convenience Class Claims"),
shall receive payment in Cash in an amount equal to 60% of the
amount of such Claim.
Holders of record of outstanding shares of common stock of
SCC ("SCC Common Stock") as of August 15, 1996 ("Registered
Holders") shall receive one (1) warrant ("NewSCC Warrant"),
exercisable during the period from six (6) months after the
Effective Date to two (2) years after the Effective Date, to
purchase one (1) share of NewSCC Common Stock for each ten
(10) shares of SCC Common Stock. The exercise price of the
NewSCC Warrants will be determined on a preliminary basis as
of the Confirmation Date and will be set generally at a per
share value that would, if the NewSCC Common Stock were sold
for such value, and after giving effect to the distribution of
the Unsecured Class Cash then estimated to be or to become
available for distribution to holders of Allowed General
Unsecured Claims (based on an estimate at such date of the
aggregate amount of Allowed Claims and Reserved Claims), allow
such holders to realize the amount of such Claims together
with accrued interest thereon from the Petition Date to the
Effective Date and an allocable amount for costs and expenses
incurred in connection with transaction costs relating to the
sale or other disposition of NewSCC Common Stock. The exercise
price of the NewSCC Warrants so estimated on a preliminary
basis will be subject to reduction by the Board of Directors
of NewSCC in its sole discretion prior to the date on which
the NewSCC Warrants will first become exercisable based on the
Board's estimate at such time of the total amounts of
Unsecured Class Cash and of General Unsecured Claims that may
be Allowed Claims or Reserved Claims. All SCC Common Stock
will be canceled, annulled and extinguished upon effectiveness
of the Plan.
5. Distributions Under the Plan
Under the Plan, the Debtors intend to satisfy all Allowed
General Unsecured Claims through the distribution of the
Unsecured Class Cash and 85% of the NewSCC Common Stock to
holders of such Claims. The Debtors intend to satisfy all Allowed
Claims senior to Allowed General Unsecured Claims by the payment
in full in Cash or notes (as provided for by the Bankruptcy Code)
or the assumption of all such Claims. In addition, Allowed
Convenience Class Claims shall receive payment in Cash in an
amount equal to 60% of the amount of such Claim. Finally,
Registered Holders of SCC Common Stock shall receive the NewSCC
Warrants.
In order to provide for the distributions described in the
Plan, on the Effective Date, Cash and notes necessary to pay or
reserve for all Allowed Claims senior to General Unsecured Claims
and Convenience Class Claims, and the Unsecured Class Cash and
one (1) share of NewSCC Common Stock for each $6.00 of Allowed
General Unsecured Claims, shall be transferred to the
Distribution Agent. The Distribution Agent shall hold such
consideration, including the Unsecured Class Cash and the NewSCC
Common Stock, in trust for distribution to the holders of Allowed
Claims or in reserve for payment to holders of Disputed Claims
after a Final Order has been entered providing that any such
Disputed Claim has become an Allowed Claim. The NewSCC Warrants
will be distributed to the Registered Holders by NewSCC or by the
agent appointed pursuant to the Warrant Agreement between such
agent (the "Warrant Agent") and NewSCC (the "NewSCC Warrant
Agreement").
The Debtors proposed this Chapter 11 Plan rather than a
liquidation by a trustee after conversion of the case to one
under Chapter 7 of the Bankruptcy Code because the Plan will
return substantially more to unsecured creditors than they would
receive if the Debtors were liquidated, and because preservation
of the Debtors as a going concern will preserve many ongoing and
beneficial business relationships between the Debtors and their
creditors. See "Confirmation of the Plan -- Non-acceptance and
Cramdown -- Best Interests Test -- Liquidation Analysis."
The classification of Claims and the distribution that holders
of Claims may receive under the Plan are set forth below under
"Summary of the Classification and Treatment of Allowed Claims
and Equity Interests and Recoveries That Might Be Available to
Certain Creditors."
6. Substantive Consolidation
The Plan contemplates and is predicated upon the substantive
consolidation of the estates of the Debtors into a single entity
for purposes of confirmation, consummation and implementation of
the Plan. As a result of substantive consolidation: (i) all
intercompany Claims by and among the Debtors will be eliminated;
(ii) all assets and all proceeds thereof and all liabilities of
the Debtors will be merged or treated as though they were merged;
(iii) any obligation of any of the Debtors and all guarantees
thereof executed by any of the Debtors will be deemed to be one
obligation of the Debtors; (iv) any Claims filed or to be filed
in connection with any such obligation and such guarantees will
be deemed one Claim against the Debtors; (v) each and every Claim
filed in the individual Chapter 11 Case of any of the Debtors
will be deemed one Claim filed against the Debtors; (vi) all
duplicative claims filed against more than one of the Debtors
will be automatically expunged so that only one claim survives
against the Debtors; (vii) all Equity Interests of any Debtor in
any other Debtor shall be deemed automatically canceled and
retired by operation of law and shall cease to exist; and (viii)
the Debtors will be deemed, for purposes of determining the
availability of the right of set-off under section 553 of the
Bankruptcy Code, to be one entity, so that, subject to other
provisions of section 553 of the Bankruptcy Code, the debts due
to a particular Debtor may be offset against claims against such
Debtor or another Debtor. Substantive consolidation is supported
by existing case law and will eliminate time-consuming and
wasteful arguments by Creditors who may attempt to trap assets or
other value at a particular SCC subsidiary for their own benefit
or who may seek multiple distributions for the same claim.
In addition, the Debtors may elect to seek substantive
consolidation with some or all of SCC's Non-Debtor Subsidiaries
in the Bankruptcy Court.
The substantive consolidation contemplated herein shall not
affect any intercompany claims and equity interests held by any
of the Debtors against any of the Non-Debtor Subsidiaries of SCC,
which shall remain outstanding (except to the extent that any
Non-Debtor Subsidiary is substantively consolidated with SCC).
The Debtors will proceed by motion to obtain Bankruptcy Court
approval of the substantive consolidation described herein (which
approval may be embodied in the Confirmation Order).
Summary of the Classification and
Treatment of Allowed Claims and Equity Interests and
Recoveries That Might Be Available to Certain Creditors
The following is a summary of the classification and treatment
of Allowed Claims and Equity Interests and recoveries that might
be available to certain creditors and holders of Equity Interests
of the Debtors under the Plan. This summary is qualified in its
entirety by reference to the relevant provisions of the Plan, a
copy of which is attached as Exhibit A to this Disclosure
Statement. For a description of certain other significant terms
and provisions of the Plan, see "The Plan of Reorganization --
Summary of Designation of Classes," "-- Summary of Payment
Provisions of the Plan" and "-- Other Provisions of Plan."
Description of Claims and Interests and
Classes and Anticipated Amount of Allowed
Claims
Description of Proposed Distribution Under
the Plan
Claims Under the Chemical DIP Loan Agreement
---------------------------------------------------
Presently approximately $500,000. Generally,
such claims shall consist of all Claims under
the loan agreement between SCC and SCC's
debtor-in-possession lenders, Chemical Bank
and Bank of America Illinois ("Chemical" and
"BofA" and collectively, the "Banks") dated as
of July 10, 1995 (the "Chemical DIP Loan
Agreement"), including approximately $500,000
in respect of documentary letters of credit,
plus any Allowed indemnification Claims and
Claims for fees and expenses held by the Banks
under the Chemical DIP Loan Agreement.
Not Classified Under the Plan
----------------------------------------
Each holder of a Claim under the Chemical DIP Loan
Agreement shall be satisfied (I) with respect to
reimbursement obligations
under outstanding letters of credit, through
the cash collateralization of such obli-
gations; (ii) in the case of obligations
arising after the Effective Date pursuant to
Section 2.22(c) of the Chemical DIP Loan
Agreement, by NewSCC making prompt payment
thereof; (iii) with respect to all other
Claims accrued or owing as of the Effective
Date, by the payment in full in cash on the
Effective Date; (iv) with respect to any fees
and expenses of the Banks and Chemical, as
Agent, payable under Section 9.5 of the
Chemical DIP Loan Agreement accruing after the
Effective Date, by payment thereof by NewSCC
up to an aggregate of $650,000, less any
amounts accrued by or paid to the Banks or the
professionals retained by the Banks from and
after July 5, 1995 with respect to any
Avoidance Actions against the Banks promptly
upon presentation of appropriate invoices to
NewSCC, subject only to determination and
allowance by the Bankruptcy Court as to amount
and appropriateness if the Creditors'
Committee objects to any such fees and
expenses, including without limitation on the
grounds that such fees and expenses should be
recovered upon entry of a judgment in
connection with an Avoidance Action with
respect to the Banks, or (v) in such other
manner as may be agreed by the Debtors and
holders of such Claim, at such time or times
as provided in Section 10.1 of the Plan.
Allowed Administrative Claims
Anticipated to be approximately $3,550,000.
Generally, an Allowed Administrative Claim
means any cost and expense of administration
of the Chapter 11 Case entitled to and allowed
priority in payment under section 507(a)(1) of
the Bankruptcy Code or as may be allowed by
Final Order of the Bankruptcy Court. Such
claims shall consist of all Allowed
Administrative Claims (other than Claims under
the Chemical DIP Loan Agreement), including
cure payments for assumed executory contracts
and unexpired leases and severance and
vacation pay for terminated employees relating
to periods of employment after the Petition
Date.Not Classified Under the Plan
Each Allowed Administrative Claim shall be
paid in full in Cash (or otherwise satisfied
in accordance with its terms) as of the
Effective Date, or such other date upon entry
of a Final Order of the Bankruptcy Court
allowing such Administrative Claim.
Allowed Priority Tax Claims
---------------------------
Anticipated to be approximately $3,700,000.
An Allowed Priority Tax Claim shall be any
Claim that is entitled to priority in payment
pursuant to section 507(a)(8) of the
Bankruptcy Code.
Not Classified Under the Plan
-----------------------------
Each Holder of an Allowed Priority Tax Claim
shall receive the full amount thereof at
NewSCC's option either in Cash or in deferred
cash payments in the form of a Priority Tax
Note, in accordance with section 1129(a)(9)(C)
of the Bankruptcy Code.
Class 1 (Allowed Priority Wage Claims)
--------------------------------------
Anticipated to be approximately $45,000.
Class 1 shall consist of all Claims to the
extent Allowed and entitled to priority in
payment under section 507(a)(3) of the
Bankruptcy Code.
Not Impaired Under the Plan
---------------------------
Each Allowed Priority Wage Claim in Class 1
shall be paid in full in Cash at such time
or times as provided in Section 10.1 of the
Plan, in full compliance with its legal,
contractual and equitable rights. Class 1 is
unimpaired and is deemed to accept the Plan.
Class 2 (Allowed Secured Claims)
-------------------------------
Anticipated to be not more than
approximately $15,000. Class 2 shall consist
of all Allowed Claims to the extent of the
value, as determined pursuant to sections
506(a) or 1111(b) of the Bankruptcy Code, of
any interest in property of the Debtors'
estate securing such Claims. To the extent any
such Allowed Claim exceeds the value of any
interest in property of the Debtors' estates
securing such Claim, such Allowed Claim shall
be considered an Allowed General Unsecured
Claim.
Impaired Under the Plan
-----------------------
In full satisfaction of each Allowed Secured
Claim, each holder of such Claim shall, at
the option of NewSCC, receive either (i)
payment in full in Cash in the amount of such
Claim at such time or times as provided in
Section 10.1 of the Plan, (ii) the collateral
securing such Claim, or (iii) such other
treatment as may be agreed to by NewSCC and
the holder of such Claim. Class 2 is impaired
and is entitled to vote on the Plan.
Class 3 (Allowed Environmental Claims)
--------------------------------------
Anticipated to be approximately $3,377,000.
Class 3 shall consist of any Claim presently
asserted or which may be asserted in the
future, including, without limitation, any
Contingent Claim (as such term is defined in
the Plan) or Claim for contribution or
indemnity, of any governmental unit, or Claim
for contribution or indemnity by any Person,
arising out of or related to any
Environmental, Health and Safety Laws (as such
term is defined in the Plan) with respect to
the properties in Groton, New York or
Cortlandville, New York owned by SCC;
provided, however, that any such Claims with
respect to either the Rosen Site or the
Melville Site (each as hereinafter defined),
or both, may be treated as Environmental
Claims if the Debtors so elect, after
consultation with the Creditors' Committee, on
or before the Confirmation Date: provided
further, however, that if the Debtors do not
elect to treat such Claims with respect to
either the Rosen Site or the Melville Site, or
both, as Environmental Claims, such Claims,
respectively, shall be treated as General
Unsecured Claims.
Not Impaired Under the Plan
---------------------------
Each Allowed Environmental Claim shall be
satisfied in full by assumption of such
Claim by NewSCC, with the legal, equitable and
contractual rights to which such Claim
entitles the holder of such Claim unaltered.
Class 3 is unimpaired and is deemed to accept
the Plan.
Class 4 (Pension Plan Claims)
----------------------------
Class 4 shall consist of all Pension Plan
Claims (Claims arising from or related to any
qualified pension plan sponsored or maintained
by any of the Debtors, including without
limitation, Claims by or on behalf of any SCC
Retirement Plan for contributions due from any
Debtor, other Claims relating to any actual or
alleged unfunded benefit liabilities, unpaid
minimum funding contributions, or unpaid
premiums, or for any interest or penalty
allegedly owed upon or by reason of any such
Claims and any and all Claims against a Debtor
in its capacity as administrator or fiduciary
of an SCC Retirement Plan) to the extent such
Claims are not matured by the termination of
any SCC Retirement Plan by the Pension Benefit
Guaranty Corporation ("PBGC") or the Debtors.
On August 7, 1996, SCC gave notice to the PBGC
and its present and former employees of its
intention to terminate the Smith Corona
Corporation Hourly Employees' Retirement Plan
and SCM Office Supplies, Inc. Salaried
Employees' and Hourly Employees' Retirement
Plan, and the Smith Corona Corporation Sala-
ried Employees' Retirement Plan (collectively,
the "Defined Benefit Plans").
Not Impaired Under the Plan
---------------------------
Each Pension Plan Claim shall be satisfied
in full: (i) for Claims arising from or
related to the Defined Benefit Plans, to the
extent that the Bankruptcy Court does not
terminate the Defined Benefit Plans, by leav-
ing the legal, equitable and contractual
rights to which such Claim entitles the holder
of such Claim unaltered; and (ii) for Claims
arising from or related to the Smith Corona
Corporation Retirement Savings and Investment
Plan (the "Defined Contribution Plan"), by the
assumption of such Claims by NewSCC, with the
legal, equitable and contractual rights to
which such Claim entitles the holder of such
Claim unaltered. To the extent any Claim
arising from any SCC Retirement Plan,
including any Claim against SCC as fiduciary
or administrator of such SCC Retirement Plan,
is matured by a termination of any SCC Retire-
ment Plan by the PBGC or the Debtors, such
Claims shall be reclassified as Administrative
Claims, Priority Tax Claims and/or General
Unsecured Claims, as determined by the
Bankruptcy Court or as may be agreed to by
NewSCC and the holder of such Claims. Class 4
is unimpaired and is deemed to
accept the
Plan.
Class 5 (Retiree Health and Insurance Claims)
--------------------------------------------
Class 5 shall consist of all Retiree Health
and Insurance Claims (Claims for health and
life insurance benefits for retired employees
of any Debtor under any SCC Health and Welfare
Plan).
Not Impaired Under the Plan
---------------------------
Each Retiree Health and Insurance Claim in
Class 5 shall be satisfied in full by the
assumption of such Claims by NewSCC, with the
legal, equitable and contractual rights to
which such Claim entitles the holder of such
Claim unaltered. Class 5 is unimpaired and is
deemed to accept the Plan.
Class 6 (Allowed Warranty and Contract Claims)
---------------------------------------------
Class 6 shall consist of any Claim (i) for
breach of warranty based upon contract and not
upon tort with respect to any product sold by
the Debtors, (ii) in connection with customer
promotional programs or (iii) relating to
accounts receivable and accrued liabilities
incurred in the ordinary course of business
arising on or after the Petition Date (other
than certain Administrative Claims and Claims
under the Chemical DIP Loan Agreement).
Not Impaired Under the Plan
---------------------------
Each Warranty and Contract Claim in Class 6
shall be satisfied in full by the assumption
of such Claims by NewSCC, with the legal,
equitable and contractual rights to which such
Claim entitles the holder of such Claim
unaltered. Class 6 is unimpaired and is deemed
to accept the Plan.
Class 7 (Allowed Reclamation Claims)
------------------------------------
Anticipated to be approximately $167,000 if
there is a finding that SCC was insolvent on
the Petition Date or if it is otherwise
resolved that SCC was insolvent on the
Petition Date, or $0 if there is a finding
that SCC was solvent on the Petition Date or
if it is otherwise resolved that SCC was
solvent on the Petition Date or if a finding
or other resolution that SCC was insolvent is
not made or reached by the date which is one
(1) year after the Effective Date. Class 7
shall consist of all Claims pursuant to
section 546(c) of the Bankruptcy Code for
reclamation of goods shipped to the Debtors
prior to the Petition Date; provided, however,
that any Disputed Reclamation Claim that has
not been Allowed by the date which is one (1)
year after the Effective Date will no longer
be deemed a Reclamation Claim but instead will
be deemed a General Unsecured Claim unless the
Bankruptcy Court orders otherwise.
Impaired Under the Plan
-----------------------
Each holder of an Allowed Reclamation Claim
in Class 7 which has not been satisfied
prior to the Effective Date shall be paid in
full in Cash on the Effective Date (or
otherwise satisfied in accordance with its
terms) by NewSCC, at such times or times as
provided in Section 10.1 of the Plan. Class 7
is impaired and is entitled to vote on the
Plan.
Class 8 (Allowed General Unsecured Claims)
------------------------------------------
Anticipated to be approximately $25,443,000.
Class 8 shall consist of all Allowed Claims
not included in any other Class and not
secured by a charge against or interest in
property in which the Debtors' estate has an
interest, including any Allowed Unsecured
Deficiency Claim and any Claim in favor of any
Person arising from a judgment against such
Person in any Avoidance Action (if the effect
of such judgment gives such person an Allowed
General Unsecured Claim).
Impaired Under the Plan
-----------------------
Each holder of an Allowed General Unsecured
Claim in Class 8 shall receive (i) its Pro
Rata Share of the Unsecured Class Cash, which
shall consist of $10,780,000 less the
aggregate amount of Cash paid to holders of
Allowed Convenience Class Claims plus the Net
Avoidance Action Proceeds plus the Excess Rec-
lamation Funds plus interest on such Cash
prior to its distribution and (ii) one (1)
share of NewSCC Common Stock for each $6.00 in
amount of such holder's Allowed General
Unsecured Claim (which shares in the aggregate
shall constitute 85% of the total shares of
NewSCC Common Stock which are issued pursuant
to the Plan, determined on a fully-diluted
basis, not including the effect of the
exercise of any of the NewSCC Warrants), each
at such time or times as provided in Article
10 of the Plan. Class 8 is impaired and is
entitled to vote on the Plan.
Class 9 (Convenience Class Claims)
----------------------------------
Anticipated to be approximately $230,000.
Class 9 shall consist of Allowed General
Unsecured Claims of $1,500 or less, and
Allowed General Unsecured Claims voluntarily
reduced by their holders to $1,500.
Impaired Under the Plan
-----------------------
Holders of Class 9 Convenience Class Claims
shall receive 60% of the amount of such
Claim in Cash, at such time or times as
provided in Section 10.1 of the Plan,
provided, however, that if Class 9 votes to
reject the Plan, all Allowed Convenience Class
Claims shall be treated as Allowed General
Unsecured Claims, and shall be treated in
accordance with Section 5.11 of the Plan.
Class 9 is impaired and is entitled to vote on
the Plan.
Class 10 (SCC Common Stock)
--------------------------
Class 10 shall consist of the shares of
common stock of SCC, $.01 par value,
outstanding on August 15, 1996.
Impaired Under the Plan
-----------------------
Registered Holders shall receive one (1)
NewSCC Warrant for each ten (10) shares of
SCC Common Stock, which NewSCC Warrant shall
entitle the holder to purchase one (1) share
of NewSCC Common Stock at an exercise price
determined as set forth in the NewSCC Warrant
Agreement, exercisable during the period
commencing on the date occurring six (6)
months after the Effective Date and ending on
the date occurring two (2) years after the
Effective Date. All shares of SCC Common Stock
will be canceled, annulled, and extinguished
on the Effective Date. Class 10 is impaired
and is deemed to reject the Plan.
Class 11 (Other Equity Interests)
---------------------------------
Class 11 shall consist of any Equity
Interests in any of the Debtors represented by
any class or series of capital stock issued by
any Debtor prior to the Petition Date (other
than the SCC Common Stock) and any warrants,
options, or rights to purchase any capital
stock of the Debtors or any Stockholder
Actions in respect of the Equity Interests, to
the extent provided in section 510(b) of the
Bankruptcy Code.
Impaired Under the Plan
-----------------------
Holders of Class 11 Equity Interests will
not be entitled to receive or retain any
property under the Plan on account of such
Equity Interests. All Class 11 Equity
Interests will be canceled, annulled, and
extinguished on the Effective Date. Class 11
is impaired and is deemed to reject the Plan
pursuant to section 1126(g) of the Bankruptcy
Code.
The following table summarizes the recoveries that might be
available to holders of Claims under the Chemical DIP Loan
Agreement, Administrative Claims, Priority Tax Claims, Priority
Wage Claims, Secured Claims and Reclamation Claims (collectively,
the "Priority Claims") and General Unsecured Claims and
Convenience Class Claims under certain scenarios and assumptions.
THE TABLE IS INCLUDED FOR ILLUSTRATIVE PURPOSES ONLY, AND IS NOT
INTENDED AS A FORECAST OR PREDICTION OF ACTUAL RECOVERIES BY
CREDITORS.
SUMMARY OF THE CLASSIFICATION AND TREATMENT OF ALLOWED CLAIMS AND
INTERESTS AND RECOVERIES THAT MIGHT BE AVAILABLE TO CERTAIN
CREDITORS
($000's)
[Download Table]
Claim Amount (1)
Estimated Allowed
Plan Class Class Description Range
---------- ----------------- ---------------------
Superiority Chemical DIP Loan $500 - $500
Administrative Allowed Administrative
Professional Fees $3,000 - $3,000
Rents and Expenses $500 - $500
Severance $50 - $50
Tax Allowed Priority Tax $3,700 - $3,700
Class 1 Allowed Priority Wage $45 - $45
Class 2 Allowed Secured $15 - $15
Class 3 Allowed Environmental $3,377 - $3,377
Class 4 Pension Plan $16,684 - $- (3)
Class 5 Retiree Health & Insurance $12,754 - $12,754
Class 6 Allowed Warranty & Contract $- - $-
Class 7 Allowed Reclamation $167 - $167
Class 8 Allowed General Unsecured $25,443 - $42,127 (3)
Class 9 Allowed Convenience Class $230 - $230
Class 10 SCC Common Stock $- - $-
Class 11 Other Equity Interests $- - $-
[Enlarge/Download Table]
Treatment
Estimated Value of Total Value
Stock Distribution of Distributions
Plan Class Class Description Cash Low High Low High
---------- ----------------- ------ --------------------- ------------------
Superiority Chemical DIP Loan $500 $- $- $500 $500
Administrative Allowed Administrative
Professional Fees $3,000 $- $- $3,000 $3,000
Rents and Expenses $500 $- $- $500 $500
Severance $50 $- $- $50 $50
Tax Allowed Priority Tax $3,700 (2) $- $- $3,700 $3,700
Class 1 Allowed Priority Wage $45 $- $- $45 $45
Class 2 Allowed Secured $15 $- $- $15 $15
Class 3 Allowed Environmental $- $- $- $- $-
Class 4 Pension Plan $- $- $- $- $-
Class 5 Retiree Health & Insurance $- $- $- $- $-
Class 6 Allowed Warranty & Contract $- $- $- $- $-
Class 7 Allowed Reclamation $167 $- $- $167 $167
Class 8 Allowed General Unsecured $10,642 (4) $0 (5) $20,400 (5) $10,642 (6) $31,042 (6)
Class 9 Allowed Convenience Class $138 $- $- $138 $138
Class 10 SCC Common Stock $- $- $- $- $-
Class 11 Other Equity Interests $- $- $- $- $-
[Download Table]
Treatment
------------------------------------------
Recovery
Plan Class Class Description Low High Consideration
---------- ------------------------- ------------------- --------------
Superiority Chemical DIP Loan 100% 100% Cash
Administrative Allowed Administrative
Professional Fees 100% 100% Cash
Rents and Expenses 100% 100% Cash
Severance 100% 100% Cash
Tax Allowed Priority Tax 100% 100% Cash and Note
Class 1 Allowed Priority Wage 100% 100% Cash
Class 2 Allowed Secured 100% 100% Cash
Class 3 Allowed Environmental 0% 0% Assumed
Class 4 Pension Plan 0% N/A Low-Assumed/
High-Terminates
Class 5 Retiree Health & Insurance 0% 0% Assumed
Class 6 Allowed Warranty & Contract N/A N/A Cash
Class 7 Allowed Reclamation 100% 100% Cash
Class 8 Allowed General Unsecured 41.8% (7) 73.7% (7) Cash and Equity
Class 9 Allowed Convenience Class 60% 60% Cash
Class 10 SCC Common Stock N/A N/A NewSCC Warrants
Class 11 Other Equity Interests N/A N/A No consideration
(1) Claims as of June 1, 1996 (includes projected claims).
(2) Includes $2,800 tax note.
(3) Reflects terminated Defined Benefit Plans. Includes
$16,684 of termination liability, which is the book amount
of such liability and does not reflect the amount of the
actual Claim that may be allowed.
(4) Plus Net Avoidance Actions Proceeds (which cannot be
determined at this time).
(5) Zero equity value reflects the Low range of equity
values under the Defined Benefit Plans assumption
scenario. The equity value of $20,400 reflects the High
range of equity values under the Defined Benefit Plans
termination scenario. Estimated Value of Stock
Distribution under other scenarios falls between the High
and Low range.
(6) Low Total Value of Distributions of $10,642 is the cash
plus zero equity value. High Total Value of Distributions
of $31,042 is the cash plus equity value of $20,400
reflecting high equity valuation under the Defined Benefit
Plans termination scenario. Total Value of Distribution
under other scenarios falls between the High and Low
range.
(7) The Low Recovery represents cash plus zero equity value
over the lower (Defined Benefit Plans assumption) claims
base. The High Recovery represents the cash plus the high
end of the equity value range under either the Defined
Benefit Plans assumption or Defined Benefit Plans
termination scenario; the High Recoveries under either
scenario are not materially different as the increase in
the claims base triggered by a Defined Benefit Plans
termination yields an increase in the valuation of the
equity. Estimated Recovery under other scenarios falls
between the High and Low range.
C. Creditors Entitled to Vote
A ballot is enclosed for the use of Creditors entitled to
vote on the Plan. Only Creditors in Classes 2, 7, 8 and 9
holding Allowed Claims are entitled to vote on the Plan.
Holders of Claims in Class 8 who voluntarily elect to reduce
such claims to $1,500 for purposes of inclusion in Class 9
shall be deemed to vote in favor of the Plan. As set forth in
Section 9.1 of the Plan, Claims which have not been objected
to, or which have been allowed by Final Order of the
Bankruptcy Court, or which have been temporarily allowed for
voting purposes, are entitled to vote. Creditors holding
Disputed Claims who wish to vote on the Plan must seek an
order from the Bankruptcy Court temporarily allowing such
Claims for voting purposes, which order must be entered prior
to October 18, 1996, which is the deadline for submitting
ballots on the Plan. See "Introduction -- Instructions
Regarding Voting, Confirmation and Objections to Confirmation
-- Voting Instructions -- Returning Ballots".
Classes 1, 3, 4, 5 and 6 are unimpaired under the Plan. In
accordance with section 1126(f) of the Bankruptcy Code, the
holders of Claims in such Classes are deemed to have accepted
the Plan, and their votes on the Plan are not being solicited.
Holders of Class 10 and 11 Equity Interests are deemed to have
rejected the Plan and are not entitled to vote on the Plan.
The Plan will be confirmed if it is accepted by the
requisite majorities of each Class of Claims entitled to vote
(provided that the Debtors may "cramdown" over the deemed
rejections of Class 10 and 11 or the actual rejections of
Classes 2, 7, 8 or 9 as discussed in "Cramdown and Withdrawal
of Plan" below) and all other conditions to confirmation are
met by the Debtors. The requisite majority of a Class of
creditor Claims is at least two-thirds in dollar amount and
more than one-half in number of Allowed Claims that are
actually voted.
D. Cramdown and Withdrawal of Plan
In the event that any Class of impaired Claims or Equity
Interests votes to reject the Plan (or is deemed to have
rejected
the Plan), the Debtors may, in the case of Classes 2, 7, 8 and 9
(and will, in the case of Classes 10 and 11): (a) seek to effect
a "cramdown" on such dissenting Class and all Classes that are
junior to such dissenting Class under section 1129(b) of the
Bankruptcy Code; or (b) withdraw the Plan.
If a Class of any Debtor votes against the Plan, and the Plan
is not withdrawn, the terms of the Plan may be modified by the
Debtors to effect a "cramdown" on such dissenting Class by
reallocating value from all Classes at and below the level of
the
objecting Class to all impaired non-consenting senior Classes
until such impaired senior Classes are paid in accordance with
the absolute priority rule of section 1129(b) of the Bankruptcy
Code. The Debtors may make such modifications or amendments to
the Plan and such modifications or amendments shall be filed
with
the Bankruptcy Court and served on all parties in interest
entitled to receive notice of the hearing on the confirmation of
the Plan at least five days prior to such hearing or on such
other date as is specified by an order of the Bankruptcy Court.
Subject to the conditions set forth in the Plan, a determination
by the Bankruptcy Court that the Plan is not confirmable
pursuant
to section 1129 of the Bankruptcy Code shall not limit or affect
the Debtors' ability to modify the Plan to satisfy the
provisions
of section 1129 of the Bankruptcy Code. See "Confirmation of the
Plan -- Non-acceptance and Cramdown" below.
E. Instructions Regarding Voting, Confirmation and Objections to
Confirmation
1. Voting Instructions
a. Ballots
In voting for or against the Plan, please use only the ballot
sent to you with this Disclosure Statement. If you are a holder
of a Class 2, 7, 8 or 9 Claim and did not receive a ballot or if
your ballot is damaged or lost call DONLIN, RECANO & COMPANY,
INC. (1-800-489-7444). If you have any questions concerning the
voting procedures, call DONLIN, RECANO & COMPANY, INC.
(1-800-489-7444).
b. Returning Ballots
You should complete and sign the enclosed ballot in accordance
with the instructions provided with the ballot. In order to be
counted, ballots must be received on or before October 18, 1996
at 4:30 p.m., Prevailing Eastern Time, at the address indicated
on the ballot. Ballots should be returned in the envelopes which
are provided with the ballots.
2. Objections to Confirmation
Any objections to confirmation of the Plan setting forth with
particularity the basis therefor, must be filed with the Clerk
of
the Bankruptcy Court and served upon (a) Young, Conaway,
Stargatt
& Taylor, P.O. Box 391, 11th Floor, Rodney Square North,
Wilmington, Delaware 19899-0391, Attention: Laura Davis Jones,
Esq.; (b) Winthrop, Stimson, Putnam & Roberts, One Battery Park
Plaza, New York, New York 10004, Attention: Richard L. Epling,
Esq.; (c) The Office of the United States Trustee, Suite 950
West, Curtis Center, 601 Walnut Street, Philadelphia,
Pennsylvania 19106, Attention: John D. McLaughlin, Esq.; (d)
Willkie Farr and Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022, Attention: Tonny K. Ho, Esq.;
(e) O'Melveny & Myers, One Citicorp Center, 153 East 53rd
Street,
New York, New York 10022, Attention: Joel B. Zweibel, Esq.; and
(f) Bayard, Handelman & Murdoch, P.A., 902 Market Street, 13th
Floor, P.O. Box 25130, Wilmington, Delaware 19801, Attention:
Neil B. Glassman, Esq., in such manner as will cause such
objections to be received and filed on or before October 18,
1996
at 4:30 p.m., Prevailing Eastern Time.
3. Confirmation Hearing
A hearing on confirmation of the Plan has been scheduled to be
held before the Honorable Helen S. Balick, United States
Bankruptcy Judge, in the United States Bankruptcy Court of the
District of Delaware, Marine Midland Plaza, 824 Market Street,
Wilmington, Delaware, on October 31, 1996 at 2:00 p.m. of that
day. Announcement of the adjournment of such hearing, if any,
may
be made in writing or in open court. No further written notice
is
required to be sent to Creditors or parties in interest.
NO REPRESENTATIONS CONCERNING THE DEBTORS OR THEIR BUSINESS OR
FUTURE OPERATIONS, OTHER THAN THOSE SPECIFICALLY SET FORTH
HEREIN, ARE AUTHORIZED BY THE DEBTORS.
ARTICLE 2
BACKGROUND INFORMATION REGARDING DEBTORS
A. History of the Debtors' Businesses
SCC's typewriter and personal word processor business traces
its origins back to the 1880's with the development of office
typewriters. SCC introduced the world's first portable electric
typewriter in 1957 and, for the next decade, SCC had the only
portable electric typewriter available in the marketplace. In
1973, SCC introduced its revolutionary cartridge ribbon system,
which is still used today. Beginning in 1979, SCC moved into
electronics with major research and development efforts and, in
1981, introduced its first electronic product to the
marketplace.
During the early 1980's, as the market shifted to electronic
typewriters, Japanese manufacturers became a significant factor
in the world marketplace. In order to compete effectively,
between 1984 and 1986 SCC developed and implemented a major
business restructuring of its typewriter operations which
resulted in substantially reduced manufacturing costs, a
streamlined product line, a 50% reduction in worldwide
employment
and the consolidation of certain of its United States
operations.
In 1985, SCC developed and introduced the industry's first
PWPs, and, in 1989, SCC introduced the industry's first laptop
PWP.
In mid-1992, Hulse ceased to do business as a going concern and
closed its plant and manufacturing facilities. The building
which
housed Hulse's operations was sold in late 1992 in a liquidating
sale. Prior to its liquidation, Hulse had manufactured typeface
for typewriters and mechanical printing devices.
On July 5, 1994 and November 4, 1994, SCC sold substantially
all the assets and liabilities of OSI and SCC LI (formerly known
as Histacount Corporation, "Histacount"), respectively, two of
its wholly-owned subsidiaries. Business operations of these two
entities primarily consisted of the manufacture and distribution
of office supplies and customized printed products,
respectively.
As a result of these dispositions, SCC currently consists of one
business segment -- the design, manufacture and distribution of
typewriters, PWPs and related accessories.
B. Description of SCC
1. Corporate Structure of SCC
The present corporate structure of SCC dates back to 1985 when
SCC was incorporated in the State of Delaware. Prior to 1986,
the
businesses of SCC were operated by SCM Corporation ("SCM") which
was acquired by HM Holdings, Inc. ("Hanson"), a subsidiary of
Hanson PLC, in March 1986. At the time it was acquired, SCM
consisted of a number of businesses, including the current
businesses of SCC and businesses in the chemical, paper and food
industries. Although Hanson owned the businesses of SCC through
various subsidiaries, the typewriter and PWP operations were
managed as an integrated business. On August 3, 1989, SCC
completed a registered public offering of 14,750,000 shares of
common stock (the "Common Stock") in the United States and
abroad. In connection with the offering, Hanson initiated a
series of transactions to combine the electronic typewriter, PWP
and office supplies business under a single parent entity being
SCC. As described below in "SCC's Operations," SCC currently
conducts manufacturing, distribution and sales operations
through
a number of domestic and international wholly-owned non-debtor
subsidiaries.
2. Capital Structure of SCC
a. Equity
SCC has 90,000,000 authorized shares of Common Stock, par value
$.01 per share. As of May 8, 1996, 30,250,000 shares of SCC's
Common Stock were issued and outstanding. Of the issued and
outstanding shares of Common Stock, 14,480,000 shares (47.9%)
are
held by an affiliate of Hanson and the remaining 15,770,000
shares (52.1%) are held by other persons.
SCC also has 10,000,000 authorized shares of preferred stock
(the "SCC Preferred Stock"), par value $.01 per share. As of the
date of this Disclosure Statement, no shares of SCC Preferred
Stock have been issued or are outstanding.
b. Debt
At the Petition Date, the Debtors had total liabilities
determined under generally accepted accounting principles of
approximately $105.1 million, of which approximately $17.4
million was comprised of borrowings under the Amended and
Restated Credit Agreement (as hereinafter defined) (exclusive of
accrued and unpaid interest). In addition, there was
approximately $1.0 million in outstanding letters of credit
under
the Amended and Restated Credit Agreement as of the Petition
Date.
On June 9, 1995, SCC announced that it was in technical default
of the Amended and Restated Credit Agreement. See "-- Events
Leading up to Chapter 11 Filings" below. Additionally, SCC's
Chapter 11 filing under the Bankruptcy Code automatically
accelerated the maturity of all amounts borrowed under the
Amended and Restated Credit Agreement. The Chapter 11 filing,
however, also stayed the Banks from enforcing such acceleration.
3. SCC's Operations
a. Capsule View of Intracompany Operations
SCC designs, manufactures and sells its product line of
portable and compact electronic typewriters, PWPs and related
accessories and supplies through a network of wholly-owned
manufacturing and sales subsidiaries. SCC's foreign
manufacturing
subsidiary in Mexico transforms inventory into finished products
which are then sent to both a U.S. distribution center and SCC
wholly-owned sales/distribution subsidiaries.1 SCC foreign sales
subsidiaries are located in Canada, Australia,2 the United
Kingdom, France, Germany and Belgium.
As the parent entity of these manufacturing and sales
subsidiaries, SCC utilizes a system of intracompany bank
transfers to coordinate and finance this complex process which
includes delivery of inventory and equipment to manufacturing
subsidiaries, manufacture of finished products, and subsequent
distribution of products to its U.S. distribution centers and
SCC wholly-owned sales/distribution subsidiaries.
b. Manufacturing and Distribution Operations
In July 1992, in order to maintain SCC's leadership as a
low-cost
producer in a highly competitive worldwide business, the
Board of Directors approved and SCC announced a plan to phase
out SCC's manufacturing operations in Cortland, New York and
relocate them to a new facility in Mexico. SCC implemented this
relocation plan in phases. In early 1993, assembly line operations were
moved from Cortland to a temporary location in Mexico, while
site selection activities for a permanent facility were progressing.
The original estimate for completion of the relocation was one
year; heavy spring rainfall in 1993 and SCC's reevaluation of
the decision to either lease or purchase a facility, however,
delayed the process. By the Fall of 1994, SCC had essentially completed
the relocation of the entire manufacturing operation from
Cortland into a permanent leased facility in Mexico.
As a result of the relocation plan, SCC absorbed $16.5 million
in restructuring charges during the fiscal year ended June 30,
1993 ("Fiscal 1993"), of which approximately $3.0 million was
non-cash in nature. The annual savings originally anticipated
from the plan were not realized in Fiscal 1994, as cost of sales
continued to reflect the higher Cortland manufacturing labor
costs. In Fiscal 1995, however, the relocation plan resulted in
lower manufacturing costs of approximately $15.0 million
annually, primarily due to lower labor costs in Mexico.
As of the Petition Date, SCC's foreign manufacturing operations
were located in Mexico, Singapore and Indonesia. Over the past
few years, SCC has faced intense competition from foreign
producers. Consequently, SCC announced a major restructuring
plan (the "Restructuring") on May 8, 1995 pursuant to which SCC's
typewriter manufacturing would be relocated from its Singapore
and Batam Island, Indonesia facilities to its Mexico facility.
Upon completion of the Restructuring, Mexico became the only
site for SCC manufacturing operations. SCC ceased production in
Singapore and Batam Island as of mid-November 1995, and
completed the process of relocating certain equipment to Mexico where
typewriter production commenced in December, 1995.
SCC placed its Singapore facility and the underlying land lease
up for sale following the Petition Date, and the sale of the
Singapore facility, including the leasehold interest of SCC's
wholly-owned Singapore subsidiary, SCPL, to ST Computer Systems
and Services Limited, a subsidiary of Singapore Technologies
Inc., took place on February 8, 1996. The Singapore sale
resulted in net proceeds to SCC of approximately $21.1 million and
resulted in a pretax gain for SCC of approximately $17.8
million, most of which was recorded in the third quarter of the fiscal
year ending June 30, 1996 ("Fiscal 1996"). See "-- Significant
Events During Chapter 11 Case -- Sale of Certain Assets" below.
The Batam Island facility lease expired December 26, 1995. In
addition, all manufacturing equipment at the Singapore and Batam
Island facilities, which was not transferred to Mexico, was sold
resulting in proceeds of approximately $2.3 million.
The Restructuring resulted in the termination of approximately
1,300 workers in Singapore and Batam Island. Original
expectations were to replace these workers with approximately
600 additional workers in Mexico, which would have resulted in
approximately $10.0 million pretax annual savings, primarily
through lower labor costs and --------------- 1 SCC's Singapore
subsidiary, Smith Corona Private Limited ("SCPL"), sold a
significant portion of its assets, including its factory
leasehold interest, to ST Computer Systems and Services Limited,
a subsidiary of Singapore Technologies, Inc., on February 8,
1996. See "-- SCC's Operations -- Manufacturing and Distribution
Operations" and "Background Information Regarding Debtors --
Significant Events During Chapter 11 Case -- Sale of Certain
Assets" below.
2 SCC's Australian subsidiary is currently concluding a
liquidation of its assets under the supervision of an
Administrator. See "Background Information Regarding Debtors
-- Significant Events During Chapter 11 Case --
Administration of SCC Australia" below.
greater utilization of the Mexico facility. Due to lower than
expected volumes, however, the need for replacement workers
was not warranted.
In addition to the relocation of typewriter manufacturing to
Mexico, as part of the Restructuring SCC has also eliminated
approximately 180 support positions within research and
development, finance, service, distribution, selling and
marketing in SCC's Cortland, New York and New Canaan,
Connecticut locations. Approximately $10.0 million in
additional annual pretax savings are expected from elimination
of these support positions. These reductions were completed by
the end of the first quarter of Fiscal 1996.
As a result of these actions, SCC recorded a pretax charge
of approximately $14.9 million in the fourth quarter of Fiscal
1995, of which approximately $1.9 million represents primarily
non-cash machinery and equipment asset write-offs, and the
remainder relates to employee severance. Additionally,
approximately $2.0 million of pretax costs (originally
estimated to be approximately $6.0 million), primarily
relating to the move of machinery and equipment and
renovations, are being recognized as charges to operations
incurred during Fiscal 1996.
c. Marketing, Sales and Distribution
In the United States, SCC distributes its products through
more than 8,000 outlets in all major channels of distribution,
including: (i) national retail chain stores, such as
Montgomery Ward, Sears and Wal-Mart; (ii) warehouse clubs such
as Price CostCo., Sam's and BJ Wholesale; (iii) catalog
merchandisers, such as Service Merchandise; (iv) national
television and appliance dealers, such as Lechmere and Nobody
Beats the Wiz; (v) office superstores, such as Staples, Office
Max and Office Depot; (vi) office equipment dealers; (vii)
regional discount stores, such as FedCo and Caldor; and (viii)
the United States military exchanges. SCC does not enter into
long-term contracts with its customers and there can therefore
be no assurance that SCC will continue to receive sales
revenues from any particular source.
SCC's typewriter and PWP products are serviced in the United
States by SCC's factory service center and at approximately
400 factory-appointed service stations. The service center and
stations employ trained technicians, maintain parts inventory
and perform warranty and other repairs.
Internationally, SCC also conducts sales activities in
Canada, the United Kingdom, the Benelux countries, France,
Germany and in other international markets. The channels of
distribution in the international markets are similar to those
in the United States market and include national retail
chains, catalog merchandisers, department stores, office
equipment dealers, discount stores, stationers and direct mail
accounts. In other international markets, SCC currently has
approximately 42 distributors serving the Far East, Latin
America, Europe and the Caribbean. SCC's results of operations
are subject to the risks of doing business abroad, including
currency exchange rate fluctuations, nationalization,
expropriation, limits on repatriation of funds and other risks
associated with economic or political uncertainty in countries
in which significant sales are made or manufacturing
operations are located.
Payment terms granted to customers reflect general practices
in the industry. Terms vary with product and competitive
conditions, but generally require payment within 30 to 90
days. Historically, bad debts have been insignificant. Sales
to SCC's largest customer, Wal-Mart Stores, Inc., amounted to
14.0%, 12.2% and 12.3% of consolidated net sales during Fiscal
1995, 1994 and 1993, respectively, and Wal-Mart Stores, Inc.
was the only customer responsible for more than 10% of net
sales. Substantially all of SCC sales are to customers who are
not affiliated with SCC.
SCC's business in the aggregate is not seasonal, although
certain products sell more heavily in gift-giving seasons such
as the Christmas and school graduation seasons.
d. Competition
The portable and compact electronic typewriter and PWP
business is highly competitive. Competition focuses on price,
product features and product quality. SCC has recently faced,
and continues to face, competition from various Japanese and
other companies, including, among others, Brother
International Corporation, which manufacture portable and
compact electronic typewriters and PWPs, some of which may
have greater financial resources than SCC. SCC also faces
competition from companies which manufacture office
typewriters and word processors, though these manufacturers
currently serve a somewhat different segment of the industry
than SCC. As the portable and compact electronic typewriter
and PWP market has continued to mature, competition has
increased. To remain competitive, SCC has been required to
reduce the prices of its typewriters and PWPs. Unless these
price reductions are offset by corresponding reductions in
manufacturing and other costs, SCC's results of operations
will continue to be adversely affected and its ability to
remain competitive severely restricted.
e. Patents, Trademarks and Licenses
SCC owns or licenses a number of patents and patent
applications which are valuable to its business. SCC is the
owner of a number of trademarks, and U.S. and foreign
registrations thereof, the most important of which is the
trademark, "Smith Corona."
f. Research and Development
SCC's expenditures for research and development activities
were approximately $7.2 million, $8.0 million and $10.0
million for Fiscal 1995, 1994 and 1993, respectively. Research
and development expenses were concentrated primarily in
improving product manufacturing, integration of
products/technology to SCC's product lines and development of
new products such as software architecture for PWPs. As part
of the Restructuring, research and development costs are
expected to significantly decline in the future, being limited
primarily to manufacturing support.
g. Raw Materials
SCC's products are manufactured from a wide variety of
electronic components, plastics, metals, paper and other
materials. SCC generally is not dependent on any one source
for the materials or purchased components essential to its
business and believes that such materials and components will
be available from a variety of sources in adequate quantities
to meet anticipated production schedules.
h. Employees
As of the Petition Date, SCC (together with its non-debtor
subsidiaries) employed approximately 2,300 people. Management
considers its employee relations to be good. As of June 30,
1996 the number of SCC's employees decreased to approximately
1,100, primarily as a result of Restructuring actions. See "--
SCC's Operations -- Manufacturing and Distribution Operations"
above.
i. Officers and Directors
(I) Recent Changes in Management
During 1995-96, the following changes in senior management
of SCC took place.
On March 24, 1995, G. Lee Thompson, then Chairman and Chief
Executive Officer of SCC, retired and was replaced by Robert
Van Buren, a member of the Board of Directors. Effective June
3, 1995, Mr. Van Buren was elected President, succeeding
William D. Henderson upon his termination. On July 1, 1995,
Ronald F. Stengel was elected President and Chief Executive
Officer of SCC, succeeding Mr. Van Buren in those positions
only. Also on July 1, 1995, Mr. Stengel and Mr. Thomas A.
Cawley were elected to SCC's Board of Directors. On July 26,
1995, Mr. Cawley was elected Vice President/Administration of
SCC.
Thomas C. DeFazio, Executive Vice President and Chief
Financial Officer of SCC, and Manfred E. Eckhardt, Vice
President and Treasurer of SCC, retired effective March 31,
1995 and June 30, 1995, respectively. Succeeding Mr. DeFazio,
John A. Piontkowski was elected Vice President/Finance and
Controller of SCC on March 28, 1995. Mr. Piontkowski held
these positions until June 21, 1995, when he was elected
Senior Vice President, Chief Financial Officer and Treasurer
of SCC. Mr. Piontkowski relinquished his Treasurer position on
May 16, 1996. On July 26, 1995, Martin D. Wilson was elected
Controller, succeeding Mr. Piontkowski. Mr. Wilson was elected
Vice President and Controller on May 16, 1996. On the same
date, Gary J. Lynch was elected Vice President and Treasurer.
In October, 1995, Robert Riddell resigned as Vice
President/Marketing. On November 22, 1995, Doris J. MacRae
resigned as Vice President/Product Development. W. Michael
Driscoll, Vice President of Operations and Engineering,
resigned effective December 15, 1995. On January 26, 1996,
Michael W. Chernago was elected Vice President of Operations,
James B. McCormick was elected Vice President/Supplies
Division, Eric James Cleveland was elected Vice President/West
Coast Operations, Anthony A. Bartalone was elected Vice
President/Engineering, and Anthony Giordano was elected Vice
President/Taxes. In March, 1996, Mark A. Alexander resigned as
a Director, Anthony A. Bartalone resigned as Vice
President/Engineering, and Anthony Giordano resigned as Vice
President/Taxes.
(II) Directors and Executive Officers
The officers of SCC are elected by and serve at the pleasure
of the Board of Directors. The directors and executive
officers of SCC, their respective positions and ages at June
30, 1996 are as follows:
[Download Table]
Name Position Age
Robert Van Buren . . . Chairman of the Board 70
and Director
Ronald F. Stengel . . President, Chief Executive 48
Officer and Director
John A. Piontkowski. . Senior Vice President 41
and Chief Financial Officer
Thomas A. Cawley. . . Vice President/Administration 40
and Director
John A. Cutrone . . . . Senior Vice President/Marketing 41
and Sales
Jerry L. Diener. . . . Senior Vice President/Sales 59
George H. Hempstead,III .Director 51
Robert J. Kammerer. . Director 58
John E. Lushefski . Director 39
Alfred N. Scallon . . Vice President/International 44
Operations
Craig C. Sergeant. . Director 49
David P. Verostko. . Vice President/Human Resources 52
Richard R. West. . . . Director 57
Martin D. Wilson. . . Vice President/Controller 36
Eric J. Cleveland . Vice President/West Coast
Operations 55
Gary J. Lynch. . Vice President/Treasurer 45
James B. McCormick . Vice President/Supplies 62
Division
Michael W. Chernago. . Vice President/Operations 50
It is expected that, following the Effective Date, all the
Executive Officers listed above, with the exception of Ronald
F. Stengel, current President, Chief Executive Officer, and
Director, and Thomas A. Cawley, current Vice
President/Administration and Director, will retain their
positions with NewSCC.
SCC is currently in the process of conducting an executive
search to locate a new President and Chief Executive Officer.
Ronald F. Stengel will remain President and Chief Executive
Officer of NewSCC until a qualified applicant is found and
appointed. SCC is also currently in the process of conducting
an executive search for a qualified executive to become Vice
President, Marketing, a newly created position.
On or before the Confirmation Date, the Creditors'
Committee, with the approval of the Debtors, will have named a
new slate of directors who will become directors of NewSCC on
the Effective Date.
Set forth below is information concerning SCC's compensation
of both persons who served as chief executive officer during
Fiscal 1995 and certain other highly compensated executive
officers of SCC.
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
Annual Compensation Long-Term Compensation
Awards Payouts
Other Securities All
Fiscal Annual Restricted Underlying LTIP Other
Year Bonus Compen- Stock Options/SAR's Pay- Compen-
Name and Ending Salary(6) (7) sation(8) Awards (9) (10) outs(11) sation
Principal Position June 30 ($) ($) ($) ($) (#) ($) $
------------------ ------- -------- ------ -------- --------- ------------ -------- -------------
Robert Van Buren(1) 1995 $98,307 - - 0 100,000 0 - (12)
Chairman, Chief 1994 - - - 0 - 0 - (13)
Executive Officer 1993 - - - 0 - 0 -
and President
G. Lee Thompson(2) 1995 270,215 - 1,941 0 60,000 0 185,372(12,14,
Chairman and Chief 1994 360,222 257,250 479 0 50,000 0 10,240 (13)
Executive Officer 1993 350,016 - 756 0 150,000 0 9,957
John A. Cutrone, Jr. 1995 134,500 - - 0 25,000 0 5,640 (12)
Senior Vice President 1994 130,688 40,625 24,134(19) 0 13,000 0 38,772(13,18)
Sales and Marketing 1993 17,500 - - 0 10,000 0 165
John A. Piontkowski 1995 127,000 - - 0 20,000 0 21,547(12,17)
Senior Vice President, 1994 117,000 52,650 56,453(19) 0 24,000 0 102,199(13,18)
Chief Financial Officer 1993 84,167 - - 0 10,000 0 4,988
Treasurer and Assistant
Secretary
W. Michael Driscoll(23) 1995 120,650 - - 0 25,000 0 42 (12)
Vice President - 1994 114,950 57,659 - 0 12,000 0 48 (13)
Operations 1993 110,000 - - 0 25,000 0 32
Jerry L. Diener 1995 118,025 - 4 0 20,000 0 3,950 (12)
Senior Vice President- 1994 132,484 36,138 - 0 10,000 0 3,975 (13)
Sales 1993 112,000 - - 0 25,000 0 3,982
William D. Henderson(4) 1995 277,449 - 3,715 0 50,000 0 20,892(12,21
23)
President and Chief 1994 283,762 173,700 1,257 0 45,000 0 9,228 (13)
Operating Officer 1993 275,712 - 34,876 0 50,000 0 8,670
Thomas C. DeFazio(5) 1995 157,500 - 17,156(20) 0 50,000 0 28,861(12,22
23)
Executive Vice 1994 205,833 126,000 2,075 0 45,000 0 7,923 (13)
President and Chief 1993 200,000 - 1,541 0 80,000 0 7,484
Financial Officer
__________
(1) Mr. Van Buren was elected Chairman and Chief Executive
Officer on March 24, 1995. On July 1, 1995, Mr. Van Buren
resigned as Chief Executive Officer and President, and
Ronald F. Stengel was elected Chief Executive Officer and
President of the Company. Mr. Van Buren remains Chairman
of the Board of SCC.
(2) Mr. Thompson's employment with SCC terminated on March
24, 1995.
(3) Mr. Piontkowski was elected Senior Vice President, Chief
Financial Officer and Treasurer on June 21, 1995. On May
16, 1996, Mr. Piontkowski relinquished his position as
Treasurer.
(4) Mr. Henderson's employment with SCC terminated on June
3, 1995.
(5) Mr. DeFazio's employment with SCC terminated on March
31, 1995.
(6) Amounts shown include compensation deferred under SCC's
Retirement Savings and Investment Plan ("RSIP").
(7) Amounts shown indicate the annual bonus earned by the
executive officers under SCC's Bonus Plan in the fiscal
years shown. SCC pays such bonus amounts to the executive
officers in the subsequent fiscal year.
(8) None of the executive officers, except for Mr. Cutrone
and Mr. Piontkowski during Fiscal 1994 and Mr. DeFazio in
Fiscal 1995, received perquisites or other personal
benefits, securities or property that exceeded the lesser
of $50,000 or 10 percent of such officer's salary and
bonus.
(9) No restricted stock awards have been made since shortly
after the closing of SCC's registered public offering of
common stock in August, 1989. At that time, restricted
shares were awarded to certain key executives pursuant to
the Supplemental Performance Plan ("SPP"), which plan
thereupon terminated. Of the eight executives named in the
Summary Compensation Table only Mr. Thompson was awarded
restricted shares under the SPP. As of the end of Fiscal
1995, Mr. Thompson owned 7,800 restricted shares.
(10) SCC does not grant Stock Appreciation Rights ("SAR's").
(11) SCC has no long-term incentive plans.
(12) Includes matching contributions by SCC under the RSIP for
Messrs. Van Buren, Thompson, Cutrone, Piontkowski,
Driscoll, Diener, Henderson and DeFazio of $0, $3,654,
$5,254, $4,755, $0, $3,950, $4,305 and $3,072,
respectively. Includes net term life insurance premium
payments by SCC for Messrs. Van Buren, Thompson, Cutrone,
Piontkowski, Driscoll, Diener, Henderson and DeFazio of $0,
$5,741, $386, $47, $42, $0, $4,524 and $2,457,
respectively.
(13) Includes matching contributions by SCC under the RSIP for
Messrs. Van Buren, Thompson, Cutrone, Piontkowski,
Driscoll, Diener, Henderson and DeFazio of $0, $4,500, $0,
$3,510, $0, $3,975, $4,704 and $4,647, respectively.
Includes net term life insurance premium payments by SCC
for Messrs. Van Buren, Thompson, Cutrone, Piontkowski,
Driscoll, Diener, Henderson and DeFazio of $0, $5,740,
$471, $47, $48, $0, $4,524 and $3,276, respectively.
(14) Includes amount paid under the Supplemental Executive
Retirement Plan ("SERP") for Mr. Thompson of $18,344.
(15) Includes amount paid under a Severance Agreement for Mr.
Thompson of $97,297.
(16) Includes amount paid under a Severance Agreement for Mr.
Thompson for outplacement assistance of $25,000.
(17) Includes amount paid for mortgage assistance for Mr.
Piontkowski of $16,745.
(18) Includes amounts paid for relocation expenses for Messrs.
Cutrone and Piontkowski of $38,301 and $98,642,
respectively.
(19) Includes taxes paid by SCC for relocation expenses for
Messrs. Cutrone and Piontkowski of $24,134 and $56,453,
respectively.
(20) Includes amount paid under SCC's Executive Medical Plan
of $15,870.
(21) Includes amount paid under a Termination Agreement for
Mr. Henderson of $6,496.
(22) Includes amount paid under a Supplemental Pension Benefit
provision included in the Employment Agreement for Mr.
DeFazio of $7,178.
(23) Includes amounts paid for accrued but unused vacation for
Messrs. Thompson, Henderson and DeFazio of $35,337, $5,567
and $16,154, respectively.
(24) Mr. Driscoll's employment with SCC terminated in
December, 1995.
Hanson Natural Resources Company ("HNRC"), an affiliate of
Hanson, owns 47.9% of the SCC Common Stock, and Hanson has
entered into certain agreements with SCC to indemnify SCC for
certain tax and environmental liabilities pursuant to the terms
of such agreements. See "-- Significant Events During Chapter 11
Case -- Stipulations and Settlements -- Stipulation With New York
State Department of Finance and Taxation" and "-- Environmental
Claims -- Melville Site" below. SCC is not and has not been
during Fiscal 1996 a party to any other transactions of the type
described in Regulation S-K under the Securities Act of 1933 with
directors, executive officers or holders of 5% or more of its
Common Stock.
4. Products
SCC currently designs, manufacturers and sells, both
domestically and internationally, portable and compact electronic
typewriters, PWPs and related accessories and supplies for use in
the home, at school and in small offices. SCC focuses its design
and development of these products on the major desires of
purchasers: ease of use and incorporation of monitors or
displays, as well as a full array of word processing features,
including dictionary spell checkers and grammar features. SCC's
firmly entrenched market base of typewriters and PWPs results in
a substantial accessories and supplies business.
During Fiscal 1994, SCC broadened its product line by selling
facsimile machines, laminators, calculators and product labelers,
all of which are also designed for use at home, at school and in
small offices. As discussed above, SCC intends to further expand
its product line, primarily by sourcing new products from outside
manufacturers. See "Overview of the Debtors and the Plan -- New
Products, Manufacturing and Marketing Strategies".
Only two SCC products accounted for 10% or more of net sales in
any of SCC's last three fiscal years: (i) portable and compact
electronic typewriters, which accounted for 39.7%, 40.6% and
41.3% of net sales in Fiscal 1995, 1994 and 1993, respectively,
and (ii) PWPs, which accounted for 34.5%, 37.1% and 34.7% of net
sales in Fiscal 1995, 1994 and 1993, respectively.
5. Properties
As of April 26, 1996, SCC utilized approximately 827,000 square
feet of space, of which about 535,000 square feet is located in
the United States and about 292,000 square feet is located
outside the United States, primarily in Mexico. Of the total of
827,000 square feet, approximately 422,000 square feet is owned
and the remaining 405,000 square feet is leased. Information with
respect to the principal facilities used by SCC is set forth
below:
[Download Table]
Square Owned/
Location Primary Use Footage Leased
-------------- ---------------- -------- -------
New Canaan, CT.. .Headquarters 27,000 Leased
Cortland, NY. . . Warehousing/Office 422,000 Owned
Toronto, Canada. .Warehousing/Sales 27,000 Leased
Tijuana, Mexico. .Manufacturing 252,000 Leased
San Diego, CA(3) .Warehousing/Office 77,000 Leased
805,000
All other
locations . Warehousing/Sales/Service 22,000 Leased
Total 827,000
__________
(3) SCC is consolidating manufacturing and certain of its East
Coast manufacturing support and distribution operations with
its West Coast distribution operations. In connection
therewith, SCC intends to make certain interior improvements
in this facility whereby approximately 2,000 square feet of
space currently used for warehouse use will be built out for
office use. SCC has negotiated with its landlord to amend the
lease for this facility to provide for: (i) the landlord's
contribution towards SCC's planned interior improvements,
(ii) the leasing of additional space and (iii) the extension
of the expiration of the term of the lease from May 28, 1998
to May 28, 2001. The Bankruptcy Court approved the Debtors'
application for permission to enter into the lease amendment
on July 30, 1996.
See also "-- Significant Events During Chapter 11 Case --
Sale of Certain Assets" below.
Hanson leased a Melville, New York facility, consisting of
100,000 square feet of manufacturing, warehousing and office
space, to SCC's wholly-owned subsidiary, SCC LI (formerly
known as Histacount), for rent of $75,000 per year, payable
monthly, for a term which ended on August 15, 1995. After the
sale of the assets of SCC LI on November 4, 1994, SCC
subleased the facility to HC Delaware Acquisition Corporation,
the purchaser of the SCC LI assets. On May 31, 1995, the
Melville, New York facility and the rights of Hanson under the
lease were sold to USI Realty Corp. ("USI Realty"), a
subsidiary of U.S. Industries, Inc.
C. Pre-Petition Litigation
Certain aspects of SCC's handling and/or disposal of
hazardous substances have been the subject of investigation by
federal and state regulatory authorities, or are the subject
of lawsuits filed by such authorities or by private parties.
At June 30, 1995 and 1994, SCC had recorded liabilities of
approximately $4.2 million and $3.3 million, respectively,
related to environmental matters. Because of the uncertainties
associated with assessing environmental matters, the related
ultimate liability is not presently determinable.
SCC is involved in proceedings with the New York Department
of Environmental Conservation ("DEC"), the Suffolk County
Department of Health ("Suffolk DOH") and the United States
Environmental Protection Agency ("EPA") regarding the clean-up
of a now-closed manufacturing facility in Melville, New York
(the "Melville Site"). SCC's wholly-owned subsidiary, SCC LI,
formerly known as Histacount, was a lessee of the Melville
Site beginning in June, 1989 and sublessor of the Site to HC
Delaware Acquisition Corp., now known as Histacount ("New
Histacount"), beginning in November, 1994. SCC has never been
an owner, operator, or lessee of the Melville Site.
On March 9, 1995, New Histacount, in contemplation of
vacating the facility, submitted to the DEC its updated
closure plan (the "Closure Plan") for the Melville Site
pursuant to the requirements of the Resource Conservation and
Recovery Act, 42 U.S.C. sec. 6901 et seq., New York
Environmental Conservation Law, Article 27, and Section 373.3
of Title 6 of the Codes, Rules and Regulations of the State of
New York. The DEC approved the Closure Plan on or about July
25, 1995. On July 31, 1995, New Histacount terminated its
sublease at the Melville Site and on August 12, 1995, SCC LI
terminated its lease. Accordingly, the property was vacated
and all operations at the Melville Site ceased. On July 25,
1995, Suffolk DOH directed SCC to pump the north sanitary
system (the "North Sanitary System") at the Melville Site and
sample and remove sludge by September 13, 1995. The deadline
for remediation of the North Sanitary System was extended to
October 26, 1995. In November and December, 1995, SCC
personnel worked with the DEC to develop a work plan for
executing the Closure Plan for the Melville Site. On November
28, 1995 O'Brien & Gere Engineers, Inc. ("O'Brien & Gere")
performed concrete chip sampling of the interior of the
building. Remediation activities at the Site, scheduled to
begin in accordance with the work plan, were delayed when
SCC's environmental consultants were denied access to the
property because SCC and USI Realty, an affiliate of Hanson
and the present owner of the property, could not reach a
license agreement. Ultimately, on April 2, 1996, a license
agreement was executed by SCC and USI Realty, which agreement
provided SCC's environmental consultants with access to the
property for the purpose of remediating the North Sanitary
System. On April 18, 1996 the North Sanitary System was
cleaned, and O'Brien & Gere performed certain dye testing on
all sanitary systems at the facility. Contaminated material
removed during the remediation of the North Sanitary System
was properly disposed. Suffolk DOH confirmed that remediation
of the North Sanitary System was complete. SCC subsequently
entered into negotiations with representatives of the DEC
concerning the scope of the necessary closure activities. On
June 27, 1996, O'Brien & Gere prepared a scope of work for the
Melville Site that reflects agreements reached between SCC and
the DEC (the "Scope of Work"). The components of the Scope of
Work are: (i) sampling the soil beneath an abandoned cesspool
at the Site's west sanitary system (the "West Sanitary
System"); (ii) taking additional background samples of
concrete chips at the Site and cleaning the floor of the
platemaking room; and (iii) abandoning in place a 1,000-gallon
underground storage tank according to the Suffolk DOH protocol
for underground storage tank abandonment. The Scope of Work
was incorporated by reference in a Stipulation and Order
executed by counsel for the Debtors and counsel for the DEC on
August 2, 1996 and filed with the Bankruptcy Court. SCC has
proceeded to perform the testing and work specified in the
Scope of Work except that, on August 19, 1996, representatives
of SCC and USI Realty agreed that the underground storage tank
would be removed rather than abandoned in place. Pursuant to
the Plan, NewSCC will not assume any SCC or SCC LI liabilities
with respect to the Melville Site, unless the Debtors elect
after consultation with the Creditors' Committee on or before
the Confirmation Date to assume all such liabilities, if any.
Further details concerning the Melville Site are described
below under "-- Significant Events During Chapter 11 Case --
Environmental Claims -- Melville Site".
In June 1992, SCC was served with a summons and complaint in
the United States District Court for the Northern District of
New York in a private contribution action entitled Cooper
Industries, Inc. v. Agway, Inc., 92-CV-0478, and brought
pursuant to the federal Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"). The plaintiffs in
this action are Cooper Industries, Inc., Keystone Consolidated
Industries, Inc., The Monarch Machine Tool Co., Niagara Mohawk
Power Corporation and Overhead Door Corporation. The action,
which lists SCC and fourteen other persons or entities as
defendants, seeks contribution or reimbursement for response
costs incurred to date, and to be incurred in the future, for
the environmental remediation of a site in Cortland, New York
known as the Rosen Site ("Rosen Site"). Based on SCC's records
and other evidence available to it, management does not
believe that SCC disposed of any hazardous substances at this
site and is vigorously contesting this matter. Bankruptcy
claims relating to the Cooper Industries litigation and the
Rosen Site are described below under "-- Significant Events
During Chapter 11 Case -- Environmental Claims -- Rosen Site".
SCC is also a defendant or plaintiff in various other legal
actions that have arisen in the ordinary course of its
business, none of which SCC believes will have a material
adverse effect on its financial position or results of
operations.
D. Events Leading up to Chapter 11 Filings
As a result of breaches and defaults under its prior loan
agreement and the unavailability of credit thereunder, on
April 7, 1995, SCC entered into an Amended and Restated
Revolving Credit Agreement (the "Amended and Restated Credit
Agreement") with the Banks. The Amended and Restated Credit
Agreement provided for extensions of revolving credit loans
and letters of credit, limited to a percentage of eligible
receivables and inventories, in an amount not to exceed $30.0
million up through March 30, 1996; the aggregate principal
amount of such lending commitment decreased to an amount not
in excess of $25.0 million from March 31, 1996 through the
July 1, 1996 termination date. The Amended and Restated Credit
Agreement was secured by a security interest in all the
domestic assets of SCC pursuant to a Security Agreement of
even date therewith. On June 9, 1995, SCC announced that it
was in technical default of the Amended and Restated Credit
Agreement due to the restructuring charge announced in
connection with the Restructuring.
With SCC experiencing sales declines and operating losses,
having obtained extended payment terms from trade vendors, and
needing additional financing to meet operating requirements
and fund the Restructuring, SCC filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware on
July 5, 1995.
Prior to August 18, 1995, the bankruptcy proceedings did not
include any of the subsidiaries of SCC. On August 18, 1995,
three of SCC's wholly-owned but nonoperating subsidiaries,
OSI, SCC LI (formerly known as Histacount), and Hulse (such
subsidiaries being hereinafter collectively referred to as the
"Nonoperating Subsidiaries"), filed voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code. The
Chapter 11 cases of the Nonoperating Subsidiaries are
currently being jointly administered with SCC's bankruptcy
case pursuant to an order of the Bankruptcy Court entered on
August 18, 1995 (the "Joint Administration Order").
Substantially all of the assets of each of the Nonoperating
Subsidiaries had been sold prior to the Petition Date; each
Nonoperating Subsidiary, however, retains certain residual
liabilities. SCC's other wholly-owned subsidiaries (including
its international subsidiaries) are not included in the
Chapter 11 Case. SCC is generally unable to provide direct
financial support outside of the normal course of business to
such other subsidiaries without Bankruptcy Court approval.
E. Significant Events During Chapter 11 Case
1. Continuation of Business After Filing
SCC's management has continued to manage the operations and
affairs of the Debtors as debtors-in-possession, subject to
the jurisdiction of the Bankruptcy Court. Consequently,
certain actions of the Debtors during the pendency of the
bankruptcy proceedings, including, without limitation,
transactions outside of the ordinary course of business, have
been taken only upon the approval of the Bankruptcy Court.
Due to the Chapter 11 proceedings, substantially all claims
against SCC, prior to the July 5, 1995 Petition Date (and
prior to August 18, 1995 for the three Nonoperating
Subsidiaries added to the proceedings), are subject to the
automatic stay provisions under the Bankruptcy Code while the
Debtors continue business operations as debtors-in-possession.
Prepetition claims may arise from the determination by the
Bankruptcy Court of allowed claims for contingent liabilities
and other disputed amounts.
2. Formation of Creditors' Committee
On July 25, 1995, the United States Trustee conducted an
organizational meeting and selected the Creditors' Committee.
Collectively, according to the Debtors' schedules of assets
and liabilities filed with the Bankruptcy Court (see "--
Filing of Schedules" below), the Creditors' Committee members
either hold or directly represent at least $2,943,977 of the
total indebtedness of the Debtors made up of the following
amounts of Claims:
Creditors' Committee Member Amount
Peter Parts Electronics, Inc . $117,061
Acer America Corp. . . . . $787,720
Mitsumi Electronics Corp . $883,801
Seal Products Co . $608,168
Epson America, Inc . . . . . $357,653
Card Pak, Inc. . . $194,424
Pension Benefit Guaranty Corp. . . contingent
3. Retention of Professionals
By order of the Bankruptcy Court dated as of the Petition
Date, Young, Conaway, Stargatt & Taylor ("Young, Conaway") was
retained as counsel to SCC to assist and advise SCC during the
Chapter 11 proceedings. Young, Conaway was subsequently
retained to represent the Nonoperating Subsidiaries in their
bankruptcy cases, which are currently being jointly
administered with SCC's bankruptcy case by virtue of the
Bankruptcy Court's Joint Administration Order. Young,
Conaway's retention with respect to the Nonoperating
Subsidiaries is nunc pro tunc to the August 18, 1995 Petition
Date for such subsidiaries.
By order of the Bankruptcy Court dated as of the Petition
Date, Winthrop, Stimson, Putnam & Roberts ("Winthrop,
Stimson") was retained as special counsel to SCC to assist and
advise SCC in certain general corporate, postpetition
financing, employee benefits and relations and plan and
disclosure statement matters during the bankruptcy
proceedings. Winthrop, Stimson was subsequently retained to
represent the Nonoperating Subsidiaries in their bankruptcy
cases as special counsel (under the same terms and conditions
of the Bankruptcy Court's previous retention order) pursuant
to the Bankruptcy Court's order dated August 29, 1995.
Winthrop, Stimson's retention with respect to the Nonoperating
Subsidiaries is nunc pro tunc to the August 18, 1995 Petition
Date for such subsidiaries.
By order dated as of the Petition Date, the Bankruptcy Court
approved the retention of Deloitte & Touche LLP ("D & T") as
accountants and financial advisors to SCC to perform the
bankruptcy accounting, auditing, tax, consulting and other
services required by SCC during its Chapter 11 Case. D & T was
subsequently retained to represent the Nonoperating
Subsidiaries in their bankruptcy cases as accountants and
financial advisors (under substantially the same terms and
conditions of the Bankruptcy Court's previous retention order)
pursuant to the Bankruptcy Court's order dated October 26,
1995. D & T's retention with respect to the Nonoperating
Subsidiaries is nunc pro tunc to the August 18, 1995 Petition
Date for such subsidiaries.
By order dated as of the Petition Date, the Bankruptcy Court
approved the retention of R.F. Stengel & Co., Inc. ("R.F.
Stengel") as interim management of SCC to continue to provide
interim management services pursuant to the terms of the
Engagement Letter between R.F. Stengel and SCC effective as of
July 1, 1995. R.F. Stengel was subsequently retained to
represent the Nonoperating Subsidiaries in their bankruptcy
cases as interim management of the Nonoperating Subsidiaries
(under the same terms and conditions of the Bankruptcy Court's
previous retention order) pursuant to the Bankruptcy Court's
order dated October 24, 1995. R.F. Stengel's retention with
respect to the Nonoperating Subsidiaries is nunc pro tunc to
the August 18, 1995 Petition Date for such subsidiaries.
On the Petition Date, the Bankruptcy Court also approved the
retention of Manning, Selvage & Lee ("Manning, Selvage") as
public relations consultants to SCC. Manning, Selvage
currently is employed by SCC only in the area of product-line
public relations. See " -- Motion Regarding Retention of
Ordinary Course Professionals" below. By order of the
Bankruptcy Court dated August 9, 1995, Sitrick and Company
("Sitrick") was retained as communications consultants to SCC
to assist and advise SCC in communications and public
relations matters during the bankruptcy proceedings. Sitrick's
retention with respect to SCC is nunc pro tunc to the Petition
Date.
On July 14, 1995, the Bankruptcy Court approved the
retention of Malina & Wolson ("Malina & Wolson") as special
counsel to SCC to continue its representation of SCC in
obtaining and maintaining United States and foreign patents,
preparing licensing and consulting agreements and counseling
SCC concerning patent and trademark matters. Malina & Wolson's
retention with respect to SCC is nunc pro tunc to the Petition
Date.
By orders of the Bankruptcy Court dated August 8, 1995,
Blank, Rome, Comisky & McCauley ("Blank, Rome") and KPMG Peat
Marwick, L.L.P. ("KPMG Peat Marwick") were retained as counsel
and financial advisors and accountants, respectively, to the
Creditors' Committee to assist and advise the Creditors'
Committee during the Chapter 11 proceedings. Blank, Rome's and
KPMG Peat Marwick's retentions with respect to the Creditors'
Committee were both nunc pro tunc to July 19, 1995. On
September 15, 1995, however, Blank, Rome filed its withdrawal
of appearance as counsel to the Creditors' Committee.
Meanwhile, on September 12, 1995, the Creditors' Committee
filed an application to retain Willkie Farr & Gallagher
("Willkie Farr") as counsel nunc pro tunc to September 1,
1995. The Bankruptcy Court approved Willkie Farr's retention
application on September 29, 1995. By order of the Bankruptcy
Court dated September 20, 1995, the Creditors' Committee was
authorized to retain Bayard, Handelman & Murdoch P.A. nunc pro
tunc as of September 11, 1995, as co-counsel for the
Creditors' Committee.
By order of the Bankruptcy Court dated August 16, 1995, SCC
was authorized to retain foreign counsel and foreign patent
agents (consisting of the Wong Partnership, a law firm
practicing in Singapore; Ritch, Heather y Mueller, S.C., a law
firm practicing in Mexico; and numerous foreign patent agents
located throughout the world) nunc pro tunc to the Petition
Date.
By order of the Bankruptcy Court dated December 29, 1995,
Nixon, Hargrave, Devans & Doyle LLP ("Nixon, Hargrave") was
retained as special environmental and environmental litigation
counsel to provide such services in connection with the
Debtors' Chapter 11 cases. Nixon, Hargrave's retention with
respect to SCC is nunc pro tunc to the Petition Date.
By order of the Bankruptcy Court dated February 26, 1996,
SCC was authorized to retain Condon & Savitt as special
counsel to represent Anthony Giordano, formerly the Vice
President/Taxation and Assistant Secretary of SCC, in
connection with a pending administrative grievance hearing
before the State of Connecticut bar.
On January 23, 1996, SCC submitted an application to the
Bankruptcy Court for approval to retain Allen, Allen &
Hemsley, a law firm practicing in Sydney, Australia, as
foreign counsel to advise it in legal matters arising in
connection with its foreign operations. Allen, Allen &
Hemsley's retention would be nunc pro tunc to the Petition
Date. The application has not yet been considered by the
Bankruptcy Court.
On January 11, 1996, SCC submitted an application to the
Bankruptcy Court for approval to retain Buxbaum, Ginsberg &
Associates as its inventory evaluators in the Chapter 11 case.
Buxbaum, Ginsberg & Associates' retention would be nunc pro
tunc to the Petition Date. The application has not yet been
considered by the Bankruptcy Court.
See also "-- Motion Regarding Retention of Ordinary Course
Professionals" below.
4. DIP Financing
On July 10, 1995, SCC entered into the Chemical DIP Loan
Agreement with the Banks and Chemical as agent for the Banks,
which Agreement was approved by the Bankruptcy Court on August
2, 1995. The Chemical DIP Loan Agreement paid off the Amended
and Restated Credit Agreement (described above). The Chemical
DIP Loan Agreement provided for extensions of revolving credit
loans, term loans and letters of credit, limited to a
percentage of eligible receivables and inventories, in an
amount not to exceed $24.0 million through the original June
30, 1996 termination date. The Chemical DIP Loan Agreement
provides for a security interest in all of SCC's assets. The
Chemical DIP Loan Agreement provides certain restrictive
covenants for which management believes that it has adequate
flexibility and that such covenants should not impose undue
restrictions on the operations of SCC during its Chapter 11
proceedings. SCC is currently in compliance with the terms of
the Chemical DIP Loan Agreement or has obtained waivers as
necessary, except as discussed below.(4)
Pursuant to the First Amendment to the Chemical DIP Loan
Agreement, dated July 24, 1995, the Banks and SCC agreed that
any revolving credit loans under the Chemical DIP Loan
Agreement in an aggregate principal amount of $3 million would
be converted to, and maintained as, term loans under the
Chemical DIP Loan Agreement so that such term loans would be
secured by the Mortgage (as such term is defined in the
Chemical DIP Loan Agreement).
Pursuant to the Second Amendment to the Chemical DIP Loan
Agreement, dated August 15, 1995, the Banks agreed to waive
certain provisions of the Chemical DIP Loan Agreement and that
certain Letter Agreement Regarding Post Closing Covenants.
Pursuant to Section 5.3 of the Chemical DIP Loan Agreement,
SCC delivered to the Banks a proposed Business Plan (as
hereinafter defined) on September 8, 1995. See "--
Presentation of Business Plan" below. Under the Chemical DIP
Loan Agreement, if the Banks did not approve the Business Plan
in writing by September 15, 1995 (later extended by agreement
to October 9, 1995) (which approval was in the sole discretion
of each Bank), the loans would mature on November 15, 1995
(later extended to December 11, 1995). Pursuant to the Third
Amendment to the Chemical DIP Loan Agreement, dated December
6, 1995 (the "Third Amendment"), which was approved by the
Bankruptcy Court on December 22, 1995, the Banks agreed not to
terminate the facility on November 15, 1995, extending the
maturity date until June 30, 1996; the Banks, however,
retained the right to terminate the loans under the Chemical
DIP Loan Agreement with 60 days' notice in their sole
discretion. The Third Amendment also provides for new covenant
levels under the Chemical DIP Loan Agreement.
Pursuant to the Fourth Amendment to the Chemical DIP Loan
Agreement, the maturity date of the facility was extended to
the earlier of September 30, 1996 and the Effective Date, and
the aggregate amount of credit available was reduced to
$10,000,000.
5. Administration of SCC Australia
An Administrator was appointed on August 2, 1995 for SCC's
wholly-owned subsidiary in Australia, SCC Australia Private
Limited ("SCAPL"). SCAPL's business operations had consisted
primarily of sales and marketing of products manufactured by
various of SCC's other wholly-owned non-debtor international
subsidiaries. The Administrator for SCAPL was appointed as
Liquidator on August 29, 1995. The Administrator has notified
SCC that there will be sufficient assets from the liquidation
of SCAPL to satisfy all creditors of SCAPL which are not
affiliated with SCC, and that such creditors will be paid in
full. The Administrator expects that no more than $50,000 in
additional assets will be distributed to SCC. SCC has
established a distributor relationship and is currently
exploring other potential relationships in the Australian
market.
6. Transfer of Venue Motion
On August 17, 1995, certain former employees of SCC (the
"Former Employees") filed a motion seeking transfer of venue
of the bankruptcy proceedings pursuant to 28 U.S.C. sec. 1412
and Rule 1014 of the Federal Rules of Bankruptcy Procedure
(the "Bankruptcy Rules") from the Bankruptcy Court for the
District of Delaware to the Bankruptcy Court for the Northern
District of New York (the "Venue Motion"). Pursuant to the
Bankruptcy Court's order dated September 20, 1995, the Former
Employees' Venue Motion was denied.
7. Employee Litigation Regarding Severance Benefits
--------------- (4) In January, 1996, SCC fully paid off its
outstanding borrowings under the Chemical DIP Loan Agreement.
Since that time, SCC has remained out of debt thereunder. As
of June 30, 1996, SCC had outstanding documentary letters of
credit of approximately $500,000.
On January 29, 1996, SCC filed an objection to 131 proofs of
claim filed by certain of its former employees, including the
Former Employees, for vacation and severance pay. The Former
Employees filed a response to SCC's objection on February 29,
1996. No other claimant responded to the objection.
SCC and the Former Employees agree that vacation pay claims
for both hourly wage employees and salaried employees are
general unsecured claims except to the extent the vacation pay
accrued within the ninety day period preceding the Petition
Date (the "Priority Period"). The parties also agree that the
portion of vacation pay that accrued during the Priority
Period is entitled to priority treatment pursuant to
Bankruptcy Code section 507(a)(3). The parties disagree,
however, on the correct classification of salaried employees'
vacation pay claims. SCC asserts that because vacation pay
accrued on January 1, 1995 under its pre-petition policy for
salaried employees, no vacation pay was earned by such
employees during the Priority Period. As a result, no portion
of salaried employees' claims for vacation pay is entitled to
section 507(a)(3) priority. The Former Employees assert that
notwithstanding SCC's written policy, vacation pay for
salaried employees accrued concurrently with wages, and that
salaried employees have a section 507(a)(3) priority claim for
3/12 of their annual vacation pay, the remaining 9/12 being
treated as a general unsecured claim.
The parties agree that the Former Employees are entitled to
severance pay. The parties disagree, however, on the proper
classification of severance pay claims. SCC asserts that its
pre-petition policies for both hourly wage employees and
salaried employees clearly reflect that severance is earned
over time and that, as a result, the Former Employees'
severance claims are entitled to the following treatment.
First, that portion of severance pay earned between the
Petition Date and each Former Employee's termination date is
entitled to administrative priority pursuant to Bankruptcy
Code section 503(b)(1)(A). Second, that portion of severance
pay earned by each Former Employee during the Priority Period
is entitled to priority treatment pursuant to Bankruptcy Code
section 507(a)(3). Finally, the remaining amounts of each
Former Employee's severance pay claims are general unsecured
claims. According to the Former Employees, their claims for
severance pay arose after the Petition Date, thus justifying
administrative claim status. SCC asserts that this position is
inconsistent with the applicable law and should be rejected.
The Bankruptcy Court conducted a hearing on SCC's objection
to the vacation pay claims and severance pay claims on April
22, 1996. The Bankruptcy Court has yet to rule on this
objection.
8. Rejection of Certain Leases and Executory Contracts
Since the Petition Date, the Debtors have sought to reject
certain leases of non-residential real property, equipment
leases and executory contracts as follows:
By motion dated August 7, 1995, SCC sought to reject four
leases of non-residential real property located at Suite No.
425, 18552 MacArthur Blvd., Irvine, California; 13 Orient
Way, Lyndhurst, New Jersey; 386 Park Ave. South (portion of
8th floor), New York, New York; and 3700 East Inland Empire
Boulevard, Suite Y, Ontario, Canada, pursuant to section 365
of the Bankruptcy Code. SCC sought to reject such leases
following a determination that it did not need the
properties leased under any of the leases in its current or
future operations. On August 24, 1995, the Bankruptcy Court
signed an order approving SCC's motion.
By motion dated September 5, 1995, SCC sought to reject a
consulting agreement with Hamilton Research, Inc.
("Hamilton") and to require surrender of documents pursuant
to sections 365 and 542 of the Bankruptcy Code. The
agreement required Hamilton to provide management and
consulting services to SCC by assisting it in developing a
strategic plan to enhance its business. SCC sought to reject
the agreement following a determination that it did not need
the services provided under the agreement and that rejection
of the agreement was in the best interests of its creditors
and its estate. On November 3, 1995, the Bankruptcy Court
signed a consent order approving SCC's motion.
By motion dated September 13, 1995, SCC sought to reject a
certain lease of non-residential real property known as
Riverway I at 6133 North River Road, Rosemont, Illinois (the
"Riverway I Property"), pursuant to section 365 of the
Bankruptcy Code. SCC sought to reject the lease following a
determination that it did not need the Riverway I Property
in its current or future operations. The Riverway I Property
had been used by SCC as a sales office. SCC closed the sales
office and vacated the premises by the close of business on
September 29, 1995. On September 29, 1995, the Bankruptcy
Court signed an order approving SCC's motion.
By motion dated September 13, 1995, SCC sought to reject
certain equipment leases and executory contracts (the
"Leases/Contracts") with General Electric Capital
Corporation, Pitney Bowes Credit Corp. and AT&T Information
Systems, Inc. pursuant to section 365 of the Bankruptcy
Code. SCC sought to reject the Leases/Contracts following a
determination that it did not need the equipment leased or
the services provided under any of the Leases/Contracts in
its current or future operations. Moreover, SCC asserted
that the rejection of the Leases/Contracts was in the best
interest of its creditors and its estate, as SCC believed
the Leases/Contracts were unnecessary, unprofitable and
burdensome to its operations. On October 10, 1995, the
Bankruptcy Court signed an order approving SCC's motion.
By motion dated December 5, 1995, SCC sought to reject a
certain lease of non-residential real property located at
Suite 420 in Wellington Centre, 14643 Dallas Parkway,
Dallas, Texas, pursuant to section 365 of the Bankruptcy
Code. SCC sought to reject the lease following a
determination that it did not need the leased property in
its current or future operations and that rejection of the
lease was in the best interests of its estate and its
creditors. The property had been used by SCC as a sales
office; SCC, however, closed the office, vacated the
premises and returned possession to the landlord, Parkway,
Ltd., on or about September 30, 1995. On February 6, 1996,
the Bankruptcy Court signed an order approving SCC's motion.
By motion dated December 21, 1995, SCC sought to reject
certain equipment leases and executory contracts pursuant to
section 365 of the Bankruptcy Code. The leases and contracts
related to SCC's Rosemont, Illinois office which had been
closed. SCC sought to reject the leases and contracts
following a determination that it did not need the equipment
leased or the services provided under any of the contracts
and that rejection was in the best interests of its
creditors and its estate. On January 5, 1996, the Bankruptcy
Court signed an order approving SCC's motion.
By motion dated February 16, 1996, SCC sought to reject a
Relocation Management Agreement with PHH Homequity ("PHH")
pursuant to section 365 of the Bankruptcy Code. The
agreement provided for PHH to provide assistance to SCC in
relocating employees, including, without limitation,
acquiring appraisals of, purchasing, and reselling homes of
relocated employees and providing closing services in
connection with the sale of homes of relocated employees.
SCC sought to reject the agreement following a determination
that it did not need the services provided under the
agreement and that rejection of the agreement was in the
best interests of its creditors and its estate. On March 5,
1996, the Bankruptcy Court signed an order approving SCC's
motion.
By motion dated March 1, 1996, SCC sought to reject a
Purchase and Exclusive Distribution Agreement with Handifax
Corporation ("Handifax") pursuant to section 365 of the
Bankruptcy Code. The agreement provided for Handifax to
manufacture small handheld fax machines bearing SCC's
trademarks and for SCC to purchase and resell the machines.
SCC sought to reject the agreement following a determination
that rejection was in the best interests of its creditors
and estate because SCC had no future plans to sell the fax
machines and had not ordered any such machines in over a
year. On March 19, 1996, the Bankruptcy Court signed an
order approving SCC's motion.
9. Sale of Certain Assets
By order dated August 9, 1995, the Bankruptcy Court approved
SCC's motion to consummate a purchase agreement ("Purchase
Agreement") and a sale agreement ("Sale Agreement") relating
to certain real property located in Cortlandville, New York.
The Purchase Agreement, executed on March 8, 1995, between
Mary M. Gemelli, individually and as Executrix of the Estate
of Joseph C. Gemelli, deceased, as seller ("Gemelli"), and
SCC, as purchaser, provided for the payment by SCC to Gemelli
of approximately $205,000 in exchange for title to certain
buildings and improvements owned by Gemelli in Cortlandville
(the "Cortlandville Buildings"). The purchase of the
Cortlandville Buildings was subject to a preexisting mortgage
held by Connecticut Life Insurance Company, dated June 15,
1970, in the original principal amount of $1,056,650 and in
principal amount of approximately $300,000 as of July 8, 1995.
The Sale Agreement, executed on February 28, 1995, between
SCC, as seller, and J.M. Murray Center, Inc., as purchaser
("J.M. Murray"), provided for the payment by J.M. Murray to
SCC of approximately $2,000,000 cash in exchange for title to
certain land, buildings and improvements known as the SCC
Distribution Facility Plant 6 in Cortlandville, New York (the
"Cortlandville Property"). The Cortlandville Property includes
the Cortlandville Buildings which were the subject of the
Purchase Agreement. The Purchase Agreement and the Sale
Agreement were consummated and the transactions closed on
October 11, 1995. Title to the Cortlandville Property was
conveyed to J.M. Murray by SCC free and clear of all liens,
claims and encumbrances, with any such liens, claims and
encumbrances attaching to the proceeds of the sale.
By two orders dated November 29, 1995, the Bankruptcy Court
approved two motions by SCC for authorization without further
application to the Court to sell surplus equipment and
furniture as well as certain blocks of inventory outside the
ordinary course of business upon approval of the Creditors'
Committee and Chemical Bank, SCC's primary secured lender. The
orders authorized SCC to conduct sales outside the ordinary
course of business of surplus office furniture and industrial
equipment in amounts less than $50,000 per sale and certain
inventory of typewriters and word processors in amounts less
than $250,000 per sale upon provision of ten days written
notice to the Chairman of the Creditors' Committee and
Chemical Bank of each proposed sale. SCC sought authorization
to sell these assets after a good faith determination in its
sound business judgment that the assets were not marketable
through normal sales or distribution channels or usable in
operations. SCC had determined that sales outside the ordinary
course of business would inure to the benefit of SCC's estate
and its creditors.
SCC sold its Singapore facility and the leasehold interest
of its wholly-owned Singapore subsidiary, SCPL, to ST Computer
Systems and Services Limited, a subsidiary of Singapore
Technologies, Inc., on February 8, 1996 for net proceeds of
approximately $21.1 million. The sale resulted in a pretax
gain of approximately $17.8 million, most of which was
recorded in the third quarter of Fiscal 1996. In addition, all
manufacturing equipment at the Singapore and Batam Island
facilities was sold resulting in proceeds of approximately
$2.3 million. Of such proceeds realized from such sales,
approximately $7.4 million was paid to SCC on account of
satisfaction of an intercompany note, approximately $7.3
million of retrenchment costs were incurred and approximately
$8.7 million was paid as a dividend to SCC on June 21, 1996.
As a result of the sale of its Singapore facility, which
occurred as a part of SCC's Restructuring, Mexico will be the
only site of SCC manufacturing operations.
By motion dated June 21, 1996, SCC sought to consummate an
asset purchase and sale agreement (the "Asset Purchase and
Sale Agreement") with Kroy, Inc. ("Kroy"), whereby SCC will
sell to Kroy: (i) inventory exclusively related to SCC's
manufacture of certain labelling machines; (ii) machinery,
fixtures and equipment exclusively used in the manufacture,
production, packaging, and shipping of such labelers, and
their tapes and cartridges; and (iii) certain intellectual
property rights and confidential information possessed and
used by SCC in the manufacture of such labellers, cartridges
and tapes and the related products and supplies for such
labellers, in exchange for $981,014 in cash (to be paid over
time) and a royalty of five percent of all of Kroy's sales of
such tapes and cartridges for thirty-six months. SCC has
determined that the assets being sold are extraneous to SCC's
core operations, and that their sale will provide greater
value for the estate than continuation of manufacturing that
line of business. By order dated July 16, 1996, the Bankruptcy
Court approved the motion and the transaction was consummated
on July 31, 1996.
10. Presentation of Business Plan
On September 8, 1995, SCC presented its Preliminary Business
Plan, as the same has been or may be amended from time to time
(the "Business Plan"), to its Board of Directors. Copies of
the Business Plan were also distributed to those parties that
had executed confidentiality agreements as of September 8,
1995 (or subsequently executed confidentiality agreements with
SCC), including the Banks and members of the Creditors'
Committee.
11. Payment of Accrued Bonuses to Certain Employees
By order dated September 18, 1995, the Bankruptcy Court
approved SCC's motion to make bonus payments to certain of its
international employees (the "Bonus Motion"). The bonus
payments, totalling $49,293, had accrued to the employees
through an incentive program designed to increase the
profitability of SCC's foreign subsidiaries. Four of the nine
employees eligible for bonuses under the incentive program are
directly employed by certain of SCC's foreign subsidiaries
themselves; however, five of the employees, Alfred L. Scallon,
Joseph P. Cardone, Emery R. Letterman, Mark L. Carlin and
Stephan J. Ritter, are/were employed by SCC. Consequently,
following the Petition Date, SCC's foreign subsidiaries, none
of which are currently in Chapter 11, remained able to pay the
incentive bonuses due to their employees who had earned them,
while SCC, prior to September 18, 1995, was not allowed to pay
similar bonuses earned by the five above-named international
employees without first obtaining the Bankruptcy Court's
authorization.
12. Motion Regarding Retention of Ordinary Course
Professionals
On September 18, 1995, SCC filed a motion seeking authority
to continue to employ and compensate professionals who provide
specific services in the ordinary course of operating its
business and managing its properties (the "Ordinary Course
Professionals"). The Ordinary Course Professionals covered by
the motion include (i) Manfred E. Eckhardt, treasury
consultant; (ii) Baker & McKenzie, customs counsel; (iii)
Hewitt & Associates, actuarial services; (iv) Coopers &
Lybrand, pension consultant; (v) Holt & Ross, Inc., public
affairs; (vi) Graham & James, legal services; (vii) Manning,
Selvage and Lee, product-line public relations; (viii)
Drinker, Biddle and Reath, environmental counsel; and (ix)
Owen, Shoup & Kinzie, legal services.
On November 3, 1995, the Bankruptcy Court approved a Consent
Order Authorizing Debtor to Employ and Compensate
Professionals for Specific Purposes (the "Ordinary Course
Professionals Consent Order"). Pursuant to the Ordinary Course
Professionals Consent Order, SCC is authorized to employ and
compensate the above-named Ordinary Course Professionals
postpetition. SCC is also authorized to pay, without
application to the Bankruptcy Court, but upon submission of an
appropriate invoice to the Creditors' Committee, all interim
fees and disbursements of: (i) Manfred E. Eckhardt; (ii) all
non-legal Ordinary Course Professionals (Hewitt & Associates,
Coopers & Lybrand, Holt & Ross, Inc., and Manning, Selvage and
Lee) up to $100,000 per firm over the course of the Chapter 11
Case; and (iii) all legal Ordinary Course Professionals (Baker
& McKenzie, Graham & James, Owen, Shoup & Kinzie, and Drinker,
Biddle and Reath) up to $75,000 per firm over the course of
the Chapter 11 Case. Pursuant to the Ordinary Course
Professionals Consent Order, any invoices exceeding the
maximums in (ii) or (iii) above will become subject to the
Bankruptcy Court's approval.
13. Filing of Schedules
On August 18, 1995, SCC filed its Summary of Schedules of
assets and liabilities, including its Statement of Financial
Affairs (the "SCC Schedules"), with the Bankruptcy Court.
Schedules for SCC's Nonoperating Subsidiaries (the
"Nonoperating Subsidiary Schedules") were filed with the
Bankruptcy Court on August 30, 1995 (the SCC Schedules and the
Nonoperating Subsidiary Schedules, collectively the
"Schedules"). Amendments to the SCC Schedules were filed with
the Bankruptcy Court on or about November 16, 1995 and March
27, 1996.
14. Appointment of Claims Agent
By order dated September 29, 1995, the Bankruptcy Court
approved the appointment of Donlin, Recano & Company, Inc.
("DRC") as agent of the Bankruptcy Court pursuant to 28 U.S.C.
sec. 156(c). Pursuant to such order, DRC has been authorized
to, among other things, relieve the clerk of the Bankruptcy
Court's office of all noticing and processing of claims in the
Debtors' Chapter 11 Case. DRC is further authorized to
maintain all proofs of claim, maintain an official claims
register, record all transfer of claims pursuant to Bankruptcy
Rule 3001(e) and to engage in the organization, management,
control and reconciliation of Claims against the Debtors.
15. Last Day for Filing Claims
By order dated August 23, 1995, the Bankruptcy Court
established the last date for filing prepetition claims
against the Debtors as October 31, 1995 (the "Bar Date"). The
Bar Date is the date by which certain claims against the
Debtors must be filed if the claimants wish to receive any
distribution in the Debtors' Chapter 11 Case. The Debtors have
given notice to all known actual or potential claimants
subject to the Bar Date of their need to file a proof of claim
with the Bankruptcy Court. The Debtors will reconcile claims
that differ from the Debtors' records, and any differences
that cannot be resolved by negotiated agreement between the
Debtors and the claimant will be resolved by the Bankruptcy
Court. Accordingly, allowed claims may arise which are not
currently reflected in the Debtors' financial statements and
recorded claims are subject to change. The ultimate amount of
and settlement terms for such liabilities are subject to the
Plan which is subject to approval by the Bankruptcy Court and,
accordingly, are not presently determinable. After reviewing
the claims filed against the Debtors by the Bar Date, the
Debtors believe that the amount of claims which will be
allowed will not be materially different from the estimates
provided herein.
16. Stipulations and Settlements
a. Settlement Regarding Sex Discrimination Complaint
By order dated October 10, 1995, the Bankruptcy Court
approved the compromise and settlement of United States Equal
Employment Opportunity Commission ("EEOC") and State of
Connecticut Commission on Human Rights and Opportunities
("CCHRO") actions brought against SCC by Erin LaManna
("Lamanna"). On July 15, 1993, LaManna filed complaint number
16A93152 with the EEOC and complaint number 9420020 with the
CCHRO (collectively, the "Complaints") alleging that she had
been denied a promotion on the basis of her pregnancy in
violation of federal and state law. SCC denied the
allegations.
Prior to a hearing on the matter, SCC and LaManna negotiated
and entered into a Stipulated Agreement (the "Settlement
Agreement") dated August 24, 1995, whereby SCC denied the
validity of the allegations and agreed to pay LaManna $3,000
cash in return for her withdrawal of the Complaints, with
prejudice. On September 20, 1995, SCC filed an application
with the Bankruptcy Court for an order approving the
Settlement Agreement. The order was signed by the Bankruptcy
Court on October 10, 1995.
b. Settlement Regarding Company Cars
On October 2, 1995, Emkay, Inc. ("Emkay") filed with the
Bankruptcy Court a Motion to Compel Assumption of Personal
Property Lease or, in the Alternative, to Compel Debtor's
Compliance With Section 365(d)(10) of the Bankruptcy Code and
to Direct Payment of Administrative Expense Claim (the "Emkay
Motion"). Emkay, an Illinois-based company, and SCC had, on
April 12, 1991, entered into an agreement styled as a Vehicle
Lease Agreement (the "Vehicle Agreement"), under which Emkay
arranged for the delivery to SCC of a number of vehicles for
use by various SCC employees. A dispute arose as to whether
the Vehicle Agreement constitutes a lease, as alleged by
Emkay, or a financing agreement, as alleged by SCC.
The Emkay Motion sought an order directing SCC to assume the
Vehicle Agreement and to immediately pay to Emkay all
delinquent payments which Emkay alleged became due and payable
from and after July 1, 1995 together with penalties, interest,
costs and fees as provided for in the Vehicle Agreement; or in
the alternative, an order directing SCC to comply with all the
terms and conditions of the Vehicle Agreement from and after
September 5, 1995, the 60th day after SCC filed its Chapter 11
petition.
On October 17, 1995, SCC and Emkay entered into a Stipulated
Agreement whereby Emkay agreed to continue its motion, without
prejudice, in return for SCC's payment to Emkay of $24,062.60,
representing the portion of the monthly payments owing to
Emkay under the Vehicle Agreement for the period September 5,
1995 through October 31, 1995. SCC further agreed to make all
payments due under the Vehicle Agreement from and after
November 1, 1995 and continuing to such time as SCC either
assumes or rejects the Vehicle Agreement, or obtains an order
from the Bankruptcy Court relieving it of the obligation to do
so.
c. Stipulation with J.M. Murray
In connection with the closing on a sale of real property
located in Cortlandville, New York (see "-- Sale of Certain
Assets" above), SCC and J.M. Murray agreed to enter into a
stipulation resolving mutual prepetition obligations. J.M.
Murray owed SCC $45,684.32 for unpaid rental obligations for
property leased from SCC in Cortland, New York while SCC owed
J.M. Murray $46,060.68 for unpaid janitorial services provided
to SCC at its facility in Cortland, New York. By stipulation
dated November 18, 1995, SCC and J.M. Murray agreed to set off
these debts against each other with the difference of $376.36
to be treated as an allowed general unsecured claim of J.M.
Murray to be satisfied under the terms of any reorganization
plan ultimately confirmed. All mutual postpetition debts would
be paid in the ordinary course of business. The stipulation
was approved by the Bankruptcy Court by order dated November
29, 1995.
d. Settlement of Potential Claim on Software Maintenance
Contract
By order dated December 6, 1995, the Bankruptcy Court
approved a settlement between SCC and Global Software, Inc.
("Global"), a provider of software and software maintenance
services, whereby SCC was to pay Global $35,000 to "buy out" a
software maintenance agreement between the parties. SCC had
purchased certain general ledger and accounts payable software
from Global for $79,250 on April 15, 1993. Part of the
purchase agreement was a four year, noncancellable Annual
Improvement Maintenance and Support Agreement ("AIMS
Agreement") which provided SCC with new software updates and
support services. The AIMS Agreement called for maintenance
fees of $151,500 spread over the course of the agreement,
which was due to expire on March 30, 1998.
SCC later determined that, although it still needed the use
of the software, it no longer needed the services provided
under the AIMS Agreement because it would be able to handle
such maintenance in-house. Global thus agreed to relieve SCC
from its obligations under the AIMS Agreement in exchange for
a $35,000 buy-out fee while still allowing SCC to retain
perpetual use of the software. No litigation was ever
commenced by either party regarding the AIMS Agreement; SCC,
however, made a good faith determination in its sound business
judgment that the settlement of the potential Global claim
would inure to the benefit of SCC's estate and its creditors.
e. Defective Goods Reserve Agreement With Sears, Roebuck and
Co.
By order dated January 3, 1996, the Bankruptcy Court
approved an agreement between SCC and Sears, Roebuck and Co.
("Sears") creating a $177,000 reserve fund ("Reserve") out of
$318,000 owed to SCC but which Sears had retained for the
purpose of protecting itself against defective returns. SCC
and Sears already had prepetition policies in place whereby
SCC would refund Sears for the return of defective goods.
Under the new agreement, the balance of the money being held
by Sears was to be applied as follows: 1) $28,000 would be
applied to satisfy a price protection payment owed to Sears by
SCC; and 2) $113,000 would be returned to SCC. The agreement
further provided that the Reserve would be returned to SCC
upon confirmation of a plan of reorganization. In the event
that a plan was not confirmed by July 1, 1996, $88,500 of the
Reserve would still be returned at that time, provided that
SCC is current on the payment of postpetition refunds owing to
Sears for defective goods. SCC and Sears are currently
reconciling the amounts of such refunds owing as of July 1,
1996. In the event that a plan is not confirmed by January 1,
1997, SCC and Sears would renegotiate the terms of the Reserve
at that time.
In approving the agreement, SCC made a good faith
determination in its sound business judgment that it would
resolve a dispute with one of its significant customers,
receive payment of prepetition amounts over time, and maintain
a going-forward relationship with Sears. The agreement would
thereby inure to the benefit of SCC's estate and its
creditors.
f. Stipulation With New York State Department of Finance and
Taxation
By order dated February 21, 1996, the Bankruptcy Court
approved a stipulation between SCC and the New York State
Department of Finance and Taxation (the "Department") whereby
the parties resolved a disputed amount of liability for
prepetition net income, capital or minimum taxes under New
York franchise tax law, including interest and penalties, for
the audit period covering the August 4, 1989 through June 30,
1995 tax years. SCC had a potential aggregate liability of
$5,294,839.66 but stipulated that the Department would instead
have an allowed eighth level priority claim against SCC under
section 507(a)(8) of the Bankruptcy Code in the following
amounts: (1) $300,000 in respect of the tax year ended August
3, 1989; (2) $300,000 in respect of the tax years beginning on
August 4, 1989 and ending on June 30, 1995; and (3) $2,334.87
of withholding tax in respect to the tax year ending on
February 3, 1995. Pursuant to this stipulation, liability for
$300,000 of the above amounts is covered by an indemnity from
SCC's former parent, Hanson, by virtue of a certain Amended
and Restated Tax Sharing and Indemnification Agreement, dated
as of June 2, 1989 (the "SCC/Hanson Indemnification
Agreement"), between SCC and Hanson. This stipulation would
represent the total prepetition tax liability to the
Department. SCC determined that the stipulation would avoid
the uncertainty and expense of litigation and was in the best
interests of its estate and creditors.
g. Stipulation With Nu-kote International, Inc.
By order dated February 27, 1996, the Bankruptcy Court
approved a stipulation between SCC and Nu-kote International,
Inc. ("Nu-kote") whereby the parties resolved several mutual
debts. SCC and Nu-kote possessed slightly different books and
records as to the amounts of the debts, but agreed that: (1)
SCC would pay Nu-kote $3,816.00 in full satisfaction of its
postpetition account payable debt to Nu-kote; (2) Nu-kote
would have an allowed general unsecured claim against SCC in
the amount of $18,153.33, representing the amount of SCC's
prepetition account payable debt to Nu-kote, as reflected on
SCC's books and records, set off by the amount of Nu-kote's
prepetition account payable debt to SCC, as reflected on SCC's
books and records; and (3) SCC would withdraw its objection to
Nu-kote's claim, and, except as discussed above, Nu-kote would
withdraw its claim.
h. Stipulation With PBGC and With SCC's Hourly and Salaried
Retirement Plans
By order dated March 5, 1996, the Bankruptcy Court approved
a stipulation between SCC, the PBGC, the Smith Corona
Corporation Hourly Employees' Retirement Plan, the Smith
Corona Corporation Salaried Employees' Retirement Plan, the
SCM Office Supplies, Inc. Hourly Employees' Retirement Plan
and the SCM Office Supplies, Inc. Salaried Employees'
Retirement Plan (collectively, "the SCC Plans"), dated March
4, 1996, whereby SCC, the PBGC, and the SCC Plans made certain
agreements regarding SCC's minimum funding contributions,
unfunded benefit liabilities, and premiums.(5) The stipulation
partially resolved the claims filed against SCC by the SCC
Plans and the PBGC on or about October 30th and 31st, 1995,
respectively, and the objection to such claims filed by SCC on
or about January 31, 1996. The parties retained and preserved
all rights they otherwise may have had with respect to the
claims and objection that were the subject of the stipulation.
Specifically, the stipulation provided as follows:
(i) Minimum Funding Contributions
SCC certified that all contributions required to be made
pursuant to 29 U.S.C. sec. 1082 and 26 U.S.C. sec. 412
("Minimum Funding Contributions") to the SCC Plans had been
made and that SCC intends to make future quarterly
contributions as they come due through the date of
confirmation of a plan of reorganization.
The PBGC and the SCC Plans withdrew their Minimum Funding
Contribution claims without prejudice to their refiling such
claims up until the date of confirmation of a plan of
reorganization, except the SCC Plans are obligated to file
an amended and superseding claim against each of the Debtors
in the amount of $112,114 on account of contributions for
Plan Year 1995 due on September 15, 1996. SCC reserved all
rights to object to such claims, agreed that the Bar Date
for filing claims would not serve as a bar to refiling any
such claims, and withdrew its objection to the withdrawn
claims without prejudice to its reasserting such objection
to any refiled claims. SCC also agreed to notify the PBGC
and the SCC Plans within one business day of its making or
its failure to make all Minimum Funding Contributions.
The PBGC, the SCC Plans, and SCC agreed that any Minimum
Funding Contribution claims were properly pursued by the SCC
Plans and that, upon termination of any plan, the respective
Minimum Funding Contribution claims belonged to the PBGC as
statutory trustee.
(ii) Unfunded Benefit Liabilities
The SCC Plans withdrew with prejudice their claims for
unfunded benefit liabilities ("Unfunded Benefit
Liabilities"), recognizing that such claims belong
exclusively to the PBGC, and SCC withdrew with prejudice its
objection to the withdrawn claims.
SCC committed to fund the SCC Plans and the PBGC refrained
from initiating involuntary termination proceedings in the
hope that an acceptable bidder would purchase SCC and assume
responsibility for the SCC Plans. The PBGC accordingly
withdrew its Unfunded Benefit Liabilities claims while
reserving all of its rights to refile such claims up through
the date of confirmation of a plan of reorganization. SCC
agreed that the Bar Date for filing claims would not serve
as a bar to refiling any such claims and withdrew its
objection to the withdrawn claims without prejudice to its
reasserting its objection to any refiled claims.
The parties agreed that the PBGC's withdrawal of claims
would not affect its status as a creditor of SCC in any
manner or its participation as a member of the Creditors'
Committee. The parties also agreed that the PBGC has
standing to oppose, object, or otherwise respond to the
actions of any and all parties in interest, including SCC,
that might affect the PBGC's interest, including, without
limitation, pleadings, motions, proposed sales of stock or
assets, disclosure statements, plans of reorganization, or
motions for substantive consolidation.
(iii) Premiums
The PBGC agreed to provide to SCC information regarding
the specific premium payments asserted to be owed or late.
The PBGC also agreed to withdraw and/or amend its claims for
premiums, including claims for --------------- (5) The SCM
Office Supplies, Inc. Hourly Employees' Retirement Plan and
the SCM Office Supplies, Inc. Salaried Employees' Retirement
Plan have been merged with and into the Smith Corona
Corporation Hourly Employees' Retirement Plan.
penalties and interest, upon presentment by SCC of evidence
in the form of canceled checks as to the existence and
timeliness of such payments.
The parties agreed that SCC's objection to the PBGC's
claims for premiums be held in abeyance pending the parties'
efforts to consensually resolve their disputes regarding the
premium claims; provided, however, that SCC may renew its
objection upon ten (10) days written notice to the PBGC.
i. Termination Agreement With Acer America Corporation
SCC, Acer America Corporation ("Acer"), and Smith
Corona/Acer, a general partnership (the "Venture") have
executed a JV Termination Agreement, as amended (the
"Termination Agreement"), to terminate a joint venture entered
into between SCC and Acer, and to settle all claims in
connection therewith. The Venture was created in February,
1990 for the purpose of developing, producing, and marketing a
line of IBM MS/DOS compatible personal computers, with SCC
designated as the exclusive selling agent and distributor of
the computers. The Termination Agreement abandoned the
unsuccessful Venture in its entirety, provided that no further
business be conducted by the Venture, and terminated certain
subsidiary agreements between the parties. The Agreement
further provided for the appointment of SCC as the Liquidating
Venturer. All assets remaining after payment of Venture debts
and liabilities would be distributed to SCC exclusively. The
Termination Agreement also settled and resolved all actual or
potential objections of SCC to Acer's claim as well as the
claim itself, leaving Acer with an allowed non-priority
unsecured claim against SCC of $787,720.00.
The original Agreement was presented to the Bankruptcy Court
for approval on February 2, 1996. A subsequent renegotiation
of certain intellectual property provisions by the parties,
however, resulted in an amended Agreement, and on or about May
7, 1996 the Debtors submitted an application to the Bankruptcy
Court for permission to enter the Agreement as amended, which
application was granted by order dated May 30, 1996.
17. Rejection of Employment/Severance Agreements and Approval
of Incentive Compensation Program
By order dated October 20, 1995, the Bankruptcy Court
approved the Debtors' motion to reject the employment and
severance agreements of former Executive Vice President and
Chief Financial Officer Thomas C. DeFazio, former President
and Chief Operating Officer William D. Henderson, former
President and Chief Executive Officer G. Lee Thompson, and
former Vice President of Marketing Robert Riddell. By order
dated January 17, 1996, the Bankruptcy Court approved the
Debtors' motion to reject the employment and severance
agreements of former employees of the Debtors, Norman London,
Bernard W. Slater, John Noblitt, and John Bendik.
The Debtors had argued that the agreements did not provide
sufficient benefit to the Debtors, their creditors and
shareholders to justify their expense since the individuals no
longer provide services to the Debtors. The Debtors further
argued that the contracts were not executory and that any
remaining monetary claims against the Debtors were prepetition
general unsecured claims.
By order dated November 9, 1995, the Bankruptcy Court
approved the motion of SCC to reject the severance agreements
with then current SCC employees: Anthony A. Bartolone, Michael
W. Chernago, Eric J. Cleveland, John A. Cutrone, W. Michael
Driscoll, Anthony V. Giordano, James B. McCormick, Doris J.
McRae, Stephen Pawlak, John A. Piontkowski, Alfred N. Scallon,
Melvin Stojakovich, David P. Verostko, and Martin D. Wilson.
While realizing that the rejection of the agreements could
have a negative impact on employee morale, SCC sought to
reject the severance agreements after determining in good
faith and in its sound business judgment that the agreements
were so potentially burdensome that rejection was in the best
interests of its estate and creditors.
By order dated December 14, 1995, the Bankruptcy Court
approved SCC's motion to create an incentive compensation
program ("ICP") for Fiscal 1996. The ICP was designed to
reward certain employees of SCC's U.S. and international
operations for financial performance in excess of that set
forth in SCC's September 8, 1995 Business Plan. Under the ICP,
forty executives would participate with bonus levels ranging
from twenty percent to fifty percent of base salary, and all
other domestic employees would participate with a bonus level
ranging from six to ten percent of base salary. Money to fund
the ICP was capped at 50% of a $3 million positive variance to
the Business Plan in each six month period of Fiscal 1996,
consisting of $1.3 million of direct funds, and a $200,000
discretionary fund to allow the President of SCC to recognize
truly outstanding performance by one or more employees. Money
would be paid out under the ICP after evaluating performance
against SCC's Business Plan in six month increments with the
first period ending December 31, 1995. No money would be paid
out unless performance exceeded SCC's Business Plan, and the
ICP would terminate upon the earlier of June 30, 1996 or
confirmation of a plan of reorganization.
In approving the ICP, SCC made a good faith determination in
its sound business judgment that its establishment would
improve employee morale and thereby inure to the benefit of
SCC's estate and its creditors.
SCC anticipates proposing, at or prior to Confirmation, a
new ICP for the period ending December 31, 1996.
18. Attempts to Locate Third-Party Investors
As discussed in greater detail above (See "Overview of the
Debtors and the Plan -- Pre- and Post-Petition Marketing of
SCC" and "Overview of the Debtors and the Plan -- Development
of the Plan"), during the year prior to the Petition Date, SCC
solicited interest from potential qualified purchasers of
SCC's stock or all or a portion of the Debtors' assets. These
activities ceased as of the Petition Date.
Following the Petition Date, SCC received unsolicited
expressions of interest from various parties. See "Overview of
the Debtors and the Plan -- Pre- and Post-Petition Marketing
of SCC" and "Overview of the Debtors and the Plan --
Development of the Plan".
Despite these expressions of interest and series of bidding
processes, SCC has been unable to consummate a purchase
agreement for the sale of all or substantially all of its
common stock or assets on terms providing sufficient
recoveries to its various creditor constituencies.
Accordingly, the Debtors have concluded that the restructuring
contemplated by the Plan offers the best prospect for a
consensual plan of reorganization with recoveries regarded as
acceptable to representatives of all the major creditor
constituencies in the Chapter 11 Case. Pursuant to the Plan,
the Debtors intend to remain a going concern by entering into
product partnerships or strategic alliances with various
third-parties and by satisfying or assuming outstanding
claims. SCC continues to hold discussions with potential
purchasers, however, and reserves the right, but has no
obligation, to amend the Plan to include the terms of any
offers that SCC decides to accept from any such purchasers.
19. Extensions of Debtors' Exclusive Periods To File Plans of
Reorganization and To Solicit Acceptances
On October 31, 1995, the Debtors first moved for an order
extending the Debtors' exclusive periods to file a plan or
plans of reorganization and to solicit acceptances of such
plan or plans. The Debtors sought to extend for ninety days
the exclusive periods which were due to expire on November 2,
1995 (plan filing) and January 2, 1996 (plan solicitation) for
SCC and December 18, 1995 (plan filing) and February 14, 1996
(plan solicitation) for OSI, SCC LI, and Hulse. By interim
order dated November 1, 1995, the Bankruptcy Court extended
the exclusive periods. By order dated November 21, 1995, the
Bankruptcy Court extended the exclusive periods ninety days
such that the new exclusive periods would expire for SCC on
January 31, 1996 (plan filing) and April 1, 1996 (plan
solicitation) and for OSI, SCC LI, and Hulse on March 18, 1996
(plan filing) and May 14, 1996 (plan solicitation). By order
dated January 31, 1996, the Bankruptcy Court granted a second
motion to extend the exclusive periods such that the exclusive
periods for the Debtors were consolidated and extended to
April 30, 1996 (plan filing) and July 1, 1996 (plan
solicitation). Subsequently, by order dated April 26, 1996,
the Bankruptcy Court granted a third motion to extend the
exclusive periods to July 1, 1996 (plan filing) and August 30,
1996 (plan solicitation). On June 27, 1996, the Debtors filed
a fourth motion to extend for ninety days the exclusive
periods to September 27, 1996 (plan filing) and November 27,
1996 (plan solicitation). By interim order dated June 28,
1996, the Bankruptcy Court extended the exclusive periods. By
order dated July 16, 1996, the Bankruptcy Court extended the
exclusive periods to September 27, 1996 (plan filing) and
November 27, 1996 (plan solicitation).
20. Claim Objections
By orders, each dated January 16, 1996, the Bankruptcy Court
disposed of certain claims filed against the Debtors. The
various orders adjudicated the following categories of claims:
The Bankruptcy Court expunged certain claims filed by
shareholders of SCC. SCC had filed an Omnibus Objection to
the claims on November 29, 1995 on the grounds that the
shareholders were interest holders rather than claimants
under section 501 of the Bankruptcy Code and also on the
grounds that certain claims were filed after the October 31,
1995 Bar Date.
The Bankruptcy Court also resolved certain claims filed by
various litigation claimants. SCC had filed an Omnibus
Objection to various claims on November 29, 1995 on the
grounds that no amount was due and owing to the claimants
and that no basis for liability existed. A number of these
claims were subsequently withdrawn by the claimants, and the
Bankruptcy Court approved these particular withdrawals.
Certain other claims were expunged by the Bankruptcy Court.
The Bankruptcy Court also resolved certain other claims.
SCC had filed an Omnibus Objection to the allowance of
various claims on November 29, 1995 on the grounds that: (1)
certain claims differed in amount from the amounts shown as
due and owing in SCC's records and should therefore be
reduced to such levels; (2) certain claims were duplicative
of other claims filed by the same claimant against SCC and
should therefore be expunged; (3) certain claims were filed
after the October 31, 1995 Bar Date and should therefore be
expunged; (4) certain claims were claims that had been
subsequently amended and should therefore be expunged; (5)
certain claims had insufficient supporting documentation and
should therefore be expunged; (6) certain claims said to be
secured or priority claims should be reclassified as
unsecured claims because such claims failed to state a
sufficient basis for entitlement to preferred treatment; and
(7) certain claims said to be secured or priority claims
differed in amount from the amounts shown as due and owing
in the Debtors' records, did not state a sufficient basis
for entitlement to preferred treatment, and therefore should
be appropriately reduced and reclassified as unsecured
claims. SCC later withdrew its original objection to certain
of the claims to which it had objected, and the Bankruptcy
Court ordered that hearings on certain other claims be
continued to a later date. The Bankruptcy Court expunged,
reclassified or reduced all remaining claims in accordance
with the SCC's Omnibus Objection.
By orders, each dated March 5, 1996, the Bankruptcy Court
disposed of certain claims filed against the Debtors. The
various orders adjudicated the following categories of claims:
The Bankruptcy Court approved the withdrawal of SCC's
objections to the claims of Duke Power Co. and Histacount
Corporation (New Histacount). SCC had filed an Omnibus
Objection to the claims on January 31, 1996, objecting to
the claims on the grounds that the amounts asserted in the
Duke Power Co. claim differed from the amounts shown as due
and owing according to SCC's books and records, and that the
Histacount Corporation claim was filed after the October 31,
1995 Bar Date.
The Bankruptcy Court also resolved certain other claims.
On January 31, 1996, SCC had filed an Omnibus Objection to
the allowance of various claims on the grounds that: (1)
certain claims differed in amount from the amounts shown as
due and owing in SCC's records and should therefore be
reduced to such levels; (2) certain claims were for amounts
that were not due and owing by SCC at all and should
therefore be expunged; and (3) certain claims were filed
after the October 31, 1995 Bar Date and should therefore be
expunged with such claims limited to the classification and
amount, if any, reflected in SCC's schedules of liabilities.
The Bankruptcy Court reduced, expunged, and limited all such
claims in accordance with SCC's Omnibus Objection.
By orders, each dated March 13, 1996, the Bankruptcy Court
disposed of certain claims filed against the Debtors. The
various orders adjudicated the following categories of claims:
The Bankruptcy Court disallowed and expunged in its
entirety the claim of Anne Marie Welsh for severance and
vacation pay. The Bankruptcy Court expunged the claim upon
the grounds that at the time of her termination, SCC did not
provide severance benefits to hourly employees or payment of
accrued but unused vacation to terminated employees. This
was in accordance with SCC's Omnibus Objection to the
allowance of certain claims dated November 29, 1995.
The Bankruptcy Court reclassified as general unsecured
claims the claims filed by Mrs. Marie J. Kleinschmidt and
Professor William Kleinschmidt on the grounds that neither
claim indicated any basis for allowance as a secured claim.
This was in accordance with SCC's Omnibus Objection to the
allowance of certain claims dated November 29, 1995.
The Bankruptcy Court disallowed and expunged in its
entirety the claim of Christine Nadolny for tuition
reimbursement. The Bankruptcy Court expunged the claim upon
the grounds Ms. Nadolny had adequate opportunity to avoid
incurring the tuition expenses for which she sought
reimbursement after having been informed by SCC that such
expenses would not be reimbursed. This was in accordance
with SCC's Omnibus Objection to the allowance of certain
claims dated November 29, 1995.
The Bankruptcy Court reclassified as a general unsecured
claim the claim filed by Finite Industries, Inc. on the
grounds that the claim indicated no basis for allowance as
an administrative priority claim. This was in accordance
with SCC's Omnibus Objection to the allowance of certain
claims dated November 29, 1995.
SCC has filed a motion dated January 16, 1996 in which it
requested the Bankruptcy Court to enter an order determining
SCC's tax liability pursuant to its discretionary authority
under sections 505(a) and 105(a) of the Bankruptcy Code (the
"Section 505 Estimation Motion"). On April 19, 1996, SCC
amended its Section 505 Estimation Motion to include a request
for an evidentiary hearing on the issue of the amount of SCC's
pre-1990 tax liability and a request for an order disallowing
certain claims filed against SCC's affiliated debtors on the
grounds that such claims were duplicative of the initial IRS
claim filed against SCC.
The bulk of the amounts claimed by the IRS related to tax
years ending prior to 1990, when SCC was a member of the
tax-filing group of HM Anglo-American, Ltd. ("HMA"), the ultimate
U.S. parent of Hanson. SCC asserted that these liabilities
arose out of the pre-1990 economic activities of HMA and its
affiliates for which SCC would be liable, if at all, only on a
joint and several basis as a member of HMA's tax-filing group.
In addition, since Hanson had agreed to indemnify SCC for any
tax liability for such filing periods on June 2, 1989 and was
able, along with HMA and its present affiliates, to pay this
asserted tax liability arising from its own economic and
business activities, SCC argued that it made no sense for the
IRS to hold SCC responsible for the taxes. SCC further argued
that HMA and its affiliates were responsible for the taxes
either directly or under a certain Tax Sharing and
Indemnification Agreement executed in conjunction with SCC's
August 3, 1989 Common Stock offering, and requested that the
Bankruptcy Court determine that SCC's estate had no liability
whatsoever for the pre-1990 taxes.
SCC also asserted that its liability for the tax periods
beginning August 3, 1989 and ending June 30, 1995 was exactly
as it had stated in its filed tax returns because it had
ceased to be a part of HMA for consolidated tax return filing
purposes on or about August 2, 1989.
SCC argued that the pendency of the enormous unresolved tax
claims posed a great obstacle to confirmation of a plan of
reorganization and that it was particularly appropriate for
the Bankruptcy Court to determine the specific amount, if any,
of tax liability to facilitate the reorganization.
The Debtors filed an amended motion, dated April 19, 1996,
objecting to IRS claims against SCC's affiliated subsidiaries,
SCC LI, Hulse, and OSI, which were duplicative of the claim
originally filed by the IRS against SCC, on the same grounds
described above. In addition to again requesting a
determination of tax liability, the Debtors also requested an
order expunging and disallowing the new duplicative claims.
Since filing the motion, the Debtors and the IRS have
tentatively reached an agreement on the amount of Claims the
IRS will be able to assert against the Debtors with respect to
the post-August 1989 amounts, which amount is approximately
$2.8 million. No agreement, however, has yet been reached with
respect to the pre-August 1989 amounts, and no hearing has
been held on the Debtors' requests for a determination of the
tax liability. The Debtors have been conducting continuing
discussions with the IRS in attempts to resolve the pre-August
1989 amounts.
SCC filed a Third Omnibus Objection to Allowance of Claims
on March 22, 1996 and an Objection to Certain Environmental
Claims on March 25, 1996 (see "-- Environmental Claims"
below). SCC will continue to diligently file objections to
claims where appropriate and in the best interest of its
creditors and its estate.
21. Environmental Claims
Liability has been asserted against SCC with respect to
several environmental sites (i) where SCC has been either an
owner/operator or former operator, or (ii) where SCC allegedly
disposed of, or arranged for the disposal of hazardous
substances.
a. SCC-Owned Sites (Groton, New York and Cortlandville, New
York)
SCC was the owner and operator of manufacturing facilities
in Groton, New York (the "Groton Site") and Cortlandville, New
York (the "Cortlandville Site" and, together with the Groton
Site, the "Owner/Operator Sites"). SCC's liability, if any, at
the Owner/Operator Sites stems from groundwater contamination
at the Cortlandville Site and soil contamination at the Groton
Site. Remediation programs at the Owner/Operator Sites
currently consist of round-the-clock pumping and filtering
(Cortlandville) or soil venting with a soil infiltration
injection system (Groton). The costs associated with the
respective programs had largely been paid by SCC prior to the
Petition Date. To the Debtors' knowledge, the only future
costs that will be associated with remediation of those sites
are for operation, maintenance, monitoring, shutdown, and
post-shutdown of the systems. SCC believes it has set aside
adequate reserves for the payment of expenses for the ongoing
remediation programs at the Groton and Cortlandville Sites.
The only claim asserted against SCC with respect to the
Groton and Cortlandville Sites was filed by the DEC and the
New York State Department of Health ("NY DOH") for testing,
remediation and other costs expended with respect to the
sites. On or about June 19, 1996, the DEC also sent SCC a bill
for costs of approximately $522,000 allegedly incurred by the
DEC with respect to the Groton Site. (The agreement governing
the Cortlandville Site does not authorize the payment of the
DEC's costs except under limited circumstances not present
here.) SCC filed an objection to the DEC and NY DOH claims in
the Bankruptcy Court.
After extensive negotiations, on June 26, 1996, SCC reached
an agreement in principle with the State of New York that
resolved all of the claims filed by the DEC and NY DOH, as
well as certain issues relating to the Melville Site. The
agreement was documented in a Stipulation and Order executed
by attorneys for SCC and the State of New York on August 6,
1996, and filed with the Bankruptcy Court. The parties'
agreement, as memorialized, among other things includes the
following components. First, SCC's remediation obligations at
the Cortlandville Site under a 1989 Settlement Agreement will
survive the bankruptcy. The DEC and NY DOH withdrew the
portion of their claim relating to the Cortlandville Site in
the amount of $252,301.74, contingent on SCC's compliance with
the above-referenced 1989 Settlement Agreement. Second, SCC
will provide an allowed general unsecured claim to the State
of New York for $24,500 in settlement of all DEC and NY DOH
claims at the following sites: Quanta, Roblin Steel/Envirotek
II, PAS/Oswego, PAS/Fulton Terminals, PAS/Clothier, South Hill
Dump, Cortland County Landfill, and Tri-City Barrel (see below
for further details regarding these sites). Third, the DEC and
NY DOH will litigate their claims concerning the Rosen Site on
the same schedule as the pending Rosen Site claims of the EPA.
Fourth, the portion of the claim of the DEC and NY DOH for
past costs and expenses at the Groton Site will be settled in
full for $196,930, to be paid in four annual installments:
$50,000 each year for the first three years, and $46,930 in
the fourth year. Fifth, future costs and expenses of the DEC
at the Groton Site chargeable to SCC shall be capped at the
following sums: $20,000 per year for the first and second
years following the execution of the Stipulation and Order;
$15,000 per year for the third and fourth years; $10,000 per
year for the fifth and sixth years; $5,000 per year for the
seventh through eleventh years; and $1,000 per year for the
twelfth through fifteenth years. If, in the seventh through
fifteenth years following the Petition Date, the annual cap is
insufficient to cover the DEC's costs and either (i) SCC
petitions for de-listing or reclassification of the Groton
Site; or (ii) the DEC discovers new information showing an
imminent threat to public health or that the remedial plan is
ineffective; then unused portions of the sums specified for
the first through sixth years shall be made available to cover
costs documented by the DEC. In no event shall SCC's liability
for future costs at the Groton Site exceed a total of
$119,000. SCC presently does not expect that remediation at
the Groton Site will extend beyond six years, and also
believes that the caps for each year are significantly higher
than the costs that will actually be incurred and passed on to
SCC by the DEC. Sixth, the Melville Site closure shall be
accomplished according to the Scope of Work prepared by
O'Brien & Gere (or any amended, modified or supplemental Scope
of Work agreed upon by the parties and approved by the DEC).
See "Background Information Regarding Debtors -- Pre-Petition
Litigation."
b. PAS and Miscellaneous Sites (Oswego, Fulton Terminals,
Clothier, Envirotek II/Roblin Steel, Envirotek I, South
Hill Dump, Genoa, Tri-City Barrel, Butler Tunnel)
These sites are locations to which SCC allegedly shipped
hazardous substances. SCC has been named or listed as a
potentially responsible party ("PRP") for remediation costs
incurred at the Oswego, Fulton Terminals and Clothier Sites,
also known as the PAS Sites. Consent orders are in place with
either the EPA or the DEC and the respective PRP site groups
for the PAS Sites, pursuant to which SCC has agreed to a
percentage of liability for the response costs incurred or to
be incurred.
SCC believes that it has no further liability with respect
to the Envirotek II/Roblin Steel Site. The Envirotek I, South
Hill Dump, Genoa, Tri-City Barrel and Butler Tunnel Sites are
locations as to which SCC believes it has de minimis
liability, if any.
Claims have been filed in the Bankruptcy Court with respect
to the Oswego and Fulton Terminals Sites, asserting, among
other things, liability for future costs incurred under the
relevant consent decrees. SCC filed an omnibus objection with
respect to those claims. SCC and counsel for the PRP groups
settled the disputed claims as to future liability under the
relevant consent decrees at the Oswego Site in exchange for an
Allowed General Unsecured Claim of $126,839, and at the Fulton
Terminals Site in exchange for an Allowed General Unsecured
Claim of $145,964. These agreements were memorialized in
Stipulations executed by counsel for SCC and counsel for the
PRP groups on July 11, 1996 (Oswego) and July 31, 1996 (Fulton
Terminals), and filed with the Bankruptcy Court.
A claim was also filed by PRPs for remediation costs with
respect to the Butler Tunnel Site, which is located near
Scranton, Pennsylvania. SCC objected to the claim on the
ground that it has no record that it disposed of any hazardous
substances at the Butler Tunnel Site. On June 26, 1996, the
parties reached an agreement in principle to settle the Butler
Tunnel claim in full by SCC's providing the PRP group with a
de minimis Allowed General Unsecured Claim of $3,500. That
agreement is being documented by the parties in a stipulation
to be filed in the Bankruptcy Court.
Pursuant to the Plan, NewSCC will not assume any SCC
liabilities with respect to the PAS Sites or the Envirotek
II/Roblin Steel, Envirotek I, South Hill Dump, Genoa, Tri-City
Barrel or Butler Tunnel Sites.
c. Rosen Site
The Rosen Site is a Superfund Site where several PRPs have
already begun their own remediation program and have sued SCC
and fourteen other defendants, seeking reimbursement of their
expenditures at the Rosen Site. See description of Cooper
Industries, Inc. v. Agway, Inc. in "Background Information
Regarding Debtors -- Pre-Petition Litigation" above. The
Cooper Industries action has been pending since June 1992. SCC
has consistently maintained that it never arranged for the
disposal of hazardous substances at the Rosen Site.
The United States, on behalf of the EPA and the United
States Department of the Interior ("DOI"), has asserted claims
with respect to the Rosen Site for response costs that have
been or may be incurred in the future, and for damage to
natural resources. The United States asserts that the EPA has
incurred response costs of $474,490.97 with respect to the
Rosen Site through April 30, 1995, and will incur between $5
million and $25 million in response costs in the future. On
behalf of the DOI, the United States claims damage to natural
resources amounting to approximately $83,000. On January 31,
1996, SCC objected to the United States' claims on the ground
that SCC never disposed of hazardous substances, or sent such
substances for treatment, at the Rosen Site. On February 23,
1996, the United States filed an opposition to the Debtors'
objection, moved to withdraw the reference of the United
States' claims to Bankruptcy Court, and moved to stay the
substantive proceedings pending resolution of the motion to
withdraw the reference. The United States asserted that its
Rosen Site claims and SCC's objection must or should be
withdrawn from the Bankruptcy Court because their resolution
required substantial consideration and application of federal
law outside the Bankruptcy Code. SCC and the Creditors'
Committee have opposed this motion because the objection
presents a primarily factual, not a legal, issue that was
properly before the Bankruptcy Court. On February 26, 1996,
the Bankruptcy Court stayed proceedings on SCC's objections to
the Rosen Site Claims, pending a ruling by the District Court
on the United States' motion to withdraw the reference. The
District Court has not yet ruled on the motion to withdraw the
reference.
On June 6, 1996, the Bankruptcy Court approved a scheduling
stipulation entered into between the Debtors and the United
States providing for discovery and a trial of the United
States' Rosen Site claim as soon as the District Court rules
on the motion to withdraw the reference.
Pursuant to the Plan, NewSCC will not assume any SCC
liabilities with respect to the Rosen Site unless the Debtors
elect after consultation with the Creditors' Committee on or
before the Confirmation Date to assume all such liabilities,
if any.
Parties from the Cooper Industries litigation have asserted
claims with respect to the Rosen Site against SCC in the
bankruptcy proceedings. Certain plaintiffs from the Cooper
Industries litigation seek SCC's contribution and
reimbursement of response costs paid by these PRPs to
remediate environmental conditions at the Rosen Site, and the
reimbursement of future response costs that the PRPs
anticipate paying. Certain defendants from the Cooper
Industries litigation have sought contribution from SCC in the
event that they are held liable in that action. Pursuant to
its Omnibus Environmental Objection (see "-- Claims
Objections," above), SCC seeks to have the claims of the
private parties disallowed and expunged because (i) the claims
are duplicative of the claim of the United States; (ii) the
claims are contingent claims for contribution; and (iii) as
SCC has consistently maintained, SCC never arranged for the
disposal of any hazardous substances at the Rosen Site. The
claimants have filed responses to SCC's objections. The Cooper
Industries plaintiffs argue that (i) a direct contingent claim
brought by private parties cannot be disallowed under 11
U.S.C. sec. 502(e)(1)(B), (ii) their claims do not duplicate
those of the United States, and (iii) the testimony of certain
witnesses shows that SCC disposed of metal turnings and other
waste that was hauled to the Rosen Site. The Cooper Industries
defendants have raised similar legal arguments. The Debtors
have filed replies to the Rosen Site claimants' papers. On or
about May 1, 1996, the Cooper Industries plaintiffs moved in
the Bankruptcy Court for relief from the Automatic Stay to
permit the Cooper Industries action to proceed against SCC in
the Northern District of New York. The Debtors and the
Creditors' Committee have opposed this motion. Subsequently,
counsel for the Cooper Industries plaintiffs and counsel for
SCC agreed that the Cooper Industries plaintiffs' claims would
be tried on the same schedule as the Rosen Site claims of the
United States described above. That agreement is documented in
a stipulation executed July 19, 1996 and filed in the
Bankruptcy Court. Counsel for the DEC has agreed to proceed
with its Rosen Site claim of $18,705.66 on the same schedule.
Certain discovery relating to the Rosen Site claims has been
undertaken by Rosen Site claimants and SCC in preparation for
a hearing on the Debtors' objections to those claims.
d. Melville Site
SCC's former subsidiary, Histacount (now known as SCC LI),
was a lessee of the Melville Site. Operations at the Site
ceased in 1995, and Histacount itself was sold in 1994. The
Site is currently owned by a Hanson affiliate, USI Realty.
A prepetition Closure Plan was completed and approved by the
DEC for this site in connection with SCC LI's termination of
its lease. SCC performed concrete sampling on November 28,
1995, taking concrete chip samples to test for possible
chromium contamination in the concrete floor of the former
manufacturing facility located on the site. SCC was able to
reach an agreement with USI Realty on April 2, 1996 (the
"License Agreement"), providing it with access to the Melville
Site. Pursuant to the License Agreement, SCC was able to pump
out solid wastes from the North Sanitary System, as required
under the Closure Plan. An agreement between SCC and counsel
for the DEC with respect to additional environmental testing
and work at the Melville Site, which incorporates the Scope of
Work developed by O'Brien & Gere, is described above. See
"Background Information Regarding Debtors -- Pre-Petition
Litigation."
Pursuant to the Scope of Work, on July 25, 1996, SCC's
environmental consultants, O'Brien & Gere, performed follow-up
sampling and testing at the Melville Site under the
supervision of the DEC and Suffolk DOH. Representatives of the
property's present owner, USI Realty, were also present at the
site. Additional background comparison samples of concrete
chips from the site's former manufacturing facility were taken
in the non-manufacturing areas of the facility as requested by
the DEC and Suffolk DOH. Various options were discussed among
the parties for immediate abandonment in place of a 1,000
gallon underground storage tank under conditions acceptable to
the DEC and Suffolk DOH. Additionally, at the request of the
DEC and Suffolk DOH, O'Brien & Gere performed sampling of the
soil beneath the abandoned cesspool at the Site's West
Sanitary System, a cesspool separate from the Site's North
Sanitary System cesspool (which had been cleaned by O'Brien &
Gere in April 1996). See "Background Information Regarding
Debtors -- Pre-Petition Litigation."
From 1965 through 1987, operations at the Melville Site
allegedly resulted in the disposal of chemical wastes in the
West Sanitary System. Since 1987, all chemical wastes were
removed by Chemical Pollution Control, Bayshore, New York. The
cesspool at the West Sanitary System had been abandoned or
closed in 1985, with Suffolk DOH's oversight and approval,
prior to the time SCC LI first occupied the Melville Site as a
lessee in 1989. Although O'Brien & Gere received a preliminary
indication that volatile organic compounds (VOCs) were present
near the cesspool in the soil and water, test results on the
soil borings and groundwater samples taken at the cesspool by
O'Brien & Gere indicate that VOCs are below levels that would
require clean-up action under New York law. Tests for other
contaminants conducted in August, 1996 indicated such
contaminants were also below levels requiring clean-up action.
SCC believes that neither it nor SCC LI contributed any
contaminants to the West Sanitary System, among other things
because (a) the cesspool at the West Sanitary System was
sealed in 1985, prior to the time SCC LI first occupied the
Melville Site; (b) comprehensive dye testing of all sanitary
systems at the Melville Site requested by the DEC and Suffolk
DOH and conducted in April 1996 revealed that none of the
former manufacturing facility's drains emptied into the West
Sanitary System; and (c) all chemical wastes generated by the
former manufacturing facility were disposed of off-site from
1987 onward.
SCC is a party to a certain Amended and Restated
Cross-Indemnification Agreement, dated as of July 14, 1989 (the
"Indemnification Agreement"), between SCC and Hanson. On May
30, 1996, SCC formally notified Hanson of possible
indemnification liabilities of Hanson with respect to the
Melville Site.
Pursuant to the Plan, NewSCC will not assume any SCC or SCC
LI liabilities with respect to the Melville Site, unless the
Debtors elect after consultation with the Creditors' Committee
on or before the Confirmation Date to assume all such
liabilities, if any.
e. Fisher Kalo
The Fisher Kalo Site, located in Indiana, is a Superfund
Site. The EPA brought suit against a number of PRPs under the
Comprehensive Environmental Response Compensation and
Liability Act of 1980, 42 U.S.C. sec. 9601 et seq., which
resulted in the formation of a site group and a consent decree
among the parties. SCC's predecessor, SCM, did not enter into
the consent decree but eventually settled separately with the
site group for a de minimis amount of less than $9,000. SCC
has signed an amendment to the consent decree shielding it
from any further liability with respect to the Site.
f. Onondaga Lake
In June 1996, SCC received an inquiry from the EPA and the
DEC regarding SCC's manufacturing activity at a former plant
located in Syracuse, New York. The Syracuse manufacturing
facility was closed in 1961 and since that time SCC has not
maintained any operations at the site. The EPA and the DEC
informed SCC that their overall inquiry was directed at
approximately 50 companies, including SCC, that conducted or
continue to conduct manufacturing operations in the vicinity
of Onondaga Lake, located in the greater Syracuse metropolitan
area. The purpose of the inquiry is to establish whether such
manufacturing operations resulted in pollution of the
watershed area surrounding Onondaga Lake. SCC does not
presently believe that it possesses any corporate records that
indicate that SCC polluted or contributed to pollution at
Onondaga Lake through its former Syracuse manufacturing
facility. Moreover, SCC believes that even if liability for
pollution of the watershed area surrounding Onondaga Lake
could be established by the EPA and the DEC, SCC's
proportionate share of such liability would be de minimis.
g. Quanta Resources
The EPA named SCC as a PRP with respect to the Quanta
Resources Superfund Site ("Quanta Resources Site") located in
Syracuse, New York in 1990. SCC became a PRP at the Quanta
Resources Site solely due to the storage of certain SCC
drummed wastes at the site by Environmental Oil, a certified
waste hauler. In 1992, without admitting liability, SCC
entered into a settlement agreement with the EPA and
approximately 25 other PRPs relating to the Quanta Resources
Site (the "Quanta Settlement Agreement"). SCC has made
approximately $40,000 in environmental remediation payments
under the Quanta Settlement Agreement as a de minimis settling
party. On August 30, 1996, the EPA informed SCC that it
intends to perform an additional removal/response action at
the Quanta Resources Site, and requested SCC's participation.
The removal/response action will involve the removal of four
underground storage tanks. SCC believes that it has no further
obligation to the EPA with respect to the Quanta Resources
Site, and that any liability it may face with respect to the
removal action at the site is de minimis.
22. Suspension and Delisting of SCC Common Stock
On May 30, 1996, the New York Stock Exchange (the "NYSE")
announced that trading in the Common Stock of SCC under the
ticker symbol SCO would be suspended immediately. The NYSE
announcement also indicated that following the suspension of
trading in the Common Stock of SCC, application would be made
to the Securities and Exchange Commission to delist the issue.
The NYSE made such application on July 23, 1996, which
application was granted, and the Common Stock of SCC was
struck from listing and registration on the NYSE on August 6,
1996.
23. Litigation Against Cannon Group
From October 1995 through June 21, 1996, the Debtors had
been in periodic contact with a potential bidder group known
as Cannon T&C Limited ("Cannon"). The Creditors' Committee was
also in periodic contact with Cannon beginning in May, 1996.
Two of Cannon's principals, Gerald Resnick and Martin Gerber,
executed a Confidentiality Agreement dated as of October 23,
1995 (the "Confidentiality Agreement") and Cannon
representatives subsequently conducted due diligence at SCC.
On June 24, 1996, Cannon and two other parties filed in the
Bankruptcy Court a document styled "Objection to the Second
Disclosure Statement Pursuant to section 1125 of the
Bankruptcy Code in Respect of Debtors' Second Joint Plan of
Reorganization" (the "Cannon Objection"). The Cannon Objection
attached a confidential Letter of Intent. The Cannon Objection
alleged that the Debtors had breached their fiduciary duty to
creditors and shareholders by not including the Cannon
acquisition proposal in the Plan and Disclosure Statement. On
June 26, 1996, Cannon issued a press release describing the
Cannon Objection and the purported offer set forth in the
Letter of Intent. By telecopies dated June 25, 1996 and June
26, 1996, the Debtors' counsel informed Cannon's counsel that
the Objection had violated Cannon's agreements and
undertakings in the Confidentiality Agreement, among other
things by communicating details of the Letter of Intent.
On June 27, 1996, the Debtors filed a verified complaint in
the Bankruptcy Court against Cannon, Gerald Resnick, Martin
Gerber, MaraFund, Ltd. ("MaraFund") and one other affiliated
party. The verified complaint, captioned Smith Corona Corp. et
al. v. Gerald Resnick et al., Adv. Pro. No. 96-96 (Bankr. D.
Del.) (the "Adversary Proceeding"), alleged that the
defendants had violated the Confidentiality Agreement and
sections 1121 and 1125 of the Bankruptcy Code by filing the
Cannon Objection and issuing the June 26, 1996 press release.
The Debtors sought, among other things, a declaratory judgment
that the defendants had breached the Confidentiality
Agreement, an injunction preventing the defendants from
committing further such breaches, and an award of costs and
attorneys' fees to SCC pursuant to the Confidentiality
Agreement.
The Debtors also moved for a Temporary Restraining Order
("TRO") to prevent further violations by the defendants of the
Confidentiality Agreement and the Bankruptcy Code. After
hearing oral argument on June 28, 1996 from the Debtors, from
the Creditors' Committee (which supported the Debtors' request
for a TRO), and from counsel for the defendants, the
Bankruptcy Court granted a TRO in the form requested by the
Debtors.
By Stipulation and Order filed on July 25, 1996, the
defendants' time to move, answer or otherwise respond to the
complaint in the Adversary Proceeding was extended from July
27, 1996 to August 30, 1996; trial of the action was continued
to October 15, 1996; and the TRO was continued in effect
through the date of trial. By Stipulation and Order filed
August 19, 1996, the parties agreed to extend the defendants'
time to answer, move or otherwise respond to the complaint in
the Adversary Proceeding from August 30, 1996 to December 16,
1996; to move the trial date to a date not sooner than
December 16, 1996; and to continue the TRO in full force and
effect through the date of trial (unless otherwise ordered by
the Bankruptcy Court).
Pursuant to the Stock Purchase Agreement (as defined below),
the defendants and SCC executed mutual general releases and
MaraFund paid all of SCC's costs, expenses and legal fees
arising out of or related to the Adversary Proceeding in the
amount of $30,000.
24. Stock Purchase Agreement with MaraFund
On July 16, 1996, the Debtors' Second Amended Second
Disclosure Statement (the "Second Disclosure Statement") in
support of the Debtors' Second Amended Second Joint Plan of
Reorganization (the "Second Plan") was approved by the
Bankruptcy Court. At the hearing with respect thereto, Cannon,
MaraFund and certain related parties appeared and filed
various objections to the Second Disclosure Statement, stating
that they wished to file their own reorganization plan. The
Bankruptcy Court overruled all of their objections.
Following such hearing, the Debtors began negotiations with
Cannon and MaraFund concerning ways in which Cannon and
MaraFund could enhance the Second Plan. The principal object
of the negotiations was to explore a means by which MaraFund
could make an equity investment in NewSCC by purchasing shares
of NewSCC Common Stock, thereby increasing the amount of cash
to be received by holders of Allowed General Unsecured Claims
under the Second Plan. As a result of these negotiations, SCC
and MaraFund executed a Stock Purchase Agreement (the "Stock
Purchase Agreement") on August 16, 1996. Pursuant to the terms
of the Stock Purchase Agreement, MaraFund agreed to purchase
15% of the NewSCC Common Stock to be issued pursuant to the
Plan for a purchase price of $5,000,000, which amount would
have been distributed to the holders of Allowed General
Unsecured Claims. Such holders would also have received 70% of
the NewSCC Common Stock, instead of 85%. The Stock Purchase
Agreement also provided that MaraFund could attempt to obtain
stock subscriptions to purchase an additional 70% of the
NewSCC Common Stock, which otherwise would have been
distributed to the holders of Allowed General Unsecured
Claims, if it paid to SCC by August 31, 1996 an additional
$15,000,000 in cash and executed an agreement satisfactory in
form and substance to SCC with respect thereto.
Upon execution of the Stock Purchase Agreement on August 16,
1996, MaraFund deposited $500,000 with SCC in escrow. Pursuant
to the terms of the Stock Purchase Agreement, MaraFund was
obligated to deposit an additional $4,500,000 not later than
five business days thereafter. On August 27, 1996, SCC gave
MaraFund notice that MaraFund was in breach of the Stock
Purchase Agreement because it failed to deposit the additional
$4,500,000 in cash as required by the Stock Purchase
Agreement. As a result, the stock subscription transaction
between SCC and MaraFund has been terminated. The Stock
Purchase Agreement provides for liquidated damages in the
amount of $500,000 in the case of termination due to breach by
MaraFund.
25. SCC's Notice of Intent to Terminate the Defined Benefit
Plans
Subsequent to the Bankruptcy Court's approval of the
stipulation pursuant to which the PBGC agreed to the
withdrawal of its unfunded benefit liabilities and minimum
funding contribution claims (see "Background Information
Regarding Debtors -- Significant Events During Chapter 11 Case
-- Stipulations and Settlements -- Stipulation with PBGC and
With SCC's Hourly and Salaried Retirement Plans"), the Debtors
determined that termination of the Defined Benefit Plans would
be in their best interests. Exercising its business judgment,
SCC, on August 6, 1996, decided to discontinue future benefit
accruals under the Defined Benefit Plans as of September 1,
1996 and to seek termination of the Defined Benefit Plans as
of October 6, 1996. On August 7, 1996, pursuant to applicable
Federal law and regulations, the Debtors caused a Notice of
Intent to Terminate to be issued to each affected party under
the Defined Benefit Plans.
The effect of a termination of the Defined Benefit Plans by
the Debtors prior to confirmation of the Joint Plan would be
to reclassify all such Class 4 Pension Plan Claims as
Administrative Claims, Priority Tax Claims and/or Class 8
General Unsecured Claims, as may be determined by the
Bankruptcy Court or as may be agreed to by NewSCC and the
holder of such Claims. Currently the PBGC has asserted certain
priorities for its Pension Plan Claims, in whole or in part.
The Debtors, however, believe that any such claims, to the
extent triggered by a termination by the PBGC or the Debtors
of any Defined Benefit Plan, are not entitled to the
priorities asserted by the PBGC and constitute General
Unsecured Claims to the extent they are based upon services
rendered to the Debtors pre-petition.
On August 23, 1996, the Debtors filed with the Bankruptcy
Court a Motion for Approval of Distress Termination of Pension
Plans, together with supporting materials. The motion asks
that the Bankruptcy Court: (i) find that the Debtors meet the
standards for distress termination of the Defined Benefit
Plans under applicable statutes and regulations; (ii) approve
termination of the Defined Benefit Plans and order that they
be terminated as of October 6, 1996; (iii) find that the
PBGC's claims arising from termination of the Defined Benefit
Plans constitute General Unsecured Claims; and (iv) determine
the amount of any Allowed Claim of the PBGC arising from
termination of the Defined Benefit Plans through the use of a
reasonable and appropriate discount rate.
ARTICLE 3
THE PLAN OF REORGANIZATION
THE FOLLOWING IS A SUMMARY OF THE PROVISIONS OF THE PLAN
AND, ACCORDINGLY, IS NOT AS COMPLETE AS THE FULL TEXT OF THE
PLAN WHICH ACCOMPANIES THIS DISCLOSURE STATEMENT. THE PLAN
ITSELF SHOULD BE READ IN ITS ENTIRETY.
A. General
Distributions under the Plan to holders of Allowed General
Unsecured Claims shall be made from the Unsecured Class Cash,
and from shares of NewSCC Common Stock which, in the
aggregate, will constitute 85% of the shares of NewSCC Common
Stock, determined on a fully-diluted basis not including the
effect of the exercise of any of the NewSCC Warrants.
Distributions under the Plan will be made on the Effective
Date and any subsequent distribution dates until all Disputed
Claims and Avoidance Actions, if any, have been resolved. The
amount of the Allowed Claims in each of the Classes and
designations described below may vary depending on the final
disposition of objections to Claims.
B. Summary of Designation of Classes
The Plan provides for nine (9) classes of Creditors and two
(2) classes of equity holders. Claims under the Chemical DIP
Loan Agreement, Allowed Administrative Claims and Allowed
Priority Tax Claims are not designated as classes of Claims
for purposes of the Plan and sections 1123, 1124, 1126 and
1129 of the Bankruptcy Code. A Claim or Equity Interest is
included in a particular Class or designation only to the
extent that the Claim or Equity Interest qualifies within the
description of that Class or designation, and is in a
different Class or designation to the extent that the
remainder of the Claim or Equity Interest qualifies within the
description of the different Class or designation.
Claims Under the Chemical DIP Loan Agreement
Such Claims will consist of all Claims under the Chemical
DIP Loan Agreement, dated as of July 10, 1995, as amended,
among SCC, the Banks and Chemical, as agent, including claims
in respect of documentary letters of credit and any indemnity
claims or claims for fees and expenses under such Agreement,
allowed by the Bankruptcy Court and held by the Banks.
Allowed Administrative Claims
Such Claims will consist of all Allowed Administrative
Claims (other than Claims under the Chemical DIP Loan
Agreement).
Allowed Priority Tax Claims
Such Claims will consist of all Claims to the extent Allowed
and entitled to priority in payment under section 507(a)(8) of
the Bankruptcy Code.
Class 1 (Allowed Priority Wage Claims)
Class 1 will consist of all Claims to the extent Allowed and
entitled to priority in payment under section 507(a)(3) of the
Bankruptcy Code.
Class 2 (Allowed Secured Claims)
Class 2 will consist of all Allowed Claims to the extent of
value, as determined pursuant to section 506(a) or 1111(b) of
the Bankruptcy Code, of any interest in property of the
Debtors' estates securing such Claims (other than Claims under
the Chemical DIP Loan Agreement). To the extent such Allowed
Claim exceeds the value of any interest in property of the
Debtors' estates securing such Claim, such Allowed Claim shall
be considered an Allowed General Unsecured Claim.
Class 3 (Allowed Environmental Claims)
Class 3 will consist of all Allowed Claims presently
asserted or which may be asserted in the future, including,
without limitation, any Contingent Claim or Claim for
contribution or indemnity, of any governmental unit, or Claim
for contribution or indemnity by any Person, arising out of or
related to any Environmental, Health and Safety Laws with
respect to the Groton and Cortlandville Sites, and, at the
election of the Debtors after consultation with the Creditors'
Committee on or before the Confirmation Date, the Rosen Site
and/or the Melville Site.
Class 4 (Pension Plan Claims)
Class 4 will consist of all Pension Plan Claims (Claims
arising from or related to any qualified pension plan
sponsored or maintained by the Debtors, including without
limitation, Claims by or on behalf of any SCC Retirement Plan
for contributions due from any Debtor, other Claims relating
to any actual or alleged unfunded benefit liabilities, unpaid
minimum funding contributions, or unpaid premiums, or for any
interest or penalty allegedly owed upon or by reason of any
such Claims, and any and all Claims against SCC in its
capacity as fiduciary or administrator of any SCC Retirement
Plan), to the extent such Claims are not matured by a
termination of any SCC Retirement Plan by the PBGC, pursuant
to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), 29 U.S.C. sec.sec. 1341(c) and 1342, or by
the Debtors, in which case such Claim shall be reclassified as
Administrative Claims, Priority Tax Claims and/or General
Unsecured Claims, as determined by the Bankruptcy Court or as
may be agreed to by NewSCC and the holder of such Claims.
Class 5 (Retiree Health and Insurance Claims)
Class 5 will consist of all Retiree Health and Insurance
Claims (Claims for health or life insurance benefits for
retired employees of any Debtor under any SCC Health and
Welfare Plan).
Class 6 (Warranty and Contract Claims)
Class 6 will consist of any Claim (i) for breach of warranty
based upon contract and not upon tort with respect to any
product sold by the Debtors, (ii) in connection with customer
promotional programs or (iii) relating to accounts receivable
and accrued liabilities incurred in the ordinary course of
business arising on or after the Petition Date (other than
certain Administrative Claims and Claims Under the Chemical
DIP Loan Agreement).
Class 7 (Allowed Reclamation Claims)
Class 7 will consist of all Allowed Claims pursuant to
section 546(c) of the Bankruptcy Code for reclamation of goods
shipped to the Debtors prior to the Petition Date; provided,
however, that any Disputed Reclamation Claim that has not been
Allowed by the date which is one (1) year after the Effective
Date will no longer be deemed a Reclamation Claim and will
instead be deemed a General Unsecured Claim unless the
Bankruptcy Court orders otherwise.
Class 8 (Allowed General Unsecured Claims)
Class 8 will consist of all Allowed Claims not included in
any other class and not secured by a charge against or
interest in property in which the Debtors' estate has an
interest, including any Unsecured Deficiency Claim, and any
Claim in favor of any Person arising from a judgment against
such Person in any Avoidance Action (if the effect of such
judgment gives such Person an Allowed General Unsecured
Claim).
Class 9 (Allowed Convenience Class Claims)
Class 9 will consist of all Allowed General Unsecured Claims
of $1,500 or less, and all such Claims exceeding $1,500 that
are voluntarily reduced by the holder of such Claim to $1,500.
Class 10 (SCC Common Stock)
Class 10 shall consist of the shares of common stock of SCC,
$.01 par value, outstanding on August 15, 1996.
Class 11 (Other Equity Interests)
Class 11 will consist of any Equity Interests in any of the
Debtors (other than the SCC Common Stock) represented by any
class or series of capital stock issued by any Debtor prior to
the Petition Date and any warrants, options, or rights to
purchase any capital stock of the Debtors or any Stockholder
Actions in respect of the Equity Interests, to the extent
provided in section 510(b) of the Bankruptcy Code.
C. Summary of Payment Provisions of the Plan
1. Impairment of Claims and Interests
Under the Bankruptcy Code, a class of claims or interests is
deemed "impaired" under a plan of reorganization unless, in
general, the rights of the holders of the claims or interests
of such class are not altered or, with respect to interests,
the holders receive cash equal to the greater of (i) any
liquidation preference or (ii) the redemption price, if either
is applicable. Any class that is deemed impaired must accept
the plan by the requisite majority before the plan can be
confirmed, unless the Bankruptcy Court finds, pursuant to
section 1129(b) of the Bankruptcy Code, that the plan is fair
and equitable and does not discriminate unfairly with respect
to each class that is impaired and has not accepted the plan.
2. Treatment of Claims and Equity Interests
The treatment of and consideration to be received by holders
of Allowed Claims and Equity Interests pursuant to the Plan
will be in full settlement, release and discharge of their
respective Allowed Claims or Equity Interests relating to the
Debtors and other Persons, as applicable, as specified in the
Plan.
Classified Claims and Interests
The Plan divides the Claims against and Equity Interests in
the Debtors into various Classes and designations. Below is a
description of the general Classes and designations of Claims
against and Equity Interests in the Debtors and their
treatment under the Plan. Claims under the Chemical DIP Loan
Agreement, Allowed Administrative Claims and Allowed Priority
Tax Claims are not designated as classes of Claims for
purposes of the Plan and sections 1123, 1124, 1126 and 1129 of
the Bankruptcy Code. Reference is made to "SUMMARY OF THE
CLASSIFICATION AND TREATMENT OF ALLOWED CLAIMS AND EQUITY
INTERESTS AND RECOVERIES THAT MIGHT BE AVAILABLE TO CERTAIN
CREDITORS" above.
Claims Under the Chemical DIP Loan Agreement
All Claims under the Chemical DIP Loan Agreement shall be
satisfied (i) with respect to reimbursement obligations under
outstanding letters of credit, through the cash
collateralization of such obligations; (ii) in the case of
obligations arising after the Effective Date pursuant to
Section 2.22(c) of the Chemical DIP Loan Agreement, by NewSCC
making prompt payment thereof; (iii) with respect to all other
Claims accrued or owing as of the Effective Date, by the
payment in full in cash on the Effective Date; (iv) with
respect to any fees and expenses of the Banks and Chemical, as
Agent, payable under Section 9.5 of the Chemical DIP Loan
Agreement accruing after the Effective Date, by payment
thereof by NewSCC up to an aggregate of $650,000, less any
amounts accrued by or paid to the Banks or the professionals
retained by the Banks from and after July 5, 1995 with respect
to any Avoidance Actions against the Banks with respect to the
Bank Prepetition Agreements, promptly upon presentation of
appropriate invoices to NewSCC, subject only to determination
and allowance by the Bankruptcy Court as to amount and
appropriateness if the Creditors' Committee objects to any
such fees and expenses, including without limitation on the
grounds that such fees and expenses should be recovered upon
entry of a judgment in connection with an Avoidance Action
with respect to the Banks, or (v) in such other manner as is
provided in the Plan or as may be agreed by the Debtors and
holders of such Claim, at such time or times as provided in
Section 10.1 of the Plan. On the date of and immediately after
such payment and deposit under clauses (i) and (iii) or under
clause (v) above, the Banks' commitment to lend under the
Chemical DIP Loan Agreement shall terminate. Claims under the
Chemical DIP Loan are presently approximately $500,000.
The Debtors intend to seek Bankruptcy Court determination of
the scope of the obligations to the Banks under the
indemnification provisions of Section 9.5 of the Chemical DIP
Loan Agreement other than those treated under clause (iv)
above.
Claims under the Chemical DIP Loan Agreement are not
classified. Solicitation of acceptances from holders of such
Claims is not required and is not being undertaken.
Allowed Administrative Claims
All Allowed Administrative Claims shall be paid in full in
Cash on the Effective Date or the date such a Claim becomes an
Allowed Claim unless such Allowed Claim holder and the Debtors
agree upon other terms for the treatment of such Claim. It is
anticipated that there will be sufficient funds to pay all
Allowed Administrative Claims in full. Such claims are
anticipated to be approximately $3.55 million to the extent
not already paid from assets of the Debtors' estates prior to
Confirmation.
Administrative Claims consist of the costs and expenses of
the administration of the Chapter 11 Case, including
professional fees. The Allowed Administrative Claims are
granted priority in payment pursuant to section 507(a) of the
Bankruptcy Code. SCC has kept substantially current in payment
of its obligations incurred during the course of the Chapter
11 Case, inclusive of fees payable to the United States
Trustee pursuant to 28 U.S.C. sec. 1930. The Debtors believe
that the amount of unpaid postpetition liabilities other than
for professional fees, on the Effective Date, will be minimal,
consisting primarily of ordinary course business expenses for
payroll, rent, utilities and the like. The Debtors estimate
that unpaid professional fees for services rendered by
counsel, accountants and professionals appointed by the
Bankruptcy Court on an anticipated Effective Date of November
15, 1996 will aggregate approximately $3.0 million inclusive
of the sum of approximately $1.3 million attributable to
amounts reserved for payment in connection with prior interim
fees awarded by the Bankruptcy Court. The aforesaid amounts
exclude fees previously paid to said professionals and exclude
fees for auctioneers and appraisers. Approximately $7.065
million has been paid to date to professionals retained in the
case pursuant to orders of the Bankruptcy Court.
Since, under the terms of the Plan, there will be services
required after Confirmation, and since the actual fees paid
for professional services are determined by the Bankruptcy
Court, the amounts estimated for Allowed Administrative Claims
are based on the information currently available to the
Debtors and are subject to change.
In accordance with the provisions of the Plan, reserve funds
will be established for any and all Disputed Administrative
Claims. On the Effective Date, or as soon thereafter as
practicable, NewSCC will reserve the amount of Cash necessary
to pay in full all Disputed Administrative Claims and the
estimated Administrative Claims of professionals retained by
the Debtors or the Creditors' Committee which have not yet
been fixed by an order of the Bankruptcy Court. NewSCC will
assume responsibility for the payment of all post-Confirmation
Date fees and expenses of professionals retained by the
Debtors or the Creditors' Committee (subject to certain
limitations. See "The Plan of Reorganization -- Other
Provisions of Plan -- Miscellaneous -- Payment of Certain
Post-Effective Date Expenses"). To the extent a Disputed
Administrative Claim becomes an Allowed Claim, or the
Administrative Claim of a professional is fixed thus being
deemed an Allowed Claim, NewSCC will pay to the holder of such
Allowed Claim, as soon as practicable thereafter, the amount
of such Allowed Claim. No distribution will be made to the
holder of a Disputed Administrative Claim, unless and until a
Final Order providing that such Claim has become an Allowed
Claim has been entered.
Allowed Administrative Claims are not classified.
Solicitation of acceptances from holders of Allowed
Administrative Claims is not required and is not being
undertaken.
Allowed Priority Tax Claims
Each Person holding an Allowed Priority Tax Claim shall be
paid in full either (a) in Cash on the Effective Date or on
the date such Claim becomes an Allowed Priority Tax Claim or
(b) by issuance of a Priority Tax Note in the amount of such
Allowed Priority Tax Claim, which Priority Tax Note shall
provide for the payment of the principal amount thereof in six
equal installments payable on each anniversary of the date of
assessment of the Claim on which such Allowed Priority Tax
Claim is based through the sixth anniversary thereof, with
interest on such amount payable quarterly in arrears. NewSCC
reserves the right to pay any unpaid portion of any Priority
Tax Note, together with any accrued and unpaid interest to the
date of payment, in part or in full, at any time on or after
the Effective Date, at its option, without premium or penalty.
The Debtors estimate that, as of the Effective Date,
Priority Tax Claims will in the aggregate approximate $3.7
million for all Debtors, with all such Claims being satisfied
at NewSCC's option through payment in Cash or by the issuance
of the Priority Tax Notes described above, except the Allowed
Priority Tax Claim of the State of New York in the amount of
$600,000 (the "New York State Tax Claim"), which shall be paid
in Cash pursuant to Stipulation and Order dated January 31,
1996 between the New York State Department of Finance and
Taxation and SCC. Liability for $300,000 of the New York State
Tax Claim is covered by an indemnity from SCC's former parent,
Hanson, by virtue of the SCC/Hanson Indemnification Agreement,
between SCC and Hanson. See "Background Information Regarding
Debtors -- Significant Events During Chapter 11 Case --
Stipulations and Settlements -- Stipulation With New York
State Department of Finance and Taxation."
Allowed Priority Tax Claims are not classified. Solicitation
of acceptances from holders of Allowed Priority Tax Claims is
not required and is not being undertaken.
Class 1 (Allowed Priority Wage Claims)
All Allowed Priority Wage Claims shall be paid in full in
Cash on the Effective Date or the date such a Claim becomes an
Allowed Claim unless such Allowed Claim holder and the Debtors
agree upon other terms for the treatment of such Claim, which
payment shall be in full compliance with the legal, equitable
and contractual rights to which the holder of such Claim is
entitled. It is anticipated that there will be sufficient
funds to pay all Allowed Priority Wage Claims in full. Such
claims are anticipated to be approximately $45,000.
Priority Wage Claims consist of all claims of employees of
the Debtors for unpaid wages, salaries and commissions
(including vacation, severance and sick pay) earned in the 90
days prior to the Petition Date, in an amount up to $4,000 for
each employee.
In accordance with the provisions of the Plan, reserve funds
will be established for any and all Disputed Priority Wage
Claims. On the Effective Date, or as soon thereafter as
practicable, NewSCC will reserve the amount of Cash necessary
to pay in full all Disputed Priority Wage Claims. To the
extent a Disputed Priority Wage Claim becomes an Allowed
Claim, NewSCC will pay to the holder of such Allowed Claim, as
soon as practicable thereafter, the amount of such Allowed
Claim. No distribution will be made to the holder of a
Disputed Priority Wage Claim, unless and until a Final Order
providing that such Claim has become an Allowed Claim has been
entered.
Class 1 is not impaired and, pursuant to the Bankruptcy
Code, is deemed to have accepted the Plan. Solicitation of
acceptances from Class 1 is not required and is not being
undertaken.
Class 2 (Allowed Secured Claims)
Class 2 under the Plan consists of all Allowed Secured
Claims other than Claims under the Chemical DIP Loan
Agreement. Schedule 5.5 to the Plan lists the Secured Claims
known to the Debtors which are not subject to dispute. The
claim of Kamden International Shipping, Inc. (the "Kamden
Claim") is the only claim which, to the Debtors' knowledge,
has been asserted in whole or in part as a Secured Claim. The
Debtors have filed an objection to the Kamden Claim seeking to
reclassify such Claim as a Class 8 General Unsecured Claim.
Each holder of an Allowed Secured Claim shall, at the option
of NewSCC, receive either (i) Cash in the full amount of such
Claim at such time or times as provided in Section 10.1 of the
Plan, (ii) the collateral securing such Claim, or (iii) such
other treatment as may be agreed to by NewSCC and the holder
of such Claim. Class 2 Claims are anticipated to be not more
than approximately $15,000.
In accordance with the provisions of the Plan, reserve funds
will be established for any and all Disputed Secured Claims.
On the Effective Date, or as soon thereafter as practicable,
NewSCC will reserve the amount of Cash necessary to pay in
full all Disputed Secured Claims. To the extent a Disputed
Secured Claim becomes an Allowed Claim, NewSCC will pay to the
holder of such Allowed Claim, as soon as practicable
thereafter, the amount of such Allowed Claim. No distribution
will be made to the holder of a Disputed Secured Claim, unless
and until a Final Order providing that such Claim has become
an Allowed Claim has been entered. To the extent any such
Allowed Claim exceeds the value of any interest in property of
the Debtors' estates securing such Claim, such Allowed Claim
shall be considered an Allowed General Unsecured Claim.
Class 2 is impaired under the Plan. Solicitation of
acceptances from Class 2 shall be undertaken.
Class 3 (Environmental Claims)
All Allowed Environmental Claims shall be assumed by NewSCC,
with the legal, equitable and contractual rights to which such
Claims entitles the holder unaltered. Class 3 Claims are
anticipated to be approximately $3,377,000.
Allowed Environmental Claims will consist of all Allowed
Claims presently asserted or which may be asserted in the
future, including, without limitation, any Contingent Claim or
Claim for contribution or indemnity, of any governmental unit,
or Claim for contribution or indemnity by any Person, arising
out of or related to any Environmental, Health and Safety Laws
with respect to the Groton and Cortlandville Sites, and, at
the election of the Debtors after consultation with the
Creditors' Committee on or before the Confirmation Date, the
Rosen Site and/or the Melville Site.
Class 3 is not impaired and, pursuant to the Bankruptcy
Code, is deemed to have accepted the Plan. Solicitation of
acceptances from Class 3 is not required and is not being
undertaken.
Class 4 (Pension Plan Claims)
All Pension Plan Claims shall be satisfied in full: (i) for
Claims arising from or related to the Defined Benefit Plans,
to the extent that the Bankruptcy Court does not terminate the
Defined Benefit Plans, by leaving the legal, equitable and
contractual rights to which such Claim entitles the holder of
such Claim unaltered; and (ii) for Claims arising from or
related to the Defined Contribution Plan, by the assumption of
such Claims by NewSCC, with the legal, equitable and
contractual rights to which such Claim entitles the holder of
such Claim unaltered. To the extent any Claim arising from any
SCC Retirement Plan is matured by a termination of any SCC
Retirement Plan by the PBGC pursuant to ERISA, 29 U.S.C.
sec.sec. 1341(c) and 1342, or by the Debtors, except as
otherwise ordered by the Bankruptcy Court, such claim shall be
reclassified as a Class 8 Claim. The PBGC has asserted certain
priorities for its claims against the Debtors, in whole or in
part. The Debtors, however, believe that any such claims, to
the extent they are matured by a termination by the PBGC or
the Debtors of any SCC Retirement Plan, are not entitled to
the priorities asserted by the PBGC.
Pension Plan Claims consist of any Claims arising from or
related to any qualified pension plan sponsored or maintained
by any of the Debtors, including without limitation, any
Claims by or on behalf of any SCC Retirement Plan for
contributions due from any Debtor, any other Claims relating
to any actual or alleged unfunded benefit liabilities, unpaid
minimum funding contributions, or unpaid premiums, or for any
interest or penalty allegedly owed upon or by reason of any
such Claims. Class 4 will also include all Pension Plan Claims
against SCC as fiduciary or administrator of any SCC
Retirement Plan. To the extent any Claim against SCC as
fiduciary or administrator is matured by a termination of any
SCC Retirement Plan by the PBGC or the Debtors prior to
confirmation of the Plan, such Claim shall be reclassified as
Administrative Claims, Priority Tax Claims and/or General
Unsecured Claims, as determined by the Bankruptcy Court or as
may be agreed to by NewSCC and the holder of such Claims. In
the event of a termination of any SCC Retirement Plan by the
PBGC or by the Debtors prior to Confirmation, SCC anticipates
that the PBGC will seek appointment, and will be appointed,
statutory trustee of each terminated plan. Upon such
appointment, SCC would resign its position as fiduciary or
administrator of such plan.
In the event that neither the PBGC nor the Debtors trigger a
termination of any of the SCC Retirement Plans and the Plan is
confirmed, nothing in this Disclosure Statement or the Plan
shall be construed as discharging, releasing or relieving the
Debtors, NewSCC, or any other party, in any capacity, from any
liability with respect to the SCC Retirement Plans under any
law, governmental policy or regulatory provision, and neither
the PBGC nor the SCC Retirement Plans shall be enjoined from
enforcing such liability as a result of the Plan provisions
for satisfaction, release and discharge of Claims.
Class 4 is not impaired and, pursuant to the Bankruptcy
Code, is deemed to have accepted the Plan. Solicitation of
acceptances from Class 4 is not required and is not being
undertaken.
Class 5 (Retiree Health and Insurance Claims)
All Retiree Health and Insurance Claims shall be satisfied
in full by the assumption of such Claims by NewSCC, with the
legal, equitable and contractual rights to which such Claims
entitles the holder unaltered.
Retiree Health and Insurance Claims consist of Claims for
health or life insurance benefits for retired employees of any
Debtor under any SCC Health and Welfare Plan.
Class 5 is not impaired and, pursuant to the Bankruptcy
Code, is deemed to have accepted the Plan. Solicitation of
acceptances from Class 5 is not required and is not being
undertaken.
Class 6 (Warranty and Contract Claims)
All Warranty and Contract Claims shall be satisfied in full
by the assumption of such Claims by NewSCC, with the legal,
equitable and contractual rights to which such Claims entitles
the holder unaltered.
Warranty and Contract Claims consist of any Claim (i) for
breach of warranty based upon contract and not upon tort with
respect to any product sold by the Debtors, (ii) in connection
with customer promotional programs or (iii) relating to
accounts receivable and accrued liabilities incurred in the
ordinary course of business arising on or after the Petition
Date (other than Administrative Claims of professionals
retained pursuant to sections 327 or 328 of the Bankruptcy
Code, fees and expenses of ordinary course professionals,
expenses of members of the Creditors' Committee, Claims under
the Chemical DIP Loan Agreement and Claims under clauses
(viii) and (ix) of the definition of Allowed Administrative
Claim set forth in the Plan.
Class 6 is not impaired and, pursuant to the Bankruptcy
Code, is deemed to have accepted the Plan. Solicitation of
acceptances from Class 6 is not required and is not being
undertaken.
Class 7 (Allowed Reclamation Claims)
Each holder of an Allowed Class 7 Reclamation Claim which
has not been satisfied prior to the Effective Date shall be
paid in full in Cash (or otherwise satisfied in accordance
with its terms), at such time or times as provided in Section
10.1 of the Plan. Allowed Class 7 Claims are anticipated to be
approximately $167,000 if there is a finding that SCC was
insolvent on the Petition Date or if it is otherwise resolved
that SCC was insolvent on the Petition Date, or $0 if there is
a finding that SCC was solvent on the Petition Date or if it
is otherwise resolved that SCC was solvent on the Petition
Date or if a finding or other resolution that SCC was
insolvent is not made or reached by the date which is one (1)
year after the Effective Date.
In accordance with the provisions of the Plan, reserve funds
will be established for any and all Disputed Reclamation
Claims. On the Effective Date, or as soon thereafter as
practicable, NewSCC will reserve the amount of Cash necessary
to pay in full all Disputed Reclamation Claims. To the extent
a Disputed Reclamation Claim becomes an Allowed Claim, NewSCC
will pay to the holder of such Allowed Claim, as soon as
practicable thereafter, the amount of such Allowed Claim. No
distribution will be made to the holder of a Disputed
Reclamation Claim, unless and until a Final Order providing
that such Claim has become an Allowed Claim has been entered.
All Reclamation Claims, notwithstanding the existence of any
other dispute with respect to their allowability, will be
considered to be Disputed Claims unless and until there has
been a determination or other resolution that the Debtors were
insolvent on the Petition Date.
Class 7 is impaired under the Plan. Solicitation of
acceptances from Class 7 shall be undertaken.
Class 8 (Allowed General Unsecured Claims)
Class 8 under the Plan consists of prepetition general
unsecured claims, including, without limitation, (i) Claims
for goods and services delivered prior to the Petition Date
and (ii) Claims arising out of the rejection of any Executory
Contract. Based upon proofs of claim filed with the Bankruptcy
Court on or before the October 31, 1995 Bar Date for filing
proofs of Claim, and upon the books and records of SCC, the
total of all filed Class 8 Claims is estimated to be
approximately $25.443 million. Until the claims objection
process and the prosecution of all Avoidance Actions (if any)
are completed, no assurance can be provided as to the ultimate
amount of total Allowed Class 8 General Unsecured Claims.
As promptly as practicable after the Effective Date, the
Distribution Agent will distribute to each holder of an
Allowed General Unsecured Claim (i) such holder's Pro Rata
Share as of the Effective Date of the Unsecured Class Cash
(after reserving the amount of Unsecured Class Cash necessary
to pay in full (x) the holders of all Disputed General
Unsecured Claims the amount, if any, that such Claims would
have received if they were Allowed General Unsecured Claims at
the time of such distribution and (y) the holders of all
Disputed Convenience Class Claims) and (ii) one (1) share of
NewSCC Common Stock for each $6.00 in amount of such holder's
Allowed General Unsecured Claim. To the extent that a Disputed
General Unsecured Claim becomes an Allowed Claim, the
Distribution Agent will pay to the holder of such Allowed
Claim, as soon as is practicable thereafter, (i) an amount of
Unsecured Class Cash equal to the amount, if any, that such
Claim would have received if it had been an Allowed Class 8
General Unsecured Claim on the Effective Date and any
subsequent distribution dates, and any interest earned on the
amounts that would have been so distributed and (ii) one (1)
share of NewSCC Common Stock for each $6.00 in amount of such
holder's Allowed General Unsecured Claim. No distribution will
be made to the holder of any Disputed Claim unless and until
(a) a Final Order providing that such Claim has become an
Allowed Claim has been entered or (b) the Bankruptcy Court
shall have entered an order treating any portion of such
Disputed Claim as an Allowed Claim. In addition, holders of
Allowed General Unsecured Claims will receive their Pro Rata
Share of subsequent distributions (taking into account amounts
received in previous distributions).
The Unsecured Class Cash will consist of the following: (a)
Cash in the amount of $10,780,000 less the aggregate amount of
Cash paid to holders of Allowed Convenience Class Claims; (b)
the Net Avoidance Action Proceeds; (c) the Excess Reclamation
Funds; and (d) any interest accrued on such Cash prior to its
distribution and after it has been received by the
Distribution Agent. The NewSCC Common Stock to be distributed
to the holders of Allowed General Unsecured Claims shall
constitute 85% of the total issued and outstanding shares of
NewSCC, determined on a fully-diluted basis not including the
effect of the exercise of any of the NewSCC Warrants.
Class 8 is impaired under the Plan. Solicitation of
acceptances from Class 8 shall be undertaken.
Class 9 (Allowed Convenience Class Claims)
Class 9 under the Plan consists of all Allowed General
Unsecured Claims of $1,500 or less, and any such Claims
exceeding $1,500 that are voluntarily reduced by the holders
of such claims to $1,500. Holders of General Unsecured Claims
who voluntarily elect to reduce such claims to $1,500 for
purposes of inclusion in Class 9 shall be deemed to vote in
favor of the Plan.
Each holder of an Allowed Convenience Class Claim will
receive a payment equal to 60% of the amount of such Claim in
Cash on the Effective Date or the date such a Claim becomes an
Allowed Claim. Such claims are anticipated to be approximately
$230,000.
If Class 9 votes to reject the Plan, all Allowed Convenience
Class Claims shall be treated as Allowed General Unsecured
Claims and shall be accorded the treatment given to Class 8
Allowed General Unsecured Claims under the Plan.
In accordance with the provisions of the Plan, reserve funds
will be established for any and all Disputed Convenience Class
Claims. On the Effective Date, or as soon thereafter as
practicable, NewSCC will reserve the amount of Cash necessary
to pay all Disputed Convenience Class Claims the amount
provided by the Plan. To the extent a Disputed Convenience
Class Claim becomes an Allowed Claim, NewSCC will pay to the
holder of such Allowed Claim, as soon as practicable
thereafter, 60% of the amount of such Allowed Claim. No
distribution will be made to the holder of a Disputed
Convenience Class Claim, unless and until a Final Order
providing that such Claim has become an Allowed Claim has been
entered. Upon resolution of any Disputed Convenience Class
Claim, any Cash reserved on account of such Disputed Claim and
not paid to the holder of such Disputed Claim on account of
such Claim shall be transferred by NewSCC to the Distribution
Agent to be part of the Unsecured Class Cash.
Class 9 is impaired under the Plan. Solicitation of
acceptances from Class 9 shall be undertaken.
Class 10 (SCC Common Stock)
Class 10 shall consist of the shares of common stock of SCC,
$.01 par value, outstanding on August 15, 1996.
Registered Holders shall receive one (1) NewSCC Warrant for
each ten (10) shares of SCC Common Stock, which NewSCC Warrant
shall entitle the holder to purchase one (1) share of NewSCC
Common Stock at an exercise price determined as set forth in
the NewSCC Warrant Agreement and described above in
"Introduction -- Overview of the Debtors and the Plan --
Sources of Recovery Under the Plan," exercisable during the
period commencing on the date occurring six (6) months after
the Effective Date and ending on the date occurring two (2)
years after the Effective Date. All shares of SCC Common Stock
will be canceled, annulled, and extinguished on the Effective
Date.
Class 10 is impaired and is deemed to reject the Plan.
Holders of Class 10 Equity Interests are not entitled to vote
on the Plan and their votes are not being solicited.
Class 11 (Other Equity Interests)
Class 11 shall consist of any Equity Interests in any of the
Debtors represented by any class or series of capital stock
issued by any Debtor prior to the Petition Date (other than
the SCC Common Stock) and any warrants, options, or rights to
purchase any capital stock of the Debtors or any Stockholder
Actions in respect of the Equity Interests, to the extent
provided in section 510(b) of the Bankruptcy Code. Holders of
Class 11 Equity Interests will receive no distribution under
the Plan in respect of such Interests. Under section 1126(g)
of the Bankruptcy Code, a class is deemed not to have accepted
a plan if such plan provides that the holders of claims or
interests in such class of claims or interests are not
entitled to receive or retain any property under such plan on
account of such claims or interests. No distributions of any
nature will be made with regard to or in respect of the
interests of the holders of Class 11 Equity Interests. On the
Effective Date all capital stock of the Debtors shall be
deemed automatically canceled and retired by operation of law
and will cease to exist.
Holders of Class 11 Equity Interests are therefore deemed to
have rejected the Plan, are not entitled to vote on the Plan
and their votes are not being solicited.
Classes 2, 7, 8, 9, 10 and 11 are impaired under the Plan.
Solicitation of acceptances from holders of Claims in Classes
2, 7, 8 and 9 is required while Classes 10 and 11 are deemed
to have rejected the Plan. In the event that the required
majority of the holders of Class 2 Claims or the holders of
Class 7 Claims or the holders of Class 8 Claims or the holders
of Class 9 Claims do not vote to confirm the Plan consensually
pursuant to sections 1126 and 1129(a) of the Bankruptcy Code,
then the Debtors reserve the right, in their sole discretion,
to seek to confirm the Plan with respect to one or more of
such classes pursuant to section 1129(b) of the Bankruptcy
Code.
Position of the PBGC With Respect to Class 4 (Pension Plan
Claims)
The PBGC is a wholly-owned United States government
corporation, created by ERISA to administer the mandatory
pension plan termination insurance program established under
Title IV of ERISA. The PBGC guarantees the payment of certain
pension benefits upon termination of a pension plan covered by
Title IV. The two Defined Benefit Plans set forth in Schedule
1.74 to the Plan are pension plans covered by Title IV.
It is the position of the PBGC that the Defined Benefit
Plans are underfunded for benefit liabilities on a termination
basis. See 29 C.F.R. sec.sec. 2616 & 2617. ERISA requires that
unfunded benefit liabilities upon termination of a pension
plan be calculated in accordance with assumptions prescribed
by the PBGC. The PBGC asserts that the Defined Benefit Plans
are underfunded on a termination basis, as of an assumed date
of plan termination of July 5, 1995, by approximately $25.5
million. The PBGC has filed, and has subsequently stipulated
to the withdrawal of, its contingent, estimated, priority
claims with respect to the Defined Benefit Plans' unfunded
benefit liabilities (defined in ERISA sec. 4001(a)(18), 29
U.S.C. sec. 1301(a)(18)). See ERISA sec. 4062, 29 U.S.C. sec.
1362. The PBGC has also filed, and has subsequently stipulated
to the withdrawal of its contingent, unliquidated,
administrative priority claims on behalf of the Defined
Benefit Plans for statutorily required minimum funding
contributions. See ERISA sec.sec. 302 and 4062(c), 29 U.S.C.
sec.sec. 1082 and 1362(c), and IRC sec. 412, 26 U.S.C. sec.
412. The PBGC's filed unfunded benefit liabilities claims were
for approximately $25.2 million, based on an assumed date of
plan termination of July 1, 1995. The actual amount of the
PBGC's claims will be different from that estimate, but cannot
be determined until (and only if) the plan(s) are terminated
and a date of plan termination is determined. The PBGC's
claims for unfunded benefit liabilities and minimum funding
contributions have been withdrawn by stipulation without
prejudice to refiling prior to Plan confirmation. Finally, the
PBGC has filed claims for unpaid pension termination insurance
premiums and penalties and interest relating thereto. See
ERISA sec. 4007(a), (b) & (e), 29 U.S.C. sec. 1307(a), (b) &
(e); 29 C.F.R. sec. 2610.26(a). See "Background Information
Regarding Debtors -- Significant Events During Chapter 11 Case
-- Stipulations and Settlements -- Stipulation With PBGC and
With SCC's Hourly and Salaried Retirement Plans" above.
Under ERISA, the PBGC has discretionary authority to seek to
terminate a pension plan whenever it determines that the
PBGC's possible long-run loss may reasonably be expected to
increase unreasonably unless the plan is terminated.
Under ERISA, the Debtors may seek to terminate a pension
plan if they have filed for relief under Chapter 11 of the
Bankruptcy Code and their cases have not been dismissed and if
the Debtors determine that they will be unable to continue in
business outside the Chapter 11 reorganization process unless
the pension plan or plans are terminated.
A pension plan covered by Title IV of ERISA may only be
terminated in accordance with that statute. ERISA sec.sec.
4041, 4042, 29 U.S.C. sec.sec. 1341, 1342. The filing of a
petition under the Bankruptcy Code does not automatically
result in termination.
Subsequent to the Bankruptcy Court's approval of the
stipulation pursuant to which the PBGC agreed to the
withdrawal of its unfunded benefit liabilities and minimum
funding contribution claims (see "Background Information
Regarding Debtors -- Significant Events During Chapter 11 Case
-- Stipulations and Settlements -- Stipulation With PBGC and
With SCC's Hourly and Salaried Retirement Plans"), the Debtors
determined that termination of the Defined Benefit Plans would
be in their best interests. Exercising its business judgment,
SCC, on August 6, 1996, decided to discontinue future benefit
accruals under the Defined Benefit Plans as of September 1,
1996 and to seek termination of the Defined Benefit Plans as
of October 6, 1996. On August 7, 1996, pursuant to applicable
Federal laws and regulations, the Debtors caused a Notice of
Intent to Terminate to be issued to each affected party under
the Defined Benefit Plans.
The effect of a termination of the Defined Benefit Plans by
the Debtors prior to confirmation of the Joint Plan would be
to reclassify all such Class 4 Pension Plan Claims as
Administrative Claims, Priority Tax Claims and/or Class 8
General Unsecured Claims, as may be determined by the
Bankruptcy Court or as may be agreed to by NewSCC and the
holder of such Claims. Currently the PBGC has asserted certain
priorities for its Pension Plan Claims, in whole or in part.
The Debtors, however, believe that any such claims, to the
extent triggered by a termination by the PBGC or the Debtors
of any Defined Benefit Plan, are not entitled to the
priorities asserted by the PBGC and constitute General
Unsecured Claims to the extent they are based upon services
rendered to the Debtors pre-petition.
On August 23, 1996, the Debtors filed with the Bankruptcy
Court a Motion for Approval of Distress Termination of Pension
Plans, together with supporting materials. The motion asks
that the Bankruptcy Court: (i) find that the Debtors meet the
standards for distress termination of the Defined Benefit
Plans under applicable statutes and regulations; (ii) approve
termination of the Defined Benefit Plans and order that they
be terminated as of October 6, 1996; (iii) find that the
PBGC's claims arising from termination of the Defined Benefit
Plans constitute General Unsecured Claims; and (iv) determine
the amount of any Allowed Claim of the PBGC arising from
termination of the Defined Benefit Plans through the use of a
reasonable and appropriate discount rate.
The PBGC asserts that, under ERISA, the Debtors and each
member of the Debtors' controlled group are jointly and
severally liable for the Defined Benefit Plans' unfunded
benefit liabilities, for due and unpaid employer
contributions, and for unpaid premiums. As defined by ERISA, a
"controlled group" includes trades or businesses connected
through common ownership and control, as defined by sections
414(b) and (c) of the Internal Revenue Code and regulations
promulgated thereunder. The PBGC asserts that the Debtors are
part of a controlled group which includes various related
entities, and that if either of the Defined Benefit Plans were
to terminate prior to confirmation of the Plan, the Debtors
and any other members in the Debtors' controlled group would
incur joint and several liability under ERISA for any unfunded
obligations with respect to the Defined Benefit Plans. ERISA
sec. 4062, 29 U.S.C. sec. 1362.
The PBGC asserts that, as a matter of law, ERISA's
provisions for joint and several liability of each controlled
group member for unfunded benefit liabilities, minimum funding
contributions, and premiums cannot be negated by the equitable
doctrine of substantive consolidation. The PBGC also asserts
that the Debtors cannot demonstrate that they meet the
applicable standards for substantive consolidation in any
event. Accordingly, the PBGC has advised the Debtors that it
will oppose the Debtors' motion for substantive consolidation.
The Debtors believe that substantive consolidation is proper
and that they will be successful on their motion for
substantive consolidation because, among other reasons, (i)
all proceeds from the sales of the assets of each of SCC's
Nonoperating Subsidiaries were conveyed to SCC immediately
after all such assets were sold; (ii) each of the Nonoperating
Subsidiaries ceased doing business after the sale of its
assets and essentially ceased to have a separate corporate
existence; and (iii) each of the Nonoperating Subsidiaries
effectively became a shell corporation whose expenses have
been paid both prior and subsequent to the Petition Date by
SCC. The Debtors also believe that the PBGC cannot enforce
claims for unfunded benefit liabilities, for due and unpaid
employer contributions, or for unpaid premiums against any of
SCC's foreign, non-debtor subsidiaries because the revenue
laws of the countries in which such subsidiaries are located
do not permit creditors, including the PBGC, to enforce such
claims.
D. Other Provisions of Plan
1. Substantive Consolidation
The Plan is predicated upon the Bankruptcy Court's entering
an order granting the Debtors' motion for substantive
consolidation of the Chapter 11 Case. The Debtors' motion for
an order directing the substantive consolidation of the
Chapter 11 Case and a memorandum of law in support thereof
will be filed shortly with the Bankruptcy Court and will be
returnable at or shortly before the Plan Confirmation hearing.
Notice of the motion will be provided to all entities
receiving ballots, and copies of the motion and memorandum of
law will be made available upon request at the Debtors'
expense.
Substantive consolidation is an equitable remedy which a
bankruptcy court may be asked to apply in those Chapter 11
cases involving affiliated debtors. As contrasted with
procedural consolidation (which has already been accomplished
pursuant to the Bankruptcy Court's Joint Administration
Order),(6) substantive consolidation may affect the
substantive rights and obligations of creditors and debtors.
Substantive consolidation involves the pooling of the assets
and liabilities of the affected debtors (to be substantively
consolidated). All the debtors in the substantively
consolidated group are treated as if they were a single
corporate/economic entity. Consequently, a creditor of the
substantively consolidated debtors is treated as a creditor of
the substantively consolidated group of debtors and issues of
individual corporate ownership of property and individual
corporate liability on obligations are ignored. Substantive
consolidation, however, does not affect the debtors' separate
corporate existence or independent ownership of property for
any purpose other than for making distributions of property
under a plan of reorganization or otherwise as necessary to
implement such plan.
The granting of substantive consolidation by the Bankruptcy
Court turns on two primary factors: (i) whether creditors
dealt with the entities as a single economic unit and did not
rely on their separate identity in extending credit; or (ii)
whether the affairs of the Debtors are so entangled that
consolidation would benefit creditors. The Bankruptcy Court
will review the record to determine whether substantive
consolidation results in fairness to the Debtors' creditors.
As mentioned above, the Plan contemplates and is predicated
upon the substantive consolidation of the estates of all the
Debtors into a single entity solely for the purpose of the
Plan and all actions with respect to confirmation and
consummation of the Plan. On the Effective Date or such other
date as may be set by a Final Order of the Bankruptcy Court,
but subject to the occurrence of the Effective Date: (i) all
intercompany Claims by and among the Debtors will be released;
(ii) all assets and all proceeds thereof and all liabilities
of the Debtors will be deemed merged or treated as though they
were merged; (iii) any obligation of any Debtor and all
guarantees thereof executed by any of the Debtors will be
deemed to be one obligation of the Debtors; (iv) any Claims
filed or to be filed in connection with any such obligation
and such guarantees will be deemed one Claim against the
Debtors; (v) each and every Claim filed in the individual
Chapter 11 Case of any of the Debtors will be deemed one Claim
filed against the Debtors; (vi) all duplicative claims filed
against more than one of the Debtors will be automatically
expunged so that only one claim survives against the Debtors;
(vii) all Equity Interests of any Debtor in any other Debtor
shall be deemed automatically canceled and retired by
operation of law and shall cease to exist; and (viii) the
Debtors will be deemed, for purposes of determining the
availability of the right of set-off under section 553 of the
Bankruptcy Code, to be one entity, so that, subject to other
provisions of section 553 of the Bankruptcy Code, the debts
due to a particular Debtor may be offset against claims
against such Debtor or another Debtor. On the Effective Date,
and in accordance with the terms of the Plan and the
consolidation of the assets and liabilities of
--------------- (6.) Procedural consolidation or joint
administration has no effect on the substantive rights of
debtors and their respective creditors, interest holders or
other parties. Rather, it is simply an administrative process
provided for under Bankruptcy Rule 1015(b) whereby the
affiliated debtors remain separate entities while there is a
joint handling of purely administrative matters to expedite
the cases.
the Debtors, all Claims based upon guarantees of collection,
payment or performance made by the Debtors as to the
obligations of another Debtor or of any other person shall be
discharged, released and of no further force and effect.
Absent substantive consolidation, the allowance of these
multiple Claims has the effect of diluting the amounts payable
to holders of General Unsecured Claims generally, as a
consequence of such unsecured creditors having to share their
distributions with additional creditors holding large Claims.
Notwithstanding the foregoing, the right of recovery of the
Creditors' Committee under the Avoidance Actions exercisable
on behalf of the Debtors' estate shall not be prejudiced by
such consolidation, and all Claims and Equity Interests of a
Debtor against or in any Non-Debtor Subsidiary shall not be
impaired by the Plan, and shall continue to exist after the
Effective Date.
The Debtors believe that the substantive consolidation
contemplated herein is proper and shall not affect any
intercompany claims and equity interests between any of the
Debtors and any of the Non-Debtor Subsidiaries of SCC, which
shall remain outstanding. Additionally, the Debtors believe
that they will be successful on their motion for substantive
consolidation (to be filed shortly as discussed above) for a
number of reasons (not limited to the following). First,
immediately following the sale of assets of each of SCC's
Nonoperating Subsidiaries all proceeds from such sales were
conveyed to SCC. Second, each of the Nonoperating Subsidiaries
ceased doing business after the sale of its assets and
essentially ceased to have a separate corporate existence from
SCC. Third, following the sale of their respective assets,
each of the Nonoperating Subsidiaries effectively became a
shell corporation with substantially no business other than
business with or related to SCC and its affiliates and no
assets except those conveyed to them by SCC or its affiliates.
Fourth, with only few identifiable exceptions, SCC and the
Nonoperating Subsidiaries shared overhead, management,
accounting and related expenses. Finally, SCC owned all of the
capital stock of all of the Nonoperating Subsidiaries.
In addition, the Debtors may elect to seek substantive
consolidation with some or all of SCC's Non-Debtor
Subsidiaries in the Bankruptcy Court pursuant to the motion
discussed herein.
2. Executory Contracts
a. Assumed Agreements
As of the Effective Date, all executory contracts and
unexpired leases of the Debtors listed on Schedule 1.4 of the
Plan will be assumed (the "Assumed Agreements"). The amount of
any cure payment which the Debtors believe is required to be
paid is listed on Schedule 7.1(c). The listed amount will be
binding on the counterparty to such Assumed Agreement unless
objected to by October 18, 1996.
The Bankruptcy Court shall determine any dispute pertaining
to the assumption and assignment of any Assumed Agreement, and
any required disputed cure payment shall be paid promptly
following the entry of a Final Order resolving such dispute.
b. Rejected Agreements
All executory contracts and unexpired leases not theretofore
assumed by the Debtors, subject to a pending motion to assume,
or to be assumed pursuant to the terms of the Plan will be
rejected (the "Rejected Agreements").
NewSCC may make mitigating offers at its discretion to
certain non-Debtor parties to Rejected Agreements. If NewSCC
makes a mitigating offer that is not accepted by the non-Debtor
party, any Claim which such non-Debtor party may have
against the Debtors by reason of the rejection of such
Rejected Agreement shall be limited to that amount, if any,
which the Bankruptcy Court shall determine gives effect to the
mitigation of damages which would have been effected by
acceptance of such offer or, if greater, the amount of
mitigation determined by the Bankruptcy Court, all to the
fullest extent permitted by law.
All proofs of claim with respect to Claims arising from the
rejection of executory contracts or unexpired leases shall be
filed with the Bankruptcy Court within thirty (30) days after
the earlier of (i) the date of service of notice of entry of
an order of the Bankruptcy Court approving such rejection and
requiring the filing of a proof of claim, and (ii) the date of
service of notice of the Confirmation Date, if such executory
contract or unexpired lease has been rejected under the Plan.
Any Claims not filed within such time shall be released and
discharged and forever barred from assertion against the
Debtors, their estate and property, or NewSCC.
Any party to a Rejected Agreement on the date of this
Disclosure Statement should take whatever action it deems
appropriate to have its unliquidated rejection damage claim
allowed or temporarily allowed for voting purposes if it
wishes to vote such Claim to accept or reject the Plan, or may
seek to enter into an agreement with the Debtors to have such
contract or lease assumed on modified terms. Any motion to
have a Claim allowed for voting purposes must be heard and
determined by the Bankruptcy Court prior to October 18, 1996.
3. Creditors' Committee After the Effective Date
The Creditors' Committee will continue in existence from and
after the Effective Date and shall have standing to appear and
be heard in proceedings before the Bankruptcy Court, and shall
be deemed a "party in interest" within the meaning of section
1109(b) of the Bankruptcy Code, with respect to and for the
limited purpose of, (i) participating in or responding to any
appeals of or motions to withdraw, modify or revoke the Plan
or the Confirmation Order, as applicable, or any other order
made in furtherance of the implementation or confirmation of
the Plan, (ii) participating in all proceedings to determine
any and all applications for allowances of compensation and
reimbursement of expenses and other fees and expenses
authorized to be paid or reimbursed under the Bankruptcy Code
or the Plan, including, but not limited to, claims for
substantial contribution under section 503(b) of the
Bankruptcy Code, (iii) investigating and pursuing the
potential Avoidance Action with respect to the Amended and
Restated Credit Agreement Lien (as defined in "The Plan of
Reorganization -- Other Provisions of Plan -- Avoidance
Actions" below), (iv) participating in any proceedings with
respect to the termination of any SCC Retirement Plan and the
determination or resolution of any Claims relating thereto and
(v) participating in or responding to any actions or
proceedings in which the Creditors' Committee is a party after
the Effective Date, to the extent the Creditors' Committee is
not permitted to withdraw from such action or proceeding by
the Bankruptcy Court, upon motion or otherwise. After the
Effective Date, the Creditors' Committee shall consist of
three members selected by the existing Creditors' Committee.
4. Distribution Agent
A Distribution Agent shall be appointed by NewSCC to make
distributions under the Joint Plan. NewSCC may be the
Distribution Agent, or may appoint another Person to be the
Distribution Agent. Any Distribution Agent and any successor,
if appointed prior to the Effective Date, must be reasonably
satisfactory to the Creditors' Committee.
On the Effective Date, the Unsecured Class Cash (less the
amount of Cash necessary to pay all Reserved Claims which are
Convenience Class Claims in the amount in which such Claims
would be paid if they were Allowed in full) and one (1) share
of NewSCC Common Stock for each $6.00 in amount of Allowed
General Unsecured Claims shall be transferred to the
Distribution Agent, as well as amounts necessary to make
distributions to holders of Allowed Superpriority Claims
(other than Claims under the Chemical DIP Credit Agreement),
Allowed Administrative Claims, Allowed Priority Tax Claims
(other than those paid with a Priority Tax Note), Allowed
Priority Wage Claims, Allowed Secured Claims, Allowed
Reclamation Claims and Allowed Convenience Class Claims
(unless such distributions are made by NewSCC). The
Distribution Agent shall hold any such Cash and stock in trust
for distributions to the holders of such Allowed Claims.
All charges of the Distribution Agent for the services it
renders as Distribution Agent will be paid by NewSCC.
5. Avoidance Actions
Prior and subsequent to the commencement of the Chapter 11
Case, the Debtors began an analysis and are continuing to
investigate potential voidable transfers which may have been
made by the Debtors during the ninety (90) days preceding the
Chapter 11 Case (and with regard to insiders, within one (1)
year preceding the Chapter 11 Case).
Exhibit D hereto contains a list of (i) those vendors for
whom SCC had an accounts payable balance on the Petition Date
of less than SCC's accounts payable balance to such vendor 90
days before the Petition Date and that received cumulative
payments from SCC during such 90 day period greater than
$50,000; (ii) those vendors for whom SCC had an accounts
payable balance on the Petition Date at least $10,000 less
than SCC's accounts payable balance to such vendor 90 days
before the Petition Date and that received cumulative payments
from SCC during such 90 day period less than $50,000; and
(iii) those vendors for whom SCC had an accounts payable
balance on the Petition Date of not less than SCC's accounts
payable balance to such vendor 90 days before the Petition
Date and that received cumulative payments greater than
$50,000 during such 90 day period. The analysis contained in
Exhibit D identified the date goods were received or invoices
from service providers were received and analyzes the date
SCC's payment by check cleared or the date on which payment by
wire transfer was made. The analysis further assumes that only
those payments made by SCC more than 10 days before or 30 days
after receipt of the goods or invoice, as the case may be, are
potentially preferential and that those made within such
period are not. Exhibit D should be consulted for further
qualifying and clarifying assumptions. The Debtors are also
examining payments made by SCC between 90 days and one year
prior to the filing of the Chapter 11 Case. These payments
will include, among other things, a dividend in the amount of
$756,250 paid to SCC's shareholders in April, 1995. Whether
any one or more of any of the above payments is voidable will
depend upon a number of complex legal and factual issues
concerning the amount and timing of such payments and whether
SCC was insolvent at the time of such payments. All avoidance
claims will be preserved after the Effective Date.
Any holder of a Claim that also holds property that is
recoverable as a preference, fraudulent conveyance or
otherwise under sections 542, 543, 550 or 553 of the
Bankruptcy Code or that is a transferee of a transfer
avoidable under section 522(f), 522(h), 544, 545, 547, 548,
549 or 724(a) of the Bankruptcy Code (collectively, the
"Avoidance Actions") may have its Claim disallowed unless the
holder has turned over to the Debtors any such property or has
paid the amount for which such holder or transferee is liable
in accordance with section 502(d) of the Bankruptcy Code. The
Debtors have examined the 63 creditors receiving the largest
payments to determine whether the 90-day payments advantaged
each such party vis-a-vis other creditors. As a result of this
analysis, NewSCC intends to allow holders whose Claims may be
subject to disallowance under section 502(d) of the Bankruptcy
Code to receive distributions on account of their Claims
(subject to disgorgement if an Avoidance Action is
successfully prosecuted against such holder) unless the
Bankruptcy Court, after objection, orders otherwise, in which
case such payments will be reserved until the preference
claims are resolved.
As noted above, on April 7, 1995, within the 90 days
preceding the Petition Date, SCC entered into the Amended and
Restated Credit Agreement with the Banks. The Amended and
Restated Credit Agreement was secured by a security interest
in all the domestic assets of SCC (the "Amended and Restated
Credit Agreement Lien") pursuant to a Security Agreement of
even date therewith. The Creditors' Committee is investigating
whether the Amended and Restated Credit Agreement Lien may
have been given to the Banks by SCC while SCC was insolvent,
which investigation could give rise to an action to avoid such
lien pursuant to section 547 of the Bankruptcy Code as to the
then existing indebtedness to the Banks.
Pursuant to the Chemical DIP Loan Agreement (described
above), SCC represented and warranted that the Banks held
valid, perfected and nonavoidable security interests to secure
all obligations. Any right to seek to avoid the Amended and
Restated Credit Agreement Lien currently resides with the
Creditors' Committee for the benefit of creditors. The Banks
intend to vigorously assert defenses to any preference
claim(s) brought against them. There can be no assurance that
the attempts of the Debtors to recover any outstanding alleged
preferential transfers or fraudulent conveyances or of the
Creditors' Committee to recover any alleged preferential
transfers arising out of the liens granted to the Banks
prepetition in April, 1995 will be successful. Moreover, to
the extent any such transfers or liens are avoided, the
holders will, to the extent thereof, become holders of Class 8
General Unsecured Claims which will share Pro Rata in all
Class 8 Unsecured Class Cash including such recoveries, and
shall receive one (1) share of NewSCC Common Stock for each
$6.00 in amount of Allowed General Unsecured Claims held.
Pursuant to the terms of the Plan, NewSCC will have the
power and authority to bring or continue all Avoidance Actions
after the Effective Date, except for any Avoidance Action with
respect to the Amended and Restated Credit Agreement Lien, as
discussed above, which shall remain with the Creditors'
Committee prior to and after the Effective Date.
6. Administrative Bar Date
Pursuant to the Plan, all parties asserting Administrative
Claims (other than Administrative Claims of professionals
retained pursuant to sections 327 or 328 of the Bankruptcy
Code, fees and expenses of ordinary course professionals,
expenses of members of the Creditors' Committee, Claims under
the Chemical DIP Loan Agreement and Claims under 28 U.S.C.
sec. 1930 and Chapter 123 of 28 U.S.C.) incurred prior to
August 16, 1996 are required to file a Proof of Administrative
Claim with the Bankruptcy Court on or prior to October 18,
1996, or such other date, if any, as determined by the
Bankruptcy Court.
7. Subsequent and Final Distributions
The Distribution Agent shall make subsequent distributions
to Class 8 Creditors upon the request of NewSCC (but not more
than quarterly or less than yearly) as Unsecured Class Cash
which had been reserved with respect to Disputed Claims is
released from such reserve, provided, however, that all
distributions shall comply with the terms of the Plan. A final
distribution will be made after all objections to Claims and
Avoidance Actions are resolved.
8. Objections to Claims
Under section 502 of the Bankruptcy Code, the Debtors or any
interested party may continue to file objections to the
validity, nature or amounts of any claims, which objections
will be resolved by the Bankruptcy Court. After Confirmation
of the Plan, the right and duty to object to Claims on behalf
of the estate shall vest in NewSCC.
Because of the large number of Claims which may be the
subject of future objections, until such objections are filed
and resolved by the Bankruptcy Court, it is impossible to
state with any certainty the ultimate amount of Allowed Claims
in such classes. Thus, as described above, in the event that a
Claim is objected to, a reserve will be set aside in
proportion to the full amount which the holder of such Claim
would otherwise be entitled to receive. Upon final resolution
of all Disputed Claims, any surplus funds will be distributed
to the holders of Class 8 Claims in relation to the
proportional amounts of their Allowed Claims subject to the
limit on total payments to any holder of an Allowed General
Unsecured Claim as described in "Summary of Payment Provisions
of the Plan -- Class 8 (Allowed General Unsecured Claims)"
above.
9. Estimation of Unliquidated Claims
As a condition to the effectiveness of the Joint Plan, the
Debtors shall seek an order of the Bankruptcy Court estimating
or determining the aggregate amount of unliquidated Claims
which must be reserved for.
10. Retention of Jurisdiction
After the Effective Date, the Bankruptcy Court will retain
jurisdiction over the Chapter 11 Case for the following
purposes:
(i) to determine any and all objections to the allowance
of Claims;
(ii) to determine any and all applications for the
rejection, assumption, or assumption and assignment, as the
case may be, of executory contracts or unexpired leases to
which any of the Debtors is a party or with respect to which
any of the Debtors may be liable, and to hear and determine,
and if need be to liquidate, any and all Claims arising
therefrom;
(iii) to determine any and all applications for the
determination of any priority of any Claim, including Claims
arising from any event that occurred prior to the Petition
Date or from the Petition Date through the Effective Date
and for payment of any alleged Administrative Claim,
Priority Tax Claim, Priority Wage Claim, Secured Claim or
Reclamation Claim;
(iv) to determine any and all applications, motions,
adversary proceedings and contested or litigated matters
that may be pending on the Effective Date;
(v) to determine all controversies, suits and disputes
that may arise in connection with the interpretation,
enforcement or consummation of the Plan or in connection
with the obligations of the Debtors, NewSCC and the
Creditors' Committee under the Plan, and to enter such
orders as may be necessary or appropriate to implement any
distributions to holders of Allowed General Unsecured
Claims;
(vi) to consider any modification, remedy any defect or
omission, or reconcile any inconsistency in the Plan or any
order of the Bankruptcy Court, including the Confirmation
Order, all to the extent authorized by the Bankruptcy Code;
(vii) to issue such orders in aid of execution of the Plan
to the extent authorized by section 1142 of the Bankruptcy
Code;
(viii) to determine such other matters as may be set forth
in the Confirmation Order or as may arise in connection with
the Plan or the Confirmation Order;
(ix) to hear and determine any claim or controversy of any
nature arising from or in connection with any agreement made
a part of the Plan; and to enter such orders as may be
appropriate to enforce, modify, interpret or effectuate such
agreements;
(x) to determine any suit or proceeding brought by the
Creditors' Committee or NewSCC, on behalf of the Debtors'
estates, to (a) recover property under section 542, 543 or
553 of the Bankruptcy Code or to avoid any transfer or
obligation under section 522(f), 522(h), 544, 545, 547, 548,
549 or 724(a) of the Bankruptcy Code or (b) collect or
recover on account of any Claim or cause of action that any
of the Debtors may have;
(xi) to consider and act on the compromise and settlement
of any Claim against or cause of action by or against the
Debtors' estates;
(xii) to estimate Claims pursuant to section 502(c) of the
Bankruptcy Code;
(xiii) to hear and determine any dispute or controversy
relating to any Allowed Claim or any Claim alleged or
asserted by any Person to be an Allowed Claim;
(xiv) to supervise the activities of the Creditors'
Committee following the Effective Date;
(xv) to determine any and all applications for allowances
of compensation and reimbursement of expenses and any other
fees and expenses authorized to be paid or reimbursed under
the Bankruptcy Code or the Plan, including, to the extent
provided in Section 14.4(d) of the Plan, any such allowances
or reimbursement sought for or on behalf of the Creditors'
Committee; and
(xvi) to administer and enforce the injunctions contained
in Sections 12.3 and 14.3 of the Plan, and any related
injunction or decree contained in the Confirmation Order.
11. Discharge
The consideration distributed under the Plan shall be in
exchange for and in complete satisfaction, discharge, release,
and termination of, all Claims of any nature whatsoever
against any Debtor or any of its assets or properties and all
Equity Interests in any Debtor; and except as otherwise
provided in the Plan, upon the Effective Date (i) each Debtor
shall be deemed discharged and released pursuant to section
1141(d)(1)(A) of the Bankruptcy Code from any and all Claims,
including but not limited to demands and liabilities that
arose before the Confirmation Date, all Stockholder Actions
(as defined in the Plan) as they relate to such Debtor, and
all debts of the kind specified in section 502(g), 502(h) or
502(i) of the Bankruptcy Code, whether or not: (a) a proof of
claim based upon such debt has been filed or is deemed filed
under section 501 of the Bankruptcy Code; (b) a Claim based
upon such debt is allowed under section 502 of the Bankruptcy
Code; or (c) the holder of a Claim based upon such debt has
accepted the Plan, and (ii) all rights and interests of
holders of Equity Interests in each Debtor shall be terminated
pursuant to section 1141(d)(1)(B) of the Bankruptcy Code;
provided that nothing contained in the Plan or the
Confirmation Order shall discharge obligations, if any, of the
Debtors pursuant to section 2.16 of the Chemical DIP Loan
Agreement.
Except as otherwise specifically provided in the Plan, the
Confirmation Order shall be a judicial determination of
discharge and termination of all liabilities of and all Claims
against, and all Equity Interests in, each Debtor. On the
Confirmation Date, as to every discharged debt, Claim and
Equity Interest, the Creditor or Equity Interest holder that
held such debt, Claim or Equity Interest shall be permanently
enjoined and precluded from asserting against NewSCC, or
against its assets or properties or any transferee thereof,
any other or further Claim or Equity Interest of any kind or
nature that occurred prior to the Confirmation Date, except as
expressly set forth in the Plan. In the event that, after the
Confirmation Date, any Person asserts, against NewSCC or any
of its subsidiaries or affiliates, any right to payment or
equitable remedy for breach of performance which gives rise to
a right of payment, which right was not asserted prior to the
Confirmation Date but is based on any act, fact, event,
occurrence, or omission, by or relating to any of the Debtors,
as such Debtors existed before the Confirmation Date, and in
the further event that such right is determined by a court of
competent jurisdiction not to have been discharged pursuant to
the provisions of Bankruptcy Code section 1141 and the Plan,
and that such right may be asserted against NewSCC then, in
such circumstances the holder of such right shall be entitled
to receive from NewSCC value equivalent to the value such
holder would have received if such right had been asserted
against such Debtor before the Confirmation Date and only to
the extent such right would have been allowed or allowable as
a Claim. Nothing in the Plan shall have the effect of
excepting from discharge any Claim which is or would be
discharged pursuant to Bankruptcy Code section 1141 or the
Plan.
12. Miscellaneous
a. Consummation -- Retention of Jurisdiction
Consummation of the Plan consists of commencement of payment
by NewSCC of all of the funds required to be paid by NewSCC
pursuant to the terms and conditions of the Plan. Pursuant to
Article 15 of the Plan (and as described above), the
Bankruptcy Court will continue to retain jurisdiction after
Confirmation to resolve all outstanding matters in the Chapter
11 Case and with respect to the fulfillment of the obligations
of the Debtors, NewSCC and the Creditors' Committee under the
Plan.
b. Cancellation and Surrender of Equity Interests
As of the Effective Date, all previously issued and
outstanding securities of the Debtors, including without
limitation: (i) all SCC Common Stock, (ii) all OSI Common
Stock, (iii) all SCC LI Common Stock and (iv) all Hulse Common
Stock, shall be deemed void, canceled, and of no further force
or effect, without any further action on the part of any
Person.
By virtue of substantive consolidation, the Debtors shall be
deemed to have compromised and settled all Claims against one
another.
c. Release of Certain Claims and Actions
On the Effective Date, in order to further the
rehabilitation of the Debtors, any and all claims and causes
of action, now existing or hereafter arising, against any
present or former officer or director of any of the Debtors or
any of the Debtors' professional advisors arising out of or
related to such Person's actions or omissions to act in his or
her capacity as an officer or director of the Debtors or as a
member of any committee, or as a fiduciary of any pension or
employee benefit plan, or as such an advisor, relating to the
Debtors at any time through the Confirmation Date, shall be
finally and irrevocably waived, released and relinquished, and
each of the Debtors, its Creditors and Equity Holders and all
other persons shall be enjoined from asserting any such claim
or cause of action in any court or forum; provided, however,
(i) no claim or cause of action arising from any actual fraud
(but not constructive fraud) or willful misconduct of any such
Person shall be released, waived or relinquished and (ii) no
Avoidance Action against any such Person shall be released,
waived or relinquished; provided, further nothing in the Plan
shall be deemed to waive, release or relinquish any rights the
Debtors or NewSCC may have to assert any claim under any
insurance policy indemnifying present or former officers or
directors of any of the Debtors or any of the Debtors'
professional advisors. Except with respect to Avoidance
Actions, pursuant to the Plan, NewSCC will indemnify each such
Person for all reasonable legal fees or expenses incurred by
such Person in connection with any claim or cause of action
brought against such Person as a result of such Person's acts
or omissions to act and such legal fees and expenses shall be
paid as incurred; provided, however, that if any such Person
is determined by Final Order of a court to have any liability
for any claim or cause of action arising from an actual fraud
(but not constructive fraud) or willful misconduct of any such
Person, such Person shall not be indemnified for legal fees or
expenses incurred in connection with any such claim or cause
of action as to which it is so determined to be liable, and
such Person shall reimburse NewSCC for any legal fees and
expenses that NewSCC previously advanced in connection with
such claim; provided, further, if a court has determined by
Final Order that the legal fees and expenses incurred by such
Person in connection with any claim or cause of action
(regardless of whether such claim or cause of action arises
from an actual fraud or willful misconduct of such Person) are
unreasonable, such Person shall reimburse NewSCC the amount of
such legal fees and expenses so determined to be unreasonable.
The Confirmation Order shall provide that all Persons shall
be permanently enjoined, stayed and restrained from pursuing
or prosecuting any claims, including Stockholder Actions, that
may be asserted against any present or former directors or
officers of the Debtors, including claims arising out of
intercompany transactions that occurred and decisions that
were made prior to the Petition Date, except as to Avoidance
Actions against such Persons.
On the Effective Date, each of the Debtors, its Creditors
and Equity Interest holders shall be deemed to have finally
and irrevocably waived, released and relinquished any and all
claims and causes of action, if any, that they have or may
have as of the Confirmation Date against the Creditors'
Committee and any member thereof, including the firms and
corporations represented by them and their employees and
agents, and the Creditors' Committee's professional advisors
arising out of or related to such Person's actions or
omissions to act in his or her capacity as a member of such
Committee or as such an advisor, and shall be enjoined from
asserting any such claim or cause of action; provided,
however, that no claim or cause of action arising from any
actual fraud (but not constructive fraud) or willful
misconduct of any such Person shall be released, waived or
relinquished. Pursuant to the Plan, NewSCC will indemnify each
such Person for all reasonable legal fees or expenses incurred
by such Person in connection with any claim or cause of action
brought against such Person as a result of such Person's acts
or omissions to act and such legal fees and expenses shall be
paid as incurred; provided, however, that if any such Person
is determined by Final Order of a court to have any liability
for any claim or cause of action arising from an actual fraud
(but not constructive fraud) or willful misconduct of any such
Person, such Person shall not be indemnified for legal fees or
expenses incurred in connection with any such claim or cause
of action as to which it is so determined to be liable, and
such Person shall reimburse NewSCC for any legal fees and
expenses that NewSCC previously advanced in connection with
such claim; provided, further, if a court has determined by
Final Order that the legal fees and expenses incurred by such
Person in connection with any claim or cause of action
(regardless of whether such claim or cause of action arises
from an actual fraud or willful misconduct of such Person) are
unreasonable, such Person shall reimburse NewSCC the amount of
such legal fees and expenses so determined to be unreasonable.
The PBGC has advised the Debtors of its view that it is
inappropriate for a plan of reorganization to contain releases
that relate in any way to the functioning of any person as a
fiduciary of any pension plan, or as an advisor to any pension
plan. The PBGC has further advised the Debtors that it intends
to object to Confirmation of the Plan on that ground.
The Debtors believe that the PBGC's objection is not well
founded and will contest it at the hearing on Confirmation of
the Plan. Among other things, the pension plan fiduciaries may
make indemnification claims over against SCC or NewSCC (under
certain applicable legal principles) in the event third
parties bring claims against such fiduciaries. If the releases
set forth in the Plan are not approved, such indemnification
claims are potentially unending and could potentially diminish
SCC's estate available for distribution to creditors.
d. Conditions Precedent to Confirmation of the Plan
Each of the following conditions must occur and be satisfied
on or prior to the confirmation of the Plan; provided that any
of such conditions may be waived by the mutual agreement of
the Debtors and the Creditors' Committee:
(i) The Bankruptcy Court shall have entered an order (which
may be the Confirmation Order) approving the substantive
consolidation of the Debtors' estates.
(ii) A commitment letter with respect to a new credit
agreement, pursuant to which NewSCC shall obtain access to
not less than $10,000,000 of working capital (the "NewSCC
Credit Agreement"), shall have been delivered by the
applicable lending institution.
(iii) The Debtors' motion under section 505 of the
Bankruptcy Code with respect to its tax liability to the
United States shall have been resolved.
Except as set forth below, the Bankruptcy Code requires as a
condition to Confirmation that each class of claims or equity
interests that is impaired under the Plan accept the Plan. A
class of Creditors has accepted the Plan if the Plan has been
accepted by Creditors that hold at least two-thirds in dollar
amount and more than one-half in number of the allowed claims
in such class that actually voted on the Plan. Claims under
the Chemical DIP Loan Agreement, Allowed Administrative
Claims, Allowed Priority Tax Claims and Classes 1, 3, 4, 5 and
6 are either not impaired or not classified under the Plan and
pursuant to section 1126(f) of the Bankruptcy Code are deemed
to have accepted the Plan, or are not entitled to accept or
reject the Plan. Thus, solicitation of acceptances with
respect to such Claims and Classes is not required and is not
being undertaken. Under section 1126(g) of the Bankruptcy
Code, a class is deemed not to have accepted a plan if such
plan provides that the claims or interests of such class of
claims or interests are not entitled to receive or retain any
property under such plan on account of such claim or interest.
Holders of Classes 10 and 11 Equity Interests are deemed to
have rejected the Plan and are not entitled to vote. Holders
of Classes 2, 7, 8 and 9 Claims are impaired under the Plan
and accordingly, holders of Classes 2, 7, 8 and 9 Claims have
the right to vote and should vote on the Plan.
Section 1129(a)(10) of the Bankruptcy Code requires the
affirmative vote of at least one impaired class in order to
confirm the Plan. As holders of Classes 2, 7, 8 and 9 Claims
are the only holders of Claims or Equity Interests entitled to
vote, the Plan cannot be confirmed unless the holders of
Classes 2, 7, 8 and 9 Claims vote to accept the Plan. If the
Plan is not accepted by all impaired classes, as long as at
least one impaired class of claims has accepted it, the
"cramdown" provision of the Bankruptcy Code set forth in
section 1129(b) of the Bankruptcy Code may be utilized. A Plan
may be confirmed under the cramdown provisions if, in addition
to satisfying the usual requirements of section 1129 of the
Bankruptcy Code, it (1) "does not discriminate unfairly" and
(2) is "fair and equitable," with respect to each class of
claims or interests that is impaired under, and has not
accepted, the Plan. As used by the Bankruptcy Code, the
phrases "discriminate unfairly" and "fair and equitable" have
narrow and specific meanings unique to bankruptcy law. In
general, the cramdown standard requires that a dissenting
class receive full compensation for its allowed claims or
interests before any junior class receives any distribution.
If the holders of any one Class of Claims, including Classes
2, 7, 8 and 9, do not vote to accept the Plan, a new Plan
could be proposed or alternatively the Chapter 11 Case may be
converted to a case under Chapter 7 of the Bankruptcy Code.
The Debtors believe that a conversion of the Chapter 11 Case
into a Chapter 7 case would result in a reduction in the
distribution to Holders of Classes 2, 7, 8 and 9 Claims.
In the event that the required majorities of any one or more
of the holders of Class 2 Claims or Class 7 Claims or Class 8
Claims or Class 9 Claims do not vote to confirm the Plan
consensually pursuant to sections 1126 and 1129(a) of the
Bankruptcy Code, then the Debtors reserve the right, in their
sole discretion, to seek to confirm the Plan with respect to
one or more of such classes pursuant to section 1129(b) of the
Bankruptcy Code or to amend the Plan in accordance with
section 1127 of the Bankruptcy Code.
e. Conditions Precedent to Effectiveness of the Plan
Each of the following conditions must occur and be satisfied
on or before the Effective Date for the Plan to be confirmed
and effective:
(i) The Confirmation Order shall have been entered, shall
not have been modified or altered in any way, and no stay
of the Confirmation Order shall be in effect.
(ii) The Bankruptcy Court shall have entered an order (which
may be the Confirmation Order) approving the substantive
consolidation of the Debtors' estates and no stay of such
order shall be in effect.
(iii) The Bankruptcy Court shall have entered an order
(which may be the Confirmation Order) estimating or
determining the aggregate amount of unliquidated Claims
(see "The Plan of Reorganization -- Other Provisions of
Plan -- Estimation of Unliquidated Claims").
(iv) A closing under the NewSCC Credit Agreement shall have
occurred, or be ready to occur subject only to the
occurrence of the Effective Date.
f. Filing Claims
Pursuant to the order of the Bankruptcy Court, the Bar Date
for filing certain proofs of claim, other than for certain
administration expenses, was October 31, 1995. The last date
for filing for most administration expenses as were excepted
from said Bar Date order will be fixed by the Bankruptcy Court
on or before the Confirmation of the Plan. See "The Plan of
Reorganization -- Other Provisions of Plan -- Administrative
Bar Date" above. FAILURE TO HAVE TIMELY FILED A CLAIM MAY
CAUSE YOU TO BE INELIGIBLE TO VOTE ON THE PLAN AND/OR TO
RECEIVE A DISTRIBUTION FROM THE ESTATE. YOU WILL NEVERTHELESS
BE BOUND BY THE PROVISIONS OF THE PLAN.
g. Revesting of Assets of the Debtors
The Plan provides that the assets of each Debtor and all
property of each Debtor's estate (including, without
limitation, all rights of the Debtors to recover property
under sections 542, 543, 550 and 553 of the Bankruptcy Code,
all avoiding powers under sections 522(f), 522(h), 544, 545,
547, 548, 549 or 724(a) of the Bankruptcy Code, all proceeds
thereof, and all claims and causes of action, cross-claims and
counterclaims of any kind or nature whatsoever against third
parties arising before the Confirmation Date that have not
been disposed of prior to the Confirmation Date), shall be
preserved and revest in NewSCC, in each case free and clear of
all Claims and Equity Interests, but subject to the
obligations of NewSCC as specifically set forth in the Joint
Plan; provided, however, that all Avoidance Actions shall vest
in the Debtors' estates, to be exercisable on behalf of the
Debtors' estates by NewSCC, and provided further, that any
Claim to avoid the Amended and Restated Credit Agreement Lien
arising under section 547 of the Bankruptcy Code which was
delegated or assigned to the Creditors' Committee by Order of
the Bankruptcy Court dated July 10, 1995 (see "The Plan of
Reorganization -- Other Provisions of Plan -- Avoidance
Actions" above) shall remain the Creditors' Committee's (to
the extent it continues in existence after the Effective Date)
responsibility to prosecute, settle, withdraw or release on
behalf of the Debtors' estate.
h. Payment of Certain Post-Effective Date Expenses
Any payments due to the Creditors' Committee continuing in
existence after the Effective Date, the professionals retained
by it and the members of such Creditors' Committee pursuant to
the Plan, shall be paid by NewSCC as follows: (i) with respect
to the prosecution of any Avoidance Actions with respect to
the Amended and Restated Credit Agreement Lien, an aggregate
amount of up to $650,000, less any amounts accrued by or paid
to the Creditors' Committee, the professionals retained by it
and its members from and after July 5, 1995 with respect to
such prosecution prior to the Effective Date; (ii) with
respect to actions under which the Creditors' Committee is a
party and is not permitted to withdraw by the Bankruptcy
Court, an unlimited amount; and (iii) with respect to all
other fees and expenses, an aggregate amount of up to
$150,000.
i. Rounding
Whenever any payment of a fraction of a cent would otherwise
be called for, the actual payment shall reflect a rounding of
such fraction to the nearest whole cent, with one-half cent
being rounded up to the nearest whole cent. To the extent Cash
remains undistributed as a result of the rounding of such
fraction to the nearest whole cent, such Cash shall be treated
as unclaimed property under the Plan. Wherever any
distribution of a fraction of a share of NewSCC Common Stock
would otherwise be called for, the actual distribution shall
reflect a rounding of such fraction down to the nearest whole
number of shares.
E. Means of Consummating and Effectuating the Plan
Upon Confirmation of the Plan, NewSCC will use the Unsecured
Class Cash described above (see "Introduction -- Overview of
the Debtors and the Plan -- Sources of Recovery Under the
Plan") and 85% of the NewSCC Common Stock to satisfy the
Claims of Unsecured Creditors holding Allowed General
Unsecured Claims in accordance with the provisions of the
Plan. Upon the Effective Date, holders of Claims under the
Chemical DIP Loan Agreement and holders of all Allowed
Administrative, Priority, Secured and Reclamation Claims will
be paid in full in Cash, and holders of Allowed Convenience
Class Claims will be paid 60% of such Claims in Cash. NewSCC
will also assume all Class 3 Allowed Environmental Claims,
Class 4 Pension Plan Claims arising from or related to the
Defined Contribution Plan, Class 5 Retiree Health and
Insurance Claims and Class 6 Warranty and Contract Claims
going forward from the Effective Date, and all future payments
associated with the assumption of such Claims will be paid
from the future cash flow of NewSCC. Class 4 Pension Plan
Claims arising from or related to the Defined Benefit Plans
will, to the extent that the Bankruptcy Court does not
terminate the Defined Benefit Plans, be satisfied by leaving
the legal, equitable and contractual rights to which such
Claim entitles the holder of such Claim unaltered. Registered
Holders of SCC Common Stock will receive the NewSCC Warrants.
In addition, upon Confirmation of the Plan, NewSCC will
reject all executory contracts and unexpired leases, other
than those specifically assumed during the Chapter 11 Case or
pursuant to the Plan.
All issued and outstanding capital stock of any of the
Debtors (including all options, warrants and other rights to
acquire the same) will be canceled at the Effective Date.
NewSCC will then issue NewSCC Common Stock and the NewSCC
Warrants which NewSCC intends will be exempt from registration
under the Securities Act of 1933.
All assets of the Debtors will revest in NewSCC on the
Effective Date free and clear of all claims and liens, except
for those Claims or liens expressly assumed pursuant to the
Plan.
ARTICLE 4
CONFIRMATION OF THE PLAN
A. Feasibility
Section 1129(a) of the Bankruptcy Code requires a judicial
determination that Confirmation of the Plan will not likely be
followed by liquidation or the need for further financial
reorganization of the Debtors or any successor to the Debtors
under the Plan, unless liquidation is contemplated under the
Plan. In this case, the Plan contemplates that there will be
sufficient funds available for the payment of Claims as
specified in the Plan.
In addition, the Debtors are confident that there will be
sufficient funds on hand to satisfy the minimum distributions
required under section 1129(a)(9) of the Bankruptcy Code and
the obligations of NewSCC under the Plan.
Creditors are advised to consult Exhibit B to this
Disclosure Statement, which contains SCC's unaudited
historical, projected and pro forma Consolidated Balance
Sheets, Consolidated Income Statements, Consolidated Cash Flow
Statements and Supplemental Projected Pro Forma Financial
Information and Exhibit C to this Disclosure Statement which
contains audited consolidated financial statements of SCC for
Fiscal 1995 for additional information supporting the
feasibility of the Debtors' Plan.
B. Acceptance
As a condition to Confirmation of the Plan, section 1129(a)
of the Bankruptcy Code, with certain exceptions, requires that
each impaired Class accept the Plan. In general, a class is
"impaired" if the legal, equitable or contractual rights
attaching to the claims or interests of that class are
modified, other than by curing defaults and reinstating
maturities or by payment in full in cash.
The Bankruptcy Code defines acceptance of a plan by a class
of creditors entitled to vote thereon as acceptance by holders
of two-thirds in dollar amount and a majority in number of
Allowed Claims in that class. Each calculation, however,
includes only those holders of Allowed Claims who actually
vote to accept or reject the Plan.
Under section 1126(f) of the Bankruptcy Code, classes of
claims that are not "impaired" under a plan are conclusively
deemed to have accepted the plan. Under section 1126(g) of the
Bankruptcy Code, classes that receive no distributions under a
plan are conclusively deemed to have rejected the plan. For
these reasons, acceptances of the Plan are being solicited
only from Classes 2, 7, 8 and 9. Holders of Claims in Classes
1, 3, 4, 5 and 6 who will receive full payment of their
Allowed Claims with the legal, equitable and contractual
rights to which such Claim entitles the holder of such Claim
unaltered, are unimpaired. In contrast, Class 11 will not
receive any Distributions under the Plan and therefore is
deemed to have rejected the Plan. In addition, Class 10,
although receiving consideration in the form of the NewSCC
Warrants, is deemed to have rejected the Plan.
C. Post-Confirmation Financing
A condition to the effectiveness of the Joint Plan is that
NewSCC obtain from a bank, or other commercial lending
institution, a line of revolving credit, or similar credit
arrangement likely to be secured by a floating first level
priority lien on NewSCC's inventory and accounts receivable.
SCC expects that availability of the credit would be based
upon the amount of NewSCC's accounts receivable and inventory,
and would be determined in accordance with a borrowing base
formula. This financing would be committed as of the
Confirmation Date. SCC is actively in discussions with several
financial institutions regarding this financing.
D. Non-acceptance and Cramdown
If any Class of impaired Claims fails to accept the Plan,
the Debtors will seek to effect a "cramdown" on such
dissenting Class and all Classes that are junior to such
dissenting Class under section 1129(b) of the Bankruptcy Code.
The Debtors also reserve the right to amend the Plan and
request the Bankruptcy Court to confirm the Plan as further
amended. If an amendment or amendments to the Plan are
material, the Debtors may have to resolicit acceptances from
any Class affected by the change(s), unless that Class can be
deemed to have accepted or rejected the Plan.
If an impaired class of secured claims rejects a plan, the
plan may nonetheless be confirmed so long as the plan provides
with respect to such class: (i) (a) that the holders of such
claims retain the liens securing such claims to the extent of
the allowed amount of such claims, and (b) that each holder of
a claim of such class receive deferred cash payments equalling
the allowed amount of such claim as of the plan's effective
date; and (ii) for the realization by such holders of the
indubitable equivalent of such claims. The Plan's treatment of
Class 2 is consistent with the foregoing. Consequently, the
Debtors believe that if any of the holders of Allowed Claims
in Class 2 reject the Plan, the Plan may be confirmed over
such opposition.
If an impaired class of unsecured claims rejects a plan, the
plan may still be confirmed so long as it provides that the
holder of any claim or interest that is junior to the claims
of such class will not receive or retain any property on
account of such junior claim or interest. Because the holders
of Class 10 Equity Interests will not be entitled to receive
or retain property which the Debtors believe currently has any
value on account of their Claims or Interests, the Plan may be
confirmed over the rejection of the Plan by the holders of
Allowed Class 8 or Class 9 Claims.
Pursuant to section 1129(b) of the Bankruptcy Code, the
Debtors will seek Confirmation of the Plan, notwithstanding
the possible rejection of the Plan by holders of Claims in any
Class, and notwithstanding the deemed rejection by holders of
Class 10 and Class 11 Equity Interests.
1. Best Interests Test -- Liquidation Analysis
Notwithstanding acceptance of the Plan in accordance with
section 1126 of the Bankruptcy Code, the Court must find that
each member of an impaired class of creditors and each member
of an impaired class of interest holders has accepted the
plan, or will receive or retain property of a value, as of the
effective date of the plan, that is not less than the amount
such creditor or interest holder would have received or
retained if the Debtors were liquidated under Chapter 7 of the
Bankruptcy Code. The Debtors believe that the Plan complies
with this "best interests" test.
As discussed below and demonstrated in Exhibit E, a
conversion of the Chapter 11 Case to a case under Chapter 7 of
the Bankruptcy Code, followed by a liquidation under Chapter
7, would engender higher expenses and risks than the
reorganization contemplated by the Plan. When coupled with the
inevitable delay caused by the appointment of a Chapter 7
trustee and the retention of the trustee's professionals,
distribution to holders of Allowed Claims that would otherwise
be made on the Plan's Effective Date necessarily will be
delayed for an indefinite period.
A conversion of the Chapter 11 Case to a case under Chapter
7 of the Bankruptcy Code would require the appointment of a
trustee to conduct the liquidation of the Debtors. Such a
trustee would likely have limited historical experience or
knowledge of the Chapter 11 Case or of the Debtors' records,
assets or former business. The fees charged by a Chapter 7
trustee and any professionals hired by the Chapter 7 trustee
could impose additional administrative costs on the Debtors'
estate that will not be incurred under the Plan and which will
be paid ahead of Allowed Administrative, Priority Tax and
Priority Wage Claims.
The liquidation analysis reveals that confirmation of the
Plan is preferable to a liquidation under Chapter 7 of the
Bankruptcy Code because creditors will receive more under the
Plan than they would receive in a Chapter 7 liquidation.
Further, conversion of the case to a later Chapter 7 case
would necessarily occasion substantial delay associated with
the trustee and its professionals educating themselves as to
the particularities of the Debtors' estate. The Plan, in
contrast, provides an efficient mechanism for prompt and
subsequent periodic distributions to holders of Allowed Claims
that would not exist in a Chapter 7 liquidation. Consequently,
the value of the liquidation proceeds would be further reduced
by the time value of money.
Accordingly, for all the foregoing reasons, the Debtors
believe that the Plan is in the best interests of creditors
and fully complies with the statutory requirements of the
Bankruptcy Code.
ARTICLE 5
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE JOINT PLAN
The following discussion summarizes certain federal income
tax consequences of the Plan to the Debtors and holders of
Claims and Equity Interests. The analysis contained herein is
based upon the Internal Revenue Code of 1986, as amended (the
"Tax Code"), the Treasury Regulations promulgated and proposed
thereunder, judicial decisions and published administrative
rulings and pronouncements of the Internal Revenue Service
("IRS") as in effect on the date hereof. Legislative, judicial
or administrative changes or interpretations hereafter enacted
or promulgated could alter or modify the analysis and
conclusions set forth below. Any such changes or
interpretations may be retroactive and could affect
significantly the federal income tax consequences discussed
below. This summary does not address foreign, state or local
or other tax law, or any estate or gift tax consequences of
the Plan, nor does it purport to address the federal income
tax consequences of the Plan to special classes of taxpayers
(such as taxpayers who are not U.S. domestic corporations or
citizens or residents of the United States, S corporations,
banks, mutual funds, insurance companies, financial
institutions, regulated investment companies, broker-dealers
and tax-exempt organizations).
THE TAX CONSEQUENCES TO HOLDERS OF CLAIMS AND EQUITY
INTERESTS MAY VARY BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF
EACH HOLDER. MOREOVER, THE TAX CONSEQUENCES OF CERTAIN ASPECTS
OF THE PLAN ARE UNCERTAIN DUE TO THE LACK OF APPLICABLE LEGAL
PRECEDENT AND THE POSSIBILITY OF CHANGES IN THE APPLICABLE TAX
LAW. NO RULING HAS BEEN APPLIED FOR OR OBTAINED FROM THE IRS
WITH RESPECT TO ANY OF THE TAX ASPECTS OF THE PLAN AND NO
OPINION OF COUNSEL HAS BEEN REQUESTED OR OBTAINED BY THE
DEBTORS WITH RESPECT THERETO. THIS DISCUSSION DOES NOT
CONSTITUTE TAX ADVICE OR A TAX OPINION CONCERNING THE MATTERS
DESCRIBED. THERE CAN BE NO ASSURANCE THAT THE IRS WILL NOT
CHALLENGE ANY OR ALL OF THE TAX CONSEQUENCES DESCRIBED HEREIN,
OR THAT SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE SUSTAINED.
ACCORDINGLY, EACH HOLDER OF A CLAIM OR EQUITY INTEREST IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING
THE FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES
OF THE PLAN.
A. Federal Income Tax Consequences to the Debtors
1. In General
As mentioned above, the Plan contemplates and is predicated
upon the substantive consolidation of all the estates of the
Debtors into a single entity for purposes of confirmation,
consummation and implementation of the Plan. Further, the
Debtors (other than SCC) will merge with and into SCC on the
Effective Date, with NewSCC as the surviving corporation. At
the present time, the Debtors have not determined the exact
federal income tax consequences of these transactions, but,
except as described below, the Debtors currently believe that
these transactions should not have a material effect on the
federal income tax posture of the Debtors. The Debtors believe
that the mergers of the Debtors into SCC will either qualify
as tax-free liquidations under section 332 of the Tax Code or
will be loss transactions.
2. Utilization by NewSCC of Debtors'
Existing Tax Attributes
The Debtors may have net operating loss carryovers ("NOLs")
and built-in losses, general business credit carryovers,
capital loss carryforwards, minimum tax credit carryforwards
and foreign tax credit carryforwards as of the Effective Date
which will carry over and be available to NewSCC and its
subsidiaries to offset income of NewSCC and its subsidiaries
after the Effective Date. For Fiscal 1996, the Debtors do not
have any NOL carryforwards from years prior to the current
fiscal year, but expect to generate an NOL in the current
fiscal year ending June 30, 1996. Pursuant to section
172(b)(3) of the Tax Code, SCC may choose to utilize this NOL
as a carryback or elect to waive the carryback period and use
the NOL exclusively as a carryover. At this time, SCC is not
in a position to conclude whether it would be beneficial to
utilize this NOL as a carryback. Accordingly, it is difficult
to ascertain the amount of potential future tax attributes
which will carry over to NewSCC and its subsidiaries. While
the issue is not entirely free from doubt, the Debtors do not
believe that any of these tax attributes are currently subject
to limitation under section 382 of the Tax Code. As discussed
below, however, because the Plan will result in an "ownership
change" (as defined in section 382 of the Tax Code) with
respect to the Debtors, the availability of any such tax
attributes to offset income of NewSCC and its subsidiaries
after the Effective Date may be severely limited by sections
382 and 383 of the Tax Code, unless the exception provided in
section 382(l)(5) of the Tax Code (the "Bankruptcy Exception")
applies. (In general, an ownership change occurs if the stock
ownership of a company changes by more than 50 percentage
points during a three-year testing period.) SCC also believes
that it has significant built-in losses, which, if realized
within the "recognition period" (generally, the five-year
period following an ownership change) would also be severely
limited by section 382 of the Tax Code unless the Bankruptcy
Exception applies. The Debtors' tax attributes may also be
reduced by any gain or income recognized as a result of the
transactions contemplated by the Plan and, absent any
applicable exceptions, any discharge of indebtedness income
excluded from income pursuant to section 108 of the Tax Code
(the "COI income"). The precise amount of the Debtors' COI
income and tax attributes has not been finally determined.
a. Effect of Sections 382 and 383 of the Tax Code
The Plan will cause an ownership change within the meaning
of section 382 of the Tax Code with respect to the Debtors on
the Effective Date.
In general, unless the Bankruptcy Exception applies, a
corporation that is subject to an ownership change may utilize
its pre-ownership change NOL carryforwards (and certain
built-in losses) only up to an amount in each year after such
ownership change equal to the "Section 382 limitation," which
is calculated as the product of (i) the federal long-term
tax-exempt rate (prescribed monthly by the IRS) at the time of
such ownership change (5.78% for changes occurring in July,
1996) and (ii) the fair market value of the equity of the
corporation, as determined under section 382 of the Tax Code,
immediately before the time of such ownership change. (An
analogous rule under section 383 of the Tax Code applies to
restrict utilization of certain other tax attributes following
an ownership change, such as capital losses and certain
credits). However, in the case of a corporation undergoing an
ownership change in a bankruptcy proceeding, the fair market
value of the equity of the corporation equals the value of the
corporation's stock immediately prior to the ownership change,
increased to reflect the increase (if any) in its value
resulting from any surrender or cancellation of creditors'
claims in the transaction. Further, if section 382 of the Tax
Code applies with respect to an ownership change, and the
continuity of business enterprise requirement of section 382
of the Tax Code is not satisfied during the two-year period
following the date of such ownership change, then the section
382 limitation is limited to recognized built-in gains; the
Debtors expect, however, that this requirement will be
satisfied.
If the corporation's taxable income which would otherwise be
offset by NOLs (or built-in losses) in a given year exceeds
the section 382 limitation, the excess is generally subject to
federal income tax (except to the extent such taxable income
is attributable to certain "built-in gains" of the
corporation). NOL carryforwards not utilized in a given year
because of the section 382 limitation remain available for use
in future years until their normal expiration dates. To the
extent that a corporation's section 382 limitation in a given
year exceeds its taxable income for such year, that excess
will increase the section 382 limitation in future taxable
years.
As noted above, the section 382 limitation affects the
utilization of built-in losses and is affected by built-in
gains. Generally, if a corporation has net unrealized built-in
losses (i.e., the aggregate adjusted basis of the
corporation's assets immediately before the ownership change
exceeds the fair market value of such assets at that time) in
excess of a de minimis threshold amount, any such built-in
losses recognized within the five-year period beginning on the
date of the ownership change will be subject to the applicable
section 382 limitation in the same manner as pre-change NOL
carryforwards. (This rule also applies to deductions that have
accrued economically prior to the ownership change but are
recognized for tax purposes after the ownership change.) If a
corporation has net unrealized built-in gains prior to the
section 382 ownership change (i.e., the aggregate adjusted
basis of the corporation's assets immediately before the
ownership change is less than the fair market value of such
assets) in excess of a de minimis threshold amount, the
section 382 limitation for any taxable year within the
five-year period beginning on the date of the ownership change
will
be increased by any such built-in gains recognized for such
taxable year. For purposes of the adjustments for built-in
gains and built-in losses, if the amount of the net unrealized
built-in gain or loss (i.e., the difference between the fair
market value of the assets of the corporation immediately
before the ownership change and the aggregate adjusted basis
of such assets at such time) is not greater than a de minimis
threshold amount, the net unrealized built-in gain or loss
amount will be treated as zero. The de minimis threshold
amount is the lesser of (a) 15% of the fair market value of
the assets of the corporation immediately prior to the
ownership change, or (b) $10,000,000. Consequently, at such
time as NewSCC and its subsidiaries recognize built-in gains
or built-in losses, the section 382 limitation may be
adjusted, provided the de minimis threshold requirements
applicable to unrealized built-in gains or losses are
satisfied. There can be no assurance that NewSCC or its
subsidiaries will have recognized built-in gains or losses, or
if any such built-in gains or losses will materially affect
the taxable income of NewSCC and its subsidiaries.
b. The Bankruptcy Exception
Pursuant to the Bankruptcy Exception under section 382(l)(5)
of the Tax Code, the general section 382 limitation does not
apply to an ownership change resulting from transactions that
are pursuant to a plan of reorganization of a corporation in a
Chapter 11 case if the stockholders and certain qualified
creditors of such corporation immediately before the ownership
change own at least 50 percent of the stock of the
corporation, by vote and value, immediately after such change,
as a result of being stockholders or qualified creditors
immediately before such change. For purposes of this rule,
stock transferred to a creditor is taken into account only to
the extent that such stock is transferred in satisfaction of
debt and only if such debt either (i) was held by the creditor
at least 18 months before the filing of the Chapter 11 case,
or (ii) arose in the ordinary course of the trade or business
of the old loss corporation and is held by the person who at
all times held the beneficial interest in such debt. Note,
however, that these requirements will not apply, and thus a
loss corporation generally may treat debt as always having
been owned by the creditor, unless (i) the creditor will be a
five percent (5%) shareholder of the loss corporation
(directly or indirectly) immediately after the ownership
change, or (ii) the creditor will be a less than five percent
(5%) shareholder immediately after the ownership change, but
such shareholder's participation in the formulation of the
debtor's reorganization plan makes it evident to the debtor
that the shareholder has not owned the debt in question for
the required period.
If NewSCC qualifies under the Bankruptcy Exception, it could
avoid entirely the application of the general section 382
limitation to its NOLs and built-in losses, but NewSCC's NOLs
would be reduced by the amount of interest relating to any
indebtedness that is converted into stock and for which SCC
claimed a deduction during the three-year period preceding the
taxable year of the ownership change plus the portion of the
year of the ownership change prior to the Effective Date (in
addition to any reduction for COI income excluded from income
under general tax principles, as discussed above, see "Federal
Income Tax Consequences to the Debtors -- Utilization by
NewSCC of Debtors' Existing Tax Attributes" and below, see
"Federal Income Tax Consequences to the Debtors -- Utilization
by NewSCC of Debtors' Existing Tax Attributes -- Discharge of
Indebtedness Income"). However, under the Bankruptcy
Exception, if there were a second ownership change during the
two-year period following the ownership change that results
from the Plan, the NOLs and other tax attributes of NewSCC
carried forward from the pre-Effective Date taxable years of
the Debtors would be effectively eliminated for all taxable
years ending after the date of the second ownership change.
The Bankruptcy Exception automatically applies if its
requirements are satisfied. A debtor, however, has the option
of filing an election not to have the Bankruptcy Exception
apply. If this election is made, the normal section 382
limitation will apply, and the NOL carryforwards will be
subject to the annual limitation as described above in
"Federal Income Tax Consequences to the Debtors -- Utilization
by NewSCC of Debtors' Existing Tax Attributes -- Effect of
Sections 382 and 383 of the Tax Code." Based on the
regulations under section 382 of the Tax Code and certain
assumptions of fact and law, the Debtors expect the Bankruptcy
Exception will apply to the ownership change occurring with
respect to the Debtors, in which case the section 382
limitation would not apply with respect to the NOLs and other
tax attributes of the Debtors. However, no assurance can be
given that the Bankruptcy Exception will be available because
of uncertainties regarding the assumptions on which the
Debtors' expectations are based. Further, the Debtors may
conclude that it is advisable to elect not to have the
Bankruptcy Exception apply (e.g., if the Debtors determine
that the NOL reduction rules mandated by the Bankruptcy
Exception would seriously reduce the amount of the Debtors'
NOL carryforwards, or if there is a significant possibility
that NewSCC will undergo another ownership change within the
two-year period following the ownership change resulting from
the Plan). Since the Debtors have concluded that it is likely
that the Bankruptcy Exception will apply in this case, and
that it will likely be advisable to allow it to apply, the
Plan will incorporate certain restrictions on the
transferability of the NewSCC Common Stock, the NewSCC
Warrants and the NewSCC Warrant Shares (as hereinafter
defined) (which restrictions shall in each case lapse in the
event that the Debtors either do not qualify for the
Bankruptcy Exception or choose to elect not to have the
Bankruptcy Exception apply) in order to minimize the
likelihood that an ownership change will occur with respect to
the Debtors within two (2) years of the end of the fiscal year
of the Debtors that includes the Effective Date. See "NewSCC
Securities; Corporate Governance -- Description of NewSCC
Securities -- Description of NewSCC Common Stock --
Restriction on Transfer of Shares." There can be no assurance,
however, that these restrictions will in fact prevent an
ownership change that could adversely affect the shareholders
of NewSCC.
c. Discharge of Indebtedness Income
Under the Tax Code, a taxpayer generally must include in
gross income the amount of any COI income realized. However,
such amounts are not included in gross income when the COI
income arises in a case under the Bankruptcy Code. Instead,
unless one of the exceptions discussed below applies, any COI
income which otherwise would have been included in gross
income generally is applied to reduce certain tax attributes
of the taxpayer in the following order: NOLs, general business
credit carryovers, minimum tax credit carryovers, capital loss
carryovers, the taxpayer's basis in property, and foreign tax
credit carryovers.
The treatment under the Plan of certain of each of the
Secured Claims, Reclamation Claims, General Unsecured Claims
or the Convenience Class Claims generally may result in COI
income which will reduce tax attributes of the Debtors by the
difference between the fair market value of the consideration
received by the holders thereof and the amount of the
discharged indebtedness unless, inter alia, (i) the discharged
Claims do not constitute "indebtedness" for federal income tax
purposes or (ii) the discharged Claims would have given rise
to a deduction had they been paid in full and a deduction for
such amount has not already been claimed.
The Debtors believe that, because certain Claims do not
constitute indebtedness for federal income tax purposes, the
discharge of such Claims will not result in COI income. In
addition, the Debtors believe, pursuant to section 108(e)(2)
of the Tax Code, that because certain other Claims would have
given rise to deductions had they been paid in full, discharge
of such Claims will not give rise to COI income.
3. Alternative Minimum Tax
The Tax Code provides that, for any taxable year, a
corporation's federal income tax liability equals the greater of
(i) the regular tax computed at the regular 35% corporate tax
rate on taxable income and (ii) the alternative minimum tax
("AMT") computed at a lower tax rate (20%) but on a broader
income base (alternative minimum taxable income ("AMTI")). For
purposes of computing a corporation's regular federal income tax
liability, all of the income recognized in a taxable year may be
offset by available NOLs and other tax carryovers (to the extent
permitted under, inter alia, sections 382 and 383 of the Tax
Code). In contrast, for purposes of computing AMTI, NOLs (as
determined for AMT purposes) and other tax carryovers generally
are taken into account, but may not offset more than 90% of the
pre-NOL AMTI. Thus, a corporation that is currently profitable
for AMT purposes generally will be required to pay federal income
tax at an effective rate of at least 2% of its pre-NOL AMTI (10%
of the 20% AMT tax rate), regardless of the amount of its NOLs.
As a result, even if the Debtors (or, after the Effective Date,
NewSCC and its subsidiaries) are otherwise able to fully shelter
their income with NOLs, they will be subject to current taxation
in any year in which they have positive net pre-NOL AMTI
(including as a result of gain and income recognition in
connection with the transactions contemplated by the Plan). To
the extent that a corporation's AMT liability for any taxable
year exceeds its regular federal income tax liability, the excess
may be carried forward as a credit against regular tax liability
in subsequent years.
B. Federal Income Tax Consequences to Creditors
1. Generally
The federal income tax consequences of the Plan to a Creditor
will depend upon several factors, including but not limited to:
(i) whether the Creditor's Claim (or portion thereof) constitutes
a Claim for principal or interest; (ii) the type of consideration
received by the Creditor in exchange for the Claim; (iii) whether
the Creditor is a resident of the United States for tax purposes
(or falls into any of the special classes of taxpayers excluded
from this discussion as noted above); (iv) whether the Creditor
has taken a bad debt deduction or worthless security deduction
with respect to his Claim; and (v) whether the Creditor receives
distributions under the Plan in more than one taxable year.
CREDITORS ARE STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX TREATMENT UNDER THE PLAN OF THEIR PARTICULAR
CLAIMS.
2. Creditors Who Receive Solely Cash
Creditors receiving solely Cash (defined in the Plan to include
marketable securities) in exchange for their Claims will
generally recognize taxable gain or loss in an amount equal to
the difference between the amount realized and each such
Creditor's adjusted tax basis in the Claim. The amount realized
will equal the amount of cash (or, in the case of marketable
securities, the fair market value of such securities) to the
extent that such consideration is not allocable to any portion of
the Claim representing accrued and unpaid interest. See "Federal
Income Tax Consequences to Creditors -- Receipt of Interest"
below.
The character of any recognized gain or loss (i.e., ordinary
income, or short-term or long-term capital gain or loss) will
depend upon the status of the Creditor, the nature of the Claim
in the Creditor's hands, the purpose and circumstances of its
acquisition, the Creditor's holding period of the Claim, and the
extent to which the Creditor previously claimed a deduction for
the worthlessness of all or a portion of the Claim.
A loss generally is treated as sustained in the taxable year
for which there has been a closed and completed transaction, and
no portion of a loss with respect to which there is a reasonable
prospect of reimbursement may be deducted until it can be
ascertained with reasonable certainty whether or not such
reimbursement will be recovered.
Creditors should consult with their own tax advisors as to the
matters discussed in this section concerning character and timing
of recognition of gain or loss. Because a loss will be allowed as
a deduction only for the taxable year in which the loss was
sustained, a Creditor that claims a loss in the wrong taxable
year risks denial of such loss altogether. In the case of certain
categories of Claims, consideration should be given to the
possible availability of a bad debt deduction under section 166
of the Tax Code for a period prior to the Effective Date. In
addition, a portion of any distributions received after the
Effective Date may be taxed as ordinary income under the imputed
interest rules.
3. Creditors Who Receive Cash and Stock
a. Generally
The federal income tax consequences of the Plan to the holders
of Allowed General Unsecured Claims, who will receive shares of
NewSCC Common Stock in addition to Unsecured Class Cash, will
depend in large part on whether the exchange of their Claims for
such consideration will be treated, in whole or in part, as a
"recapitalization" of SCC within the meaning of section
368(a)(1)(E) of the Tax Code.
If the exchanges contemplated by the Plan are made pursuant to
such a recapitalization, then an exchanging Creditor generally
will not recognize any gain or loss for income tax purposes
(except to the extent of "boot" and any consideration
attributable to accrued but unpaid interest). See "Federal Income
Tax Consequences to Creditors -- Receipt of Interest" below. If
an exchange is not made pursuant to a recapitalization, then an
exchanging Creditor will recognize gain or loss on such exchange.
This discussion assumes that each such Creditor holds its Claim,
and will hold any NewSCC Common Stock received under the Plan, as
capital assets under section 1221 of the Tax Code.
In order for an exchange contemplated by the Plan to constitute
a tax-free recapitalization, the Claim exchanged by a Creditor
must be a "security" for federal income tax purposes, and the
Creditor must receive stock (and/or securities) in the exchange.
The term "security" is not defined in the Tax Code or the
regulations issued thereunder, and has not been clearly defined
by court decisions. In general, a debt instrument constitutes a
"security" if it represents a participating, continuing interest
in the issuer, rather than merely the right to a cash payment.
Thus, the term of the debt instrument is usually regarded as a
significant factor in determining whether it is a security. The
IRS has ruled that a debt instrument with a maturity of ten years
or more is treated as a security. However, under the case law,
debt instruments with maturities ranging between five and ten
years are often held to be securities. Instruments with a
five-year term or less rarely qualify as tax securities. Further,
claims arising out of the extension of trade credit or litigation
generally will not constitute tax securities. Thus, except in
certain limited circumstances, it appears that the Claims to be
exchanged for NewSCC Common Stock will not constitute securities
for tax purposes. Nevertheless, because individual circumstances
may differ significantly, the Creditors should consult their own
tax advisors.
b. Tax Consequences of an Exchange
If an exchange of a Claim for Unsecured Class Cash and NewSCC
Common Stock is treated as a recapitalization within the meaning
of section 368(a)(1)(E) of the Tax Code, the federal income tax
consequences to such Creditors (other than such Creditors who
receive only cash in lieu of fractional, partial or de minimis
interests in NewSCC Common Stock), would be as follows:
(i) Subject to the discussion below as to accrued but
unpaid interest, a Creditor would not recognize loss on the
exchange, but would recognize gain to the extent of the
lesser of (a) the amount of gain realized from the exchange
and (b) the amount of the cash received in the exchange
(hereinafter referred to as "boot"). The amount of gain
realized, if any, would be equal to the excess of (a) the
sum of the cash and the fair market value of the NewSCC
Common Stock received, over (b) such Creditor's adjusted tax
basis in the Claims surrendered in the exchange.
(ii) Any such gain recognized on the exchange would be
capital gain, and such capital gain would be long-term
capital gain if such Creditor held the Claim for more than
one year as of the Effective Date.
(iii) Except for the consideration treated as received in
exchange for accrued but unpaid interest: (A) a Creditor
should have an aggregate tax basis in the NewSCC Common
Stock equal to such Creditor's adjusted tax basis in the
Claims exchanged therefor, reduced by the amount of any boot
received and increased by any gain recognized on the
exchange, and (B) the holding period of the NewSCC Common
Stock should include the holding period of the Claims
exchanged therefor.
(iv) A Creditor receiving cash in lieu of fractional,
partial or de minimis interests in NewSCC Common Stock will
be treated as having received such NewSCC Common Stock and
having exchanged it for cash in a transaction which would be
a transaction subject to section 302 of the Tax Code and
related provisions. Any such exchange should generally
result in capital gain or loss measured by the difference
between the cash received for the fractional, partial or de
minimis interest and the Creditor's adjusted tax basis for
such interest.
Alternatively, if the exchange by a Creditor of a Claim for
the cash consideration and NewSCC Common Stock is treated as a
taxable exchange under section 1001 of the Tax Code, then the
federal income tax consequences to the Creditors of such
Claims would be as follows:
(i) Subject to the discussion below as to accrued but
unpaid interest, a Creditor would recognize gain or loss on
the exchange in an amount equal to the difference between
(A) the sum of the cash and the fair market value of the
NewSCC Common Stock as of the Effective Date and (B) such
Creditor's adjusted tax basis in its Claim.
(ii) Any such gain or loss should be capital gain or loss,
and such capital gain or loss should be long-term capital
gain or loss if such Creditor held its Claim for more than
one year as of the Effective Date.
(iii) A Creditor's tax basis in the NewSCC Common Stock
would be equal to the fair market value of the NewSCC Common
stock as of the Effective Date. The holding period of the
NewSCC Common Stock would begin on the day immediately
following the Effective Date.
4. Receipt of Interest
A portion of the consideration received by a Creditor in
satisfaction of a Claim may be allocated to the portion of
such Claim (if any) that represents accrued but unpaid
interest. If any portion of the distribution were required to
be allocated to accrued interest, such portion would be
taxable to the Creditor as interest income, except to the
extent the Creditor has previously reported such interest as
income.
In the event that a Creditor has previously reported the
interest income, only the balance of the distribution after
the allocation of proceeds to accrued interest would be
considered received by the Creditor in respect of the
principal amount of the Claim. Such an allocation would reduce
the amount of the gain, or increase the amount of loss,
realized by the Creditor with respect to the Claim. If such
loss were a capital loss, it would not offset any amount of
the distribution that was treated as ordinary interest income
(except, in the case of individuals, to the limited extent
that capital losses may be deducted against ordinary income).
To the extent that any portion of the distribution is
treated as interest, Creditors may be required to provide
certain tax information in order to avoid the withholding of
taxes. CREDITORS SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL INCOME TAX TREATMENT OF CONSIDERATION
RECEIVED IN SATISFACTION OF THEIR CLAIMS.
C. Federal Income Tax Consequences to Holders of Equity
Interests
1. Holders of SCC Common Stock
a. Exchange
Registered Holders of SCC Common Stock will receive one (1)
NewSCC Warrant in exchange for each ten (10) shares of SCC
Common Stock. All shares of SCC Common Stock will be canceled,
annulled, and extinguished on the Effective Date. Upon such
exchange, such holder of SCC Common Stock will recognize gain
or loss on the exchange in an amount equal to the difference
between (A) the fair market value of the NewSCC Warrant as of
the Effective Date and (B) such holder's adjusted tax basis in
its SCC Common Stock, except to the extent that a worthless
stock deduction should have been claimed for a prior year. Any
such gain or loss should be capital gain or loss if the SCC
Common Stock was a capital asset in the hands of such holder,
and such capital gain or loss should be long-term capital gain
or loss if such holder held its SCC Common Stock for more than
one year as of the Effective Date. Such holder's tax basis in
a NewSCC Warrant would be equal to the fair market value, as
of the Effective Date, of the shares of SCC Common Stock
exchanged therefor. Stockholders should consult their own tax
advisors as to whether they are entitled to a worthless stock
deduction under section 165(g) of the Tax Code for an earlier
taxable year.
b. Exercise
No gain or loss will be recognized by a holder upon the
exercise of a NewSCC Warrant for NewSCC Warrant Shares. A
holder's tax basis in the NewSCC Warrant Shares will equal the
sum of the adjusted tax basis in the NewSCC Warrants plus the
exercise price paid on the exercise thereof. The holding
period of the NewSCC Warrant Shares received on the exercise
of the NewSCC Warrants will not include the period during
which the NewSCC Warrants were held by such holder.
c. Sale of Warrants
The sale of a NewSCC Warrant ordinarily will result in the
recognition of gain or loss to the holder for federal income
tax purposes in an amount equal to the difference between the
amount realized on such sale or exchange and the holder's tax
basis in the NewSCC Warrant. Such gain or loss should be
capital gain or loss if the NewSCC Warrant Shares would have
been a capital asset in the hands of the holder had the NewSCC
Warrant been exercised, and such capital gain or loss should
be long-term capital gain or loss if such holder held its
NewSCC Warrants for more than one year. Similarly, gain or
loss will generally be recognized upon a sale of the NewSCC
Warrant Shares received upon exercise of a NewSCC Warrant in
an amount equal to the difference between the amount realized
on the transfer and the holder's adjusted tax basis in the
NewSCC Warrant Shares. Such gain or loss should be capital
gain or loss if the NewSCC Warrant Share was a capital asset
in the hands of the holder, and such capital gain or loss
should be long-term capital gain or loss if such holder held
its NewSCC Warrant Share for more than one year.
d. Lapse
If the NewSCC Warrants lapse without exercise, the holder
will recognize a capital loss (assuming the sale or exchange
of the NewSCC Warrants by the holder would have given rise to
capital gain or loss) equal to the holder's tax basis in the
NewSCC Warrants. Any such capital loss should be long-term if
such holder held its NewSCC Warrants for more than one year.
e. Adjustments
The exercise price of the NewSCC Warrants is subject to
adjustment under certain circumstances. Section 305 of the Tax
Code and the applicable Treasury regulations provide that a
holder of warrants may be treated as receiving a constructive
distribution from the company if (i) the exercise price is
adjusted and as a result of such adjustment the proportionate
interest of such holder in the assets or earnings and profits
of NewSCC is increased, and (ii) the adjustment is not made
pursuant to a bona fide, reasonable antidilution formula
(e.g., an adjustment to an exercise price would not be
considered made pursuant to such a formula if the adjustment
were made to compensate for certain taxable distributions with
respect to the NewSCC Warrant Shares). Thus, under certain
circumstances, an adjustment in the exercise price of the
NewSCC Warrants could be taxable to the holders thereof as a
dividend to the extent of the current or accumulated earnings
and profits of NewSCC without regard to whether such holders
receive any cash or other property.
2. Holders of Other Equity Interests
Holders of Equity Interests other than SCC Common Stock will
receive no consideration and should recognize a loss upon
consummation of the Plan, except to the extent that a
worthless stock deduction should have been claimed for a prior
year. Such a loss will be a capital loss if such Equity
Interest was a capital asset in the hands of the holder, and
such capital loss should be long-term capital loss if such
holder held such Equity Interest for more than one year as of
the Effective Date. Stockholders should consult their own tax
advisors as to whether they are entitled to a worthless stock
deduction under section 165(q) of the Tax Code for an earlier
taxable year.
D. Importance of Obtaining Professional Tax Assistance
The foregoing is intended to be a summary only and not a
substitute for consultation with a tax professional. The
federal, state, local and foreign tax consequences of the
Joint Plan are complex and, in some respects, uncertain. Such
consequences may also vary based upon the individual
circumstances of each holder of a Claim or Equity Interest.
Accordingly, each holder of a Claim or Equity Interest is
strongly urged to consult with its own tax advisor regarding
the federal, state, local and foreign tax consequences of the
Plan.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF CERTAIN OF
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN, AND IS
NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX
PROFESSIONAL. THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
WHICH ARE DESCRIBED HEREIN AND THE STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF THE PLAN WHICH ARE NOT ADDRESSED HEREIN,
ARE COMPLEX AND, IN SOME CASES, UNCERTAIN. SUCH CONSEQUENCES
MAY ALSO VARY BASED ON THE INDIVIDUAL CIRCUMSTANCES OF EACH
HOLDER OF A CLAIM OR EQUITY INTEREST. ACCORDINGLY, EACH HOLDER
OF A CLAIM OR EQUITY INTEREST IS STRONGLY URGED TO CONSULT
WITH ITS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF THE PLAN.
ARTICLE 6
NEWSCC SECURITIES; CORPORATE GOVERNANCE
A. Description of NewSCC Securities
As of the Effective Date, NewSCC will issue NewSCC Common
Stock to holders of Allowed General Unsecured Claims and
NewSCC Warrants to Registered Holders. See "Introduction --
Overview of the Debtors and the Plan -- Sources of Recovery
Under the Plan" and "The Plan of Reorganization -- Summary of
Payment Provisions of the Plan -- Treatment of Claims and
Equity Interests" above, and "Material Uncertainties and Risk
Factors" below. The following summarizes the material
provisions of the NewSCC Common Stock, the NewSCC Warrants,
the Restated Certificate of Incorporation and By-Laws of
NewSCC which will be adopted pursuant to the Plan, and the
Rights Agreement, dated as of the Effective Date, between
NewSCC and the Rights Agent to be designated thereunder (the
"Rights Agreement"), to be entered into pursuant to the Plan.
These statements do not purport to be complete and are
qualified in their entirety by reference to the full text of,
and are subject to the detailed provisions of, the NewSCC
Warrant Agreement (including the form of Warrant), the Rights
Agreement and the Restated Certificate of Incorporation and
By-Laws of NewSCC. The form of NewSCC Warrant Agreement is
attached as Schedule 1.49 to the Plan, and the form of Rights
Agreement is attached as Schedule 1.69 to the Plan. Forms of
the Restated Certificate of Incorporation and By-Laws of
NewSCC are attached as Schedule 12.7 to the Plan. See "--
Description of NewSCC Common Stock," "-- The NewSCC Warrants,"
"-- Corporate Governance -- Summary of the Rights Agreement"
and "-- Corporate Governance -- Certificate of Incorporation
and By-Laws" below.
1. Description of NewSCC Common Stock
The NewSCC Common Stock will be issued to holders of Allowed
General Unsecured Claims. In addition, following the Effective
Date, NewSCC shall (a) implement an employee stock incentive
or other similar plan, which shall provide for the issuance of
up to ten percent (10%) of the total shares of NewSCC Common
Stock (or options to acquire such shares) which are issued
pursuant to the Plan, determined on a fully-diluted basis, not
including the effect of the exercise of any of the NewSCC
Warrants, and (b) be authorized to award to any person
employed by NewSCC following the Confirmation Date in the
position of Chief Executive Officer, Chief Financial Officer
or Senior Vice President/Marketing, NewSCC Common Stock or
options to purchase NewSCC Common Stock up to an aggregate
amount of five percent (5%) of the total shares of NewSCC
Common Stock which are issued pursuant to the Plan, determined
on a fully-diluted basis, not including the effect of the
exercise of any of the NewSCC Warrants. Rights to the shares
granted under (a) and (b) above shall not vest prior to the
second anniversary of the Effective Date.
On the Effective Date, NewSCC's Certificate of Incorporation
and By-Laws will be amended and restated. The Restated
Certificate of Incorporation will authorize (i) 250,000,000
shares of NewSCC Common Stock and (ii) 10,000,000 shares of
preferred stock. Giving effect to the Plan, including the
distributions and other transactions contemplated by the Plan,
the Debtors estimate that 7,000,000 shares of NewSCC Common
Stock will be issued pursuant to the Plan (not including
NewSCC Common Stock that may be issued upon the exercise of
NewSCC Warrants and not including any NewSCC Common Stock
which may be issued as a result of successful prosecutions of
Avoidance Actions). The Restated Certificate of Incorporation
will provide, to the extent required by section 1123 of the
Bankruptcy Code, that NewSCC will not issue non-voting equity
securities.
The terms and conditions of the NewSCC Common Stock will be
governed by the laws of the State of Delaware as well as by
the Restated Certificate of Incorporation and By-Laws. See "--
Corporate Governance" below.
a. Dividends
It is not anticipated that NewSCC will pay any dividends on
NewSCC Common Stock in the foreseeable future. It is likely
that the post-Confirmation financing will prohibit payment of
dividends with respect to the NewSCC Common Stock, other than
the distribution of Rights (as defined in " -- Corporate
Governance -- Summary of the Rights Agreement") pursuant to
the Rights Agreement. See "-- Corporate Goverance -- Summary
of the Rights Agreement" and "Material Uncertainties and Risk
Factors -- Restrictions on Dividends" below.
b. Market and Trading Information
At the close of business on May 8, 1996, 30,250,000 shares
of SCC Common Stock were issued and outstanding. Until May 30,
1996, SCC Common Stock was traded on the NYSE under the symbol
SCO. On May 30, 1996, the NYSE announced that trading in SCC
Common Stock would be suspended immediately. The NYSE
announcement also indicated that following the suspension of
trading, application would be made to the Securities and
Exchange Commission to delist the issue. The NYSE made such
application on July 23, 1996, which application was granted,
and the Common Stock of SCC was struck from listing and
registration on the NYSE on August 6, 1996.
The following table sets forth the range of high and low
sale prices of SCC Common Stock on the NYSE during SCC's most
recent fiscal year.
[Download Table]
Fiscal Year 1996
High Low
First Quarter . . 2-7/8 1-3/8
Second Quarter. . 1-1/2 7/16
Third Quarter . . 11/16 1/32
Fourth Quarter (through May 30, 1996) 9/16 5/16
Each of the NYSE, the American Stock Exchange ("AMEX") and
the National Association of Securities Dealers Automated
Quotation -- National Market System ("NASDAQ-NMS") has certain
listing criteria applicable to listed or quoted companies,
including financial criteria and minimum requirements as to
the number of holders of listed or quoted securities. NewSCC
may not meet such criteria or minimum requirements but in such
event would seek to obtain exemption or other relief from the
relevant exchange or the NASDAQ-NMS so as to have the NewSCC
Common Stock listed on the NYSE or the AMEX, or quoted on the
NASDAQ-NMS, prior to the Effective Date. However, SCC has no
reason to believe that the NYSE, the AMEX or the NASDAQ-NMS,
as the case may be, will necessarily grant any such exemption
or relief, and therefore there can be no assurance that shares
of NewSCC Common Stock will be listed on any national exchange
or quoted on any national quotation system. In the event
NewSCC is unable to list or have quoted the NewSCC Common
Stock with any national exchange or quotation system, there
would be reduced liquidity for NewSCC's stockholders, which
would have a material adverse effect on such stockholders. See
"Material Uncertainties and Risk Factors -- Lack of Trading
Market for NewSCC Common Stock and NewSCC Warrants" below.
No precise predictions can be made of the effect, if any,
that market sales or the availability of shares for sale will
have on the market prices of the NewSCC Common Stock
prevailing from time to time. Nevertheless, sales of
substantial amounts of NewSCC Common Stock in the public
market could adversely affect the prevailing market prices of
NewSCC Common Stock. See "Material Uncertainties and Risk
Factors -- Lack of Trading Market for NewSCC Common Stock and
NewSCC Warrants" below.
c. Restriction on Transfer of Shares
The terms of the Restated Certificate of Incorporation of
NewSCC will include certain stock transfer restrictions
intended to preserve the Debtors' NOL carryforwards and
certain other tax attributes; provided, however, if NewSCC
either does not qualify for the Bankruptcy Exception or
chooses to make an election under section 382(l)(5)(H) of the
Tax Code (or the applicable provision then in effect) not to
have the provisions of the Bankruptcy Exception apply to the
ownership change occurring pursuant to the Plan, such stock
transfer restrictions shall be deemed to lapse and shall have
no further force or effect as of the earlier of the date
NewSCC is aware that it is not eligible for the Bankruptcy
Exception and the date of such election under section
382(l)(5)(H) of the Tax Code (the "Restriction Lapse Date").
As set forth in the Restated Certificate of Incorporation of
NewSCC, such terms shall provide that for the period from the
Effective Date until the earlier of (A) two (2) years after
the end of the fiscal year of the Debtors that includes the
Effective Date, or (B), if applicable, the Restriction Lapse
Date, (i) any attempted sale, transfer, assignment,
conveyance, grant, pledge, gift or other disposition of any
share or shares of stock of NewSCC (within the meaning of
section 382 of the Tax Code) or any option or right to
purchase such stock, as defined in the Treasury Regulations
under section 382 of the Tax Code, to any person or entity (or
group of persons or entities acting in concert), or any
attempted exercise of the aforementioned option or right to
purchase such stock by any person or entity (or group of
persons or entities acting in concert), who either directly or
indirectly owns or would be treated as owning, or whose shares
are or would be attributed to any person or entity who
directly or indirectly owns or would be treated as owning, in
either case prior to the purported transfer or exercise and
after giving effect to the applicable attribution rules of the
Tax Code and applicable Treasury Regulations, 5-percent or
more of the value of the outstanding capital stock of NewSCC
or otherwise treated as a 5-percent (5%) shareholder (within
the meaning of section 382 of the Tax Code), regardless of the
percent or the value of the stock owned, shall be void ab
initio insofar as it purports to transfer ownership or rights
in respect of such stock to the purported transferee and (ii)
any attempted sale, transfer, assignment, conveyance, grant,
gift, pledge or other disposition of any share of stock of
NewSCC (within the meaning of section 382 of the Tax Code) or
any option or right to purchase such stock, as defined in the
Treasury Regulations under section 382 of the Tax Code, to any
person or entity (or group of persons or entities acting in
concert) or any attempted exercise of the aforementioned
option or right to purchase such stock by any person or entity
(or group of persons or entities acting in concert) not
described in clause (i) who directly or indirectly would own,
or whose shares would be attributed to any person or entity
who directly or indirectly would own, in each case as a result
of the purported transfer or exercise and after giving effect
to the applicable attribution rules of the Tax Code and
applicable Treasury Regulations, 5-percent or more of the
value of any of the stock of NewSCC (or otherwise treated as a
5-percent shareholder within the meaning of section 382 of the
Tax Code), shall, as to that number of shares causing such
person or entity to be a 5-percent shareholder, be void ab
initio insofar as it purports to transfer ownership or rights
in respect of such stock to the purported transferee. However,
neither of these restrictions shall prevent a valid transfer
or exercise if (A) the transferor or exercisor, as the case
may be, obtains the written approval of the Board of Directors
of NewSCC and provides NewSCC with an opinion of counsel
satisfactory to NewSCC that, assuming, as of the date of such
opinion, the full exercise of all warrants issued by and any
options granted pursuant to any stock option plan of NewSCC,
the transfer or exercise shall not result in the application
of any tax law limitation on the use of NewSCC's NOL
carryforwards or other tax attributes or (B) a tender offer,
within the meaning of the Securities Exchange Act of 1934, as
amended, and pursuant to the rules and regulations thereof, is
made by a bona fide third party purchaser to purchase at least
sixty-six and two-thirds percent (66 2/3%) of the issued and
outstanding NewSCC Common Stock and the offeror (i) agrees to
effect, within ninety (90) days of the consummation of the
tender offer, a back-end merger in which all non-tendering
stockholders would receive the same consideration as paid in
the tender offer, and (ii) has received the tender of
sufficient shares to effect such merger.
In the absence of special approval by the Board of Directors
of NewSCC, a purported transfer or exercise of shares in
excess of the shares that can be transferred or exercised
pursuant to this restriction (the "Prohibited Shares") to the
purported acquiror (the "Purported Acquiror") is not effective
to transfer ownership of such Prohibited Shares. On demand by
NewSCC, which demand must be made within thirty (30) days of
the time NewSCC learns of the transfer or exercise of the
Prohibited Shares, a Purported Acquiror must transfer any
certificate or other evidence of ownership of the Prohibited
Shares within the Purported Acquiror's possession or control,
together with any dividends or other distributions
("Distributions") that were received by the Purported Acquiror
from NewSCC with respect to the Prohibited Shares, to an agent
designated by NewSCC (the "Agent"). The Agent will sell the
Prohibited Shares in an arm's length transaction (over a stock
exchange, if possible), and the Purported Acquiror will
receive an amount of sales proceeds not in excess of the price
paid or consideration surrendered by the Purported Acquiror
for the Prohibited Shares (or the fair market value of the
Prohibited Shares at the time of an attempted transfer to the
Purported Acquiror by gift, inheritance, or a similar
transfer). If the Purported Acquiror has sold the Prohibited
Shares prior to receiving NewSCC's demand to surrender the
Prohibited Shares to the Agent, the Purported Acquiror shall
be deemed to have sold the Prohibited Shares as an agent for
the initial transferor, or, in the case where the Prohibited
Shares are acquired pursuant to the exercise of an option or
right to purchase stock of NewSCC, for NewSCC, and shall be
required to transfer to the Agent all proceeds of such sale
and any Distributions.
In the case of an attempted exercise of an option or a right
to purchase stock of NewSCC, the Agent will pay to NewSCC any
sales proceeds in excess of those due to the Purported
Acquiror, together with any distributions received by the
Agent. In all other cases, if the initial transferor can be
identified, the Agent will pay to it any sales proceeds in
excess of those due to the Purported Acquiror, together with
any Distributions received by the Agent. If the initial
transferor cannot be identified within ninety (90) days of
receipt of such sales proceeds, if any, the Agent may pay any
such amounts to a charity of its choosing. In no event shall
amounts paid to the Agent inure to the benefit of NewSCC
(except as set forth in the first sentence of this paragraph)
or the Agent, but such amounts may be used to cover expenses
of the Agent in attempting to identify the initial transferor.
If the Purported Acquiror fails to surrender the Prohibited
Shares within the next thirty (30) business days from the
demand by NewSCC, then NewSCC may institute legal proceedings
to compel the surrender. NewSCC shall be entitled to damages,
including reasonable attorneys' fees and costs, from the
Purported Acquiror, on account of such purported transfer.
Certificates evidencing the NewSCC Common Stock will bear a
legend to the effect that it is subject to the above
restrictions.
2. The NewSCC Warrants
The NewSCC Warrants will be issued to holders of record of
SCC Common Stock on August 15, 1996 pursuant to the NewSCC
Warrant Agreement at a ratio of one NewSCC Warrant for each
ten (10) shares of SCC Common Stock then held by such holder.
Each NewSCC Warrant will represent the right to purchase one
share of NewSCC Common Stock. NewSCC does not currently intend
to either list the NewSCC Warrants on any national stock
exchange or include the NewSCC Warrants on any national
quotation system. NewSCC may not meet the listing criteria or
minimum requirements of the NYSE, the AMEX or the NASDAQ-NMS
but will seek to have the underlying shares of NewSCC Common
Stock to be issued upon exercise of the NewSCC Warrants (the
"NewSCC Warrant Shares") listed for trading or quoted on the
same national stock exchange or quotation system, if any, as
the shares of NewSCC Common Stock. Further, the NewSCC
Warrants and the NewSCC Warrant Shares shall be subject to the
same stock transfer restrictions applicable to the NewSCC
Common Stock (as well as, in the case of the NewSCC Warrants,
restrictions on their exercise). See "-- Restriction on
Transfer of Shares" above. Each NewSCC Warrant will entitle
the holder thereof to acquire one share of NewSCC Common
Stock. The exercise price of the NewSCC Warrants will be
determined on a preliminary basis as of the Confirmation Date
and will be set generally at a per share value that would, if
the NewSCC Common Stock were sold for such value, and after
giving effect to the distribution of the Unsecured Class Cash
then estimated to be or to become available for distribution
to holders of Allowed General Unsecured Claims (based on an
estimate at such date of the aggregate amount of Allowed
Claims and Reserved Claims), allow such holders to realize the
amount of such Claims together with accrued interest thereon
from the Petition Date to the Effective Date and an allocable
amount for costs and expenses incurred in connection with
transaction costs relating to the sale or other disposition of
NewSCC Common Stock. The exercise price of the NewSCC Warrants
so estimated on a preliminary basis will be subject to
reduction by the Board of Directors of NewSCC in its sole
discretion prior to the date on which the NewSCC Warrants will
first become exercisable based on the Board's estimate at such
time of the total amounts of Unsecured Class Cash and of
General Unsecured Claims that may be Allowed Claims or
Reserved Claims.
The number and kind of securities purchasable upon the
exercise of NewSCC Warrants and the exercise price therefor
will be subject to adjustment in certain events as set forth
in the NewSCC Warrant Agreement, including the issuance of
capital stock of NewSCC as a dividend or distribution on the
NewSCC Common Stock; subdivisions, reclassifications and
combinations of the NewSCC Common Stock; the issuance to all
holders of NewSCC Common Stock of certain rights, options or
warrants entitling them to subscribe for or purchase NewSCC
Common Stock at less than the then-current market price of the
NewSCC Common Stock (as determined in accordance with the
NewSCC Warrant Agreement); the distribution to holders of
NewSCC Common Stock of evidences of indebtedness or assets of
NewSCC or any entity controlled by NewSCC (excluding cash
dividends or cash distributions from consolidated earnings or
surplus legally available for such dividends or
distributions); and the distribution to holders of NewSCC
Common Stock of shares of capital stock of any entity
controlled by NewSCC (although no adjustment in such shares or
exercise price will be required in connection with the
issuance of the NewSCC Common Stock, options, rights, warrants
or other securities pursuant to the Plan or the Rights
Agreement). Additionally, no adjustment will be required if in
connection with any of the events otherwise giving rise to an
adjustment the holders of the NewSCC Warrants receive such
rights, securities or assets as such holders would have been
entitled had the NewSCC Warrants been exercised immediately
prior to such event, and no adjustment will be required unless
such adjustment would require a change in the aggregate number
of shares of NewSCC Common Stock issuable upon the
hypothetical exercise of a NewSCC Warrant of at least 1% (but
any adjustment requiring a change of less than 1% will be
carried forward and taken into account in any subsequent
adjustment).
The NewSCC Warrants will be exercisable at any time between
9:00 a.m. Eastern Time on the date that is six (6) months
after the Effective Date and 5:00 p.m. Eastern Time on the
date that is two (2) years after the Effective Date (the
"Exercise Period"). Each NewSCC Warrant not exercised prior to
the expiration of the Exercise Period will become void, and
all rights thereunder and in respect thereof under the NewSCC
Warrant Agreement will cease on the expiration of the Exercise
Period.
B. Corporate Governance
1. Certificate of Incorporation and By-Laws
The Restated Certificate of Incorporation and By-Laws will
contain certain provisions relating to corporate governance.
Under the Restated Certificate of Incorporation, the holders
of NewSCC Common Stock will be entitled to one vote for each
share held of record on all matters submitted to a vote of the
stockholders, including the election of directors.
Pursuant to the Restated Certificate of Incorporation, the
Board of Directors shall be divided into three (3) classes, as
nearly equal in number as possible, with the directors in each
of the three classes serving until the 1997, 1998 and 1999
annual meetings of stockholders, respectively. At each annual
meeting beginning with the 1997 annual meeting, successors to
the class of directors whose term shall expire at that annual
meeting shall be elected for a term expiring at the third
succeeding annual meeting of stockholders after their
election. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal
as possible. In no case shall a decrease in the number of
directors shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of preferred stock shall have the
right to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be
governed by the terms of the Restated Certificate of
Incorporation applicable thereto, or the resolution or
resolutions of the Board of Directors relating to the issuance
of such shares of preferred stock, and such directors so
elected shall not be divided into classes pursuant to such
provision unless expressly provided by such terms or such
resolution or resolutions.
Directors may be removed only by the holders of at least a
majority of the outstanding NewSCC Common Stock and only for
cause at a meeting of stockholders called for such purpose.
Stockholder action can be taken only at an annual or special
meeting of stockholders, and not by written consent in lieu of
a meeting. Pursuant to NewSCC's By-Laws, special meetings of
stockholders may be called only by a majority of the Board of
Directors, and the business to be conducted at any such
special meeting is limited to that specified in the notice of
meeting.
The affirmative vote of the holders of shares entitled to
cast at least two-thirds of the votes represented by the
shares of all classes of stock of NewSCC entitled to vote
generally in elections of directors, considered for such
purpose as one class, shall be required to amend, alter,
change or repeal, or adopt any provision inconsistent with,
the provisions of the Restated Certificate of Incorporation
described above in this subsection 1.
The number of directors of NewSCC will be fixed within a
specified range (between three (3) and fifteen (15)) by a
majority of the entire Board of Directors and the directors of
NewSCC in office from time to time will fill any vacancy or
newly-created directorship on the Board. Any director elected
to fill a vacancy shall have the same term as that of his or
her predecessor, or, if such vacancy is a result of an
increase in the number of directors, as that of the other
directors of the class of which he or she shall be a member.
The By-Laws of NewSCC may be amended or repealed at any
regular meeting of the stockholders or directors, or at any
special meeting thereof if notice of such amendment or repeal
is contained in the notice of such special meeting, provided
that the provisions thereof regarding special meetings of
stockholders and the requirement that stockholders take action
only at a meeting, the number and election of directors, and
amendments to the By-Laws may be amended only by (i) the
directors of NewSCC or (ii) the affirmative vote of the
holders of shares entitled to cast at least two-thirds of the
votes represented by the shares of all classes of stock of
NewSCC entitled to vote generally in elections of directors,
considered for such purpose as one class.
Holders of NewSCC Common Stock will be entitled to
participate equally in such dividends as may be declared by
the Board of Directors out of funds legally available
therefor. However, it is not anticipated that dividends will
be paid on NewSCC Common Stock in the foreseeable future. See
"Material Uncertainties and Risk Factors -- Restrictions on
Dividends" below. In the event of a liquidation, dissolution
or winding-up of NewSCC, holders of NewSCC Common Stock will
be entitled to participate equally in the assets remaining
after payment of liabilities and the liquidation preference of
any preferred stock of NewSCC. Holders of NewSCC Common Stock
will have no preemptive rights. Holders of NewSCC Common Stock
will have no rights to convert their NewSCC Common Stock into
any other securities and will have no redemption provisions or
sinking fund provisions with respect to such shares.
SCC currently has authorized 100,000,000 shares of capital
stock: 90,000,000 shares of SCC Common Stock and 10,000,000
shares of preferred stock. No shares of preferred stock have
been issued or are outstanding. It is intended that NewSCC's
Restated Certificate of Incorporation will authorize NewSCC to
issue 250,000,000 shares of NewSCC Common Stock and 10,000,000
shares of preferred stock. The Restated Certificate of
Incorporation will authorize the issuance by NewSCC by action
of NewSCC's Board of Directors of preferred stock in series
having such voting powers, preferences, rights, limitations or
restrictions of all shares of a series, including, without
limitation, dividend rates, preemptive rights, voting rights,
redemption and sinking fund provisions, liquidation
preferences and the number of shares constituting each such
series, without any further vote or action by the
stockholders. In connection with the issuance of Rights
pursuant to the Rights Agreement, the Board of Directors of
NewSCC will authorize a series of preferred stock to be
reserved for issuance upon any exercise of the Rights in
accordance with the terms of the Rights Agreement.
The issuance of additional shares of NewSCC Common Stock or
shares of preferred stock could have the effect of delaying,
deferring or preventing a change in control or change in
management of NewSCC. The issuance of preferred stock also
could decrease the amount of earnings and assets available for
distribution to holders of NewSCC Common Stock or adversely
affect the rights and powers, including voting rights, of the
holders of NewSCC Common Stock.
The provisions of the Restated Certificate of Incorporation
and By-Laws described herein may, under certain circumstances,
make more difficult or discourage a takeover of NewSCC and the
removal of incumbent management. The classification of
directors will have the effect of making it more difficult for
stockholders to change the composition of the Board. At least
two annual meetings of stockholders, instead of one, will
generally be required to effect a change in a majority of the
Board. Such a delay may help ensure that NewSCC's directors,
if confronted by a holder attempting to force a proxy contest,
a tender or exchange offer, or an extraordinary corporate
transaction, would have sufficient time to review the proposal
as well as any available alternatives to the proposal and to
act in what they believe to be the best interest of the
stockholders. The classification provisions will apply to
every election of directors, however, regardless of whether a
change in the composition of the Board would be beneficial to
NewSCC and its stockholders and whether or not a majority of
NewSCC's stockholders believe that such a change would be
desirable.
The Rights Agreement will be entered into as of the
Effective Date pursuant to the terms of the Plan. See "--
Summary of the Rights Agreement."
The provisions of the Restated Certificate of Incorporation
and By-Laws discussed above are designed to assist NewSCC in
carrying out its long-term strategy for enhancement of
stockholder value and to encourage persons interested in the
business combinations to negotiate with NewSCC. NewSCC has no
present intention to adopt other antitakeover measures,
although it is possible that circumstances could arise which
could cause NewSCC to do so.
The Restated Certificate of Incorporation and the By-Laws of
NewSCC shall be in the form of Schedule 12.7 to the Joint
Plan.
2. Summary of the Rights Agreement
The Plan provides that, on the Effective Date, the Board of
Directors of NewSCC will declare a dividend distribution of
one right (a "Right") to purchase one unit (a "Unit")
consisting initially of one one-thousandth of a share of
Preferred Stock, Series A, par value $.001 per share (the
"Preferred Stock"), of NewSCC, at a purchase price per Unit to
be determined by the Board of Directors of NewSCC on the
Effective Date and consisting of a multiple of the then
current market price of the NewSCC Common Stock, subject to
adjustment (the "Purchase Price"), for each outstanding share
of NewSCC Common Stock, payable to stockholders of record at
the close of business on the Effective Date and payable with
respect to NewSCC Common Stock issued thereafter until the
Distribution Date (as defined below) or as may be otherwise
provided in the Rights Agreement. Except as set forth below,
each Right, when it becomes exercisable, entitles the
registered holder to purchase from NewSCC one Unit at the
Purchase Price. The description and terms of the Rights will
be set forth in the Rights Agreement.
Initially, the Rights will be attached to all certificates
representing shares of NewSCC Common Stock, and no separate
certificates evidencing the Rights ("Rights Certificates")
will be distributed. The Rights will separate from the NewSCC
Common Stock and a "Distribution Date" will occur upon the
earlier of (i) ten days (or such later date as the Board of
Directors shall determine) following public disclosure that a
person or group of affiliated or associated persons has become
an "Acquiring Person" (as defined below) or (ii) ten business
days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an "Acquiring
Person." Except as set forth below, an "Acquiring Person" is a
person or group of affiliated or associated persons who has
acquired beneficial ownership of 15% or more of the
outstanding shares of NewSCC Common Stock. The term "Acquiring
Person" excludes (i) NewSCC, (ii) any subsidiary of NewSCC,
(iii) any employee benefit plan of NewSCC or any subsidiary of
NewSCC or (iv) any person or entity organized, appointed or
established by NewSCC for or pursuant to the terms of any such
plan. In addition, because HNRC may, by virtue of its
acquisition of NewSCC Warrants pursuant to the Plan, be
deemed, for purposes of the Rights Agreement, a beneficial
owner of more than 15% of the NewSCC Common Stock to be
outstanding after giving effect to the issuance of NewSCC
Common Stock to holders of Allowed General Unsecured Claims as
of the Effective Date and of NewSCC Warrants to it, the Rights
Agreement will contain provisions to the effect that HNRC
would become an Acquiring Person only if its level of
beneficial ownership exceeded an amount approximating its
percentage of beneficial ownership as of the Effective Date.
Until the Distribution Date, (i) the Rights will be
evidenced by the NewSCC Common Stock certificates and will be
transferred with and only with such NewSCC Common Stock
certificates, (ii) NewSCC Common Stock certificates will
contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any
certificates for NewSCC Common Stock outstanding will also
constitute the transfer of the Rights associated with the
NewSCC Common Stock represented by such certificate. Pursuant
to the Rights Agreement, NewSCC reserves the right to require
prior to the occurrence of a Triggering Event (as defined
below) that, upon any exercise of Rights, a number of Rights
be exercised so that only whole shares of Preferred Stock will
be issued.
As soon as practicable after the occurrence of the
Distribution Date, Rights Certificates will be mailed to
holders of record of the NewSCC Common Stock as of the close
of business on the Distribution Date and, thereafter, the
separate Rights Certificates alone will represent the Rights.
Except as may be otherwise provided in the Rights Agreement,
only shares of NewSCC Common Stock issued prior to the
Distribution Date will be issued with Rights.
The Rights are not exercisable until the Distribution Date
and until the Rights are no longer redeemable. The Rights will
expire at the close of business on the tenth annual
anniversary of the Effective Date, unless extended or earlier
redeemed by NewSCC as described below.
In the event that a person becomes an Acquiring Person, each
holder of a Right will have the right to receive, upon
exercise of the Right after the Distribution Date and subject
to the provisions of the Rights Agreement, NewSCC Common Stock
(or, in certain circumstances, cash, property or other
securities of NewSCC) having a value equal to two times the
exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event set forth in this
paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and
void and nontransferable and any holder of any such right
(including any purported transferee or subsequent holder) will
be unable to exercise or transfer any such right.
In the event that, at any time following the date on which
there has been public disclosure that, or of facts indicating
that, a person has become an Acquiring Person (the "Stock
Acquisition Date"), (i) NewSCC is acquired in a merger or
other business combination transaction in which NewSCC is not
the surviving corporation, or (ii) 50% or more of NewSCC's
assets or earning power is sold, mortgaged or transferred,
each holder of a Right (except Rights which previously have
been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price
of the Right. The events set forth in this paragraph and in
the preceding paragraph are referred to as the "Triggering
Events."
The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend
on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are
granted certain rights or warrants to subscribe for Preferred
Stock or convertible securities at less than the current
market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular cash dividends) or
of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at
least 1% of the Purchase Price. No fractional Units will be
issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend and
liquidation rights, the value of the one one-thousandth
interest in a share of Preferred Stock purchasable upon
exercise of each Right should approximate the value of one
share of NewSCC Common Stock. Shares of Preferred Stock
purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to
a quarterly dividend payment of 1,000 times the dividend
declared per share of NewSCC Common Stock. In the event of
liquidation, each share of Preferred Stock will be entitled to
a $1 preference, and thereafter the holders of the shares of
Preferred Stock will be entitled to an aggregate payment of
1,000 times the aggregate payment made per share of NewSCC
Common Stock. Each share of Preferred Stock will have 1,000
votes, voting together with the shares of NewSCC Common Stock.
These rights are protected by customary antidilution
provisions.
At any time until ten days following the Stock Acquisition
Date, NewSCC may redeem the Rights in whole, but not in part,
at a price (the "Redemption Price") of $.001 per Right
(payable in cash, NewSCC Common Stock or other consideration
deemed appropriate by the Board of Directors) by resolution of
the Board of Directors (provided that following a Stock
Acquisition Date such resolution is approved by a majority of
the Continuing Directors and only if the Continuing Directors
constitute a majority of the directors then in office). A
"Continuing Director" is a member of the Board of Directors
who is not an Acquiring Person, an affiliate or associate of
an Acquiring Person or a representative or nominee of an
Acquiring Person. Immediately upon such action of the Board of
Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of NewSCC, including,
without limitation, the right to vote or to receive dividends.
While the distribution of the Rights will not be taxable to
stockholders or to NewSCC, stockholders may, depending upon
the circumstances, recognize taxable income in the event that
the Rights become exercisable for NewSCC Common Stock (or
other consideration) or for common stock of the acquiring
company as set forth above.
Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the
Rights Agreement may be amended by resolution of the Board of
Directors of NewSCC (provided that following a Stock
Acquisition Date such resolution is approved by a majority of
the Continuing Directors and only if the Continuing Directors
constitute a majority of the directors then in office) prior
to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by
resolution of the Board of Directors of NewSCC (provided that
following a Stock Acquisition Date such resolution is approved
by a majority of the Continuing Directors and only if the
Continuing Directors constitute a majority of the directors
then in office) in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders
of Rights (excluding the interests of any Acquiring Person or
its affiliates or associates), or to shorten or lengthen any
time period under the Rights Agreement; provided, however,
that no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not
redeemable.
The Rights will have certain anti-takeover effects. The
Rights will cause substantial dilution to a person or group
that attempts to acquire NewSCC without conditioning the offer
on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business
combination approved by each of the Board of Directors and the
Continuing Directors since the Board of Directors may (with
the concurrence of a majority of the Continuing Directors and
only if the Continuing Directors constitute a majority of the
directors then in office), at its option, at any time until
ten days (or such later date as may be determined by action of
the Board of Directors with the concurrence of a majority of
the Continuing Directors and only if the Continuing Directors
constitute a majority of the directors then in office)
following the Stock Acquisition Date redeem all but not less
than all the then outstanding Rights at the Redemption Price.
The foregoing summary description of the Rights does not
purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, the proposed form of which
is attached to the Plan as Schedule 1.69. As discussed above,
provisions will be added to such form, based on the amounts of
Allowed General Unsecured Claims and other information as of
the Effective Date, to reflect HNRC's beneficial ownership of
more than 15% of the NewSCC Common Stock.
3. Delaware Anti-Takeover Statute
NewSCC, as a Delaware corporation, will elect in its
Restated Certificate of Incorporation to be subject to section
203 of the Delaware General Corporation Law ("DGCL"). In
general, section 203 prohibits an "interested stockholder"
from engaging in a "business combination" for three years
following the time that such stockholder became an interested
stockholder, unless (i) the business combination, or the
transaction which resulted in such stockholder becoming an
interested stockholder, was approved by the board of directors
of the corporation before the other party to the business
combination or the party to such transaction became an
interested stockholder, (ii) upon consummation of the
transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are
also officers or held in employee stock plans in which the
employees do not have a confidential right to tender stock
held by the plan) or (iii) the business combination was
approved by the board of directors of the corporation and
ratified by holders of 66 2/3% of the voting stock which the
interested stockholder did not own. The three-year prohibition
also does not apply to certain business combinations proposed
by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested
stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the
corporation's directors.
The term "business combination" is defined generally to
include mergers or consolidations between a Delaware
corporation and an "interested stockholder," transactions with
an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and
transactions which increase an interested stockholder's
percentage of stock. The term "interested stockholder" is
defined generally, subject to a number of exceptions, as any
stockholder who becomes the beneficial owner of 15% or more of
a Delaware corporation's voting stock.
4. Limitation of Liability; Indemnification of Directors,
Officers and Others
a. Charter Provisions
The Restated Certificate of Incorporation will limit
personal liability of NewSCC's directors to the full extent
permitted by Delaware law. Section 102(b)(7) of the DGCL
enables a Delaware corporation to include in its certificate
of incorporation a provision eliminating or limiting the
personal liability of a director to the corporation or its
stockholders for monetary damages for breaches of fiduciary
duties as a director, but no such provision may eliminate or
limit the liability of a director (i) for any breach of the
duty of loyalty, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under section 174 of the GDCL (dealing with
illegal redemptions and stock repurchases) or (iv) for any
transaction from which the director derived an improper
personal benefit.
The Restated Certificate of Incorporation and By-Laws will
also provide for the indemnification of persons to the fullest
extent permitted by Delaware law. Section 145 of the DGCL
provides that a corporation (a) must indemnify its directors,
officers, employees and agents for all expenses of litigation
when they are successful on the merits or otherwise; (b) may
indemnify such persons for the expenses, judgments, fines and
amounts paid in settlement of litigation (other than a
derivative suit) even if they are not successful on the
merits, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of criminal
proceedings, have no reason to believe that their conduct was
unlawful); and (c) may indemnify such persons for the expenses
of a derivative suit even if they are not successful on the
merits if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best
interests of the corporation, provided that no such
indemnification may be made on behalf of a person adjudged to
be liable in a derivative suit, unless the Delaware Chancery
Court determines that, despite such adjudication but in view
of all of the circumstances, such person is entitled to
indemnification. In any such case, indemnification may be made
only upon determination by (i) a majority of the disinterested
directors, (ii) independent legal counsel or (iii) the
shareholders that indemnification is proper because the
applicable standard of conduct was met. The advancement of
litigation expenses to a director or officer is also
authorized upon receipt by the board of directors of an
undertaking to repay such amounts if it is ultimately
determined that such person is not entitled to be indemnified
for them.
The Restated Certificate of Incorporation and By-Laws also
will provide for indemnification to the fullest extent
permitted by the DGCL for any person made or threatened to be
made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or
officer of NewSCC or serves or served any other enterprise as
a director or officer at the request of NewSCC. Furthermore,
NewSCC may enter into agreements with any person which provide
for indemnification greater or different than provided for in
the Restated Certificate of Incorporation.
b. Director and Officer Insurance
Section 145 of the DGCL also permits a corporation to
purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or
incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the
power to indemnify him against such liability. The Restated
Certificate of Incorporation and By-Laws will authorize NewSCC
to maintain insurance protecting itself, its directors,
offices, employees and agents against certain losses arising
out of actual or threatened actions, suits or proceedings to
which such persons may be made or threatened to be made
parties. However, NewSCC and the directors or officers cannot
be sure that such insurance coverage will continue to be
available in the future or, if available, that it will not be
unreasonably expensive to purchase and maintain.
C. Registrar and Transfer Agent
Chase Mellon Shareholder Services LLC is the registrar and
transfer agent for SCC Common Stock. The registrar and
transfer agent for the NewSCC Common Stock will be determined
prior to the Confirmation Date and SCC expects that such party
will also serve as registrar and warrant agent for the NewSCC
Warrants and as rights agent for the Rights pursuant to the
terms of the Rights Agreement. The Debtors will not select a
registrar and transfer agent for the NewSCC Common Stock that
is a holder of any indebtedness of the Debtors or that is an
affiliate of any such holder.
ARTICLE 7
SECURITIES LAW CONSIDERATIONS
Section 1145 of the Bankruptcy Code provides that federal
and state securities registration requirements do not apply to
the offer or sale under a plan of reorganization of securities
of a debtor or of a successor to a debtor under such a plan to
holders of claims or interests wholly or principally in
exchange for those claims or interests. The ability of the
recipients of such securities to resell such securities,
however, is subject to certain restrictions under such
securities laws. Set forth below is a discussion of the
securities law considerations regarding the offer and issuance
of such securities under the Plan and subsequent transfers
thereof.
A. Initial Issuance of NewSCC Common Stock, NewSCC Warrants
and
NewSCC Warrant Shares
Section 1145 of the Bankruptcy Code provides that the
securities registration and qualification requirements of
federal and state securities laws do not apply to the offer or
sale of stock or other securities by a debtor if three
principal requirements are satisfied: (i) the securities must
be issued under a plan of reorganization by the debtor or a
successor to the debtor under the plan or by an affiliate
participating in the joint plan with the debtor; (ii) the
recipients of the securities must hold a claim against the
debtor, an interest in the debtor or a claim for an
administrative expense against the debtor or such affiliate;
and (iii) the securities must be offered entirely in exchange
for the recipient's claim against or interest in the debtor or
such affiliate, or principally in such exchange and partly for
cash or property. Section 1145 also provides that such
securities registration and qualification requirements do not
apply to the offer of common stock through any warrant that
was issued in the manner specified above or the sale of common
stock upon the exercise of such a warrant. Although the
Debtors believe that the issuance under the Plan of (a) NewSCC
Common Stock to the holders of the Class 8 Allowed General
Unsecured Claims, (b) NewSCC Warrants to Class 10 Equity
Interests and (c) the NewSCC Warrant Shares underlying the
NewSCC Warrants each satisfies the requirements of section
1145(a) of the Bankruptcy Code and is, therefore, exempt from
registration under federal and state securities laws, under
certain circumstances described below subsequent transfers of
such securities may be subject to registration requirements
under such securities laws.
B. Subsequent Transfers of NewSCC Common Stock, NewSCC
Warrants and NewSCC Warrant Shares Under Federal Securities
Laws
NewSCC Common Stock, NewSCC Warrants and NewSCC Warrant
Shares issued pursuant to the Plan will not be "restricted
securities" in the hands of holders of Class 8 Allowed General
Unsecured Claims and Class 10 Equity Interests, respectively,
subject to the restrictions described in "NewSCC Securities;
Corporate Governance -- Description of NewSCC Securities --
Description of NewSCC Common Stock -- Restriction on Transfer
of Shares" and "NewSCC Securities; Corporate Governance --
Description of NewSCC Securities -- The NewSCC Warrants"
above, and may be freely transferred by most holders of Class
8 Allowed General Unsecured Claims and Class 10 Equity
Interests, respectively, under the Securities Act of 1933, as
amended (the "Securities Act"), subject to such tax related
restrictions on transfer. Accordingly, all resales and
subsequent transactions in NewSCC Common Stock, NewSCC
Warrants and NewSCC Warrant Shares will be exempt from
registration under the Securities Act pursuant to section 4(1)
of the Securities Act, unless the holder thereof is an
"underwriter" with respect to such securities. Section 1145(b)
of the Bankruptcy Code defines four types of "underwriters":
(1) persons who purchase a claim against, interest in or
claim for administrative expense in the case concerning,
the debtor, with a view to distribution of any security
received or to be received in exchange for such claim or
interest;
(2) persons who offer to sell securities offered or sold
under the plan for holders of such securities;
(3) persons who offer to buy securities offered or sold
under a plan, if such offer to buy is (a) with a view to
distributing such securities and (b) made under an
agreement made in connection with the plan; or
(4) any person who is an "issuer" (as defined in section
2(11) of the Securities Act) with respect to such
securities.
Under section 2(11) of the Securities Act, an "issuer"
includes any person directly or indirectly controlling or
controlled by the debtor, as the case may be, or any person
under direct or indirect common control with the debtor.
Whether a person is an "issuer," and therefore an
"underwriter," for purposes of section 1145(b) of the
Bankruptcy Code depends on a number of factors. These include
(i) the person's equity interest in a company, (ii) the
distribution and concentration of other equity interests in
the company, (iii) whether the person is a director or an
officer of the company, (iv) whether the person, either alone
or acting in concert with others, has a contractual or other
relationship giving that person power over management policies
and decisions of the company, and (v) whether the person
actually has such power notwithstanding the formal indicia of
control. A director or an officer of a company may be deemed a
controlling person, particularly if his position is coupled
with ownership of a significant percentage of voting stock. In
addition, the legislative history of section 1145 of the
Bankruptcy Code suggests that a creditor with at least ten
percent (10%) of the securities of a debtor could be deemed a
controlling person.
To the extent that persons deemed "underwriters" receive
NewSCC Common Stock, NewSCC Warrants or NewSCC Warrant Shares
pursuant to the Plan, resales by such persons would not be
exempted by section 1145(a) of the Bankruptcy Code from
registration under the Securities Act or other applicable
laws. Persons deemed to be "underwriters," however, may be
able to sell such securities without registration subject to
the registration exemption provided by Rule 144 under the
Securities Act, which permits "affiliates" of the issuer to
publicly sell within any three-month period a number of shares
that does not exceed the greater of one percent (1%) of the
outstanding shares of common stock or the average weekly
trading volume in common stock during the four calendar weeks
preceding the date on which notice of such sale is filed
pursuant to Rule 144, subject to the satisfaction of certain
other requirements of Rule 144 regarding the manner of sale,
notice requirements, holding period requirements and the
availability of current public information regarding the
issuer.
Whether any particular person would be deemed to be an
"underwriter" with respect to any security to be issued
pursuant to the Plan would depend on various facts and
circumstances applicable to that person. Accordingly, the
Debtors express no view as to whether any person would be an
"underwriter" with respect to any security to be issued
pursuant to the Plan. See "Material Uncertainties and Risk
Factors -- Restrictions on Resale of NewSCC Common Stock,
NewSCC Warrants and NewSCC Warrant Shares" below.
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF
WHETHER A PARTICULAR PERSON MAY BE AN "UNDERWRITER," THE
DEBTORS MAKE NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY
PERSON TO TRADE IN NEWSCC COMMON STOCK OR NEWSCC WARRANTS TO
BE TRANSFERRED PURSUANT TO THE PLAN. THE DEBTORS RECOM- MEND
THAT HOLDERS OF CLASS 8 ALLOWED GENERAL UNSECURED CLAIMS AND
CLASS 10 EQUITY INTERESTS CONSULT THEIR OWN COUNSEL CONCERNING
WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS ANY SUCH COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
THE DEBTORS HAVE NOT SOUGHT A "NO-ACTION" LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION WITH RESPECT TO ANY MATTER DISCUSSED HEREIN.
ARTICLE 8
MATERIAL UNCERTAINTIES AND RISK FACTORS
HOLDERS OF CLAIMS AGAINST THE DEBTORS SHOULD READ AND
CAREFULLY CONSIDER THE RISK FACTORS SET FORTH BELOW, AS WELL
AS OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT
(AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR
INCORPORATED BY REFERENCE HEREIN). THESE RISK FACTORS SHOULD
NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS
INVOLVED IN CONNECTION WITH THE JOINT PLAN AND ITS
IMPLEMENTATION.
A. Certain Disputed Claims
The recoveries estimated for the holders of Claims are based
on assumptions regarding the amount of such claims. As
discussed in "Introduction -- Overview of the Debtors and the
Plan -- Sources of Recovery Under the Plan", the amount of
Unsecured Class Cash being paid to creditors is a set amount,
regardless of the level of Allowed Claims. The Debtors are and
will be diligently working to resolve all filed Claims and to
ascertain the aggregate level of liabilities, both fixed and
contingent, that must be addressed under the Plan. While the
Debtors anticipate that the final allowance of Claims will be
within the range discussed, there is no assurance that the
amount of Allowed Claims will not be materially different from
the amounts estimated. If the amount of Allowed Claims in
Class 8 materially exceeds the estimates contained herein, the
recoveries by holders of Allowed General Unsecured Claims may
be materially lower than the range discussed.
Additionally, the feasibility of the Plan is predicated upon
the levels of Administrative and Priority Claims not being
materially in excess of the amounts estimated herein. If such
claims are substantially in excess of the estimated amounts,
the Debtors will not have enough Cash to make all payments
required under the Plan and therefore the Plan will not become
effective. Certain former employees of the Debtors have
asserted priority claims which, if Allowed, would cause a
reclassification of $4.5 million of General Unsecured Claims
as Priority Wage Claims. See "Background Information Regarding
Debtors -- Significant Events During Chapter 11 Case --
Employee Litigation Regarding Severance Benefits." While the
Debtors believe that they will be successful in challenging
such claims of such former employees, if such former employees
are successful in asserting their claims the Debtors will not
have enough Cash to allow the Plan to become effective.
B. Conditions to Confirmation and Effective Date
As more fully discussed herein, if certain conditions
precedent to the Effective Date have not been satisfied, the
Debtors shall be deemed to have withdrawn the Plan and the
Confirmation Order shall be vacated.
In order for the Plan to become effective, a new credit
agreement, pursuant to which NewSCC shall have obtained access
to not less than $10 million of working capital, must be in
effect. The Debtors believe that the applicable conditions
will be met and that the Effective Date will occur, although
NewSCC's ability to gain access to such additional working
capital cannot be assured. If the Debtors are not able to
enter into such new credit agreement, the Plan will have to be
withdrawn and the Confirmation Order shall be vacated.
The Plan is also predicated upon the substantive
consolidation of all of the Debtors' estates. See "The Plan of
Reorganization -- Other Provisions of Plan -- Substantive
Consolidation." While the Debtors believe, as more fully
discussed herein, that they have met the applicable standards
for substantive consolidation to be granted, there is no
assurance that substantive consolidation will be granted. If
the Bankruptcy Court does not grant the Debtors' motion for
substantive consolidation, the Plan will be withdrawn.
C. Certain Tax Matters
Implementation of the Plan will have material federal income
tax consequences to the Debtors and holders of Claims and
Equity Interests. See "Certain Federal Income Tax Consequences
of the Joint Plan" above for a discussion of such tax
consequences.
D. Lack of Trading Market for NewSCC Common Stock and NewSCC
Warrants
No assurance can be given as to the liquidity of the market
for the NewSCC Common Stock or the NewSCC Warrants or the
price at which any sales of such securities may occur. At the
close of business on May 8, 1996 SCC had 30,250,000 shares of
SCC Common Stock issued and outstanding. On May 30, 1996, the
NYSE announced that trading in the Common Stock of SCC would
be suspended immediately. The NYSE announcement also indicated
that following the suspension of trading, application would be
made to the Securities and Exchange Commission to delist the
issue. The NYSE made such application on July 23, 1996, which
application was granted, and the Common Stock of SCC was
struck from listing and registration on the NYSE on August 6,
1996.
Each of the NYSE, the AMEX and the NASDAQ-NMS has certain
listing criteria applicable to listed or quoted companies,
including financial criteria and minimum requirements as to
the number of holders of listed or quoted securities. NewSCC
may not meet such criteria or minimum requirements, but in
such event would seek to obtain exemption or other relief from
the relevant exchange or the NASDAQ-NMS so as to have the
NewSCC Common Stock listed on the NYSE or the AMEX, or quoted
on the NASDAQ-NMS, prior to the Effective Date. However, SCC
has no reason to believe that the NYSE, the AMEX, or the
NASDAQ-NMS, as the case may be, will necessarily grant any
such exemption or relief, and therefore there can be no
assurance that shares of NewSCC Common Stock will be listed on
any national exchange or quoted on any national quotation
system. In the event NewSCC is unable to list the NewSCC
Common Stock with any national exchange or quotation system,
there would be reduced liquidity for the holders of such
securities which would have a material adverse effect on such
holders. NewSCC does not currently intend to either list the
NewSCC Warrants on any national stock exchange or include the
NewSCC Warrants on any national quotation system.
No precise predictions can be made of the effect, if any,
that market sales or the availability of shares for sale will
have on the market prices of the NewSCC Common Stock or NewSCC
Warrants prevailing from time to time. Nevertheless, sales of
substantial amounts of NewSCC Common Stock or NewSCC Warrants
in the public market could adversely affect the respective
prevailing market prices of NewSCC Common Stock and NewSCC
Warrants.
E. Restrictions on Resale of NewSCC Common Stock, NewSCC
Warrants and NewSCC Warrant Shares
Shares of NewSCC Common Stock, the NewSCC Warrants and the
NewSCC Warrant Shares will be issued pursuant to the Plan
without registration under the Securities Act and without
qualification or registration under state securities laws,
pursuant to exemptions from such registration and
qualification contained in section 1145(a) of the Bankruptcy
Code. With respect to persons deemed to be "underwriters" who
receive NewSCC Common Stock, NewSCC Warrants or NewSCC Warrant
Shares pursuant to the Plan, these Bankruptcy Code exemptions
apply only to the distribution of such securities under the
Plan and do not apply to any subsequent sale, exchange,
transfer, or other disposition of NewSCC Common Stock, NewSCC
Warrants or NewSCC Warrant Shares or any interest therein by
such persons. Therefore, subsequent sales, exchanges,
transfers or other dispositions of NewSCC Common Stock, NewSCC
Warrants or NewSCC Warrant Shares or any interest therein by
such "underwriters" would not be exempted by section 1145 of
the Bankruptcy Code from registration under the Securities Act
or state securities laws.
Any person (or group of persons who act in concert) who
receives a substantial number of shares of NewSCC Common
Stock, NewSCC Warrants or NewSCC Warrant Shares pursuant to
the Plan may be deemed an "underwriter." Absent registration
or the availability of another exemption therefrom, persons
deemed to be underwriters would be subject to the resale
restrictions imposed by Rule 144 under the Securities Act,
which would only allow persons deemed to be underwriters to
sell, exchange, transfer or otherwise dispose of certain
specified limited quantities of such securities, and only
subject to the compliance with all other requirements of Rule
144.
Additionally, such shares of NewSCC Common Stock, NewSCC
Warrants and NewSCC Warrant Shares may not be sold, exchanged,
transferred or otherwise disposed of without registration or
qualification under state securities laws unless specific
exemptions from such registration or qualification
requirements are available with respect to such sale,
exchange, transfer or other disposition.
F. Restrictions on Dividends
It is not anticipated that NewSCC will pay any dividends on
NewSCC Common Stock in the foreseeable future. It is likely
that the post-Confirmation financing will prohibit payment of
dividends with respect to NewSCC Common Stock other than the
distribution of Rights pursuant to the Rights Agreement.
G. Risks Associated With NewSCC Warrants
The NewSCC Warrants are speculative securities. Under their
terms, the NewSCC Warrants are exercisable at a specified
exercise price during the period between 9:00 a.m. Eastern
Time on the date six (6) months after the Effective Date and
5:00 p.m. Eastern Time on the date two (2) years after the
Effective Date. There can be no assurance that the market
value of the NewSCC Common Stock will exceed the exercise
price of the NewSCC Warrants at any time during such exercise
period and prior to the expiration of the NewSCC Warrants. The
NewSCC Warrants will have no voting rights and no rights to
share in dividends, if any, paid with respect to NewSCC Common
Stock and would have no rights on liquidation of NewSCC.
NewSCC does not currently intend to either list the NewSCC
Warrants on any national stock exchange or include the NewSCC
Warrants on any national quotation system. There can be no
assurance that the NewSCC Warrants or the NewSCC Warrant
Shares will have access to a liquid trading market.
H. New Products and Business Strategies
The success of NewSCC as a going concern post-Confirmation
will depend in large part upon NewSCC's ability to source new
products from outside manufacturers and become a profitable
vendor of technologically advanced office products
manufactured abroad. See "Introduction -- Overview of the
Debtors and the Plan -- New Products, Manufacturing and
Marketing Strategies" above. There can be no assurance that
NewSCC will be able to source such new products, however, and
NewSCC's inability to secure such new products for sale in its
existing distribution network may adversely affect the ability
of NewSCC to achieve its projected financial results.
I. Working Capital
NewSCC will require approximately $8.0 million of working
capital in its first fiscal year which has to be provided by
cash on hand (of which approximately $3.1 million will be on
hand at the Effective Date), the balance of which must be
provided by bank loans, asset sales, equity infusions or some
other source to meet such working capital need.
J. Competition
The home and office information technology industry is
highly competitive, and the factors affecting competition are
subject to rapid change. See "Background Information Regarding
Debtors -- Description of SCC -- SCC's Operations --
Competition" above. NewSCC will continue SCC's manufacturing,
sales and distribution business specializing in typewriters
and PWPs in addition to attempting to source new products from
outside manufacturers. See "Introduction -- Overview of the
Debtors and the Plan -- New Products, Manufacturing and
Marketing Strategies" above. NewSCC will face significant
competition from many companies with assets and resources
which far exceed NewSCC's. Consequently, no assurance can be
given that NewSCC's products will remain competitive, even
with the anticipated introduction of an expanded product line.
K. Management
NewSCC's ability to be competitive will depend, in part, on
its ability to attract and retain highly qualified personnel,
including a new President and Chief Executive Officer and a
qualified executive to become Vice President, Marketing, a
newly created position. See "Background Information Regarding
Debtors -- Description of SCC -- SCC's Operations -- Officers
and Directors" above. Retention of such personnel will depend,
at least in part, on NewSCC's ability to provide such
personnel with competitive compensation arrangements. There
can be no assurance, however, that NewSCC will be able to
secure the continued services of highly qualified personnel
currently employed by SCC or that NewSCC will be able to
locate replacements for anticipated and unanticipated
departures of senior management both prior and subsequent to
the Effective Date of the Plan.
Dated: Wilmington, Delaware
September 6, 1996
Respectfully submitted,
SMITH CORONA CORPORATION
By: /s/ Ronald F. Stengel
_______________________________________________________
Name: Ronald F. Stengel
Title: President and CEO
SCM OFFICE SUPPLIES, INC.
By: /s/ John A. Piontkowski
______________________________________________________________
Name: John A. Piontkowski
Title: President
SCC LI CORP.
By: /s/ John A. Piontkowski
_______________________________________________________________
Name: John A. Piontkowski
Title: President
HULSE MANUFACTURING COMPANY
By: /s/ John A. Piontkowski
______________________________________________________________
Name: John A. Piontkowski
Title: President
EXHIBIT A
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
____________________________________________________________
In re
SMITH CORONA CORPORATION,
SCM OFFICE SUPPLIES, INC.,
Chapter 11
SCC LI CORP. and
Case No. 95-788 (HSB)
HULSE MANUFACTURING COMPANY,
Jointly Administered
Debtors.
_________________________________________________________________
DEBTORS' THIRD AMENDED SECOND JOINT
PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE
James L. Patton, Jr.
Laura Davis Jones
YOUNG, CONAWAY, STARGATT &
TAYLOR
P.O. Box 391
11th Floor, Rodney Square North
Wilmington, Delaware 19801
(312) 571-6600
Counsel to the Debtors
and Debtors-In-Possession
Richard L. Epling
Robin L. Spear
WINTHROP, STIMSON, PUTNAM &
ROBERTS
One Battery Park Plaza
New York, New York 10004
(212) 858-1000
Special Counsel to the Debtors
and Debtors-In-Possession
Dated: September 6, 1996
TABLE OF CONTENTS
Page
ARTICLE 1.
DEFINITIONS
1.1. Administrative Bar Date A-1
1.2. Administrative Claim A-1
1.3. Allowed Claim A-1
1.4. Assumed Agreement A-1
1.5. Avoidance Action A-1
1.6. Bankruptcy Code A-2
1.7. Bankruptcy Court A-2
1.8. Bankruptcy Rules A-2
1.9. Bank Prepetition Agreements A-2
1.10. Banks A-2
1.11. Business Day A-2
1.12. Cash A-2
1.13. CERCLA A-2
1.14. Chapter 11 Case A-2
1.15. Chemical A-2
1.16. Chemical DIP Loan Agreement A-2
1.17. Claim A-2
1.18. Common Stock A-2
1.19. Confirmation Date A-2
1.20. Confirmation Order A-2
1.21. Contingent Claim A-2
1.22. Convenience Class Claim A-2
1.23. Creditor A-2
1.24. Creditors' Committee A-3
1.25. Debtors A-3
1.26. Disputed Claim A-3
1.27. Distribution Agent A-3
1.28. Distribution Agent Charges A-3
1.29. Distribution Date A-3
1.30. Effective Date A-3
1.31. Environmental Claim A-3
1.32. Environmental, Health and Safety Laws A-3
1.33. Equity Interest A-4
1.34. ERISA A-4
1.35. Excess Reclamation Funds A-4
1.36. Final Distribution Date A-4
1.37. Final Order A-4
1.38. General Unsecured Claim A-4
1.39. Hulse A-4
1.40. Hulse Common Stock A-4
1.41. IRS A-4
1.42. Joint Plan or Plan A-4
1.43. Melville Site A-4
1.44. Net Avoidance Action Proceeds A-4
1.45. NewSCC A-5
1.46. NewSCC Common Stock A-5
1.47. NewSCC Credit Agreement A-5
1.48. NewSCC Warrants A-5
1.49. NewSCC Warrant Agreement A-5
1.50. Non-Debtor Subsidiaries A-5
1.51. Old SCC Stock Option Plans A-5
1.52. OSI A-5
1.53. OSI Common Stock A-5
1.54. PBGC A-5
1.55. Pension Plan Claim A-5
1.56. Person A-5
1.57. Petition Date A-5
1.58. Priority Tax Claim A-5
1.59. Priority Tax Note A-5
1.60. Priority Wage Claim A-6
1.61. Pro Rata Share A-6
1.62. Reclamation Claim A-6
1.63. Registered Holder A-6
1.64. Rejected Agreement A-6
1.65. Rejected Agreement Offer A-6
1.66. Reserved Claims A-6
1.67. Retiree Benefits A-6
1.68. Retiree Health and Insurance Claim A-6
1.69. Rights Agreement A-6
1.70. Rosen Site A-6
1.71. SCC A-6
1.72. SCC Common Stock A-6
1.73. SCC Health and Welfare Plans A-6
1.74. SCC Retirement Plans A-6
1.75. SCCLI A-6
1.76. SCCLI Common Stock A-7
1.77. Schedules A-7
1.78. Secured Claim A-7
1.79. Stockholder Actions A-7
1.80. Superpriority Claims A-7
1.81. Taxes A-7
1.82. Trust Fund Tax Claim A-7
1.83. Unsecured Claim A-7
1.84. Unsecured Class Cash A-7
1.85. Unsecured Deficiency Claim A-7
1.86. Warrant Agent A-7
1.87. Warranty and Contract Claim A-7
1.88. Other Definitions A-7
ARTICLE 2.
SUBSTANTIVE CONSOLIDATION OF THE DEBTORS
2.1. Substantive Consolidation A-8
ARTICLE 3.
CERTAIN PROVISIONS RELATING TO
PAYMENT OF ADMINISTRATIVE CLAIMS
3.1. Administrative Claims A-8
ARTICLE 4.
PROVISIONS FOR PAYMENT OF PRIORITY
TAX CLAIMS AND TRUST FUND TAX CLAIMS
4.1. Manner of Payment A-8
4.2. Effect A-9
ARTICLE 5.
DESIGNATION OF AND PROVISIONS FOR
TREATMENT OF CLAIMS AND EQUITY INTERESTS
5.1. Claims under the Chemical DIP Loan Agreement A-9
5.2. Allowed Administrative Claims A-9
5.3. Allowed Priority Tax Claims A-9
5.4. Class 1 -- Allowed Priority Wage Claims A-9
5.5. Class 2 -- Allowed Secured Claims A-9
5.6. Class 3 -- Allowed Environmental Claims A-10
5.7. Class 4 -- Pension Plan Claims A-10
5.8. Class 5 -- Retiree Health and Insurance Claims A-10
5.9. Class 6 -- Warranty and Contract Claims A-10
5.10. Class 7 -- Allowed Reclamation Claims A-10
5.11. Class 8 -- Allowed General Unsecured Claims A-10
5.12. Class 9 -- Allowed Convenience Class Claims A-10
5.13. Class 10 -- SCC Common Stock A-10
5.14. Class 11 -- Other Equity Interests A-10
ARTICLE 6.
NEWSCC COMMON STOCK
6.1. NewSCC Common Stock A-11
6.2. Employee Stock Incentive Plan A-11
6.3. Senior Officer Stock A-11
ARTICLE 7.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
7.1. Assumption of Certain Executory Contracts and Unexpired
Leases A-11
7.2. Rejection of Certain Executory Contracts and Unexpired
Leases A-12
7.3. Claims Based on Rejection of Executory Contracts or
Unexpired Leases A-12
ARTICLE 8.
IDENTIFICATION OF CLASSES OF CLAIMS NOT IMPAIRED
BY THIS JOINT PLAN AND CLASSES OF CLAIMS AND EQUITY
INTERESTS DEEMED TO HAVE REJECTED THIS JOINT PLAN
8.1. Unimpaired and Unclassified Classes A-12
8.2. Classes Deemed Not to Have Accepted this Joint PlanA-12
ARTICLE 9.
ACCEPTANCE OR REJECTION OF THIS JOINT PLAN;
EFFECT OF REJECTION BY ONE OR MORE CLASSES
9.1. Impaired Classes to Vote A-13
9.2. Acceptance By Class of Creditors A-13
9.3. Cramdown A-13
ARTICLE 10.
PROVISIONS COVERING DISTRIBUTIONS AND PAYMENTS
10.1. Making of Distributions and Payments A-13
10.2. Distributions by the Distribution Agent A-13
10.3. Delivery of Distributions; Unclaimed Property A-15
10.4. Method of Payment A-16
10.5. Payment Dates A-16
10.6. Rounding A-16
ARTICLE 11.
PROCEDURES FOR RESOLVING
DISPUTED CLAIMS AND AVOIDANCE ACTIONS
11.1. Filing of Objections to Claims A-16
11.2. Prosecutions of Objections to Claims A-16
11.3. Payment or Distribution Upon Resolution of
Disputed Claims A-17
11.4. Avoidance Actions A-17
ARTICLE 12.
MEANS FOR IMPLEMENTATION OF THIS JOINT PLAN
12.1. Conveyance Free and Clear A-17
12.2. Certain Mergers A-17
12.3. Release of Certain Claims and Actions A-17
12.4. Certain Benefit Plans and Programs A-18
12.5. Rights Agreement A-19
12.6. Exemption from Certain Taxes A-19
12.7. Certificate of Incorporation and By-Laws A-19
12.8. Directors and Officers A-19
12.9. Revesting of Assets; No Further Supervision A-19
12.10. Authority to Implement A-19
12.11. No Injunctive Relief A-19
ARTICLE 13.
CONDITIONS PRECEDENT TO CONFIRMATION AND THE EFFECTIVE DATE
13.1. Conditions to Confirmation of this Joint Plan A-19
13.2. Effectiveness of this Joint Plan A-20
ARTICLE 14.
MISCELLANEOUS PROVISIONS
14.1. Modification of Payment Terms A-20
14.2. Cancellation of Securities A-20
14.3. Discharge of Debtors A-20
14.4. Post-Effective Date Creditors' Committee A-21
14.5. Filing of Additional Documents A-22
14.6. Compliance with Tax Requirements A-22
14.7. Setoffs A-22
14.8. Retiree Benefits; Benefit Plans A-22
14.9. Payment of Certain Expenses by NewSCC A-22
14.10. Section Headings A-22
14.11. Waiver A-22
ARTICLE 15.
PROVISIONS FOR EXECUTION AND SUPERVISION OF THIS JOINT PLAN
15.1. Retention of Jurisdiction A-23
15.2. Amendment of Joint Plan A-24
15.3. Revocation of Joint Plan A-24
15.4. Implementation A-24
LIST OF SCHEDULES
Schedule 1.4 Assumed Agreements
Schedule 1.49 Form of NewSCC Warrant Agreement
Schedule 1.50 Existing Non-Debtor Subsidiaries of SCC
Schedule 1.59 Form of Priority Tax Note
Schedule 1.69 Form of Rights Agreement
Schedule 1.73 SCC Health and Welfare Plans
Schedule 1.74 SCC Retirement Plans
Schedule 5.5 Subclasses of Secured Claims
Schedule 7.1(c) Cure Payments
Schedule 12.7 Form of Amended and Restated Certificate of
Incorporation and By-Laws
of NewSCC
DEBTORS' THIRD AMENDED SECOND JOINT
PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE
SMITH CORONA CORPORATION, SCM OFFICE SUPPLIES, INC., SCC LI
CORP. and HULSE MANUFACTURING COMPANY, the Debtors and
Debtors-in-Possession in the above-captioned,
jointly-administered
Chapter 11 Case, hereby propose the following Third Amended
Second Joint Plan of Reorganization pursuant to section 1121(a),
title 11, United States Code.
ARTICLE 1.
DEFINITIONS
As used in this Joint Plan, the following terms shall have the
respective meanings specified below:
1.1. Administrative Bar Date: Other than with respect to
Administrative Claims of professionals retained pursuant to
sections 327 or 328 of the Bankruptcy Code, fees and expenses of
ordinary course professionals, expenses of members of the
Creditors' Committee, Claims under the Chemical DIP Loan
Agreement and Claims under clauses (viii) and (ix) of the
definition of Administrative Claim below, with respect to
Administrative Claims incurred (a) prior to August 16, 1996,
October 18, 1996 or such other date as determined by the
Bankruptcy Court and (b) on or after August 16, 1996, such date,
if any, as determined by the Bankruptcy Court.
1.2. Administrative Claim: Any Allowed Superpriority Claim and
any cost or expense of administration of the Chapter 11 Case (a)
required to be asserted by filing a proof of claim with the
Bankruptcy Court prior to the Administrative Bar Date or (b)
Allowed under section 503(b) of the Bankruptcy Code, except to
the extent the holder of such Claim agrees to be treated
differently. Administrative Claims include, but are not limited
to, (i) any actual and necessary expenses of preserving the
estate of any Debtor incurred during the Chapter 11 Case, (ii)
any actual and necessary expenses of operating the business of
any Debtor incurred during the Chapter 11 Case, (iii) any
indebtedness or obligations incurred or assumed by any Debtor in
connection with the conduct of the business as a
debtor-in-possession or for the acquisition or lease of property
by, or for
the rendition of services to, any Debtor as a
debtor-in-possession, (iv) obligations pursuant to executory
contracts
assumed by a Debtor pursuant to an order of the Bankruptcy Court,
(v) all Claims as provided by section 507(b) of the Bankruptcy
Code, (vi) all allowances of compensation or reimbursement of
expenses to the extent allowed by the Bankruptcy Court, (vii) any
Allowed Contingent Claims which are granted administrative
priority status by Final Order of the Bankruptcy Court, (viii)
all fees payable and unpaid under section 1930 of title 28,
United States Code and (ix) any fees or charges assessed against
the estates of the Debtors under Chapter 123, title 28, United
States Code.
1.3. Allowed Claim: Any Claim against a Debtor (i) proof of
which was filed on or before the date designated by the
Bankruptcy Court as the last date for filing proofs of claims
against the Debtors or, if no proof of claim is filed, which has
been or hereafter is listed by the Debtors in their Schedules as
liquidated in amount and not disputed or contingent and, in
either case, a Claim as to which no objection to the allowance
thereof has been interposed within the applicable period of
limitation fixed by this Joint Plan, the Bankruptcy Code, the
Bankruptcy Rules or the Bankruptcy Court or (ii) in favor of any
Person arising from a judgment against such Person in any
Avoidance Action (if the effect of such judgment gives such
Person an Allowed General Unsecured Claim). A Disputed Claim
shall be an Allowed Claim if, and only to the extent that, such
Disputed Claim has been Allowed by a Final Order. The term
"Allowed," when used to modify a reference in this Joint Plan to
any Claim or class of Claims, shall mean a Claim (or any Claim in
any such class) that is allowed, e.g., an Allowed Secured Claim
is a Claim that has been Allowed to the extent of the value, as
determined by the Bankruptcy Court pursuant to section 506(a) of
the Bankruptcy Code, of any interest in property of the estate of
a Debtor securing such Claim. Unless otherwise specified in this
Joint Plan or in the Final Order of the Bankruptcy Court allowing
such Claim, "Allowed Claim" shall not include interest on the
amount of such Claim from and after the Petition Date. Claims
under the Chemical DIP Loan Agreement are recognized as Allowed
Superpriority Claims.
1.4. Assumed Agreement: Each executory contract and unexpired
lease of a Debtor that is listed on Schedule 1.4 hereof.
1.5. Avoidance Action: Any action to avoid a transfer of
property or to recover property pursuant to sec.sec. 542, 543,
544, 545, 546, 547, 548, 549 or 550 of the Bankruptcy Code.
1.6. Bankruptcy Code: The Bankruptcy Reform Act of 1978, as
amended, title 11, United States Code.
1.7. Bankruptcy Court: The unit of the United States District
Court for the District of Delaware having jurisdiction over the
Chapter 11 Case.
1.8. Bankruptcy Rules: The Federal Rules of Bankruptcy
Procedure and the local rules of the Bankruptcy Court, as
applicable to the Chapter 11 Case.
1.9. Bank Prepetition Agreements: Any and all agreements
between the Banks and any of the Debtors entered into prior to
the Petition Date.
1.10. Banks: Chemical and Bank of America Illinois.
1.11. Business Day: Any day other than a Saturday, Sunday
or other day on which commercial banks in New York or
Connecticut are authorized or required by law to close.
1.12. Cash: Cash and readily marketable securities or
instruments including, without limitation, readily marketable
direct obligations of the United States of America or agencies
or instrumentalities thereof, time certificates of deposit
issued by any bank, and commercial paper.
1.13. CERCLA: The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
1.14. Chapter 11 Case: The cases under Chapter 11 of the
Bankruptcy Code in which the Debtors are the debtors.
1.15. Chemical: Chemical Bank, a New York banking
corporation.
1.16. Chemical DIP Loan Agreement: The Credit Agreement,
dated as of July 10, 1995, among SCC, the Banks, and Chemical,
as agent, as amended.
1.17. Claim: Any right to payment from any of the Debtors,
whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured, arising at
any time before the Confirmation Date or relating to any event
that occurred before the Confirmation Date; or any right to an
equitable remedy for breach of performance if such breach
gives rise to a right of payment from any of the Debtors,
whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured, arising at any time before
the Confirmation Date or relating to any event that occurred
before the Confirmation Date.
1.18. Common Stock: With respect to any Debtor, all of the
outstanding shares of common stock (or equivalent common
equity security, however designated) in such Debtor.
1.19. Confirmation Date: The date upon which the Bankruptcy
Court enters the Confirmation Order.
1.20. Confirmation Order: An order of the Bankruptcy Court,
in form and substance satisfactory to the Debtors, confirming
this Joint Plan in accordance with the provisions of Chapter
11 of the Bankruptcy Code.
1.21. Contingent Claim: A Claim which is either contingent
or unliquidated on or immediately before the Confirmation
Date.
1.22. Convenience Class Claim: Any General Unsecured Claim
of $1,500 or less and any such Claim exceeding $1,500 that is
voluntarily reduced by the holder of such Claim to $1,500.
Each holder of a General Unsecured Claim exceeding $1,500 that
voluntarily elects to reduce its claim to $1,500 (the
"Convenience Class Election") shall be deemed to have voted to
accept this Joint Plan. The Convenience Class Election shall
be irrevocably made by so indicating a holder's election on
the ballot to be provided to holders of Claims for voting for
or against this Joint Plan. By making the Convenience Class
Election, the holder shall agree to reduce the amount of its
Claim in Class 8 of the Plan to a Convenience Class Claim in
the amount of $1,500 and receive the treatment accorded Class
9 by this Joint Plan. If the holder of a General Unsecured
Claim who is entitled to but fails to make the Convenience
Class Election or improperly completes the ballot provided,
such holder will be entitled to receive the treatment afforded
Allowed General Unsecured Claims in Class 8 for the full
amount of such holder's Allowed Claim, if any, in such Class.
1.23. Creditor: Any Person that holds a Claim against any
of the Debtors.
1.24. Creditors' Committee: The Official Committee of
Unsecured Creditors appointed in the Chapter 11 Case of SCC
pursuant to section 1102(a) of the Bankruptcy Code, as it may
be constituted or reconstituted from time to time, including
such committee as it may exist following the Effective Date
pursuant to the terms of this Joint Plan.
1.25. Debtors: SCC, OSI, SCCLI and Hulse, including any
such Debtor in its capacity as a debtor-in-possession pursuant
to sections 1107 and 1108 of the Bankruptcy Code.
1.26. Disputed Claim: A Claim (other than a Claim under the
Chemical DIP Loan Agreement) which is the subject of a timely
objection interposed by the Debtors or any party in interest
(including NewSCC or the Creditors' Committee) in the Chapter
11 Case, if at such time such objection remains unresolved;
provided, however, that the Bankruptcy Court may determine the
amount of a Disputed Claim for purposes of allowance pursuant
to section 502(c) of the Bankruptcy Code; provided, further,
that (a) the Debtors, in their sole discretion, may elect to
treat the portion of a Disputed Claim, if any, that is not in
dispute as an Allowed Claim, with the disputed portion
remaining a Disputed Claim and (b) any holder of a Disputed
Claim shall be entitled to seek an order of the Bankruptcy
Court treating all or any portion of such Claim as an Allowed
Claim. The term "Disputed," when used to modify a reference in
this Joint Plan to any Claim or class of Claims, shall mean a
Claim (or any Claim in any such class) (other than a Claim
under the Chemical DIP Loan Agreement) that is a Disputed
Claim as defined herein. Except as provided in Section 5.1
hereof with respect to any Claim under the Chemical DIP Loan
Agreement, in the event there is a dispute as to
classification or priority of a Claim, it shall be considered
a Disputed Claim in its entirety. Except as provided in
Section 5.1 hereof and the Chemical DIP Loan Agreement, until
such time as a Contingent Claim becomes fixed and absolute,
such Claim shall be treated as a Disputed Claim and not an
Allowed Claim for purposes related to allocations and
distributions under this Joint Plan. Any reference in this
Section 1.26 to Claims under the Chemical DIP Loan Agreement
shall not have any effect on the treatment of Claims of the
Banks under the Bank Prepetition Agreements, including any
Claims under the Bank Prepetition Agreements for reimbursement
of attorneys' or other professional fees, which shall remain
subject to allowance and/or disgorgement, as appropriate, or
with respect to any Avoidance Actions related to the Bank
Prepetition Agreements.
1.27. Distribution Agent: NewSCC or such disbursing
agent(s) as NewSCC shall from time to time employ at its
expense for the purpose of making distributions under this
Joint Plan. Any Distribution Agent and any successor, if
appointed prior to the Effective Date, must be reasonably
satisfactory to the Creditors' Committee.
1.28. Distribution Agent Charges: Any Taxes imposed upon or
with respect to (i) the Distribution Agent in its capacity as
such, or (ii) the assets held by the Distribution Agent in its
capacity as such, or (iii) any income realized by the
Distribution Agent in its capacity as such, or (iv) any trust
deemed to be created pursuant to Article 10 of this Joint
Plan.
1.29. Distribution Date: With respect to any Allowed Claim,
each date on which a distribution is made with respect to such
Allowed Claim.
1.30. Effective Date: The last to occur of (i) such date as
the Debtors (with the consent of the Creditors' Committee)
shall, by a written instrument or instruments filed from time
to time with the Bankruptcy Court, have most recently
designated as the Effective Date, and (ii) the Business Day on
which all of the conditions set forth in Section 13.2 of this
Joint Plan shall have been satisfied.
1.31. Environmental Claim: Any Claim presently asserted or
which may be asserted in the future, including, without
limitation, any Contingent Claim or Claim for contribution or
indemnity, of any governmental unit, or Claim for contribution
or indemnity by any Person, arising out of or related to any
Environmental, Health and Safety Laws with respect to the
properties in Groton, New York or Cortlandville, New York
owned by SCC; provided, however, that any such Claims with
respect to either the Rosen Site or the Melville Site, or
both, may be treated as Environmental Claims if the Debtors so
elect, after consultation with the Creditors' Committee, on or
before the Confirmation Date; provided further, however, that
if the Debtors do not elect to treat such Claims with respect
to either the Rosen Site or the Melville Site, or both, as
Environmental Claims, such Claims, respectively, shall be
treated as General Unsecured Claims.
1.32. Environmental, Health and Safety Laws: CERCLA, the
Resource Conservation and Recovery Act of 1976, and the
Occupation Safety and Health Act of 1970, each as amended,
together with all other laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings
and charges thereunder) of federal, state, local and foreign
governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or
employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous or toxic
materials or wastes.
1.33. Equity Interest: Any interest in any of the Debtors
represented by any class or series of capital stock, including
common or preferred stock, issued by any Debtor prior to the
Petition Date, and any and all warrants, options, convertible
or exchangeable securities, subscriptions, rights (including
any preemptive rights), stock appreciation rights, calls or
commitments of any character whatsoever relating to any such
shares of capital stock of any Debtor. Equity Interests
include, without limitation, all SCC Common Stock, all SCCLI
Common Stock, all OSI Common Stock and all Hulse Common Stock,
and any warrants or options to acquire any of the above.
Equity Interests also include, without limitation, all
Stockholder Actions and other Claims arising from rescission
of a purchase or sale of an Equity Interest, for damages
arising from the purchase or sale of such an Equity Interest,
or for reimbursement or contribution allowed under section 502
of the Bankruptcy Code on account of such a Claim.
1.34. ERISA: The Employee Retirement Income Security Act of
1974, as amended.
1.35. Excess Reclamation Funds: The difference between (a)
$167,000 and (b) the total aggregate amount of Cash paid to
holders of Allowed Reclamation Claims on account of such
Claims after all Disputed Reclamation Claims have been
resolved. Upon the resolution of all Disputed Reclamation
Claims, the Excess Reclamation Funds, if any, shall be
transferred promptly by NewSCC to the Distribution Agent to be
part of the Unsecured Class Cash for distribution to holders
of Allowed General Unsecured Claims, pursuant to the terms of
this Joint Plan.
1.36. Final Distribution Date: The first Distribution Date
to occur after all Disputed Claims and Avoidance Actions that
are pursued and prosecuted by or on behalf of the Debtors by
NewSCC or the Creditors' Committee have been resolved by Final
Order.
1.37. Final Order: An order which is no longer subject to
appeal, certiorari proceeding or other proceeding for review
or rehearing, and as to which no appeal, certiorari
proceeding, or other proceeding for review or rehearing shall
then be pending.
1.38. General Unsecured Claim: Any Unsecured Claim, other
than a Superpriority Claim, an Administrative Claim, a
Priority Wage Claim, a Priority Tax Claim, an Environmental
Claim, a Pension Plan Claim, a Retiree Health and Insurance
Claim, a Warranty and Contract Claim, a Reclamation Claim or a
Convenience Class Claim. Allowed General Unsecured Claims
include, without limitation, Allowed Unsecured Deficiency
Claims, and any Claim in favor of any Person arising from a
judgment against such Person in any Avoidance Action (if the
effect of such judgment gives such Person an Allowed General
Unsecured Claim).
1.39. Hulse: Hulse Manufacturing Company, a Delaware
corporation.
1.40. Hulse Common Stock: The currently outstanding shares
of common stock of Hulse, par value $100, which will be
canceled on the Effective Date.
1.41. IRS: The Internal Revenue Service.
1.42. Joint Plan or Plan: This Third Amended Second Joint
Plan of Reorganization, either in its present form or as it
may be amended or modified from time to time in any manner
permitted by the Bankruptcy Code or Bankruptcy Rules.
1.43. Melville Site: The site located in Melville, New
York, formerly leased by SCCLI, which is undergoing
environmental remediation.
1.44. Net Avoidance Action Proceeds: The Cash or other
proceeds received by judgment or settlement from any Avoidance
Action against any Person commenced by the Debtors, NewSCC or
the Creditors' Committee, after first deducting the amount
offset and retained or to be retained by such Person pursuant
to Section 11.4 hereof equal to the Cash distributions such
Person would have received (based upon all distributions
theretofore made to holders of Allowed General Unsecured
Claims) on account of such Person's Allowed General Unsecured
Claim if such Claim had been Allowed as of the Effective Date
(if the effect of such judgment or settlement gives such
Person an Allowed General Unsecured Claim), and then deducting
all expenses incurred with respect thereto. Net Avoidance
Action Proceeds, less the amount offset and retained or to be
retained by such Person pursuant to Section 11.4 hereof equal
to the Cash distributions such Person would have received
(based upon such Person's Pro Rata Share of such Net Avoidance
Action Proceeds) on account of such Person's Allowed General
Unsecured Claim (if the effect of such judgment or settlement
gives such Person an Allowed General Unsecured Claim), shall
be transferred promptly by the Debtors, NewSCC or the
Creditors' Committee, as the case may be, to the Distribution
Agent to be part of the Unsecured Class Cash for distribution
to holders of Allowed General Unsecured Claims (other than
such Person), pursuant to the terms of this Joint Plan.
1.45. NewSCC: SCC from and after the Effective Date, as
reorganized, discharged and revested with its assets pursuant
to this Joint Plan.
1.46. NewSCC Common Stock: The common stock, par value
$.001 per share, of NewSCC.
1.47. NewSCC Credit Agreement: The Credit Agreement between
NewSCC and one or more financial institutions acceptable to
the Debtors and the Creditors' Committee, pursuant to which
such financial institutions shall have agreed to provide at
least $10,000,000 in working capital financing to NewSCC on
terms and conditions satisfactory to the Debtors and the
Creditors' Committee.
1.48. NewSCC Warrants: The warrants, each to purchase one
share of NewSCC Common Stock, to be issued by NewSCC pursuant
to the NewSCC Warrant Agreement, which warrants shall be
issued to Registered Holders pursuant to Section 5.13 hereof,
and which warrants each shall (a) have an exercise price
determined as set forth in the NewSCC Warrant Agreement and
(b) be exercisable during the period commencing on the date
occurring six (6) months after the Effective Date and ending
on the date occurring two (2) years after the Effective Date.
1.49. NewSCC Warrant Agreement: The Warrant Agreement
between NewSCC and the Warrant Agent, in substantially the
form attached hereto as Schedule 1.49.
1.50. Non-Debtor Subsidiaries: All direct and indirect
subsidiaries of SCC, other than OSI, SCCLI and Hulse, as
listed on Schedule 1.50 hereto.
1.51. Old SCC Stock Option Plans: All contracts, plans,
agreements or arrangements existing on the Petition Date
providing for the grant to any employees of the Debtors of
options to acquire SCC Common Stock or stock appreciation
rights related to SCC Common Stock.
1.52. OSI: SCM Office Supplies, Inc., a Delaware
corporation.
1.53. OSI Common Stock: The currently outstanding shares of
common stock of OSI, with no par value, which will be canceled
on the Effective Date.
1.54. PBGC: The Pension Benefit Guaranty Corporation.
1.55. Pension Plan Claim: Any Claim arising from or related
to any qualified pension plan sponsored or maintained by any
of the Debtors, including without limitation, any Claim by or
on behalf of any SCC Retirement Plan for contributions due
from any Debtor, any other Claim relating to any actual or
alleged unfunded benefit liabilities, unpaid minimum funding
contributions, or unpaid premiums, or for any interest or
penalty allegedly owed upon or by reason of any such Claim,
and any and all Claims against a Debtor in its capacity as
administrator or fiduciary of an SCC Retirement Plan.
1.56. Person: An individual, a corporation, a partnership,
an association, a joint stock company, a joint venture, an
estate, a trust, an unincorporated organization or a
government, governmental unit or any subdivision thereof or
any other entity.
1.57. Petition Date: (a) With respect to SCC, July 5, 1995
and (b) with respect to OSI, SCCLI and Hulse, August 18, 1995.
1.58. Priority Tax Claim: Any Claim arising prior to the
Petition Date to the extent entitled to priority in payment
under section 507(a)(8) of the Bankruptcy Code.
1.59. Priority Tax Note: A promissory note, in the form of
Schedule 1.59 hereto, as issued and delivered to any holder of
an Allowed Priority Tax Claim. Each Priority Tax Note so
issued and delivered shall have a stated principal amount
equal to the amount of such Allowed Priority Tax Claim, shall
pay interest as provided in such Priority Tax Note, and shall
mature on the date which is the sixth anniversary of the date
of assessment of such Allowed Priority Tax Claim.
1.60. Priority Wage Claim: Any Claim to the extent entitled
to priority in payment under section 507(a)(3) of the
Bankruptcy Code.
1.61. Pro Rata Share: With respect to any distribution of
Unsecured Class Cash to the holder of any Allowed General
Unsecured Claims, a fraction, the numerator of which shall be
the amount of such holder's Allowed General Unsecured Claims
and the denominator of which shall be the sum of all Allowed
General Unsecured Claims, plus the Reserved Claims in such
Class, all determined as of the determination date relating to
any applicable distribution.
1.62. Reclamation Claims: All Claims pursuant to section
546(c) of the Bankruptcy Code for reclamation of goods shipped
to the Debtors prior to the Petition Date; provided, however,
that any Disputed Reclamation Claim that has not been Allowed
by the date which is one (1) year after the Effective Date
will no longer be deemed a Reclamation Claim but will instead
be deemed a General Unsecured Claim unless the Bankruptcy
Court orders otherwise.
1.63. Registered Holder: The holder of record of any shares
of SCC Common Stock on August 15, 1996, as such holder's name
appears on the stock registry of SCC.
1.64. Rejected Agreement: Each executory contract and
unexpired lease of a Debtor which (i) is not an Assumed
Agreement, (ii) has not been expressly assumed by order of the
Bankruptcy Court prior to the Confirmation Date, or (iii) is
not the subject of a pending application to assume on the
Confirmation Date.
1.65. Rejected Agreement Offer: An offer, to be made by
NewSCC to certain non-Debtor parties to Rejected Agreements,
pursuant to which NewSCC will offer to enter into a new
contract, lease or similar agreement with each such non-Debtor
party to which such an offer is made for the equipment,
facilities or other goods or services previously subject to
such Rejected Agreement, all on the terms and conditions
specified in such Rejected Agreement Offer.
1.66. Reserved Claims: All Disputed Claims as of the
applicable determination date in the face amount of the proof
of claim filed with respect to such Claim, unless such Claim
has been estimated or otherwise determined by the Bankruptcy
Court for the purpose of allowance pursuant to section 502(c)
of the Bankruptcy Code or pursuant to the order described in
Section 13.2(c) hereof, in which case in such estimated or
determined amount. Unless any particular order of the
Bankruptcy Court estimating or determining a Claim provides
otherwise, the amount so estimated or determined shall apply
both for voting purposes, if applicable, and for purposes of
computing Reserved Claims.
1.67. Retiree Benefits: Payments to any Person for the
purpose of providing or reimbursing payments for retired
employees and their spouses and dependents for medical,
surgical, or hospital care benefits, or benefits in the event
of sickness, accident, disability, or death under any plan,
fund, or program (through the purchase of insurance or
otherwise) maintained or established in whole or in part by
any Debtor prior to the Petition Date.
1.68. Retiree Health and Insurance Claim: Any Claim for
health or life insurance benefits for retired employees of the
Debtors under any SCC Health and Welfare Plan.
1.69. Rights Agreement: The Rights Agreement between NewSCC
and the rights agent appointed thereunder, in substantially
the form attached hereto as Schedule 1.69.
1.70. Rosen Site: The site located in Cortland, New York
undergoing environmental remediation, which is the subject of
the legal proceeding entitled Cooper Industries, Inc. v.
Agway, et al.
1.71. SCC: Smith Corona Corporation, a Delaware
corporation.
1.72. SCC Common Stock: The currently outstanding shares of
common stock of SCC, $.01 par value, which will be canceled on
the Effective Date.
1.73. SCC Health and Welfare Plans: All plans and programs
of SCC providing for health and welfare benefits to employees
of SCC and its affiliates, as listed on Schedule 1.73 hereof.
1.74. SCC Retirement Plans: The plans and programs of any
of the Debtors providing for certain retirement benefits to
employees of SCC and its affiliates and listed on Schedule
1.74 hereof.
1.75. SCCLI: SCC LI Corp., a New York corporation.
1.76. SCCLI Common Stock: The currently outstanding shares
of common stock of SCCLI, with no par value, which will be
canceled on the Effective Date.
1.77. Schedules: The respective schedules of assets and
liabilities and any amendments thereto filed by the Debtors
with the Bankruptcy Court in accordance with section 521(l) of
the Bankruptcy Code.
1.78. Secured Claim: A Claim to the extent of the value, as
determined pursuant to section 506(a) or 1111(b) of the
Bankruptcy Code, of any interest in property of the Debtors'
estates securing such Claim (other than Claims under the
Chemical DIP Loan Agreement). To the extent that the value of
such interest is less than the amount of the Claim which has
the benefit of such security, such Claim is an Unsecured
Deficiency Claim unless, in any such case, the class of which
such Claim is a part makes a valid and timely election under
section 1111(b) of the Bankruptcy Code to have such Claim
treated as a Secured Claim to the extent allowed.
1.79. Stockholder Actions: Any claims, litigations or
actions brought or that could have been or could be brought by
or on behalf of stockholders of SCC or derivatively on behalf
of SCC or any of its subsidiaries, arising out of or with
respect to any action, event or omission occurring before the
Confirmation Date.
1.80. Superpriority Claims: All Claims under the Chemical
DIP Loan Agreement and any other Claim created by Final Order
of the Bankruptcy Court providing for a priority senior to
that provided in section 507(a)(1) of the Bankruptcy Code.
1.81. Taxes: All income, franchise, excise, sales, use,
employment, withholding, property, payroll and other taxes,
assessments, and governmental charges, together with any
interest, penalties, additions to tax, fines, and similar
amounts relating thereto, imposed or collected by any federal,
state, local or foreign governmental authority.
1.82. Trust Fund Tax Claim: Any Claim in respect of any
Taxes for which any officer, director or employee of any
Debtor has, is asserted to have, or may have, personal
liability for the collection, accounting or payment to the
relevant taxing authority, but excluding any such Claim which
is not an Administrative Claim or a Priority Tax Claim.
1.83. Unsecured Claim: A Claim not secured by a charge
against or interest in property in which the Debtors' estate
has an interest, including any Unsecured Deficiency Claim, and
any Claim arising at any time under Bankruptcy Rule
3002(c)(3).
1.84. Unsecured Class Cash: Cash in an amount equal to (a)
$10,780,000 less the aggregate amount of Cash paid to holders
of Allowed Convenience Class Claims plus (b) the Net Avoidance
Action Proceeds plus (c) the Excess Reclamation Funds plus (d)
any interest accrued on such Cash prior to its distribution
and after it has been received by the Distribution Agent
(except for interest payable to the holders of Allowed General
Unsecured Claims pursuant to Section 11.3 hereof).
1.85. Unsecured Deficiency Claim: A Claim by a Creditor
arising out of the same transaction as a Secured Claim to the
extent that the value, as determined by the Bankruptcy Court
pursuant to section 506(a) of the Bankruptcy Code, of such
Creditor's interest in property of the Debtors' estate
securing such Claim is less than the amount of the Claim which
has the benefit of such security as provided by section 506(a)
of the Bankruptcy Code.
1.86. Warrant Agent: The warrant agent appointed pursuant
to the NewSCC Warrant Agreement.
1.87. Warranty and Contract Claim: Any Claim (i) for breach
of warranty based upon contract and not upon tort with respect
to any product sold by the Debtors, (ii) in connection with
customer promotional programs or (iii) relating to accounts
receivable and accrued liabilities incurred in the ordinary
course of business arising on or after the Petition Date
(other than Administrative Claims of professionals retained
pursuant to sections 327 or 328 of the Bankruptcy Code, fees
and expenses of ordinary course professionals, expenses of
members of the Creditors' Committee, Claims under the Chemical
DIP Loan Agreement and Claims under clauses (viii) and (ix) of
the definition of Administrative Claim).
1.88. Other Definitions: Unless the context otherwise
requires, any capitalized term used and not defined herein or
elsewhere in this Joint Plan but that is defined in the
Bankruptcy Code or Bankruptcy Rules shall have the meaning set
forth therein. Wherever from the context it appears
appropriate, each term stated in either of the singular or the
plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter. The words
"herein," "hereof," "hereto," "hereunder," and others of
similar inference refer to this Joint Plan as a whole and not
to any particular article, section, subsection, or clause
contained in this Joint Plan. The word "including" shall mean
including without limitation.
ARTICLE 2.
SUBSTANTIVE CONSOLIDATION OF THE DEBTORS
2.1. Substantive Consolidation. This Joint Plan
contemplates and is predicated upon the substantive
consolidation of the estates of the Debtors into a single
entity for purposes of confirmation, consummation and
implementation of this Joint Plan. Pursuant to an order of the
Bankruptcy Court (which may be the Confirmation Order), on the
Effective Date: (i) all intercompany Claims by and among the
Debtors will be released; (ii) all assets and all proceeds
thereof and all liabilities of the Debtors will be merged or
treated as though they were merged; (iii) any obligation of
any of the Debtors and all guarantees thereof executed by any
of the Debtors will be deemed to be one obligation of the
Debtors; (iv) any Claims filed or to be filed in connection
with any such obligation and such guarantees will be deemed
one Claim against the Debtors; (v) each and every Claim filed
in the individual Chapter 11 Case of any of the Debtors will
be deemed one Claim filed against the Debtors; (vi) all
duplicative claims filed against more than one of the Debtors
will be automatically expunged so that only one claim survives
against the Debtors; (vii) all Equity Interests of any Debtor
in any other Debtor shall be deemed automatically canceled and
retired by operation of law and shall cease to exist; and
(viii) the Debtors will be deemed, for purposes of determining
the availability of setoff under section 553 of the Bankruptcy
Code, to be one entity, so that, subject to other provisions
of section 553 of the Bankruptcy Code, the debts due to a
particular Debtor may be offset against claims against such
Debtor or another Debtor. Notwithstanding the foregoing, the
right of recovery of NewSCC or the Creditors' Committee under
the Avoidance Actions exercisable on behalf of the Debtors'
estate shall not be prejudiced by such consolidation, and all
Claims and Equity Interests of a Debtor against or in any
Non-Debtor Subsidiary and all Claims of any Non-Debtor Subsidiary
against a Debtor, including but not limited to any Claims
relating to executory contracts or unexpired leases between a
Debtor and any Non-Debtor Subsidiary, shall not be impaired by
the Plan, and shall continue to exist after the Effective
Date.
ARTICLE 3.
CERTAIN PROVISIONS RELATING TO
PAYMENT OF ADMINISTRATIVE CLAIMS
3.1. Administrative Claims. Sections 5.1 and 5.2 below
contain provisions dealing with the treatment of
Administrative Claims. Such treatment is consistent with the
requirements of section 1129(a)(9)(A) of the Bankruptcy Code,
and holders of Administrative Claims are not entitled to vote
on this Joint Plan. Pursuant to section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims are not designated as
classes of Claims for purposes of this Joint Plan and sections
1123, 1124, 1126 and 1129 of the Bankruptcy Code.
ARTICLE 4.
PROVISIONS FOR PAYMENT OF PRIORITY
TAX CLAIMS AND TRUST FUND TAX CLAIMS
4.1. Manner of Payment. Each Allowed Priority Tax Claim,
if any, will be paid in full in Cash by NewSCC at such time or
times as provided in Section 10.1 hereof; provided, however,
that NewSCC may elect to pay such Claims, in any such case,
through deferred Cash payments over a period not exceeding six
years after the date of assessment of such Claim, of a value
as of the Effective Date equal to the Allowed amount of such
Claim, in each case unless otherwise agreed between NewSCC and
the holder of such Allowed Priority Tax Claim. All Allowed
Trust Fund Tax Claims against any Debtor shall be paid in full
in Cash on the later of the Effective Date or the date upon
which they become due and payable, and any payment made to any
taxing authority prior to or after the Effective Date with
respect to any Allowed Claim relating to Taxes, whether
pursuant to a Priority Tax Note or otherwise, shall be applied
first against any Allowed Trust Fund Tax Claim owing to such
taxing authority. All deferred Cash payments in respect of
Allowed Priority Tax Claims shall be made pursuant to and in
accordance with the Priority Tax Notes, which shall be
distributed to holders of such Allowed Priority Tax Claims on
or as soon as practicable after the Effective Date or the
allowance of such Priority Tax Claim, whichever is later.
4.2. Effect. The foregoing treatment of Allowed Priority
Tax Claims is consistent with the requirements of section
1129(a)(9)(C) of the Bankruptcy Code and holders of Allowed
Priority Tax Claims are not entitled to vote on this Joint
Plan. Pursuant to section 1123(a)(1) of the Bankruptcy Code,
Priority Tax Claims are not designated as classes of Claims
for purposes of this Joint Plan and sections 1123, 1124, 1126
and 1129 of the Bankruptcy Code, and all references in Article
5 to Priority Tax Claims are for organizational purposes and
convenience of reference only.
ARTICLE 5.
DESIGNATION OF AND PROVISIONS FOR
TREATMENT OF CLAIMS AND EQUITY INTERESTS
This Joint Plan treats the assets and liabilities of the
Debtors as pooled to the extent provided herein. References in
this Article 5 to the "Debtors" shall be to the pooled estates
of all of the Debtors. A Claim or Equity Interest is included
in a particular class or designation only to the extent that
such Claim or Equity Interest qualifies within the description
of that class or designation, and is in a different class or
designation to the extent that the remainder of such Claim or
Equity Interest qualifies within the description of such
different class or designation. The Claims against and Equity
Interests in the Debtors are designated, and shall be treated,
as follows:
5.1. Claims under the Chemical DIP Loan Agreement.
Notwithstanding anything to the contrary contained in this
Plan, or any outstanding objection or Avoidance Action with
respect to the Claims of the Banks, all Claims under the
Chemical DIP Loan Agreement will be satisfied (i) in the case
of reimbursement obligations with respect to letters of credit
issued thereunder and outstanding on the Effective Date, by
making the deposit on the Effective Date provided for in
Section 2.16(d) of the Chemical DIP Loan Agreement, (ii) in
the case of obligations arising after the Effective Date
pursuant to Section 2.22(c) of the Chemical DIP Loan
Agreement, by NewSCC making prompt payment thereof, (iii) with
respect to all other Claims accrued or owing as of the
Effective Date, by the payment thereof in full in cash by wire
transfer by SCC on the Effective Date, (iv) with respect to
any fees and expenses of the Banks and Chemical, as Agent,
payable under Section 9.5 of the Chemical DIP Loan Agreement
accruing after the Effective Date, by payment thereof by
NewSCC up to an aggregate of $650,000, less any amounts
accrued by or paid to the Banks or the professionals retained
by the Banks from and after July 5, 1995 with respect to any
Avoidance Actions against the Banks with respect to the Bank
Prepetition Agreements, promptly upon presentation of
appropriate invoices to NewSCC, subject only to determination
and allowance by the Bankruptcy Court as to amount and
appropriateness if the Creditors' Committee objects to any
such fees and expenses, including without limitation on the
grounds that such fees and expenses should be recovered upon
entry of a judgment in connection with an Avoidance Action
with respect to the Banks, or (v) by the payment in such other
manner as may be agreed by SCC, NewSCC and the Banks. On the
date of and immediately after such payment and deposit under
clauses (i) and (iii), or under clause (v), above, the
"Commitments", as defined in the Chemical DIP Loan Agreement,
shall terminate.
5.2. Allowed Administrative Claims. Each Allowed
Administrative Claim (other than the Superpriority Claims
treated in Section 5.1 above) shall be paid in full in Cash
(or otherwise satisfied in accordance with its terms), at such
time or times as provided in Section 10.1 hereof.
5.3. Allowed Priority Tax Claims. Each holder of an
Allowed Priority Tax Claim shall be paid in full as provided
in Article 4 of this Joint Plan.
5.4. Class 1 -- Allowed Priority Wage Claims. Allowed
Priority Wage Claims are unimpaired by this Joint Plan. Each
Allowed Priority Wage Claim shall be paid in full in Cash, in
each case at such time or times as provided in Section 10.1
hereof, which payment shall be in full compliance with the
legal, equitable and contractual rights to which the holder of
such Allowed Priority Wage Claim is entitled.
5.5. Class 2 -- Allowed Secured Claims. Allowed Secured
Claims are impaired by this Joint Plan. In full satisfaction
of each Allowed Secured Claim, each holder of such Claim
shall, at the option of NewSCC, receive either (i) payment in
full in Cash in the amount of such Claim, in each case at such
time or times as provided in Section 10.1 hereof, (ii) the
collateral securing such Claim, or (iii) such other treatment
as may be agreed to by NewSCC and the holder of such Claim.
Class 2 shall be divided into the Subclasses listed on
Schedule 5.5 hereto.
5.6. Class 3 -- Allowed Environmental Claims. Allowed
Environmental Claims are unimpaired by this Joint Plan. All
Allowed Environmental Claims shall be satisfied in full by
assumption of such Claims by NewSCC, with the legal, equitable
and contractual rights to which such Claim entitles the holder
of such Claim unaltered.
5.7. Class 4 -- Pension Plan Claims. Pension Plan Claims
are unimpaired by this Joint Plan. All Pension Plan Claims
shall be satisfied in full: (i) for Claims arising from or
related to the defined benefit plans listed on Schedule 1.74
hereto, to the extent that the Bankruptcy Court does not
terminate such defined benefit plans, as provided in Section
12.4 of this Joint Plan by leaving the legal, equitable and
contractual rights to which such Claim entitles the holder of
such Claim unaltered; and (ii) for Claims arising from or
related to the defined contribution plan listed on Schedule
1.74 hereto, by the assumption of such Claims by NewSCC as
provided in Section 12.4 of this Joint Plan, with the legal,
equitable and contractual rights to which such Claim entitles
the holder of such Claim unaltered; provided, however, that to
the extent any SCC Retirement Plan is terminated by action of
the PBGC or the Debtors, any Claims arising from or related to
such SCC Retirement Plan, including any and all Claims against
a Debtor in its capacity as administrator or fiduciary of such
SCC Retirement Plan, shall not be considered Pension Plan
Claims, and shall not be treated as Claims in this Class 4,
but shall be treated as Administrative Claims, Priority Tax
Claims and/or General Unsecured Claims, as determined by the
Bankruptcy Court or as may be agreed by NewSCC and the holder
of such Claims.
5.8. Class 5 -- Retiree Health and Insurance Claims.
Retiree Health and Insurance Claims are unimpaired by this
Joint Plan. All Retiree Health and Insurance Claims shall be
satisfied in full by assumption of such Claims by NewSCC, with
the legal, equitable and contractual rights to which such
Claim entitles the holder of such Claim unaltered.
5.9. Class 6 -- Warranty and Contract Claims. Warranty and
Contract Claims are unimpaired by this Joint Plan. All
Warranty and Contract Claims shall be satisfied in full by
assumption of such Claims by NewSCC, with the legal, equitable
and contractual rights to which such Claim entitles the holder
of such Claim unaltered.
5.10. Class 7 -- Allowed Reclamation Claims. Allowed
Reclamation Claims are impaired by this Joint Plan. In full
satisfaction of each Allowed Reclamation Claim, each holder of
such Claim which has not been satisfied prior to the Effective
Date shall be paid in full in Cash (or otherwise satisfied in
accordance with its terms), at such time or times as provided
in Section 10.1 hereof.
5.11. Class 8 -- Allowed General Unsecured Claims. Allowed
General Unsecured Claims are impaired by this Joint Plan. In
full satisfaction of each Allowed General Unsecured Claim,
each holder of such Claim shall receive (a) its Pro Rata Share
of the Unsecured Class Cash, and (b) one (1) share of NewSCC
Common Stock for each $6.00 in amount of such holder's Allowed
General Unsecured Claim (which shares in the aggregate shall
constitute 85% of the total shares of NewSCC Common Stock
which are issued pursuant to this Joint Plan, determined on a
fully-diluted basis, not including the effect of the exercise
of any of the NewSCC Warrants), each at such time or times as
provided in Article 10 hereof.
5.12. Class 9 -- Allowed Convenience Class Claims. Allowed
Convenience Class Claims are impaired by this Joint Plan. In
full satisfaction of each Allowed Convenience Class Claim,
each holder of such Claim shall receive sixty percent (60%) of
the amount of such holder's Allowed Convenience Class Claim in
Cash, at such time or times as provided in Section 10.1
hereof; provided, however, that if Class 9 votes to reject
this Joint Plan, all Allowed Convenience Class Claims shall be
treated as Allowed General Unsecured Claims, and shall be
treated in accordance with Section 5.11 hereof.
5.13. Class 10 -- SCC Common Stock. Holders of SCC Common
Stock are impaired by this Joint Plan. Each Registered Holder
shall receive one (1) NewSCC Warrant for each ten (10) shares
of SCC Common Stock. All shares of SCC Common Stock will be
canceled, annulled, and extinguished on the Effective Date.
5.14. Class 11 -- Other Equity Interests. Holders of
Equity Interests other than SCC Common Stock are impaired by
this Joint Plan. Holders of such Equity Interests will not be
entitled to receive or retain any property under this Joint
Plan on account of such Equity Interests and, pursuant to
section 1126(g) of the Bankruptcy Code, are deemed not to have
accepted this Joint Plan. All shares of stock representing any
such Equity Interests in any Debtor will be canceled,
annulled, and extinguished on the Effective Date.
ARTICLE 6.
NEWSCC COMMON STOCK
6.1. NewSCC Common Stock. The provisions of the NewSCC
Common Stock are summarized as follows:
(a) Authorization. The certificate of incorporation of
NewSCC shall authorize the issuance of 250,000,000 shares of
NewSCC Common Stock.
(b) Par Value. The NewSCC Common Stock shall have a par
value of $.001 per share.
(c) Rights. The NewSCC Common Stock shall have such rights
with respect to dividends, liquidation, voting and other
matters as are set forth in the restated certificate of
incorporation of NewSCC and as provided under applicable law.
(d) Issuance. The shares of NewSCC Common Stock to be
issued under this Joint Plan shall be issued on the Effective
Date, except as provided in Sections 5.13, 6.2, 6.3 and 10.2
hereof.
(e) Legend. If NewSCC reasonably determines that any
recipient of NewSCC Common Stock pursuant to the terms of this
Joint Plan may be deemed to be an "underwriter" as defined
under section 2(11) of the Securities Act of 1933, any or all
of the certificates evidencing such shares of NewSCC Common
Stock distributed pursuant to the terms of this Joint Plan may
bear a conspicuous legend on the face thereof as follows:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. ALTHOUGH SUBSEQUENT
DISPOSITION OF THE SHARES BY THEIR RECIPIENTS MAY BE EXEMPT
FROM REGISTRATION AND NOT SUBJECT TO HOLDING PERIODS IN SOME
CIRCUMSTANCES, CERTAIN RECIPIENTS OF THE SECURITIES --
SPECIFICALLY THOSE RECIPIENTS DEEMED TO BE "UNDERWRITERS" AS
DEFINED UNDER SECTION 2(11) OF THE SECURITIES ACT OF 1933 --
MAY BE UNABLE TO RESELL SUCH SECURITIES ABSENT REGISTRATION
OF THOSE SECURITIES UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE LAW OR ABSENT EXEMPTION THEREFROM. IT IS
RECOMMENDED THAT HOLDERS CONSULT THEIR OWN COUNSEL."
6.2. Employee Stock Incentive Plan. Following the
Effective Date, NewSCC shall implement an employee stock
incentive or other similar plan, which plan shall provide for
the issuance of that number of shares (or options to acquire
shares) of NewSCC Common Stock which shall at all times
constitute up to 10% of the total shares of NewSCC Common
Stock which are issued pursuant to this Joint Plan, determined
on a fully-diluted basis, not including the effect of the
exercise of any of the NewSCC Warrants. Rights to such shares
shall not vest prior to the second anniversary of the
Effective Date.
6.3. Senior Officer Stock. Following the Effective Date,
NewSCC shall be authorized to award to any person employed by
NewSCC following the Confirmation Date in the positions of
Chief Executive Officer, Chief Financial Officer or Senior
Vice President-Marketing, NewSCC Common Stock, or options to
purchase NewSCC Common Stock, in an aggregate amount which
shall at all times constitute up to 5% of the total shares of
NewSCC Common Stock which are issued pursuant to this Joint
Plan, determined on a fully-diluted basis, not including the
effect of the exercise of any of the NewSCC Warrants. Rights
to such shares shall not vest prior to the second anniversary
of the Effective Date.
ARTICLE 7.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
7.1. Assumption of Certain Executory Contracts and Unexpired
Leases.
(a) As of the Effective Date, all Assumed Agreements are
assumed by NewSCC, and the Confirmation Order shall constitute
an order under section 365 of the Bankruptcy Code assuming
such agreements as of the Effective Date.
(b) NewSCC may reach agreements with parties to certain
Assumed Agreements providing for the deferral of cure payments
that would otherwise be due by reason of such assumption and
for the payment of interest on such deferred amounts.
(c) Unless otherwise agreed by NewSCC with the counterparty
to any such Assumed Agreement, (i) all cure payments (in the
amounts listed on Schedule 7.1(c) hereto, which shall be
binding on the counterparty unless objected to by the date set
by the Bankruptcy Court for filing objections to this Joint
Plan) which may be required by section 365(b)(1) of the
Bankruptcy Code under any Assumed Agreement shall be made on
the Effective Date or promptly thereafter, and (ii) in the
event of a dispute regarding the amount or timing of any cure
payments, the ability of NewSCC to provide adequate assurance
of future performance, or any other matter pertaining to
assumption or assignment, such dispute shall be resolved by
the Bankruptcy Court and NewSCC shall make such cure payments,
if any, or provide such assurance as may be required by the
Final Order resolving such dispute on the terms and conditions
of such Final Order.
7.2. Rejection of Certain Executory Contracts and Unexpired
Leases.
(a) All Rejected Agreements shall be rejected in accordance
with section 365 of the Bankruptcy Code as of the Effective
Date, and the Confirmation Order shall constitute an order
under section 365 of the Bankruptcy Code rejecting such
agreements as of the Effective Date.
(b) NewSCC may make Rejected Agreement Offers to certain
non-Debtor parties to Rejected Agreements. If NewSCC makes a
Rejected Agreement Offer that is accepted by the non-Debtor
party to a Rejected Agreement, any unreleased or unsatisfied
Claim which such non-Debtor party may have against the Debtors
pursuant to section 365 of the Bankruptcy Code or otherwise by
reason of the rejection of such Rejected Agreement shall
automatically by such acceptance (and without any further
action by any Person, but subject to the filing of a proof of
claim pursuant to Section 7.3 hereof) be deemed a General
Unsecured Claim limited to that amount, if any, which the
Bankruptcy Court shall determine by Final Order gives effect
to the mitigation of damages effected by acceptance of such
Rejected Agreement Offer, unless NewSCC and such Person agree
otherwise. If NewSCC makes a Rejected Agreement Offer that is
not accepted by the non-Debtor party thereto, any Claim which
such non-Debtor party may have against the Debtors pursuant to
section 365 of the Bankruptcy Code or otherwise by reason of
the rejection of such Rejected Agreement shall be limited to
that amount, if any, which the Bankruptcy Court shall
determine by Final Order gives effect to the mitigation of
damages which would have been effected by acceptance of such
Rejected Agreement Offer or, if greater, the amount of
mitigation determined by the Bankruptcy Court, in each case to
the fullest extent permitted by applicable law.
7.3. Claims Based on Rejection of Executory Contracts or
Unexpired Leases. All proofs of claim with respect to Claims
arising from the rejection of executory contracts or unexpired
leases shall be filed with the Bankruptcy Court within thirty
(30) days after the earlier of (i) the date of service of
notice of entry of an order of the Bankruptcy Court approving
such rejection and requiring the filing of a proof of claim,
and (ii) the date of service of notice of the Confirmation
Date, if such executory contract or unexpired lease has been
rejected under this Joint Plan. Any Claims not filed within
such times shall be released and discharged and forever barred
from assertion against the Debtors, their estates and
property, or NewSCC.
ARTICLE 8.
IDENTIFICATION OF CLASSES OF CLAIMS NOT IMPAIRED
BY THIS JOINT PLAN AND CLASSES OF CLAIMS AND EQUITY
INTERESTS DEEMED TO HAVE REJECTED THIS JOINT PLAN
8.1. Unimpaired and Unclassified Classes. Claims in Class
1 (Allowed Priority Wage Claims), Class 3 (Allowed
Environmental Claims), Class 4 (Pension Plan Claims), Class 5
(Retiree Health and Insurance Claims) and Class 6 (Warranty
and Contract Claims) are not impaired under this Joint Plan.
Claims under the Chemical DIP Loan Agreement, Allowed
Administrative Claims and Allowed Priority Tax Claims are
unclassified under this Joint Plan. Any Claims not
specifically designated in this Joint Plan as part of an
unimpaired Class or unclassified are impaired under this Joint
Plan. Unclassified Claims and Claims in unimpaired Classes are
not entitled to vote on this Joint Plan.
8.2. Classes Deemed Not to Have Accepted this Joint Plan.
Equity Interests in Class 10 and Class 11 are deemed not to
have accepted this Joint Plan, and such Classes shall not be
entitled to vote on this Joint Plan.
ARTICLE 9.
ACCEPTANCE OR REJECTION OF THIS JOINT PLAN;
EFFECT OF REJECTION BY ONE OR MORE CLASSES
9.1. Impaired Classes to Vote. Except as otherwise
required by the Bankruptcy Code or the Bankruptcy Court, any
holder of a Claim that is impaired under this Joint Plan is
entitled to vote to accept or reject this Joint Plan if, at
any time prior to the voting deadline, (i) its Claim has been
Allowed, (ii) its Claim has been temporarily allowed for
voting purposes only by order of the Bankruptcy Court pursuant
to Bankruptcy Rule 3018 (in which case such Claim may be voted
in such temporarily allowed amount), (iii) its Claim has been
scheduled by the Debtors (but only if such Claim is not
scheduled as disputed, contingent or unliquidated) and no
objection to such Claim has been filed, or (iv) it has filed a
proof of claim on or before October 31, 1995, the last date
set by the Bankruptcy Court for such filings (or such later
date as the Bankruptcy Court may have established with respect
to any particular Claim, but not later than the date of the
order approving the disclosure statement accompanying this
Joint Plan), and such Claim is not a Disputed Claim.
Notwithstanding the foregoing, a holder of a Disputed Claim
which has not been temporarily allowed as provided above may
nevertheless vote such Disputed Claim in an amount equal to
the portion, if any, of such Claim shown as fixed, liquidated
and undisputed in the Debtors' Schedules.
9.2. Acceptance By Class of Creditors. A class of
Creditors shall have accepted this Joint Plan if this Joint
Plan is accepted by at least two-thirds in amount and more
than one-half in number of the Allowed Claims of such class
that have accepted or rejected this Joint Plan.
9.3. Cramdown. Inasmuch as one or more impaired classes of
Creditors with Claims against and holders of Equity Interests
in the Debtors' estates are deemed not to have accepted this
Joint Plan in accordance with section 1129(a) of the
Bankruptcy Code, and in the event that one or more other
classes of impaired Claims or Equity Interests does not accept
or is deemed not to have accepted this Joint Plan, the Debtors
request that the Bankruptcy Court confirm this Joint Plan in
accordance with section 1129(b) of the Bankruptcy Code.
ARTICLE 10.
PROVISIONS COVERING DISTRIBUTIONS AND PAYMENTS
10.1. Making of Distributions and Payments. (a) NewSCC, or
a Distribution Agent on its behalf, shall make the payments
and distributions expressly required to be made in respect of
Allowed Superpriority Claims, Allowed Administrative Claims,
Allowed Priority Tax Claims (other than those to be satisfied
by a Priority Tax Note), Allowed Priority Wage Claims, Allowed
Secured Claims, Allowed Reclamation Claims and Allowed
Convenience Class Claims (except in the case of Claims under
the Chemical DIP Loan Agreement, which shall be paid as
provided in Section 5.1 hereof, and other Allowed Claims
(other than Allowed General Unsecured Claims) for which a
Final Order provides for a different payment date) upon the
latest of (i) the Effective Date, or as soon thereafter as
practicable, (ii) such date as may be fixed by the Bankruptcy
Court, or as soon thereafter as practicable, (iii) the fifth
Business Day after such Claim is Allowed, or as soon
thereafter as practicable, and (iv) such date as the holder of
such Claim and the Person obligated to make such distribution
have agreed or shall agree or, if later, with respect to any
Allowed Trust Fund Tax Claim, or any Allowed Administrative
Claim incurred in the ordinary course of its business, the
date on which such Claim becomes due and payable in accordance
with its terms. Distributions to holders of Allowed General
Unsecured Claims shall be made in accordance with this Article
10. Distributions to Registered Holders shall be made by
NewSCC or the Warrant Agent on the Effective Date, or as soon
thereafter as practicable. NewSCC shall make payments under
any Priority Tax Notes as provided thereby.
(b) On the Effective Date, or as soon thereafter as
practicable, NewSCC shall reserve the amount of Cash necessary
to pay all Reserved Claims (other than Reserved Claims which
are General Unsecured Claims) in the amounts in which such
Reserved Claims would be paid if such Claims were Allowed in
full. Upon the determination of the Allowed amount of any such
Reserved Claim, NewSCC shall pay the holder, as soon as
practicable thereafter, the amount, if any, such holder is
entitled to receive on account of its Allowed Claim from the
reserve established pursuant to this Section 10.1(b), pursuant
to Sections 10.1(a) and 11.3 hereof, and shall be entitled to
remove from such reserve any amount of Cash reserved on
account of such Claim and not paid to such holder.
10.2. Distributions by the Distribution Agent. (a) On the
Effective Date, NewSCC will deliver the Unsecured Class Cash
(less the amount of Cash necessary to pay all Reserved Claims
which are Convenience Class Claims in the amounts in which
such Claims would be paid if they were Allowed in full) to the
Distribution Agent to be held in trust for distribution to
holders of Allowed General Unsecured Claims as provided in
Article 5 of this Joint Plan. The Distribution Agent shall
agree in writing to accept such trust subject to the terms of
this Joint Plan. As promptly as practicable after the
Effective Date, the Distribution Agent will distribute to each
holder of an Allowed General Unsecured Claim as of the
Effective Date such holder's Pro Rata Share as of the
Effective Date of the Unsecured Class Cash. On each
Distribution Date after such initial distribution, the
Distribution Agent will distribute to each holder of an
Allowed General Unsecured Claim (including any Disputed Claim
that has been Allowed since the determination date for the
preceding Distribution Date) its Pro Rata Share as of the
applicable determination date for any such Distribution Date
of the Unsecured Class Cash, less any Unsecured Class Cash
previously distributed with respect to such holder's Allowed
General Unsecured Claim. A Distribution Date with respect to
Allowed General Unsecured Claims shall occur promptly after
either (i) NewSCC directs the Distribution Agent to make such
a distribution (having due regard to the costs and expenses
involved in making a distribution, and in no event more
frequently than once every calendar quarter or less frequently
than once every calendar year, unless the available Unsecured
Class Cash is insufficient for such a distribution), or (ii)
the amount of Unsecured Class Cash available for distribution
to such holders exceeds 25% of the total amount so allocated.
The Distribution Agent shall provide NewSCC on a quarterly
basis, or at such other times as reasonably requested by
NewSCC, a report containing the following information: (a) the
aggregate amount of Allowed and Disputed Claims in the Class
of General Unsecured Claims, (b) the aggregate amount of
Unsecured Class Cash being held in trust for the holders of
the Class of General Unsecured Claims, and (c) such other
information as NewSCC shall reasonably request. On the Final
Distribution Date, the Distribution Agent will distribute to
each holder of an Allowed General Unsecured Claim such
holder's final Pro Rata Share of the Unsecured Class Cash,
less any Unsecured Class Cash previously distributed with
respect to such holder's Allowed General Unsecured Claim.
(b) On the Effective Date, NewSCC shall issue and deliver to
the Distribution Agent one (1) share of NewSCC Common Stock
for each $6.00 in amount of Allowed General Unsecured Claims
at such time to be held in trust for distribution to holders
of Allowed General Unsecured Claims as provided in Article 5
of this Joint Plan. The Distribution Agent shall agree in
writing to accept such trust subject to the terms of this
Joint Plan. As promptly as practicable after the Effective
Date, the Distribution Agent will distribute to each holder of
an Allowed General Unsecured Claim as of the Effective Date
one (1) share of NewSCC Common Stock for each $6.00 in amount
of such holder's Allowed General Unsecured Claim. Upon any
Disputed Claim becoming an Allowed General Unsecured Claim,
or, as more fully set forth in Section 11.4 hereof, upon a
judgment being rendered against any Person in any Avoidance
Action (if the effect of such judgment gives such Person an
Allowed General Unsecured Claim), NewSCC shall issue and
deliver to the Distribution Agent one (1) share of NewSCC
Common Stock for each $6.00 in amount of such Allowed General
Unsecured Claim, and as promptly as practicable thereafter,
the Distribution Agent will distribute to such holder of an
Allowed General Unsecured Claim one (1) share of NewSCC Common
Stock for each $6.00 in amount of such holder's Allowed
General Unsecured Claim. Upon resolution of any Disputed
Convenience Class Claim, any Cash reserved on account of such
Disputed Claim and not paid to the holder of such Disputed
Claim on account of such Claim shall be transferred by NewSCC
to the Distribution Agent to be part of the Unsecured Class
Cash.
(c) The determination date for each Distribution Date other
than the first Distribution Date shall be the 20th Business
Day prior to such Distribution Date. Payments and
distributions to be made on any Distribution Date pursuant to
this Joint Plan shall be deemed made on such Distribution
Date, if made on such Distribution Date or as soon as
practicable thereafter but in no event later than five
Business Days after such Distribution Date, except as
otherwise provided for in this Joint Plan or as may be ordered
by the Bankruptcy Court.
(d) If after the Effective Date NewSCC (i) pays a dividend
or makes a distribution on the outstanding NewSCC Common
Stock, (ii) subdivides the outstanding shares of NewSCC Common
Stock into a greater number of shares, (iii) combines the
outstanding shares of NewSCC Common Stock into a smaller
number of shares, (iv) issues by reclassification of the
outstanding NewSCC Common Stock any shares of its capital
stock, (v) is a party to a consolidation, merger or transfer
of assets providing for any change in or exchange of the
outstanding NewSCC Common Stock, then NewSCC's obligation to
issue and the Distribution Agent's obligation to distribute
NewSCC Common Stock to any holder of an Allowed General
Unsecured Claim arising after the record date in the case of a
dividend or distribution and after the effective date of any
of the other foregoing transactions shall be adjusted so that
the Distribution Agent shall thereafter distribute the kind
and amount of securities, Cash or other assets that such
holder of an Allowed General Unsecured Claim would have
received as a result of such distribution under this Joint
Plan and occurrence of such transaction had the Distribution
Agent distributed such NewSCC Common Stock to such holder
immediately before the record date in the case of a dividend
or distribution or immediately before the effective date of
any other such transaction (assuming such holder failed to
exercise its right of election, if any, as to the kind or
amount of securities, Cash or other property receivable upon
such transaction). If after an adjustment the Distribution
Agent is obligated (i) to issue shares of two or more classes
of capital stock of NewSCC to holders of Allowed General
Unsecured Claims, the obligation to issue such shares shall
thereafter be subject to adjustment on terms comparable to
those applicable to NewSCC Common Stock in this Section, (ii)
to issue rights or warrants, such obligation shall cease upon
the expiration of the right to exercise any such rights or
warrants in accordance with their terms or (iii) to pay Cash,
interest will not accrue on the Cash.
(e) The duties of the Distribution Agent (including its
duties as trustee pursuant to this Section 10.2) are expressly
limited to the ministerial functions set forth in this Article
10. The Distribution Agent shall incur no liability for its
actions (or failure to act) or conduct as Distribution Agent,
or as trustee holding Unsecured Class Cash or NewSCC Common
Stock except to the extent attributable to the gross
negligence or willful misconduct of the Distribution Agent.
The Distribution Agent shall at all times maintain a
segregated account for the Cash being held in trust for the
holders of the Class of Allowed General Unsecured Claims, and
the Distribution Agent shall deposit or invest all Cash being
held for distribution to Creditors in tax-free securities or
in a manner consistent with section 345 of the Bankruptcy
Code, except as otherwise authorized by the Bankruptcy Court;
provided, that no such deposit or investment shall have a
maturity of more than 90 days. NewSCC shall satisfy
Distribution Agent Charges quarterly as billed by the
Distribution Agent. All Unsecured Class Cash or NewSCC Common
Stock held by or transferred to the Distribution Agent for
distribution to Creditors pursuant to this Joint Plan shall be
held by the Distribution Agent (including NewSCC in its
capacity as Distribution Agent) solely as trustee of an
express trust and shall not be or constitute property of the
Distribution Agent for any purpose whatsoever, nor shall the
Distribution Agent have any right or interest to any such Cash
or stock for its own account, except as expressly provided in
this Joint Plan.
(f) The Distribution Agent shall cause a register for the
transfer of Allowed General Unsecured Claims to be maintained.
Transfers shall be registered only (i) upon Final Order of the
Bankruptcy Court directing such transfer, (ii) in the event of
a transfer by operation of law, or (iii) upon the delivery by
the transferor of an opinion of counsel reasonably
satisfactory to the Distribution Agent that the transfer is
exempt from any applicable registration requirement under the
Securities Act of 1933, as amended, and any applicable state
securities or blue-sky law and does not subject the
Distribution Agent to any additional requirements under the
Securities Act of 1933, the Securities Exchange Act of 1934 or
the Investment Company Act of 1940.
10.3. Delivery of Distributions; Unclaimed Property.
(a) Distributions and deliveries to holders of Allowed
Claims shall be made at the addresses set forth on the proofs
of claim filed by such holders (or at the last known addresses
of such holders if no proof of claim is filed or if NewSCC has
been notified of a change of address). Distributions and
deliveries to Registered Holders shall be made at the
addresses set forth in SCC's stock registry. If any holder's
distribution is returned as undeliverable, no further
distributions to such holder shall be made unless and until
NewSCC is notified in writing of such holder's then current
address, at which time all missed distributions shall be made
to such holder without interest (except to the extent that
such missed distributions have become unclaimed property).
Amounts in respect of undeliverable distributions made through
the Distribution Agent shall be returned to the Distribution
Agent until such distributions are claimed. All claims for
undeliverable distributions shall be made on or before the
earlier of the second (2nd) anniversary of the applicable
Distribution Date and the Final Distribution Date, and after
such date, such undeliverable distributions shall be unclaimed
property. All unclaimed property attributable to any Claim or
Equity Interest other than an Allowed General Unsecured Claim
shall revert to NewSCC, and the claim of any holder with
respect to such property shall be discharged and forever
barred and, in the case of a Claim, shall no longer be deemed
an Allowed Claim. All unclaimed property attributable to any
Allowed General Unsecured Claim will be dealt with pursuant to
Section 10.3(b) of this Joint Plan.
(b) (i) If any property distributed to the holder of an
Allowed General Unsecured Claim is returned to the
Distribution Agent as undeliverable, such property shall be
deemed an unclaimed distribution. Until the earlier of the
determination date for the Final Distribution Date or two
years following the Distribution Date as to which such
property was unclaimed, unclaimed distributions shall be held
by the Distribution Agent solely for the holders of Allowed
General Unsecured Claims entitled to such distribution. After
any distribution to any holder of an Allowed General Unsecured
Claim has become an unclaimed distribution, no further
distributions shall be made to such holder unless and until
the Distribution Agent has been notified in writing by such
holder of such holder's current address, promptly after which
all unclaimed distributions shall be made to such holder
(except as provided in the next sentence). Upon the earlier of
the determination date for the Final Distribution Date and the
second anniversary of the Distribution Date as to which such
property was unclaimed, each holder of an Allowed General
Unsecured Claim entitled to an unclaimed distribution from a
Distribution Date prior to the Final Distribution Date who has
failed to claim such distribution shall cease to be entitled
to such distribution and the Allowed General Unsecured Claim
of such holder shall no longer be deemed an Allowed General
Unsecured Claim for any purpose under this Joint Plan,
including calculation of any holder's Pro Rata Share.
(ii) Any unclaimed distributions of Unsecured Class Cash
with respect to the earlier of the determination date for the
Final Distribution Date and the second anniversary of the
Distribution Date as to which such property was unclaimed
shall become part of the Unsecured Class Cash to be
distributed to holders of Allowed General Unsecured Claims
pursuant to Section 10.2 hereof, whereupon the holder entitled
to an unclaimed distribution on such date shall cease to be
entitled to such distribution or any further distributions
made to the holders of Allowed General Unsecured Claims. Any
unclaimed distributions of NewSCC Common Stock with respect to
the earlier of the determination date for the Final
Distribution Date and the second anniversary of the
Distribution Date as to which such property was unclaimed
shall be returned to NewSCC.
(c) Checks issued by NewSCC or the Distribution Agent in
respect of Allowed Claims shall be null and void if not cashed
within ninety (90) days of the date of issuance thereof.
Subject to Section 10.3(b)(ii) hereof, any amounts paid to the
Distribution Agent by NewSCC in respect of such a check shall
be promptly returned to NewSCC by the Distribution Agent.
Requests for reissuance of any check shall be made directly to
NewSCC by the holder of the Allowed Claim with respect to
which such check was originally issued. Any funds in respect
of such a voided check shall be deemed an undeliverable or
unclaimed distribution and shall be treated as provided in
subsections (a) and (b) of this Section 10.3, whichever is
applicable.
10.4. Method of Payment. Payments of Cash required to be
made pursuant to this Joint Plan shall be made by check drawn
on a domestic bank or by wire transfer from a domestic bank at
the election of the Person making such payment, except as
provided in Section 5.1 hereof.
10.5. Payment Dates. Whenever any payment or distribution
to be made under this Joint Plan shall be due on a day other
than a Business Day, such payment or distribution shall
instead be made, without interest, on the immediately
following Business Day.
10.6. Rounding. Whenever any payment of a fraction of a
cent would otherwise be called for, the actual payment shall
reflect a rounding of such fraction to the nearest whole cent,
with one-half cent being rounded up to the nearest whole cent.
To the extent Cash remains undistributed as a result of the
rounding of such fraction to the nearest whole cent, such Cash
shall be treated as unclaimed property under Section 10.3(b)
hereof. Wherever any distribution of a fraction of a share of
NewSCC Common Stock would otherwise be called for, the actual
distribution shall reflect a rounding of such fraction down to
the nearest whole number of shares.
ARTICLE 11.
PROCEDURES FOR RESOLVING
DISPUTED CLAIMS AND AVOIDANCE ACTIONS
11.1. Filing of Objections to Claims. After the Effective
Date, objections to Claims shall be made by NewSCC only.
Objections to Claims shall be served upon each holder of each
of the Claims to which objections are made and filed with the
Bankruptcy Court as soon as practicable, but in no event later
than the later of (i) 45 days subsequent to the Effective Date
and (ii) 90 days after the filing of a proof of claim with
respect to such Claim; provided, however, that such periods
may be extended by order of the Bankruptcy Court on motion by
NewSCC, without notice or a hearing. Any objections to Claims
made by the Debtors prior to the Effective Date shall, after
the Effective Date, be prosecuted by NewSCC.
11.2. Prosecutions of Objections to Claims. Prior to the
Effective Date the Debtors shall litigate to judgment, propose
settlements of or withdraw objections to such Disputed Claims
asserted against them as the Debtors may choose. From and
after the Effective Date NewSCC shall litigate to judgment,
propose settlements of or withdraw objections to all Disputed
Claims. NewSCC will act in accordance with its fiduciary
duties as a reorganized debtor in the claims resolution
process. All proposed settlements of Disputed Claims shall be
subject to the approval of the Bankruptcy Court after notice
and a hearing (as that term is used in section 102(1) of the
Bankruptcy Code). The Debtors or NewSCC shall with reasonable
promptness apply to the Bankruptcy Court for an order
reasonably satisfactory to the Creditors' Committee that seeks
to establish procedures to facilitate the expeditious
resolution of Disputed Claims (e.g., limits on the time and
scope of discovery and setting forth time schedules for
hearings on disputed claims within a fixed period after
discovery has been completed).
11.3. Payment or Distribution Upon Resolution of Disputed
Claims. Except as the Debtors or NewSCC, as applicable, may
otherwise agree with respect to any Disputed Claim, no
payments or distributions shall be made with respect to any
portion of a Disputed Claim unless and until (a) all
objections to such Disputed Claim have been determined by a
Final Order of the Bankruptcy Court or (b) the Bankruptcy
Court shall have entered an order treating any portion of a
Disputed Claim as an Allowed Claim. Payments and distributions
to each holder of a Disputed Claim to the extent that it
ultimately becomes an Allowed Claim shall be made in
accordance with the provisions of this Joint Plan with respect
to the class of Claims to which such Allowed Claim belongs;
provided that each such holder shall receive any interest
earned on the payments and distributions made to it since the
period such payments and distributions would have been made to
it if it had been the holder of its Allowed Claim on the
Effective Date. A Disputed Claim which is estimated for
purposes of allowance and distribution pursuant to section
502(c) of the Bankruptcy Code and which is estimated and
Allowed at a fixed amount by Final Order of the Bankruptcy
Court shall thereupon be an Allowed Claim for all purposes in
the amount so estimated and Allowed.
11.4. Avoidance Actions. After the Effective Date, NewSCC
shall have the sole right, in the name of the Debtors, to
commence, continue or settle any Avoidance Actions, including
any Avoidance Actions brought by the Debtors prior to the
Effective Date, except as provided in Section 12.9 hereof. All
proposed settlements of Avoidance Actions shall be subject to
the approval of the Bankruptcy Court after notice and a
hearing (as that term is used in section 102(1) of the
Bankruptcy Code). If any final judgment is rendered against
any Person in any Avoidance Action, such Person shall be
entitled to offset and retain from the amount it is required
to pay on account of such judgment (if the effect of such
judgment gives such Person an Allowed General Unsecured Claim)
an amount that, when added to the distributions such Person
has already received on account such Person's Allowed General
Unsecured Claims, is equal to the Cash distributions such
Person would have received (based upon (i) all distributions
theretofore made to holders of Allowed General Unsecured
Claims and (ii) such Person's Pro Rata Share of the Net
Avoidance Action Proceeds) on account of such Person's Allowed
General Unsecured Claims if such Claims had been Allowed as of
the Effective Date, with the retained amount being considered
such Person's Pro Rata Share of the Unsecured Class Cash
payable to such holder with respect to any and all
distributions that would have been payable to such Person in
accordance with Section 10.2 hereof with respect to (a)
distributions theretofore made and (b) Net Avoidance Action
Proceeds recovered from such Person. In addition, such Person
shall be entitled to receive, pursuant to Section 10.2 hereof,
one (1) share of NewSCC Common Stock for each $6.00 in amount
of such Person's Allowed General Unsecured Claim arising from
such judgment, calculated without giving effect to the offset
and retention described above. Finally, such Person shall be
entitled to receive its Pro Rata Share of all subsequent
distributions of Unsecured Class Cash made to holders of
Allowed General Unsecured Claims (other than distributions of
Net Avoidance Action Proceeds from an action commenced against
such Person).
ARTICLE 12.
MEANS FOR IMPLEMENTATION OF THIS JOINT PLAN
12.1. Conveyance Free and Clear. All assets or property of
the estate of any Debtor sold at any time during the Chapter
11 Case pursuant to section 363 of the Bankruptcy Code were or
are sold free and clear of all liens, claims, encumbrances and
interests except as otherwise specifically provided in a Final
Order of the Bankruptcy Court approving any such sale.
12.2. Certain Mergers. On the Effective Date, all of the
Debtors other than SCC will merge with and into SCC, with
NewSCC as the surviving corporation.
12.3. Release of Certain Claims and Actions.
(a) On the Effective Date, in order to further the
rehabilitation of the Debtors, any and all claims and causes
of action, now existing or hereafter arising, against any
present or former officer or director of any of the Debtors or
any of the Debtors' professional advisors arising out of or
related to such Person's actions or omissions to act in his or
her capacity as an officer or director of the Debtors or as a
member of any committee, or as a fiduciary of any pension or
employee benefit plan, or as such an advisor, relating to the
Debtors at any time through the Confirmation Date, are finally
and irrevocably waived, released and relinquished, and each of
the Debtors, its Creditors and Equity Holders and all other
persons is enjoined from asserting any such claim or cause of
action in any court or forum; provided, however, that this
provision shall not operate as a release, waiver or
relinquishment of, or injunction against asserting, (i) any
such claims or causes of action arising from any actual fraud
(but not constructive fraud) or willful misconduct of any such
Person or (ii) any Avoidance Action against any such Person;
provided, further, that nothing in this Joint Plan shall be
deemed to waive, release or relinquish any rights the Debtors
or NewSCC may have to assert any claim under any insurance
policy indemnifying present or former officers or directors of
any of the Debtors or any of the Debtors' professional
advisors. Except with respect to any Avoidance Action, NewSCC
will indemnify each such Person for all reasonable legal fees
or expenses incurred by such Person in connection with any
claim or cause of action brought against such Person as a
result of such Person's acts or omissions to act and such
legal fees and expenses shall be paid as incurred; provided,
however, that if any such Person is determined by Final Order
of a court to have any liability for any claim or cause of
action arising from an actual fraud (but not constructive
fraud) or willful misconduct of any such Person, such Person
shall not be indemnified for legal fees or expenses incurred
in connection with any such claim or cause of action as to
which it is so determined to be liable, and such Person shall
reimburse NewSCC for any legal fees and expenses that NewSCC
previously advanced in connection with such claim; provided,
further, if a court has determined by Final Order that the
legal fees and expenses incurred by such Person in connection
with any claim or cause of action (regardless of whether such
claim or cause of action arises from an actual fraud or
willful misconduct of such Person) are unreasonable, such
Person shall reimburse NewSCC the amount of such legal fees
and expenses so determined to be unreasonable.
(b) The Confirmation Order shall provide that all Persons
shall be permanently enjoined, stayed and restrained from
pursuing or prosecuting any claims, including Stockholder
Actions, that may be asserted against any present or former
officers and directors of the Debtors, including claims
arising out of intercompany transactions that occurred and
decisions that were made prior to the Petition Date, except as
to Avoidance Actions against such Persons.
(c) On the Effective Date, each of the Debtors, its
Creditors and Equity Interest holders is deemed to have
finally and irrevocably waived, released and relinquished any
and all claims and causes of action, if any, that they have or
may have as of the Confirmation Date against the Creditors'
Committee and any member thereof, including the firms and
corporations represented by them and their employees and
agents, and the Creditors' Committee's professional advisors
arising out of or related to such Person's actions or
omissions to act in his or her capacity as a member of such
Committee or as such an advisor, and is enjoined from
asserting any such claim or cause of action in any court or
forum; provided, however, that this provision shall not
operate as a release, waiver or relinquishment of, or
injunction against asserting, any such claims or causes of
action arising from any actual fraud (but not constructive
fraud) or willful misconduct of any such Person. NewSCC will
indemnify each such Person for all reasonable legal fees or
expenses incurred by such Person in connection with any claim
or cause of action brought against such Person as a result of
such Person's acts or omissions to act and such legal fees and
expenses shall be paid as incurred; provided, however, that if
any such Person is determined by Final Order of a court to
have any liability for any claim or cause of action arising
from an actual fraud (but not constructive fraud) or willful
misconduct of any such Person, such Person shall not be
indemnified for legal fees or expenses incurred in connection
with any such claim or cause of action as to which it is so
determined to be liable, and such Person shall reimburse
NewSCC for any legal fees and expenses that NewSCC previously
advanced in connection with such claim; provided, further, if
a court has determined by Final Order that the legal fees and
expenses incurred by such Person in connection with any claim
or cause of action (regardless of whether such claim or cause
of action arises from an actual fraud or willful misconduct of
such Person) are unreasonable, such Person shall reimburse
NewSCC the amount of such legal fees and expenses so
determined to be unreasonable.
12.4. Certain Benefit Plans and Programs. From and
immediately after the Effective Date, NewSCC shall assume and
continue the SCC Health and Welfare Plans, the defined
contribution plan listed on Schedule 1.74 hereto and, if and
only if the Bankruptcy Court does not terminate the defined
benefit plans listed on Schedule 1.74 hereto, NewSCC shall
continue such defined benefit plans, provided, however, that
NewSCC reserves the right to modify, amend, freeze or
terminate any such plan or program, including the provisions
thereof relating to Retiree Benefits, to the fullest extent
permitted by law; provided further, however, that NewSCC
agrees not to amend or modify the terms of the existing SCC
Health and Welfare Plans on such terms as may exist on the
Effective Date for the one-year period following the Effective
Date, except as may be required by applicable law.
Notwithstanding the foregoing, the Old SCC Stock Option Plans
and option agreements outstanding thereunder are hereby deemed
rejected and terminated with respect to all stock options
thereunder, whether granted before or after the Petition Date.
Because such rejection of such Old SCC Stock Option Plans and
option agreements does not result in any damage to any Person,
no Claim shall be Allowed against any Debtor by reason of such
rejection.
12.5. Rights Agreement. On the Effective Date, NewSCC
shall be deemed to have adopted the Rights Agreement.
12.6. Exemption from Certain Taxes. To the full extent
allowed pursuant to section 1146(c) of the Bankruptcy Code,
the consummation of the transactions contemplated by this
Joint Plan shall not subject the Debtors or NewSCC to any
state or local sales, use, transfer, documentary, recording or
gains tax. Without limiting the foregoing sentence, the merger
transactions contemplated by Section 12.2 of this Joint Plan
shall not subject the Debtors or NewSCC to any such tax
pursuant to New York Tax Law, Section 1402, by virtue of the
definition of "Controlling Interest" set forth in New York Tax
Law, Section 1401, or otherwise.
12.7. Certificate of Incorporation and By-Laws. The
certificate of incorporation and by-laws of NewSCC shall be
amended and restated in the form of Schedule 12.7 hereof.
12.8. Directors and Officers. The initial post-Effective
Date directors and officers of NewSCC, subject to the consent
of the Creditors' Committee, shall be constituted as of the
Effective Date.
12.9. Revesting of Assets; No Further Supervision. The
assets of each Debtor and all property of each Debtor's estate
(including, without limitation, all rights of the Debtors to
recover property under sections 542, 543, 550 and 553 of the
Bankruptcy Code, all avoiding powers under sections 522(f),
522(h), 544, 545, 547, 548, 549 or 724(a) of the Bankruptcy
Code, all proceeds thereof, and all claims and causes of
action, cross-claims and counterclaims of any kind or nature
whatsoever against third parties arising before the
Confirmation Date that have not been disposed of prior to the
Confirmation Date), shall be preserved and revest in NewSCC,
in each case free and clear of all Claims and Equity
Interests, but subject to the obligations of NewSCC as
specifically set forth in this Joint Plan; provided, however,
that all Avoidance Actions shall vest in the Debtors' estates,
to be exercisable on behalf of the Debtors' estates by NewSCC,
and provided further, that certain claims arising under
section 547 of the Bankruptcy Code which were delegated or
assigned to the Creditors' Committee by Order of the
Bankruptcy Court dated July 10, 1995 shall remain the
Creditors' Committee's (to the extent it continues in
existence as set forth in Section 14.4 hereof, after the
Effective Date) responsibility to prosecute, settle, withdraw
or release on behalf of the Debtors' estate. This Joint Plan
does not contain any restrictions or prohibitions on the
conduct of the business of NewSCC. NewSCC may use, operate and
deal with its assets, and may conduct and change its
businesses, without any supervision by the Bankruptcy Court or
the Office of the United States Trustee, and free of any
restrictions imposed on the Debtors by the Bankruptcy Code or
by the Bankruptcy Court during the Chapter 11 Case.
12.10. Authority to Implement. The Debtors are hereby
authorized to take all necessary steps, and perform all
necessary acts, to consummate the terms and conditions of this
Joint Plan, including, without limitation, the mergers
referred to in Section 12.2 of this Joint Plan and the
issuance of the NewSCC Common Stock, the NewSCC Warrants and
the rights under and pursuant to the Rights Agreement as
contemplated by this Joint Plan.
12.11. No Injunctive Relief. No Claim shall under any
circumstances be entitled to specific performance or other
injunctive, equitable or other prospective relief.
ARTICLE 13.
CONDITIONS PRECEDENT TO
CONFIRMATION AND THE EFFECTIVE DATE
13.1. Conditions to Confirmation of this Joint Plan. The
confirmation of this Joint Plan shall be subject to the
satisfaction of the following conditions precedent; provided,
however, that any of such conditions may be waived by the
mutual agreement of the Debtors and the Creditors' Committee:
(a) The Bankruptcy Court shall have entered an order (which
may be the Confirmation Order) approving the substantive
consolidation of the Debtors' estates.
(b) A commitment letter with respect to the NewSCC Credit
Agreement shall have been delivered by the applicable lending
institution.
(c) The Debtors' motion under section 505 of the Bankruptcy
Code with respect to its tax liability to the United States
shall have been resolved.
13.2. Effectiveness of this Joint Plan. The effectiveness
of this Joint Plan, and the occurrence of the Effective Date,
shall be subject to the satisfaction of the following
conditions precedent:
(a) The Confirmation Order shall have been entered, shall
not have been modified or altered in any way, and no stay of
the Confirmation Order shall be in effect.
(b) The Bankruptcy Court shall have entered an order (which
may be the Confirmation Order) approving the substantive
consolidation of the Debtors' estates and no stay of such
order shall be in effect.
(c) The Bankruptcy Court shall have entered an order (which
may be the Confirmation Order) estimating or determining the
aggregate amount of unliquidated Claims, which order shall be
binding for determination of the amount of Reserved Claims,
and no stay of such order shall be in effect.
(d) The closing under the NewSCC Credit Agreement shall
have occurred or be ready to occur subject only to the
occurrence of the Effective Date.
ARTICLE 14.
MISCELLANEOUS PROVISIONS
14.1. Modification of Payment Terms. NewSCC reserves the
right to modify the treatment of any Allowed Claim in any
manner adverse only to the holder of such Claim at any time
after the Effective Date upon the written consent of the
Creditor whose Allowed Claim treatment is being adversely
affected.
14.2. Cancellation of Securities. As of the Effective
Date, all previously issued and outstanding securities of the
Debtors, including without limitation: (i) all SCC Common
Stock, (ii) all OSI Common Stock, (iii) all SCCLI Common Stock
and (iv) all Hulse Common Stock, shall be deemed void,
canceled, and of no further force or effect, without any
further action on the part of any Person.
14.3. Discharge of Debtors. The consideration distributed
under this Joint Plan shall be in exchange for and in complete
satisfaction, discharge, release, and termination of, all
Claims of any nature whatsoever against any Debtor or any of
its assets or properties and all Equity Interests in any
Debtor; and except as otherwise provided herein, upon the
Effective Date (i) each Debtor shall be deemed discharged and
released pursuant to section 1141(d)(1)(A) of the Bankruptcy
Code from any and all Claims, including but not limited to
demands and liabilities that arose before the Confirmation
Date, all Stockholder Actions as they relate to such Debtor,
and all debts of the kind specified in section 502(g), 502(h)
or 502(i) of the Bankruptcy Code, whether or not (a) a proof
of claim based upon such debt is filed or deemed filed under
section 501 of the Bankruptcy Code; (b) a Claim based upon
such debt is allowed under section 502 of the Bankruptcy Code;
or (c) the holder of a Claim based upon such debt has accepted
this Joint Plan, and (ii) all rights and interests of holders
of Equity Interests in each Debtor shall be terminated
pursuant to section 1141(d)(1)(B) of the Bankruptcy Code;
provided that nothing contained in this Joint Plan or the
Confirmation Order shall discharge obligations, if any, of the
Debtors pursuant to Section 2.16 of the Chemical DIP Loan
Agreement. The Confirmation Order shall be a judicial
determination of discharge and termination of all liabilities
of and all Claims against, and all Equity Interests in, each
Debtor, except as otherwise specifically provided in this
Joint Plan. On the Confirmation Date, as to every discharged
debt, Claim and Equity Interest, the Creditor or Equity
Interest holder that held such debt, Claim or Equity Interest
shall be permanently enjoined and precluded from asserting
against NewSCC, or against its assets or properties or any
transferee thereof, 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 Confirmation Date, except as expressly
set forth in this Joint Plan. In the event that, after the
Confirmation Date, any Person asserts, against NewSCC or any
of its subsidiaries or affiliates, any right to payment or
equitable remedy for breach of performance which gives rise to
a right of payment, which right was not asserted prior to the
Confirmation Date but is based on any act, fact, event,
occurrence, or omission, by or relating to any of the Debtors,
as such Debtors existed before the Confirmation Date, and in
the further event that such right is determined by a court of
competent jurisdiction not to have been discharged pursuant to
the provisions of Bankruptcy Code section 1141 and this Joint
Plan, and that such right may be asserted against NewSCC then,
in such circumstances the holder of such right shall be
entitled to receive from NewSCC value equivalent to the value
such holder would have received if such right had been
asserted against such Debtor before the Confirmation Date and
only to the extent such right would have been allowed or
allowable as a Claim. Nothing in this Section shall have the
effect of excepting from discharge any Claim which is or would
be discharged pursuant to Bankruptcy Code section 1141 or this
Joint Plan.
14.4. Post-Effective Date Creditors' Committee.
(a) The Creditors' Committee will continue in existence
from and after the Effective Date and shall have standing to
appear and be heard in proceedings before the Bankruptcy
Court, and shall be deemed a "party in interest" within the
meaning of section 1109(b) of the Bankruptcy Code, with
respect to and for the limited purpose of, (i) participating
in or responding to any appeals of or motions to withdraw,
modify or revoke this Joint Plan or the Confirmation Order, as
applicable, or any other order made in furtherance of the
implementation or confirmation of this Joint Plan, (ii)
participating in all proceedings to determine any and all
applications for allowances of compensation and reimbursement
of expenses and other fees and expenses authorized to be paid
or reimbursed under the Bankruptcy Code or this Joint Plan,
including, but not limited to, claims for substantial
contribution under section 503(b) of the Bankruptcy Code,
(iii) investigating, asserting and prosecuting, in the name
and on behalf of the Debtors, any Avoidance Action against the
Banks in connection with the Bank Prepetition Agreements, (iv)
participating in any proceedings with respect to the
termination of any SCC Retirement Plan and the determination
or resolution of any Claims relating thereto and (v)
participating in or responding to any actions or proceedings
in which the Creditors' Committee is a party after the
Effective Date, to the extent the Creditors' Committee is not
permitted to withdraw from such action or proceeding by the
Bankruptcy Court, upon motion or otherwise.
(b) After the Effective Date, the Creditors' Committee
shall have no powers or duties other than those referred to in
this Joint Plan except that the Creditors' Committee may
perform such other functions as are consistent with winding up
its functions and discharging its duties to holders of General
Unsecured Claims.
(c) After the Effective Date, the Creditors' Committee
initially shall consist of three members, who shall initially
be selected by majority vote of the existing Creditors'
Committee prior to the Effective Date. The presence of two of
such members (in person or by telephone) shall be necessary to
constitute a quorum. Meetings of such committee may be called
by any of its members or its counsel on such notice and in
such manner as such member or counsel may deem advisable. Such
committee shall function by decisions made by majority vote or
consent of such members. The Creditors' Committee so
continuing in existence after the Effective Date may adopt
by-laws to the extent not inconsistent with this Joint Plan.
(d) Members of the Creditors' Committee continuing in
existence after the Effective Date will be compensated for
their reasonable and necessary expenses incurred in the
performance of their duties from and after the Effective Date,
and the reasonable and necessary fees and expenses of the
professionals retained by such committee for such period will
be paid, as provided in Section 14.9 hereof. The reasonable
and necessary fees and expenses of professionals retained by
such committee for such period will be paid (at such
professionals' respective customary rates) promptly upon
presentation of appropriate invoices to NewSCC except as
specifically provided below. Such payment and reimbursement of
fees and expenses shall be subject to determination and
allowance by the Bankruptcy Court if NewSCC, such committee or
the Banks object to any such fees and expenses, provided that
any undisputed portion of such fees and expenses shall be
timely paid upon the request of such committee.
(e) In the event of the death or resignation of a member of
the Creditors' Committee so continuing in existence after the
Effective Date, the remaining members may designate a
successor from among the holders of Allowed General Unsecured
Claims in his or her place. Unless and until such vacancy is
filled, such committee shall function with such reduced
membership.
(f) In the event a Creditor whose representative on the
Creditors' Committee in existence after the Effective Date
should assign its General Unsecured Claims or release the
reorganized Debtors from further distribution on such Claims,
such assignment or release shall constitute the resignation of
such Creditor from such committee. Until such vacancy on such
committee is filled, such committee shall function by action
of its remaining members.
(g) Neither the Creditors' Committee in existence after the
Effective Date nor the firms nor the corporations represented
by them, nor any of its members, nor any of its employees or
agents, shall in any way be responsible for any acts or for
the acts of any of its members, employees or agents, in the
performance of their duties as members of such committee,
except that each of them shall be personally responsible for
his, her or its own acts of gross negligence or willful
misconduct. NewSCC shall indemnify the Creditors' Committee in
existence after the Effective Date, its members and its
professional advisors from and against any and all
liabilities, expenses, claims, damages or losses incurred by
them as a direct result of acts or omissions taken by them in
good faith in their capacities as members of such committee,
to the fullest extent that a Delaware corporation is from time
to time entitled to indemnify its directors and officers;
provided, however, that if any Person so indemnified is
determined by Final Order of a court to have any liability for
any claim or cause of action arising from an actual fraud (but
not constructive fraud) or willful misconduct of any such
Person, such Person shall not be indemnified for any such
liabilities, expenses, claims, damages or losses as to which
it is so determined to be liable, and such Person shall
reimburse NewSCC for any amounts that NewSCC previously
advanced in connection with such liabilities, expenses,
claims, damages or losses; provided, further, if a court has
determined by Final Order that the amounts of fees, expenses
or other costs incurred by such Person in connection with any
such liabilities, expenses, claims, damages or losses
(regardless of whether such liabilities, expenses, claims,
damages or losses arise from an actual fraud or willful
misconduct of such Person) are unreasonable, such Person shall
reimburse NewSCC such amounts so determined to be
unreasonable.
(h) Upon substantial completion of its functions as
designated herein, the Creditors' Committee shall be dissolved
pursuant to a Final Order.
14.5. Filing of Additional Documents. On or before the
Effective Date, the Debtors shall file with the Bankruptcy
Court such agreements and other documents as may be necessary
or appropriate to effectuate and further evidence the terms
and conditions of this Joint Plan and the other agreements
referred to herein.
14.6. Compliance with Tax Requirements. In connection with
this Joint Plan, the Debtors and NewSCC shall comply with all
withholding and reporting requirements imposed by federal,
state, local and foreign taxing authorities and all
distributions hereunder shall be subject to such withholding
and reporting requirements.
14.7. Setoffs. Each Debtor and NewSCC may (if it is in the
best interests of the Debtors' estates), but shall not be
required to, set off or recoup against any Claim claims of any
nature whatsoever which such Debtor or NewSCC may have against
the holder of such Claim to the extent such claim may be set
off or recouped under applicable law, but neither the failure
to do so nor the allowance of any Claim hereunder shall
constitute a waiver or release by such Debtor or NewSCC of any
such claim that it may have against such holder.
14.8. Retiree Benefits; Benefit Plans. All Retiree
Benefits shall continue from and immediately after the
Effective Date at the levels established pursuant to section
1114(e)(1)(B) or (g) of the Bankruptcy Code, at any time prior
to the Confirmation Date, to the extent that the Debtors have
obligated themselves to provide Retiree Benefits at such
levels. NewSCC reserves the right to modify, amend, freeze or
terminate such Retiree Benefits to the full extent permitted
by law.
14.9. Payment of Certain Expenses by NewSCC. (a) Any
payments due to the Creditors' Committee continuing in
existence after the Effective Date, the professionals retained
by it and the members of such Creditors' Committee pursuant to
Section 14.4(d) hereof, shall be paid by NewSCC as follows:
(i) with respect to the prosecution of any Avoidance Actions
against the Banks with respect to the Bank Prepetition
Agreements, an aggregate amount of up to $650,000, less any
amounts accrued by or paid to the Creditors' Committee, the
professionals retained by it and its members from and after
July 5, 1995 with respect to such prosecution prior to the
Effective Date; (ii) with respect to actions under Section
14.4(a)(v) hereof, an unlimited amount; and (iii) with respect
to all other fees and expenses, an aggregate amount of up to
$150,000.
(b) NewSCC shall assume responsibility for the payment of
all fees and expenses of professionals retained by the Debtors
accruing following the Confirmation Date and all fees and
expenses of professionals retained by the Creditors' Committee
accruing following the Confirmation Date through the Effective
Date.
14.10. Section Headings. The section headings contained in
this Joint Plan are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Joint
Plan.
14.11. Waiver. The Debtors reserve the right, in their
sole discretion, to waive any provision of this Plan to the
extent such provision is for the sole benefit of the Debtors
and/or their officers or directors.
ARTICLE 15.
PROVISIONS FOR EXECUTION AND
SUPERVISION OF THIS JOINT PLAN
15.1. Retention of Jurisdiction. From and after the Effective
Date, the Bankruptcy Court shall retain and have exclusive
jurisdiction over the Chapter 11 Case for the following purposes:
(a) to determine any and all objections to the allowance of
Claims;
(b) to determine any and all applications for the rejection,
assumption, or assumption and assignment, as the case may be, of
executory contracts or unexpired leases to which any of the
Debtors is a party or with respect to which any of the Debtors
may be liable, and to hear and determine, and if need be to
liquidate, any and all Claims arising therefrom;
(c) to determine any and all applications for the
determination of any priority of any Claim including Claims
arising from any event that occurred prior to the Petition Date
or from the Petition Date through the Effective Date and for
payment of any alleged Administrative Claim, Priority Tax Claim,
Priority Wage Claim, Secured Claim or Reclamation Claim;
(d) to determine any and all applications, motions, adversary
proceedings and contested or litigated matters that may be
pending on the Effective Date;
(e) to determine all controversies, suits and disputes that
may arise in connection with the interpretation, enforcement or
consummation of this Joint Plan or in connection with the
obligations of the Debtors, NewSCC and the Creditors' Committee
under this Joint Plan, and to enter such orders as may be
necessary or appropriate to implement any distributions to
holders of Allowed General Unsecured Claims;
(f) to consider any modification, remedy any defect or
omission, or reconcile any inconsistency in this Joint Plan or
any order of the Bankruptcy Court, including the Confirmation
Order, all to the extent authorized by the Bankruptcy Code;
(g) to issue such orders in aid of execution of this Joint
Plan to the extent authorized by section 1142 of the Bankruptcy
Code;
(h) to determine such other matters as may be set forth in the
Confirmation Order or as may arise in connection with this Joint
Plan or the Confirmation Order;
(i) to hear and determine any claim or controversy of any
nature arising from or in connection with any agreement made a
part of this Joint Plan; and to enter such orders as may be
appropriate to enforce, modify, interpret or effectuate such
agreements;
(j) to determine any suit or proceeding brought by the
Creditors' Committee or NewSCC, on behalf of the Debtors'
estates, to (a) recover property under section 542, 543 or 553 of
the Bankruptcy Code or to avoid any transfer or obligation under
section 522(f), 522(h), 544, 545, 547, 548, 549 or 724(a) of the
Bankruptcy Code or (b) otherwise collect or recover on account of
any claim or cause of action that any of the Debtors may have;
(k) to consider and act on the compromise and settlement of
any Claim against or cause of action by or against the Debtors'
estates;
(l) to estimate Claims pursuant to section 502(c) of the
Bankruptcy Code;
(m) to hear and determine any dispute or controversy relating
to any Allowed Claim or any Claim alleged or asserted by any
Person to be an Allowed Claim;
(n) to supervise the activities of the Creditors' Committee
following the Effective Date;
(o) to determine any and all applications for allowances of
compensation and reimbursement of expenses and any other fees and
expenses authorized to be paid or reimbursed under the Bankruptcy
Code or this Joint Plan, including, to the extent provided in
Section 14.4(d) of this Joint Plan, any such allowances or
reimbursement sought for or on behalf of the Creditors'
Committee; and
(p) to administer and enforce the injunctions contained in
Sections 12.3 and 14.3 of this Joint Plan, and any related
injunction or decree contained in the Confirmation Order.
15.2. Amendment of Joint Plan. This Joint Plan may be amended
by the Debtors before or after the Effective Date and by NewSCC
thereafter as provided in section 1127 of the Bankruptcy Code.
15.3. Revocation of Joint Plan. The Debtors reserve the right
to revoke and withdraw this Joint Plan prior to entry of the
Confirmation Order. If the Debtors revoke or withdraw this Joint
Plan, then this Joint Plan shall be deemed null and void and
nothing contained herein shall be deemed to constitute a waiver
or release of any Claims by or against the Debtors or any other
person or to prejudice in any manner the rights of the Debtors or
any person in any further proceedings involving the Debtors.
15.4. Implementation. The Debtors shall be authorized to take
all necessary steps, and perform all necessary acts, to
consummate the terms and conditions of this Joint Plan,
including, without limitation, any transaction contemplated by
the disclosure statement approved by the Bankruptcy Court.
Nothing contained in this Section shall be construed to prohibit,
limit, restrict, or condition the Debtors' authority in any
lawful manner to sell or otherwise dispose of any other assets.
Dated: September 6, 1996
Respectfully submitted,
SMITH CORONA CORPORATION
By: /s/ Ronald F. Stengel
________________________________________________________________________________
Name: Ronald F. Stengel
Title: President and CEO
SCM OFFICE SUPPLIES, INC.
By: /s/ John A. Piontkowski
________________________________________________________________________________
Name: John A. Piontkowski
Title: President
SCC LI CORP.
By: /s/ John A. Piontkowski
__________________________
Name: John A. Piontkowski
Title: President
HULSE MANUFACTURING COMPANY
By: /s/ John A. Piontkowski
__________________________
Name: John A. Piontkowski
Title: President
Schedule 1.4
ASSUMED AGREEMENTS
[Download Table]
Reference Contract Counterparty Number
---------------------------------------------- --------------
1.Computer Associates Int'l 503189, 503193,
503192, 503300,
503190, 503194
2.ADT Security Systems 104-0691
3.Amer. Mailing Equip 2163541
4.American Software (A/R Software
MIS Maintenance) --
5.American Software (Tailored
System MIS Maintenance) --
6.AMP, Inc 502185
7.AMP, Inc 503218
8.AMP, Inc 502994
9.AMP, Inc 503480
10.AMP, Inc 503217
11.AMP, Inc 502185
12.AMP, Inc 502944
13.AMP, Inc 502941
14.AMP, Inc 502940
15.AMP, Inc 502705
16.AMP, Inc 503345
17.AMP, Inc 502693
18.AMP, Inc 502945
19.Ascom Hasler Mailing System 136877-001
20.Ascom Hasler Mailing System 137853-011
21.ASR Systems Group SA0241
22.AT&T Capital Serv. Corp 2011768, 1903855
23.Autosplice Division 502447, 503516
24.Bell Atlantic Business Systems 33343806
25.Bell Atlantic Business Systems 3842265
26.Bell Atlantic Business Systems 0191806
27.Berwind Realty, S.E. (Puerto
Rico Facility Lease) --
28.Carrier Building Systems 575022
29.CGI Systems 503508
30.CGI(Copics) 503508,502069
31.Clark Equipment Credit Co SDI-0917
32.Clark Equipment Credit Co SDI-0917
33.Clark Equipment Credit Co SDI-938
34.Clarklift 575073
35.Com Source 503497
36.Computer Asset Group Inc 103
37.Computer Asset Group Inc 103
38.Computer Associates International 000-5076-00
39.Computer Associates International
(Computer Equipment Leases) --
40.Computer Associates Int'l 131619-002
41.Computer Associates Int'l 215701-002
42.Computer Associates Int'l 131622-001
43.Computer Associates Int'l SCC88267/13
44.Computer Associates Int'l 215701-001
45.Computer Associates Int'l 000-5076-000
46.Computer Associates Int'l SCMC 83273/1
47.Computer Facilities Tech 503495
48.Copy Machine Supply 502449
49.Copy Machine Supply 502978
50.Copy Machine Supply 503413
51.Copy Machine Supply 503231
52.Copy Machine Supply 503008
53.Copy Machine Supply 503529
54.Copy Machine Supply 503459
55.Copy Machine Supply 503458
56.Copy Machine Supply 503232
57.Copy Machine Supply 503028
58.Copy Machine Supply 502521
59.Copy Machine Supply 502521
60.Copy Machine Supply 503145
61.Copy Machine Supply 503400
62.Copy Machine Supply 503148
63.Copy Machine Supply 503404
64.Copy Machine Supply 503160
65.Copy Machine Supply 503007
66.Copy Machine Supply 503197
67.Copy Machine Supply 503170
68.Copy Machine Supply 502778
69.Copy Machine Supply 600182
70.Data Design Associates 068442
71.Data Design Associates 068442
72.Data I/O Corp RJF950126132
73.DeLuxe Leasing Inc 503322
74.Diamond Page Int'l Corp 502895
75.Diamond Page Int'l Corp 600144
76.Diamond Page Int'l Corp 502894
77.Diamond Page Int'l Corp 503022
78.Ditek International (Base License
Fee) 502747
79.Eastman Kodak Co FPQ8638
80.Financial Data Planning FDP1463.A878
81.GE Capital Corp 4048673-002
82.GE Capital Corp 6497115
83.GE Information Services 503425
84.Hewlitt Packard Co 4144-83799
85.HM Holdings, Inc. (Tax Sharing
and Indemnification Agreement) --
86.Houghton Mifflin Company(License Fees) 502771
87.IBM 8348812-00/1
88.IBM License(Royalty License/Agreement) --
89.Immediate Mailing Service 503426
90.Infosoft(Software License) --
91.Ladderman 503348
92.Ladderman Associates 503348
93.Landis & Gyr Powers, Inc 550-PB-1109
94.Levi, Ray & Shoup, Inc 600142
95.Livingston Trade Tech 600181
96.Material Handling Products 503414
97.MCI International/WUI Inc 75390591
98.Microlytics (Software License) --
99.Miller Info.Processing Service L-5070
100.Miller Info.Processing Service L-5070
101.Miller Info.Processing Service L-5070
102.Miller Info.Processing Service L-5070
103.Miller Info.Processing Service L-5070
104.Miller Info.Processing Service L-5070
105.Miller Info.Processing Service L-5070
106.Monroe Extinguisher Co 503110
107.MOS Leasing 79176
108.Onondaga Litho Supply, Co 502891
109.Pitney Bowes,Inc 500687
110.Pitney Bowes, Inc 4909776
111.PSI Software Inc 503416
112.PSI Software,Inc 503416
113.Pureflo Water 402723
114.QRS 503281
115.R.G. Data, Inc 5-050-293
116.Remco Business Products 502596
117.Renewable Resources (Distribution
Agreement) --
118.Riverside Fire Extinguisher 503339
119.Rockport Trade Systems 503491
120.Samsung Corp.(Label Printer
Purchase Agreement) --
121.Southwest Yale Material Handling 575045
122.Southwest Yale Material Handling 575075
123.Standard Register K407150128
124.Supersoft Inc. License --
125.Syncsort Inc.(License Agreement) 502862
126.Terry Co 503359
127.Uarco, Inc P-16353
128.Vicom, Inc 05209202
129.Xerox Corporation L15862
130.Xerox Corporation 402416
131.Xerox Corporation 655838/655739
132.Xerox Corporation 503487
133.Yale Financial Services 5322665
134.Yale Financial Services 5323741-001
135.Yale Financial Services 402708
136.Z-Axis --
Schedule 1.49
[FORM OF NEWSCC WARRANT AGREEMENT]
________________________________________________________________________________
WARRANT AGREEMENT
between
SMITH CORONA CORPORATION
and
[ ],
as Warrant Agent
_______________
Dated as of [ ], 1996
________________________________________________________________________________
TABLE OF CONTENTS
Page
Section 1.Definitions W-1
Section 2.Form of Warrant; Execution; Registration W-2
2.1 Form of Warrant; Execution of Warrants W-2
2.2 Registration W-2
2.3 Countersignature of Warrants W-2
Section 3.Transfer and Exchange of Warrants W-3
Section 4.Term of Warrants; Exercise of Warrants;
Compliance with Government Regulations;
Restrictions on Transfer; Reduction of
Exercise Price W-3
4.1 Term of Warrants W-3
4.2 Exercise of Warrants W-3
4.3 Compliance with Government Regulations;
Qualification under the Securities Laws W-4
4.4 Restrictions on Transfer W-4
4.5 Reduction of Exercise Price W-6
Section 5.Payment of Taxes W-6
Section 6.Mutilated or Missing Warrant Certificates W-6
Section 7.Reservation of Warrant Shares W-6
Section 8.Stock Exchange Listing W-7
Section 9.Adjustment of Exercise Price; Number of
Warrant Shares and Shares of Capital Stock
Warrants Are Exercisable Into W-7
9.1 Mechanical Adjustments W-7
(a) Adjustment for Change in Capital Stock W-7
(b) Adjustment for Rights Issue W-7
(c) Adjustment for Other Distributions W-8
(d) Current Market Price; Price Per Share W-8
(e) When De Minimis Adjustment May Be
Deferred W-8
(f) Adjustment in Exercise Price W-9
(g) When No Adjustment Required W-9
(h) Shares of Common Stock W-9
(i) Expiration of Rights W-9
9.2 Voluntary Adjustment by the Company W-9
9.3 Notice of Adjustment W-9
9.4 Preservation of Purchase Rights upon Merger or
Consolidation W-10
9.5 No Adjustment for Dividends W-10
9.6 Statement on Warrants W-10
Section 10. Fractional Interests W-10
Section 11. No Rights as Stockholders; Notices to
Holders W-10
Section 12. Payments in U.S. Currency W-11
Section 13. Merger or Consolidation or Change of
Name of Warrant Agent W-11
Section 14. Appointment of Warrant Agent W-11
14.1 Concerning the Warrant Agent W-11
14.2 Correctness of Statements W-11
14.3 Breach of Covenants W-12
14.4 Performance of Duties W-12
14.5 Reliance on Counsel W-12
14.6 Proof of Actions Taken W-12
14.7 Compensation W-12
14.8 Legal Proceedings W-12
14.9 Other Transactions in Securities of Company W-12
14.10 Liability of Warrant Agent W-12
14.11 Reliance on Documents W-13
14.12 Validity of Agreement W-13
14.13 Instructions from Company W-13
Section 15. Change of Warrant Agent W-13
Section 16. Notices W-13
Section 17. Cancellation of Warrants W-13
Section 18. Supplements and Amendments W-14
Section 19. Successors W-14
Section 20. Applicable Law W-14
Section 21. Benefits of this Agreement W-14
Section 22. Counterparts W-14
Section 23. Captions W-14
EXHIBIT A FORM OF WARRANT CERTIFICATE
WARRANT AGREEMENT, dated as of [ ], 1996, by and
between SMITH CORONA CORPORATION, a Delaware corporation (the
"Company"), and [ ,] as Warrant Agent (together with
any successors and assigns, the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company was a Debtor and Debtor-in-Possession in
the case (the "Chapter 11 Case") filed in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"), entitled "In re Smith Corona Corporation, SCM Office
Supplies, Inc., SCC LI Corp. and Hulse Manufacturing Company,
Debtors," Chapter 11 Case No. 95-788 (HSB), under the Bankruptcy
Reform Act of 1978, as amended (the "Bankruptcy Code");
WHEREAS, in connection with and as part of the transactions to
be consummated pursuant to the confirmation of the Company's
Third Amended Second Joint Plan of Reorganization (as amended,
modified or supplemented from time to time) in the Chapter 11
Case (the "Plan"), the Company has agreed to issue Warrants for
the purchase of an aggregate of [ ] shares of Common
Stock of the Company (subject to adjustment as herein provided)
(the "Warrants");
WHEREAS, by Order dated , 1996, the Bankruptcy
Court confirmed the Plan;
WHEREAS, the Plan contemplates that the Company will enter into
this Warrant Agreement;
WHEREAS, the Company desires to issue the Warrants, each of
which entitles the holder thereof to purchase one share of its
Common Stock (each of said shares of Common Stock deliverable
upon exercise of the Warrants a "Warrant Share"); and
WHEREAS, the Company wishes the Warrant Agent to act on behalf
of the Company, and the Warrant Agent is willing to so act in
connection with the issuance, division, transfer, exchange and
exercise of Warrants.
NOW, THEREFORE, in consideration of the foregoing, to implement
the terms of the Plan, and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and
obligations thereunder of the Company and the registered owners
of the Warrants and any security into which they may be exchanged
(the "Holders"), the Company and the Warrant Agent hereby agree
as follows:
Section 1. Definitions. The following terms, as used herein,
have the following meanings (all terms defined herein in the
singular to have the correlative meanings when used in the plural
and vice versa):
1.1 "Agreement" means this Warrant Agreement, as the same may
be amended, modified or supplemented from time to time.
1.2 "Assets" has the meaning ascribed to such term in Section
9.1(c) hereof.
1.3 "Bankruptcy Code" has the meaning ascribed to such term in
the preamble hereto.
1.4 "Bankruptcy Court" has the meaning ascribed to such term
in the preamble hereto.
1.5 "Business Day" means a day other than (a) a Saturday or
Sunday, (b) any day on which banking institutions located in the
City of New York, New York are required or authorized by law or
by local proclamation to close or (c) any day on which the New
York Stock Exchange is closed.
1.6 "Commercially Reasonable Efforts" when used with respect
to any obligation to be performed or term or provision to be
observed hereunder, means such efforts as a prudent Person
seeking the benefits of such performance or action would make,
use, apply or exercise to preserve, protect or advance its rights
or interests, provided, that such efforts do not require such
Person to incur a material financial cost or a substantial risk
of material liability unless such cost or liability (i) would
customarily be incurred in the course of performance or
observance of the relevant obligation, term or provision, (ii) is
caused by or results from the wrongful act or negligence of the
Person whose performance or observance is required hereunder or
(iii) is not excessive or unreasonable in view of the rights or
interests to be preserved, protected or advanced. Such efforts
may include, without limitation, the expenditure of such funds
and retention by such Person of such accountants, attorneys or
other experts or advisors as may be necessary or appropriate to
effect the relevant action; and the undertaking of any special
audit or internal investigation that may be necessary or
appropriate to effect the relevant action.
1.7 "Common Stock" means the common stock, par value $.001, of
the Company.
1.8 "Current Market Price" has the meaning ascribed to such
term in Section 9.1(d) hereof.
1.9 "Effective Date" has the meaning ascribed to such term in
the Plan.
1.10 "Exercise Period" has the meaning ascribed to such term
in Section 4.1 hereof.
1.11 "Exercise Price" means $[ ] per share of
Common Stock, as such amount may be reduced pursuant to Section
4.5 hereof and as adjusted pursuant to Section 9 hereof.
1.12 "Holders" has the meaning ascribed to such term in the
preamble hereto.
1.13 "NASD" means the National Association of Securities
Dealers, Inc.
1.14 "Number of Shares" has the meaning ascribed to such term
in Section 9.1(d)(ii) hereof.
1.15 "Person" means a natural person, a corporation, a
partnership, a trust, a joint venture, any regulatory authority
or any other entity or organization.
1.16 "Plan" has the meaning ascribed to such term in the
preamble hereto.
1.17 "Price Per Share" has the meaning ascribed to such term
in Section 9.1(d)(ii) hereof.
1.18 "Proceeds" has the meaning ascribed to such term in
Section 9.1(d)(ii) hereof.
1.19 "Rights" has the meaning ascribed to such term in Section
9.1(b) hereof.
1.20 "SEC" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority
thereto.
1.21 "Subsidiary" means any corporation or other legal entity
a majority of the voting equity or equity interests of which are
owned, directly or indirectly, by the Company.
1.22 "Transfer Agent" has the meaning ascribed to such term in
Section 7 hereof.
1.23 "Warrants" has the meaning ascribed to such term in the
preamble hereto.
1.24 "Warrant Certificates" has the meaning ascribed to such
term in Section 2.1 hereof.
1.25 "Warrant Register" has the meaning ascribed to such term
in Section 2.2 hereof.
1.26 "Warrant Share" has the meaning ascribed to such term in
the preamble hereto.
Section 2. Form of Warrant; Execution; Registration.
2.1 Form of Warrant; Execution of Warrants. The
certificates evidencing the Warrants (the "Warrant
Certificates") shall be in registered form only, shall be in
the form set forth as Exhibit A hereto, and shall bear such
legends as the Company shall determine may be required to
conform to or provide compliance with any applicable federal
or state securities law, either generally or with respect to
particular Holders. The Warrant Certificates shall be signed
on behalf of the Company by its Chairman of the Board,
President or one of its Vice Presidents. The signature of any
such officer on the Warrant Certificates may be manual or by
facsimile. Any Warrant Certificate may be signed on behalf of
the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate. Each
Warrant Certificate shall be dated the date it is
countersigned by the Warrant Agent pursuant to Section 2.3
hereof.
2.2 Registration. The Warrant Certificates shall be
numbered and shall be registered on the books of the Company
maintained at the principal office of the Warrant Agent
initially in [ ] (or such other place in the
continental United States as the Warrant Agent shall from time
to time notify the Company and the Holders in writing) (the
"Warrant Register") as they are issued. The Company and the
Warrant Agent shall be entitled to treat the registered owner
of any Warrant as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other
claim to or interest in such Warrant on the part of any other
person.
2.3 Countersignature of Warrants. The Warrant Certificates
shall be countersigned by the Warrant Agent and shall not be
valid for any purpose unless so countersigned. Warrant
Certificates may be countersigned, however, by the Warrant
Agent and may be delivered by the Warrant Agent
notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company
shall have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent
shall, upon written instructions of the Chairman of the Board,
the President, any Vice President, the Treasurer or the
Secretary of the Company, countersign, issue and deliver
Warrant Certificates entitling the Holders thereof to purchase
not more than an aggregate of [ ] Warrant Shares
(subject to adjustment pursuant to Section 9 hereof) and shall
countersign, issue and deliver Warrant Certificates as
otherwise provided in this Agreement.
Section 3. Transfer and Exchange of Warrants. Subject to
the terms hereof, the Warrant Agent shall initially
countersign, register in the Warrant Register and deliver
Warrants hereunder in accordance with the written instructions
of the Company. Subject to the terms hereof and the receipt of
such documentation as the Warrant Agent may reasonably
require, the Warrant Agent shall thereafter from time to time
register the transfer of any outstanding Warrants upon the
records to be maintained by it for that purpose, upon
surrender of the Warrant Certificate or Certificates
evidencing such Warrants duly endorsed or accompanied (if so
required by it) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Warrant Agent,
duly executed by the registered Holder or Holders thereof or
by the duly appointed legal representative thereof or by a
duly authorized attorney. Subject to the terms of this
Agreement, each Warrant Certificate may be exchanged for
another Warrant Certificate or Certificates entitling the
Holder thereof to purchase a like aggregate number of Warrant
Shares as the Warrant Certificate or Certificates surrendered
then entitles such Holder to purchase. Any Holder desiring to
exchange a Warrant Certificate or Certificates shall make such
request in writing delivered to the Warrant Agent, and shall
surrender, duly endorsed or accompanied (if so required by the
Warrant Agent) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Warrant Agent,
the Warrant Certificate or Certificates to be so exchanged.
Upon registration of transfer, the Company shall issue and the
Warrant Agent shall countersign and deliver by certified mail
a new Warrant Certificate or Certificates to the persons
entitled thereto.
No service charge shall be made for any exchange or
registration of transfer of a Warrant Certificate or of
Warrant Certificates, but the Company may require payment of a
sum sufficient to cover any stamp tax or other tax or other
governmental charge that is imposed in connection with any
such exchange or registration of transfer pursuant to Section
5 hereof.
By accepting the initial delivery, transfer or exchange of
Warrants, each Holder shall be deemed to agree to the terms of
this Agreement as it may be in effect from time to time,
including any amendments or supplements duly adopted in
accordance with Section 18 hereof.
Section 4. Term of Warrants; Exercise of Warrants;
Compliance with Government Regulations; Restrictions on
Transfer; Reduction of Exercise Price.
4.1 Term of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right, which may be
exercised at any time during the period commencing at 9:00
a.m., New York City time, on the date occurring six (6) months
after the Effective Date and ending at 5:00 p.m., New York
City time, on the date occurring two (2) years after the
Effective Date (the "Exercise Period"), to receive from the
Company the number of Warrant Shares which the Holder may at
the time be entitled to receive upon exercise of such Warrants
and payment of the Exercise Price then in effect for such
Warrant Shares, and the Warrant Shares issued to a Holder upon
exercise of its Warrants shall be duly authorized, validly
issued, fully paid, nonassessable and shall not have been
issued in violation of or subject to any preemptive rights.
Each Warrant not exercised prior to the expiration of the
Exercise Period shall become void, and all rights thereunder
and all rights in respect thereof under this Agreement shall
cease as of the expiration of the Exercise Period.
4.2 Exercise of Warrants. During the Exercise Period, each
Holder may, subject to this Agreement, exercise from time to
time some or all of the Warrants evidenced by its Warrant
Certificate(s) by (i) surrendering to the Company at the
principal office of the Warrant Agent such Warrant
Certificate(s) with the form of election to purchase on the
reverse thereof duly filled in and signed, which signature
shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or
dealer which is a member of a registered securities exchange
or the NASD, and (ii) paying to the Warrant Agent for the
account of the Company the Exercise Price, for the number of
Warrant Shares in respect of which such Warrants are
exercised. Warrants shall be deemed exercised on the date such
Warrant Certificate(s) are surrendered to the Warrant Agent
and tender of payment of the Exercise Price is made. Payment
of the aggregate Exercise Price shall be made in cash by wire
transfer of immediately available funds to the Warrant Agent
for the account of the Company or by certified or official
bank check or checks to the order of the Company or by any
combination thereof.
Upon the exercise of any Warrants in accordance with this
Agreement, the Company shall issue and cause to be delivered
with all reasonable dispatch, to or upon the written order of
the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of
full Warrant Shares issuable upon the exercise of such
Warrants and shall take such other actions at its sole expense
as are necessary to complete the exercise of the Warrants
(including, without limitation, payment of any cash with
respect to fractional interests required under Section 10
hereof). The Warrant Agent shall have no responsibility or
liability for such issuance or the determination of the number
of Warrant Shares issuable upon such exercise. The certificate
or certificates representing such Warrant Shares shall be
deemed to have been issued and any person so designated to be
named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date the Warrants are
exercised hereunder. Each Warrant Share, when issued upon
exercise of the Warrants, shall be duly authorized, validly
issued, fully paid and nonassessable and will not have been
issued in violation of or subject to any preemptive rights.
In the event that less than all of the Warrants evidenced by
a Warrant Certificate are exercised, the Holder thereof shall
be entitled to receive a new Warrant Certificate or
Certificates as specified by such Holder evidencing the
remaining Warrant or Warrants, and the Warrant Agent is hereby
irrevocably authorized by the Company to countersign, issue
and deliver the required new Warrant Certificate or
Certificates evidencing such remaining Warrant or Warrants
pursuant to the provisions of this Section 4.2 hereof and of
Section 3 hereof. The Company, whenever required by the
Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such
purpose.
Upon delivery of the Warrant Shares issuable upon exercise
in accordance herewith and of any required new Warrant
Certificates, the Company shall direct the Warrant Agent by
written order to cancel the Warrant Certificates surrendered
upon exercise. Such canceled Warrant Certificates shall then
be disposed of by the Warrant Agent in a manner permitted by
applicable laws and satisfactory to the Company in accordance
with its written instructions to the Warrant Agent. The
Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the
Company all amounts received by the Warrant Agent upon
exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for
inspection by the Holders during normal business hours at its
office. The Company shall at its sole expense supply the
Warrant Agent from time to time with such numbers of copies of
this Agreement as the Warrant Agent may request.
4.3 Compliance with Government Regulations; Qualification
under the Securities Laws. The Company covenants that if the
shares of Common Stock required to be reserved for purposes of
exercise of Warrants require, under any federal or state law,
registration with or approval of any governmental authority
before such shares may be issued upon exercise, the Company
will, unless the Company has received an opinion of counsel to
the effect that such registration is not then permitted by
such laws, use its Commercially Reasonable Efforts to cause
such shares to be duly so registered or approved, as the case
may be; provided that in no event shall such shares of Common
Stock be issued, and the exercise of all Warrants shall be
suspended, for the period during which such registration or
approval is required but not in effect; provided, further,
that the Exercise Period shall be extended one day for each
day (or portion thereof) that any such suspension is in
effect. The Company shall promptly notify the Warrant Agent of
any such suspension, and the Warrant Agent shall have no duty,
responsibility or liability in respect of any shares of Common
Stock issued or delivered prior to its receipt of such notice.
The Company shall promptly notify the Warrant Agent of the
termination of any such suspension, and such notice shall set
forth the number of days that the Exercise Period shall be
extended as a result of such suspension. The foregoing
provisions of this Section 4.3 shall not require that the
Company effect or obtain any such registration or approval of
Warrant Shares in order to allow the resale or transfer
thereof by any Person that may be an underwriter for purposes
of Section 1145 of the Bankruptcy Code.
4.4 Restrictions on Transfer. (a) Article IV, Section 5 of
the Company's Restated Certificate of Incorporation provides
that:
Until June 30, 1999, (a) any attempted sale, transfer,
assignment, conveyance, grant, pledge, gift or other
disposition of any share or shares of stock of the Company
(within the meaning of Section 382 of the Internal Revenue
Code of 1986, as amended (the "Tax Code")) or any option or
right to purchase such stock, as defined in the Treasury
Regulations under Section 382 of the Tax Code, to any person
or entity (or group of persons or entities acting in concert),
or any attempted exercise of the aforementioned option or
right to purchase such stock by any person or entity (or group
of persons or entities acting in concert), who either directly
or indirectly owns or would be treated as owning, or whose
shares are or would be attributed to any person or entity who
directly or indirectly owns or would be treated as owning, in
either case prior to the purported transfer or exercise and
after giving effect to the applicable attribution rules of the
Tax Code and applicable Treasury Regulations, 5 percent or
more of the value of the outstanding stock of the Company or
otherwise treated as a 5-percent (5%) shareholder (within the
meaning of Section 382 of the Tax Code), regardless of the
percent or the value of the stock owned, shall be void ab
initio insofar as it purports to transfer ownership or rights
in respect of such stock to the purported transferee and (b)
any attempted sale, transfer, assignment, conveyance, grant,
gift, pledge or other disposition of any share of stock of the
Company (within the meaning of Section 382 of the Tax Code) or
any option or right to purchase such stock, as defined in the
Treasury Regulations under Section 382 of the Tax Code, to any
person or entity (or group of persons or entities acting in
concert) or any attempted exercise of the aforementioned
option or right to purchase such stock by any person or entity
(or group of persons or entities acting in concert) not
described in clause (a) who directly or indirectly would own,
or whose shares would be attributed to any person or entity
who directly or indirectly would own, in each case as a result
of the purported transfer or exercise and after giving effect
to the applicable attribution rules of the Tax Code and
applicable Treasury Regulations, 5-percent (5%) or more of the
value of any of the stock of the Company (or otherwise treated
as a 5-percent (5%) shareholder within the meaning of Section
382 of the Tax Code), shall, as to that number of shares
causing such person or entity to be a 5-percent (5%)
shareholder, be void ab initio insofar as it purports to
transfer ownership or rights in respect of such stock to the
purported transferee; provided, however, if the Company either
does not qualify under Section 382(l)(5) of the Tax Code or
chooses to make an election under Section 382(l)(5)(H) of the
Tax Code (or the applicable provision then in effect) not to
have the provisions of Section 382(l)(5) of the Tax Code
apply, the restrictions described above in clauses (a) and (b)
shall be deemed to lapse and shall have no further force or
effect as of the earlier of the date the Company is aware that
it does not qualify under Section 382(l)(5) of the Tax Code
and the date of such election; provided further, however, that
neither of the restrictions described above in the foregoing
clauses (a) or (b) shall prevent a valid transfer or exercise
if (i) the transferor or exercisor, as the case may be,
obtains the written approval of the Board of Directors of the
Company and provides the Company with an opinion of counsel
satisfactory to the Company that, assuming, as of the date of
such opinion, the full exercise of all warrants issued by, and
any options granted pursuant to any stock option plan of, the
Company, the transfer or exercise shall not result in the
application of any tax law limitation on the use of the
Company's loss carryforwards or other tax attributes or (ii) a
tender offer, within the meaning of the Securities Exchange
Act of 1934, as amended, and pursuant to the rules and
regulations thereof, is made by a bona fide third party
purchaser to purchase at least sixty-six and two thirds
percent (66 2/3%) of the issued and outstanding common stock
of the Company and the offeror (A) agrees to effect, within
ninety (90) days of the consummation of the tender offer, a
back-end merger in which all non-tendering shareholders would
receive the same consideration as paid in the tender offer,
and (B) has received the tender of sufficient shares to effect
such merger. Without limiting or restricting in any manner the
effectiveness of the foregoing provisions, the Company may
rely and shall be protected in relying on its shareholder
lists and stock transfer records for all purposes relating to
such notices, voting, payment of dividend or other
communication or distributions to its shareholders.
In the absence of special approval by the Board of
Directors, a purported transfer or exercise of shares in
excess of the shares that can be transferred or exercised
pursuant to this Section 5 (the "Prohibited Shares") to the
purported acquiror (the "Purported Acquiror") is not effective
to transfer ownership of such Prohibited Shares. On demand by
the Company, which demand must be made within thirty (30) days
of the time the Company learns of the transfer or exercise of
the Prohibited Shares, a Purported Acquiror must transfer any
certificate or other evidence of ownership of the Prohibited
Shares within the Purported Acquiror's possession or control,
together with any dividends or other distributions
("Distributions") that were received by the Purported Acquiror
from the Company with respect to the Prohibited Shares, to an
agent designated by the Company (the "Agent"). The Agent will
sell the Prohibited Shares in an arm's length transaction
(over a stock exchange, if possible), and the Purported
Acquiror will receive an amount of sales proceeds not in
excess of the price paid or consideration surrendered by the
Purported Acquiror for the Prohibited Shares (or the fair
market value of the Prohibited Shares at the time of any
attempted transfer to the Purported Acquiror by gift,
inheritance, or a similar transfer). If the Purported Acquiror
has sold the Prohibited Shares prior to receiving the
Company's demand to surrender the Prohibited Shares to the
Agent, the Purported Acquiror shall be deemed to have sold the
Prohibited Shares as an Agent for the initial transferor, or,
in the case where the Prohibited Shares are acquired pursuant
to the exercise of an option or right to purchase stock of the
Company, for the Company, and shall be required to transfer to
the Agent any proceeds of such sale and any Distributions.
In the case of an attempted exercise of an option or a right
to purchase stock of the Company, the Agent will pay to the
Company any sales proceeds in excess of those due to the
Purported Acquiror, together with any distributions received
by the Agent. In all other cases, if the initial transferor
can be identified, the Agent will pay to it any sales proceeds
in excess of those due to the Purported Acquiror, together
with any distributions received by the Agent. If the initial
transferor cannot be identified within ninety (90) days of
receipt of such sales proceeds, if any, the Agent may pay any
such amounts to a charity of its choosing. In no event shall
amounts paid to the Agent inure to the benefit of the Company
(except as set forth in the first sentence of this paragraph)
or the Agent, but such amounts may be used to cover expenses
of the Agent in attempting to identify the initial transferor.
If the Purported Acquiror fails to surrender the Prohibited
Shares within the next thirty (30) business days from the
demand by the Company, then the Company may institute legal
proceedings to compel the surrender. The Company shall be
entitled to damages, including reasonable attorneys' fees and
costs, from the Purported Acquiror, on account of such
purported transfer.
(b) Legend. Until June 30, 1999, all Warrant Certificates
shall bear a conspicuous legend on the face thereof as
follows:
"THESE WARRANTS AND THE WARRANT SHARES ACQUIRED UPON
EXERCISE OF THE WARRANTS REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS PURSUANT TO ARTICLE IV, SECTION 5 OF THE
RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY WHICH
ARTICLE IS REPRINTED IN ITS ENTIRETY ON THE REVERSE SIDE OF
THIS CERTIFICATE."
4.5 Reduction of Exercise Price. The Exercise Price shall
be subject to reduction at the election of the Board of
Directors of the Company, made not earlier than thirty (30)
days, and not later than twenty (20) days, prior to the first
day of the Exercise Period, if the Board of Directors shall
determine, in its sole discretion, that changes in the total
amounts of estimated Unsecured Class Cash and of General
Unsecured Claims that may be Allowed Claims or Reserved Claims
(such terms being used herein as defined in the Plan) from the
amounts thereof estimated in connection with the confirmation
of the Plan make such reduction advisable, provided that the
Board of Directors shall have no obligation to make any such
determination or to elect that the Exercise Price be so
reduced, and each Holder agrees, by its acceptance of a
Warrant, that it shall not have any claim against the Company
or any of its directors or officers in respect of the matters
provided for in this Section 4.5. If the Exercise Price is to
be reduced pursuant to the foregoing provisions, the Company
shall give notice thereof to the Warrant Agent not later than
fifteen (15) days prior to the first day of the Exercise
Period, and the Warrant Agent shall mail to each Holder not
later than ten (10) days prior to the first day of the
Exercise Period notice of such reduction, specifying the
Exercise Price as so reduced.
Section 5. Payment of Taxes. The Company will pay all
documentary stamp and other like taxes, if any, attributable
to the initial issuance and delivery of the Warrants and the
initial issuance and delivery of the Warrant Shares upon the
exercise of Warrants, provided, that the Company shall not be
required to pay any tax or taxes which may be payable in
respect of any transfer of the Warrants or involved in the
issuance or delivery of any Warrant Shares in a name other
than that of the Holder of the Warrants being exercised, and
the Warrant Agent shall not register any such transfer or
issue or deliver any Warrant Certificate(s) or Warrant Shares
unless or until the persons requesting the registration or
issuance shall have paid to the Warrant Agent for the account
of the Company the amount of such tax, if any, or shall have
established to the reasonable satisfaction of the Company that
such tax, if any, has been paid.
Section 6. Mutilated or Missing Warrant Certificates. In
the event that any Warrant Certificate shall be mutilated,
lost, stolen or destroyed, the Company shall issue, and at the
direction of the Company by written order the Warrant Agent
shall countersign and deliver in exchange and substitution for
and upon cancellation of the mutilated Warrant Certificate or
in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only
upon receipt of evidence reasonably satisfactory to the
Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and an indemnity or
bond, if requested by the Company or the Warrant Agent, also
reasonably satisfactory to them. An applicant for such a
substitute Warrant Certificate shall also comply with such
other reasonable procedures as the Company or the Warrant
Agent may reasonably require.
Section 7. Reservation of Warrant Shares. There have been
reserved, and the Company shall at all times keep reserved,
out of its authorized Common Stock, free of all preemptive
rights, a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented
by the outstanding Warrants. The transfer agent for the Common
Stock and every subsequent or other transfer agent for any
shares of the Company's capital stock issuable upon the
exercise of the Warrants (each, a "Transfer Agent") will be
and are hereby irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of
this Agreement on file with each Transfer Agent. The Warrant
Agent is hereby irrevocably authorized to requisition from
time to time from the Company or a Transfer Agent, as the case
may be, the certificates for Warrant Shares required to honor
outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply its
Transfer Agents with duly executed stock certificates for such
purposes and will itself provide or otherwise make available
any cash which may be payable as provided in Section 10
hereof. The Company will furnish to its Transfer Agents a copy
of all notices of adjustments and certificates related
thereto, transmitted to each Holder pursuant to Section 9.3
hereof. The Company will give the Warrant Agent prompt notice
of any change in any Transfer Agent or any change of address
of any Transfer Agent.
Before taking any action which would cause an adjustment
pursuant to Section 9 reducing the Exercise Price, the Company
will take any and all corporate action which may be necessary
in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares at the Exercise Price as
so adjusted.
Section 8. Stock Exchange Listing. The Company shall use
its Commercially Reasonable Efforts (including requests for
waivers) to have the Warrant Shares listed on such stock
exchange, if any, or included in such national quotation
system, if any, on which the outstanding Common Stock is
listed or included for quotation and to maintain such listing
or inclusion for so long as the outstanding Common Stock is so
listed or included. Any such listing and inclusion shall be at
the Company's sole expense.
Section 9. Adjustment of Exercise Price; Number of Warrant
Shares and Shares of Capital Stock Warrants Are Exercisable
Into. The number and kind of securities purchasable upon the
exercise of each Warrant, and the Exercise Price, shall be
subject to adjustment from time to time upon the happening of
certain events, as hereinafter described.
9.1 Mechanical Adjustments. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Exercise
Price shall be subject to adjustment as follows:
(a) Adjustment for Change in Capital Stock. Subject to
paragraphs (e) and (g) below, in case the Company shall (i)
pay a dividend on its outstanding shares of Common Stock in
shares of Common Stock or make a distribution of shares of
Common Stock on its outstanding shares of Common Stock, (ii)
make a distribution on its outstanding shares of Common Stock
in shares of its capital stock other than Common Stock, (iii)
subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iv) combine its
outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (v) issue, by reclassification of
its shares of Common Stock, other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving
entity), then the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Holder of each Warrant shall be entitled
to receive the kind and number of Warrant Shares or other
securities of the Company which such Holder would have owned
or have been entitled to receive upon the happening of any of
the events described above had such Warrant been exercised in
full immediately prior to the happening of such event or any
record date with respect thereto. If a Holder is entitled to
receive shares of two or more classes of capital stock of the
Company pursuant to the foregoing upon exercise of Warrants,
the allocation of the adjusted Exercise Price between such
classes of capital stock shall be determined reasonably and in
good faith by the Board of Directors of the Company. After
such allocation, the exercise privilege and the Exercise Price
with respect to each class of capital stock shall thereafter
be subject to adjustment on terms substantially identical to
those applicable to Common Stock in this Section 9. An
adjustment made pursuant to this paragraph (a) shall become
effective immediately after the record date for such event or,
if none, immediately after the effective date of such event.
Such adjustment shall be made successively whenever such an
event occurs.
(b) Adjustment for Rights Issue. Subject to paragraphs (e)
and (g) below, in case the Company shall issue rights, options
or warrants (collectively, "Rights") to all holders of its
outstanding Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a Price Per Share which is
lower at the record date mentioned below than the then Current
Market Price per share of Common Stock, the number of Warrant
Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon exercise of each
Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of
issuance of such Rights plus the additional Number of Shares
of Common Stock offered for subscription or purchase in
connection with such Rights and the denominator of which shall
be the number of shares of Common Stock outstanding on the
date of issuance of such Rights plus the number of shares
which the aggregate Proceeds received or receivable by the
Company upon exercise of such Rights would purchase at the
Current Market Price per share of Common Stock at such record
date. Such adjustment shall be made whenever Rights are
issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to
receive Rights.
(c) Adjustment for Other Distributions. Subject to
paragraphs (e) and (g) below, in case the Company shall
distribute to all holders of its shares of Common Stock (x)
evidences of indebtedness or assets (excluding cash dividends
or distributions payable out of the consolidated earnings or
surplus legally available for such dividends or distributions
and dividends or distributions referred to in paragraphs (a)
or (b) above) of the Company or any Subsidiary, or (y) shares
of capital stock of a Subsidiary (such evidences of
indebtedness, assets and securities as set forth in clauses
(x) and (y) above, collectively, "Assets"), then in each case
the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, the numerator of which
shall be the Current Market Price per share of Common Stock on
the date of such distribution and the denominator of which
shall be such Current Market Price per share of Common Stock
less the fair value as of such record date as determined
reasonably and in good faith by the Board of Directors of the
Company of the portion of the Assets applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Current Market Price; Price Per Share. (i) For the
purpose of any computation under Section 4.2 hereof or this
Section 9.1, the "Current Market Price" per share of Common
Stock at any date shall be the average of the daily closing
prices for the 20 consecutive trading days preceding the date
of such computation. The closing price for each day shall be
(x) if the Common Stock shall be then listed or admitted to
trading on the New York Stock Exchange, the closing price on
the NYSE-Consolidated Tape (or any successor composite tape
reporting transactions on the New York Stock Exchange) or, if
such a composite tape shall not be in use or shall not report
transactions in the Common Stock, or if the Common Stock shall
be listed on a stock exchange other than the New York Stock
Exchange, the last reported sales price regular way or, in
case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of the Common
Stock have been traded during such 20 consecutive trading
days) or (y) if the Common Stock is not listed or admitted to
trading, the average of the closing sale prices as reported by
the NASDAQ National Market System or, if the Common Stock is
not included on such system, the average of the closing bid
and asked prices of the Common Stock in the over-the-counter
market as reported by any system maintained by the NASD or any
comparable system or, if the Common Stock is not included for
quotation in any such system, the average of the closing bid
and asked prices as furnished by two members of the NASD
selected reasonably and in good faith from time to time by the
Board of Directors for that purpose. In the absence of one or
more such quotations, the Current Market Price per share of
the Common Stock shall be determined reasonably and in good
faith by the Board of Directors of the Company.
(ii) For purposes of this Section 9.1, "Price Per Share"
shall be defined and determined according to the following
formula:
P = R/N
where
P = Price Per Share;
R = the "Proceeds" received or receivable by the Company in
respect of Rights which shall be the total amount
received or receivable by the Company in consideration
for the issuance and sale of such Rights plus the
aggregate amount of additional consideration payable to
the Company upon exercise thereof; provided that the
proceeds received or receivable by the Company shall be
the net cash proceeds after deducting therefrom any
compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or
dealers or others performing similar services; and
N = the "Number of Shares," which in the case of Rights is
the maximum number of shares of Common Stock initially
issuable upon exercise thereof.
(e) When De Minimis Adjustment May Be Deferred. No
adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%)
in the number of Warrant Shares purchasable upon the
exercise of each Warrant, provided that any adjustments
which by reason of this paragraph (e) are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the
nearest one-thousandth of a Warrant Share and the nearest
cent.
(f) Adjustment in Exercise Price. Whenever the number of
Warrant Shares purchasable upon the exercise of each Warrant
is adjusted as herein provided, the Exercise Price payable
upon exercise of each Warrant immediately prior to such
adjustment shall be adjusted by multiplying such Exercise
Price by a fraction, the numerator of which shall be the
number of Warrant Shares purchasable upon the exercise of
each Warrant immediately prior to such adjustment and the
denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(g) When No Adjustment Required. No adjustment in the
number of Warrant Shares purchasable upon the exercise of
each Warrant need be made under this Section 9.1 in
connection with the issuance of Common Stock, options,
rights, warrants or other securities pursuant to the Plan or
the Rights Agreement approved by the Bankruptcy Court.
Additionally, no adjustment need be made if the Company
issues or distributes to each Holder of Warrants the shares,
rights, options, warrants, evidences of indebtedness, assets
or other securities referred to in this Section 9.1 which
each Holder of Warrants would have been entitled to receive
had the Warrants been exercised for the number of Warrant
Shares for which Warrants are then exercisable prior to the
happening of such event or the record date with respect
thereto. No adjustment in the number of Warrant Shares will
be made for a change in the par value of the shares of
Common Stock.
(h) Shares of Common Stock. For all purposes of this
Agreement, the term "shares of Common Stock" shall mean (i)
the class of stock designated as the Common Stock of the
Company at the date of this Agreement or (ii) any other
class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes
in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9.1,
the Holders shall become entitled to purchase any securities
of the Company other than shares of Common Stock, thereafter
the number of such other shares so purchasable upon exercise
of each Warrant and the Exercise Price of such shares shall
be subject to adjustment from time to time in a manner and
on terms substantially identical to the provisions with
respect to the Warrant Shares contained in paragraphs (a)
through (g) above, and the provisions of this Agreement with
respect to the Warrant Shares shall apply on like terms to
any such other securities.
(i) Expiration of Rights. Upon the expiration of any
Rights, if any thereof shall not have been exercised, the
Exercise Price and the number of Warrant Shares purchasable
upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such as it
would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be)
as if (A) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon
the exercise of such Rights and (B) such shares of Common
Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the
Company for the issuance of all of such Rights whether or
not exercised, provided that no such readjustment shall have
the effect of increasing the Exercise Price or decreasing
the number of Warrant Shares purchasable upon the exercise
of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect of the issuance of such
Rights.
9.2 Voluntary Adjustment by the Company. The Company may
at its option, at any time during the term of the Warrants,
reduce the then current Exercise Price to any amount deemed
appropriate by the Board of Directors of the Company.
9.3 Notice of Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of each Warrant or the
Exercise Price of Warrant Shares is adjusted, as herein
provided (except pursuant to Section 4.5 hereof), the Company
shall cause the Warrant Agent promptly to mail to each Holder,
at the sole expense of the Company by first class mail,
postage prepaid, notice of such adjustment or adjustments and
shall deliver to the Warrant Agent a certificate of a firm of
independent public accountants (who may be the regular
accountants employed by the Company) setting forth the number
of Warrant Shares purchasable upon the exercise of each
Warrant and the Exercise Price of Warrant Shares after such
adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth in reasonable
detail the computations by which such adjustment was made. The
Warrant Agent shall be entitled to rely on such certificate
and shall be under no duty or responsibility with respect to
any such certificate, except to exhibit the same, from time to
time, to any Holder requesting an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holder to
determine whether any facts exist which may require any
adjustment of the Exercise Price or the number of Warrant
Shares or other stock or property purchasable on exercise of
Warrants, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed
in making such adjustment.
9.4 Preservation of Purchase Rights upon Merger or
Consolidation. In case of any consolidation of the Company
with or merger of the Company into another entity, the Company
or such successor entity shall execute and deliver to the
Warrant Agent an agreement, which shall be binding on the
Holders, that each Holder shall have the right thereafter upon
payment of the Exercise Price in effect immediately prior to
such action (after giving effect to any applicable adjustments
under Section 9.1 hereof) to purchase upon exercise of each
Warrant the kind and amount of shares and other securities and
property (including cash) which such Holder would have owned
or have been entitled to receive after the happening of such
consolidation or merger had such Warrant been exercised
immediately prior to such action. The Company shall at its
sole expense mail by first class mail, postage prepaid, to
each Holder notice of the execution of any such agreement.
Such agreement shall provide for adjustments, which shall be
substantially identical to the adjustments provided for in
this Section 9. In addition, the Company shall not merge or
consolidate with or into any other entity unless the successor
entity (if not the Company) shall expressly assume, by
supplemental agreement reasonably satisfactory in form and
substance to the Warrant Agent in its sole judgment and
executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant
and condition of this Agreement to be performed and observed
by the Company. The provisions of this Section 9.4 shall
similarly apply to successive consolidations or mergers. The
Warrant Agent shall be under a good faith duty and
responsibility to determine the correctness of any provisions
contained in any such agreement relating to the kind or amount
of shares of stock or other securities or property receivable
upon exercise of Warrants or with respect to the method
employed and provided therein for any adjustments and shall be
entitled to rely upon the provisions contained in any such
agreement.
9.5 No Adjustment for Dividends. Except as expressly
provided in Section 9.1 hereof, no adjustment in respect of
any dividend shall be made during the term of a Warrant or
upon exercise of a Warrant.
9.6 Statement on Warrants. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the
same Exercise Price and number and kind of Warrant Shares as
are stated in the Warrants initially issuable pursuant to this
Agreement.
Section 10. Fractional Interests. Neither the Company nor
the Warrant Agent shall be required to issue fractional
Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised at the same time by the same
Holder, the number of full Warrant Shares which shall be
issuable upon such exercise shall be computed on the basis of
the aggregate number of Warrants so exercised. If any fraction
of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of any Warrant, the
Company shall pay an amount in cash equal to the closing price
for one share of Common Stock on the date the Warrant
Certificate is presented for exercise (determined in
accordance with the second sentence of Section 9.1(d)(i)
hereof), multiplied by such fraction.
Section 11. No Rights as Stockholders; Notices to Holders.
Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders or their
transferees the right to vote or to receive dividends or to
consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as
stockholders of the Company.
In case:
(a) the Company shall authorize the issuance to all
holders of shares of Common Stock of rights, options or
warrants to subscribe for or purchase shares of Common Stock
or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of securities or assets
(other than cash dividends); or
(c) of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the
Company is required, or of the conveyance or transfer of a
substantial portion of the properties and assets of the
Company for which approval of any stockholders of the
Company is required, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of
a subdivision or combination), or a tender offer or exchange
offer by the Company for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed with the Warrant
Agent and shall cause to be given to each Holder at its
address appearing on the Warrant Register, at least twenty
(20) days prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there
is no record date, by first class mail, postage prepaid, a
written notice stating (i) the date as of which the holders of
record of shares of Common Stock entitled to receive any such
rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in
any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or
consummated, as well as the date as of which it is expected
that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution,
liquidation, or winding up. The failure to give the notice
required by this Section 11 or any defect therein shall not
affect the legality or validity of any distribution, right,
option, warrant, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, winding up or
action, or the vote upon any of the foregoing.
Section 12. Payments in U.S. Currency. All payments
required to be made hereunder shall be made in lawful money of
the United States of America.
Section 13. Merger or Consolidation or Change of Name of
Warrant Agent. Any corporation into which the Warrant Agent
may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation
succeeding to the corporation trust business of the Warrant
Agent, shall be the successor to the Warrant Agent hereunder
without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 15
hereof. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement,
any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and
deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not
have been countersigned, any successor to the Warrant Agent
may countersign such Warrant Certificates either in the name
of the predecessor Warrant Agent or in the name of the
successor Warrant Agent; and in all such cases such Warrant
Certificates shall be fully valid and effective as provided
therein and in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall
have been countersigned but not delivered, the Warrant Agent
may adopt the countersignatures under its prior name and
deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not
have been countersigned, the Warrant Agent may countersign
such Warrant Certificates either in its prior name or in its
changed name; and in all such cases such Warrant Certificates
shall be fully valid and effective as provided therein and in
this Agreement.
Section 14. Appointment of Warrant Agent. The Company
hereby appoints the Warrant Agent to act as agent for the
Company hereunder and in accordance with the terms and
conditions hereof, and the Warrant Agent hereby accepts such
appointment.
14.1 Concerning the Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of
which the Company and the Holders, by their acceptance of
Warrant Certificates, shall be bound:
14.2 Correctness of Statements. The statements contained
herein and in the Warrant Certificates shall be taken as
statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except
such as describe the Warrant Agent or action taken by it. The
Warrant Agent assumes no responsibility with respect to the
distribution of the Warrant Certificates or Warrants except as
herein otherwise provided.
14.3 Breach of Covenants. The Warrant Agent shall not be
responsible for any failure of the Company to comply with any
of the covenants contained in this Agreement or in the Warrant
to be complied with by the Company.
14.4 Performance of Duties. The Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or through
its attorneys or agents and shall not be responsible for the
misconduct or negligence of any attorney or agent (which shall
not include an employee of the Warrant Agent) appointed with
due care.
14.5 Reliance on Counsel. The Warrant Agent may consult at
any time with legal counsel satisfactory to it (who may be
counsel for the Company), and the Warrant Agent shall incur no
liability or responsibility to the Company or to any Holder in
respect to any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or
the advice of such counsel.
14.6 Proof of Actions Taken. Whenever in the performance
of its duties under this Agreement the Warrant Agent shall
deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically
prescribed) may be deemed conclusively to be proved and
established by a certificate signed by the Chairman of the
Board, the President, a Vice President, the Treasurer or the
Secretary of the Company and delivered to the Warrant Agent;
and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon
such certificate.
14.7 Compensation. The Company agrees to pay the Warrant
Agent reasonable compensation for all services rendered by the
Warrant Agent in the performance of its duties under this
Agreement, to reimburse the Warrant Agent for all reasonable
expenses, taxes and governmental charges and other charges of
any kind and nature reasonably incurred by the Warrant Agent
in the performance of its duties under this Agreement
(including but not limited to legal fees and expenses), and to
indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and counsel
fees, for anything done or omitted by the Warrant Agent or any
of its agents in the performance of its duties under this
Agreement, except as a result of the Warrant Agent's
negligence or willful misconduct as determined in a final
judgment of a court of competent jurisdiction and authority.
The Company's obligations under this Section 14.7 and any
claim arising hereunder shall survive the resignation or
removal of the Warrant Agent and the termination or discharge
of the Company's obligations under this Agreement.
14.8 Legal Proceedings. The Warrant Agent shall be under
no obligation to institute any action, suit or legal
proceeding or to take any other action likely to involve
expense unless the Company or any one or more Holders shall
furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred or
any liabilities which may arise, but this provision shall not
affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without
any such security or indemnity. All rights of action of any
Holder under this Agreement or under any of the Warrants may
be enforced by the Warrant Agent without the possession of any
of the Warrant Certificates or the production thereof at any
trial or other proceeding relative thereto, and any such
action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent, and any
recovery of judgment shall be for the ratable benefit of the
Holders, as their respective rights or interests may appear.
14.9 Other Transactions in Securities of Company. The
Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of
the Warrants or any other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested or contract with or lend money to the
Company or otherwise act as fully and freely as though it were
not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity
for the Company or for any other legal entity.
14.10 Liability of Warrant Agent. The Warrant Agent shall
act hereunder solely as agent, and its duties shall be
determined solely by the provisions hereof. Notwithstanding
any provision in this Agreement to the contrary, the Warrant
Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except
for its own negligence or bad faith.
14.11 Reliance on Documents. The Warrant Agent will not
incur any liability or responsibility to the Company or to any
Holder for any action taken in reliance on any notice,
resolution, waiver, consent, order, certificate, or other
paper, document or instrument reasonably believed by it to be
genuine and to have been signed, sent or presented by the
proper party or parties.
14.12 Validity of Agreement. The Warrant Agent shall not
be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due
execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant Certificate (except its
countersignature thereof) or any Warrant; nor shall the
Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or
reservation of any Warrant Shares (or other securities) to be
issued pursuant to this Agreement or any Warrant, or as to
whether any Warrant Shares (or other securities) will, when
issued, be validly issued, fully paid and nonassessable, or as
to the Exercise Price or the number or amount of Warrant
Shares or other securities or any Assets or other property
issuable upon exercise of any Warrant.
14.13 Instructions from Company. The Warrant Agent is
hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from the
Chairman of the Board, the President, a Vice President, the
Treasurer or the Secretary of the Company, and to apply to
such officers for advice or instructions in connection with
its duties, and shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with
instructions of any such officer or officers.
Section 15. Change of Warrant Agent. The Warrant Agent may
resign and be discharged from its duties under this Agreement
by giving to the Company thirty (30) days' prior notice in
writing. The Warrant Agent may be removed by like notice to
the Warrant Agent and the Holders from the Company, such
notice to specify the date when removal shall become
effective. If the Warrant Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of thirty (30)
days after such removal or notification in writing of such
resignation or incapacity by the resigning or incapacitated
Warrant Agent or by any Holder (who shall with such notice
submit his Warrant Certificate or Certificates for inspection
by the Company), then any Holder may apply to any court of
competent jurisdiction for the appointment of a successor to
the Warrant Agent. Any successor Warrant Agent, whether
appointed by the Company or such a court, shall be a bank or
trust company, in good standing, incorporated under the laws
of the United States of America or any state thereof and
having at the time of its appointment as Warrant Agent a
combined capital and surplus of at least $100,000,000. After
appointment and acceptance of such appointment in writing, the
successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed;
but the former Warrant Agent shall deliver and transfer to the
successor Warrant Agent any property at the time held by it
hereunder, and shall execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.
Failure to file any notice provided for in this Section 15,
however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Warrant Agent
or the appointment of the successor Warrant Agent, as the case
may be. In the event of such resignation or removal, the
successor Warrant Agent shall mail, by first class mail,
postage prepaid, to each Holder, written notice of such
removal or resignation and the name and address of such
successor Warrant Agent.
Section 16. Notices. Any notice pursuant to this Agreement
by the Company or by any Holder to the Warrant Agent, or by
the Warrant Agent or by any Holder to the Company, shall be in
writing and shall be delivered in person or by facsimile
transmission, or mailed first class, postage pre-paid, (a) to
the Company, at its offices at 65 Locust Avenue, New Canaan,
Connecticut 06840, Attention: , Telecopier No.:
(203) 972-4226, or (b) to the Warrant Agent, at its offices at
, Attention:
, Telecopier No.: . Each party hereto
may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice to the
other party.
Any notice mailed pursuant to this Agreement by the Company
or the Warrant Agent to the Holders shall be in writing and
shall be mailed first class, postage prepaid, or otherwise
delivered, to such Holders at their respective addresses in
the Warrant Register. The initial address of each Holder shall
be as provided by the Company to the Warrant Agent. Any Holder
may change its address by notice to the Company and the
Warrant Agent given in accordance with this Section 16.
Section 17. Cancellation of Warrants. In the event the
Company shall purchase or otherwise acquire Warrants, the same
shall thereupon be delivered to the Warrant Agent and be
canceled by it and retired. The Warrant Agent shall cancel any
Warrant certificate surrendered for exchange, substitution,
transfer or exercise in whole or in part.
Section 18. Supplements and Amendments. The Company and
the Warrant Agent may from time to time supplement or amend
this Agreement, the Warrants and the Warrant Certificates
without approval of any Holder, in order to cure any ambiguity
or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other
provision herein, or to comply with the requirements of any
national securities exchange or The Nasdaq National Market
System (including but not limited to the deletion of Section
9.2), or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant
Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and this
Agreement. Any other supplement or amendment to this Agreement
may be made with the approval of the Holders of a majority of
the then outstanding Warrants; provided, however, that any
such amendment or supplement that (i) increases the Exercise
Price; (ii) decreases the number of shares of Common Stock
issuable upon exercise of a Warrant; or (iii) shortens the
period during which the Warrants may be exercised, shall
require the consent of each Holder of a Warrant affected
thereby.
Section 19. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the
Warrant Agent shall bind and inure to the benefit of the
Company or the Warrant Agent and shall bind and inure to the
benefit of their respective successors hereunder.
Section 20. Applicable Law. This Agreement and each
Warrant issued hereunder shall be governed by and construed in
accordance with the laws of the State of Delaware without
giving effect to the principles of conflict of laws thereof.
Section 21. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the
Holders any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent, their
respective successors and the Holders of the Warrants.
Section 22. Counterparts. This Agreement may be executed
in any number of counterparts; each of such counterparts shall
for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
Section 23. Captions. The captions of the Sections and
subsections of this Agreement have been inserted for
convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year
first above written.
SMITH CORONA CORPORATION
By: ---------------------------------------
Name:
Title:
[ ---------------------------------------],
as Warrant Agent
By: ---------------------------------------
Name:
Title:
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THESE WARRANTS AND THE WARRANT SHARES ACQUIRED UPON EXERCISE OF
THE WARRANTS REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS
PURSUANT TO ARTICLE IV, SECTION 5 OF THE RESTATED CERTIFICATE OF
INCORPORATION OF THE COMPANY WHICH ARTICLE IS REPRINTED IN ITS
ENTIRETY ON THE REVERSE SIDE OF THIS CERTIFICATE.
No. ________________________ ________________________
Warrants
Warrant Certificate
SMITH CORONA CORPORATION
This Warrant Certificate certifies that , or
registered assigns, is the registered holder of
Warrants (the "Warrants") expiring at 5:00 p.m., New York City
time, on (the "Expiration Date"), to purchase Common
Stock, $.001 par value per share (the "Common Stock"), of SMITH
CORONA CORPORATION, a Delaware corporation (the "Company"). The
Warrants may be exercised at any time from 9:00 a.m., New York
City time, on to 5:00 p.m., New York City time, on
the Expiration Date. Each Warrant entitles the holder upon
exercise to receive from the Company, if exercised before 5:00
p.m., New York City time, on the Expiration Date, one fully paid
and nonassessable share of Common Stock (a "Warrant Share") at
the Exercise Price (as defined in the Warrant Agreement referred
to on the reverse side hereof), payable in lawful money of the
United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or
agency of the Warrant Agent, but only subject to the conditions
set forth herein and in the Warrant Agreement. The Exercise Price
and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain
events as set forth in the Warrant Agreement.
WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., NEW YORK CITY
TIME, ON , SHALL BECOME VOID.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof, and such
further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the
Warrant Agreement.
IN WITNESS WHEREOF, SMITH CORONA CORPORATION has caused this
Warrant Certificate to be duly executed.
SMITH CORONA CORPORATION
By:
_________________________________________________________________
Title:
Dated:
_________________________________________________________________
Countersigned:
[ ---------------------------------------],
as Warrant Agent
By:
_________________________________________________________________
Authorized Signatory
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring on the Expiration
Date entitling the holder on exercise to receive shares of Common
Stock of the Company and are issued or to be issued pursuant to a
Warrant Agreement dated as of , 1996 (the "Warrant
Agreement"), duly executed and delivered by the Company to [
], as Warrant Agent (the "Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made
a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the
Company and the holders (the words "holders" or "holder" meaning
the registered holders or registered holder) of the Warrants. A
copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. By accepting initial
delivery, transfer or exchange of this Warrant, the duly
registered holder shall be deemed to have agreed to the terms of
the Warrant Agreement as it may be in effect from time to time,
including any amendments or supplements duly adopted in
accordance therewith.
The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with
the form of election to purchase set forth hereon properly
completed and executed, together with payment of the Exercise
Price in the manner described below at the office of the Warrant
Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the
total number of Warrants evidenced hereby, there shall be issued
to the holder hereof or its assignee a new Warrant Certificate
evidencing the number of Warrants not exercised.
Payment of the Exercise Price may be made in cash by wire
transfer to the Warrant Agent for the account of the Company or
by certified or official bank check or checks to the order of the
Company or by any combination thereof.
The Warrant Agreement provides that upon the occurrence of
certain events the number of shares of Common Stock issuable upon
the exercise of each Warrant, and the Exercise Price of each
Warrant, may, subject to certain conditions, be adjusted. No
fractions of a share of Common Stock will be issued upon the
exercise of any Warrant, but the Company shall pay the cash value
thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by
legal representative or attorney duly authorized in writing, may
be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like
number of Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent, a new
Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) hereof as the absolute owner(s) of this
Warrant Certificate (notwithstanding any notation of ownership or
other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary. Neither
the Warrants nor this Warrant Certificate entitles any holder
hereof to any rights of a stockholder of the Company.
Until June 30, 1999, (a) any attempted sale, transfer,
assignment, conveyance, grant, pledge, gift or other disposition
of any share or shares of stock of the Company (within the
meaning of Section 382 of the Internal Revenue Code of 1986, as
amended (the "Tax Code")) or any option or right to purchase such
stock, as defined in the Treasury Regulations under Section 382
of the Tax Code, to any person or entity (or group of persons or
entities acting in concert), or any attempted exercise of the
aforementioned option or right to purchase such stock by any
person or entity (or group of persons or entities acting in
concert), who either directly or indirectly owns or would be
treated as owning, or whose shares are or would be attributed to
any person or entity who directly or indirectly owns or would be
treated as owning, in either case prior to the purported transfer
or exercise and after giving effect to the applicable attribution
rules of the Tax Code and applicable Treasury Regulations,
5-percent or more of the value of the outstanding stock of the
Company or otherwise treated as a 5-percent (5%) shareholder
(within the meaning of Section 382 of the Tax Code), regardless
of the percent or the value of the stock owned, shall be void ab
initio insofar as it purports to transfer ownership or rights in
respect of such stock to the purported transferee and (b) any
attempted sale, transfer, assignment, conveyance, grant, gift,
pledge or other disposition of any share of stock of the Company
(within the meaning of Section 382 of the Tax Code) or any option
or right to purchase such stock, as defined in the Treasury
Regulations under Section 382 of the Tax Code, to any person or
entity (or group of persons or entities acting in concert) or any
attempted exercise of the aforementioned option or right to
purchase such stock by any person or entity (or group of persons
or entities acting in concert) not described in clause (a) who
directly or indirectly would own, or whose shares would be
attributed to any person or entity who directly or indirectly
would own, in each case as a result of the purported transfer or
exercise and after giving effect to the applicable attribution
rules of the Tax Code and applicable Treasury Regulations,
5-percent (5%) or more of the value of any of the stock of the
Company (or otherwise treated as a 5-percent (5%) shareholder
within the meaning of Section 382 of the Tax Code), shall, as to
that number of shares causing such person or entity to be a
5-percent (5%) shareholder, be void ab initio insofar as it
purports to transfer ownership or rights in respect of such stock
to the purported transferee; provided, however, if the Company
either does not qualify under Section 382(l)(5) of the Tax Code
or chooses to make an election under Section 382(l)(5)(H) of the
Tax Code (or the applicable provision then in effect) not to have
the provisions of Section 382(l)(5) of the Tax Code apply, the
restrictions described above in clauses (a) and (b) shall be
deemed to lapse and shall have no further force or effect as of
the earlier of the date the Company is aware that it does not
qualify under Section 382(l)(5) of the Tax Code and the date of
such election; provided further, however, that neither of the
restrictions described above in the foregoing clauses (a) or (b)
shall prevent a valid transfer or exercise if (i) the transferor
or exercisor, as the case may be, obtains the written approval of
the Board of Directors of the Company and provides the Company
with an opinion of counsel satisfactory to the Company that,
assuming, as of the date of such opinion, the full exercise of
all warrants issued by, and any options granted pursuant to any
stock option plan of, the Company, the transfer or exercise shall
not result in the application of any tax law limitation on the
use of the Company's loss carryforwards or other tax attributes
or (ii) a tender offer, within the meaning of the Securities
Exchange Act of 1934, as amended, and pursuant to the rules and
regulations thereof, is made by a bona fide third party purchaser
to purchase at least sixty-six and two thirds percent (66 2/3%)
of the issued and outstanding common stock of the Company and the
offeror (A) agrees to effect, within ninety (90) days of the
consummation of the tender offer, a back-end merger in which all
non-tendering shareholders would receive the same consideration
as paid in the tender offer, and (B) has received the tender of
sufficient shares to effect such merger. Without limiting or
restricting in any manner the effectiveness of the foregoing
provisions, the Company may rely and shall be protected in
relying on its shareholder lists and stock transfer records for
all purposes relating to such notices, voting, payment of
dividend or other communication or distributions to its
shareholders.
In the absence of special approval by the Board of Directors, a
purported transfer or exercise of shares in excess of the shares
that can be transferred or exercised pursuant to this Section 5
(the "Prohibited Shares") to the purported acquiror (the
"Purported Acquiror) is not effective to transfer ownership of
such Prohibited Shares. On demand by the Company, which demand
must be made within thirty (30) days of the time the Company
learns of the transfer or exercise of the Prohibited Shares, a
Purported Acquiror must transfer any certificate or other
evidence of ownership of the Prohibited Shares within the
Purported Acquiror's possession or control, together with any
dividends or other distributions ("Distributions") that were
received by the Purported Acquiror from the Company with respect
to the Prohibited Shares, to an agent designated by the Company
(the "Agent"). The Agent will sell the Prohibited Shares in an
arm's length transaction (over a stock exchange, if possible),
and the Purported Acquiror will receive an amount of sales
proceeds not in excess of the price paid or consideration
surrendered by the Purported Acquiror for the Prohibited Shares
(or the fair market value of the Prohibited Shares at the time of
any attempted transfer to the Purported Acquiror by gift,
inheritance, or a similar transfer). If the Purported Acquiror
has sold the Prohibited Shares prior to receiving the Company's
demand to surrender the Prohibited Shares to the Agent, the
Purported Acquiror shall be deemed to have sold the Prohibited
Shares as an Agent for the initial transferor, or, in the case
where the Prohibited Shares are acquired pursuant to the exercise
of an option or right to purchase stock of the Company, for the
Company, and shall be required to transfer to the Agent any
proceeds of such sale and any Distributions.
In the case of an attempted exercise of an option or a right to
purchase stock of the Company, the Agent will pay to the Company
any sales proceeds in excess of those due to the Purported
Acquiror, together with any distributions received by the Agent.
In all other cases, if the initial transferor can be identified,
the Agent will pay to it any sales proceeds in excess of those
due to the Purported Acquiror, together with any distributions
received by the Agent. If the initial transferor cannot be
identified within ninety (90) days of receipt of such sales
proceeds, if any, the Agent may pay any such amounts to a charity
of its choosing. In no event shall amounts paid to the Agent
inure to the benefit of the Company (except as set forth in the
first sentence of this paragraph) or the Agent, but such amounts
may be used to cover expenses of the Agent in attempting to
identify the initial transferor.
If the Purported Acquiror fails to surrender the Prohibited
Shares within the next thirty (30) business days from the demand
by the Company, then the Company may institute legal proceedings
to compel the surrender. The Company shall be entitled to
damages, including reasonable attorneys' fees and costs, from the
Purported Acquiror, on account of such purported transfer.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise this
Warrant, according to the terms and conditions hereof, to the
extent of purchasing shares of Common Stock and hereby makes
payment of $ in payment of the exercise price thereof.
If the number of shares shall not be all of the shares
purchasable under this Warrant, a new Warrant Certificate for the
balance remaining shall be issued in the name of the undersigned
or its assignee as indicated on the Assignment Form.
Dated: ____________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
_________________________________________________________________
(please typewrite or print in block letters)
Address:
_________________________________________________________________
Signature:
_________________________________________________________________
Note: The signature must conform in all respects to name of
holder as
specified on the face of this Warrant Certificate
Signature Guaranteed:
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers
unto
Name:
(please typewrite or print in block letters)
Address:
its right to purchase shares of Common Stock
represented by
this Warrant and does hereby irrevocably constitute and appoint
Attorney, to transfer the same on the books of the Company,
with full power
of substitution in the premises.
Dated: Signature:
---------------------------------------------------------
Social Security or other Note: The signature must
number of holder identifying conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate
Signature Guaranteed:
Schedule 1.50
EXISTING NON-DEBTOR SUBSIDIARIES OF SCC
SCM Inter-American Corporation
Smith Corona S.A. (France)
Smith Corona France S.A.R.L.
Smith Corona GmbH
Smith Corona S.A. (Belgium)
SCM (United Kingdom) Ltd.
Smith Corona Overseas Holdings Inc.
Smith Corona (Canada) Ltd.
Smith Corona Australia Pty. Ltd.
Smith Corona International Ltd.
Smith Corona (United Kingdom) Ltd.
Coronasphere Inc.
Smith Corona Private, Ltd.
P.T. Smith Corona Batam
Smith Corona de Mexico, S.A. de C.V.
Schedule 1.59
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR SECURITIES
LAWS OF OTHER JURISDICTIONS
PRIORITY TAX NOTE
$ 1 ,
19962
Smith Corona Corporation, a Delaware corporation (hereinafter
called the "Company"), for value received, hereby promises to
pay to 3, or its successors or registered assigns
(hereinafter called the "Holder"), the principal sum of
($ ), such amount to be payable in six equal
installments, with an installment payable on each anniversary of
4 through the sixth such anniversary, or to the extent a portion
thereof has been paid, the aggregate unpaid principal amount of
such installment, and to pay interest on the unpaid principal
amount quarterly in arrears on each March 31, June 30, September
30 and December 31, beginning on the first such day to occur at
least 60 days after the date hereof, and on payment in full, at
an interest rate equal to the lesser of (a) percent (
%) per annum or (b) the statutory rate imposed by the Holder for
accrual of interest on overdue taxes. Interest on this Note
will be computed on the basis of a 360-day year of twelve 30-day
months. Payment of the principal of and interest on this Note
will be made at an office or agency of the Company maintained for
that purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option
of the Company, payment of interest may be made by check mailed
to the address of the person entitled thereto as such address
shall appear on the books of the Company.
The Company may, at any time, at its option, prepay this Note,
in whole or in part, without premium or penalty, together with
interest on such principal amount accrued to the date of such
prepayment. Any notice or communication shall be sufficiently
given if in writing and delivered in person or mailed by
first-class mail addressed, if to the Company, to
5 and, if to the Holder, to .6 The Company or the Holder by
notice to the other may designate additional or different
addresses for subsequent notices or communications.
If a payment date is a legal holiday for banks at a place of
payment, payment may be made at that place on the next
succeeding business day that is not a legal holiday for banks,
and no interest shall accrue for the intervening period.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS NOTE,
excluding
principles of conflict of laws (other than Sections 5-1401 and
5-1402 of the General Obligations Law of the State of New York).
--------------- 1Insert amount of Priority Tax Note.
2Insert Effective Date.
3Insert name of holder of Priority Tax Claim.
4Insert date which is the date of assessment of the Priority
Tax Claim.
5Insert the Company's address.
6Insert the Holder's address.
A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the
Company under this Note or for any claim based on, in respect of
or by reason of such obligations or their creation.
This Note shall not be assignable or transferable, and any
purported assignment of transfer shall be void.
IN WITNESS WHEREOF, the Company has executed and delivered this
Note as of the date first written above.
SMITH CORONA CORPORATION
By:
________________________________________________________________________________
Name:
Title:
Schedule 1.69
__________
[FORM OF RIGHTS AGREEMENT]
Rights Agreement
Smith Corona Corporation
and
Rights Agent
Dated as of , 1996
TABLE OF CONTENTS
Page
Section 1. Certain Definitions R-1
Section 2. Appointment of Rights Agent R-4
Section 3. Issue of Rights Certificates R-4
Section 4. Form of Rights Certificates R-5
Section 5. Countersignature and Registration R-6
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or
Stolen Rights Certificates R-6
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights R-6
Section 8. Cancellation and Destruction of Rights
Certificates R-8
Section 9. Reservation and Availability of Capital
Stock R-8
Section 10. Preferred Stock Record Date R-9
Section 11. Adjustment of Purchase Price, Number
and Kind of Shares or Number of Rights R-9
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares R-14
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power R-14
Section 14. Fractional Rights and Fractional Shares R-15
Section 15. Rights of Action R-16
Section 16. Agreement of Rights Holders R-16
Section 17. Rights Certificate Holder Not Deemed a
Stockholder R-17
Section 18. Concerning the Rights Agent R-17
Section 19. Merger or Consolidation or Change of
Name of Rights Agent R-17
Section 20. Duties of Rights Agent R-18
Section 21. Change of Rights Agent R-19
Section 22. Issuance of New Rights Certificates R-19
Section 23. Redemption and Termination R-20
Section 24. Notice of Certain Events R-20
Section 25. Notices R-21
Section 26. Supplements and Amendments R-21
Section 27. Successors R-22
Section 28. Determinations and Actions by the Board
of Directors, etc R-22
Section 29. Benefits of this Agreement R-22
Section 30. Severability R-22
Section 31. Governing Law R-22
Section 32. Counterparts R-22
Section 33. Descriptive Headings R-22
Attachments:
Exhibit A -- Form of Certificate of Designation,
Preferences and Rights
Exhibit B -- Form of Rights Certificate
Exhibit C -- Summary of Rights
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of , 1996, between SMITH
CORONA CORPORATION, a Delaware corporation, and , a
(the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on July 5, 1995, Smith Corona Corporation, a Delaware
corporation, filed a voluntary petition for relief under Chapter
11 of Title 11 of the United States Code, 11 U.S.C. sec. 101 et
seq. (the "Bankruptcy Code"), with the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"); and
WHEREAS, pursuant to Debtors' Third Amended Second Joint Plan
of Reorganization under Chapter 11 of the United States
Bankruptcy Code, dated , 1996 (the "Plan"), with respect to Smith
Corona Corporation and certain of its subsidiaries, and Order No.
, dated , 1996, of the Bankruptcy Court (the
"Confirmation Order"), Smith Corona Corporation has, on the date
hereof, emerged from such proceeding under Chapter 11; and
WHEREAS, Smith Corona Corporation, as reorganized pursuant to
the Plan, is referred to herein as the "Company"; and
WHEREAS, on the date hereof (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company has authorized and
declared a dividend distribution of one Right for each share of
Common Stock of the Company outstanding at the close of business
on , 1996 (the "Record Date") and has authorized the
issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each
share of Common Stock of the Company issued between the Record
Date (whether originally issued or delivered from the Company's
treasury) and the Distribution Date, each Right initially
representing the right to purchase one unit (a "Unit") with each
such unit consisting initially of one one-thousandth of a share
of Preferred Stock, Series A, of the Company having the rights,
powers and preferences set forth in the form of Certificate of
Designation, Preferences and Rights of Preferred Stock, Series A,
attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth ("Rights"); and
WHEREAS, such authorization of such dividend distribution, and
of such issuance of Rights, has been approved by the Bankruptcy
Court pursuant to the Confirmation Order;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person,
shall be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding, but shall not include (i)
the Company, (ii) any Subsidiary of the Company, (iii) any
employee benefit plan of the Company or of any Subsidiary of
the Company, or (iv) any Person or entity organized,
appointed or established by the Company for or pursuant to
the terms of any such plan (each of (i) through (iv), an
"Exempted Person"). Notwithstanding the foregoing, (i) no
Person shall become an "Acquiring Person" as a result of an
acquisition of Common Stock by the Company which, by
reducing the number of such shares then outstanding,
increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the outstanding
Common Stock, except that if such Person, after such share
purchases by the Company, becomes the Beneficial Owner of
any additional shares of Common Stock, such Person shall be
deemed to be an "Acquiring Person;" and (ii) if the Board of
Directors of the Company determines in good faith that a
Person who would otherwise be an "Acquiring Person" has
become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of
Common Stock or other securities so that such Person would
no longer be an Acquiring Person then such Person shall not
be deemed to be an "Acquiring Person." The term
"outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and
outstanding together with the number of such securities not
then issued and outstanding which such Person would be
deemed to beneficially own hereunder.
(b) "Act" shall mean the Securities Act of 1933, as
amended.
(c) "Adjustment Shares" shall have the meaning set forth
in Section 11(a)(ii) of this Agreement.
(d) "Affiliate" shall have the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the
Exchange Act.
(e) "Associate" shall have the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the
Exchange Act.
(f) "Bankruptcy Code" shall have the meaning set forth in
the first "Whereas" clause of this Agreement.
(g) "Bankruptcy Court" shall have the meaning set forth in
the first "Whereas" clause of this Agreement.
(h) A Person shall be deemed the "Beneficial Owner" of,
and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or
upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange,
or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates
or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("Original Rights") or
pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not
in writing; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
any security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule
13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (h)) or disposing of any
voting securities of the Company;
provided, however, that nothing in this paragraph (h) shall
cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such
person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the
date of such acquisition. Notwithstanding anything in this
definition of Beneficial Owner to the contrary, a Person who
is a Continuing Director or officer of the Company or who is
an Affiliate or Associate of a Continuing Director or
officer of the Company (each, an "Excluded Person") shall
not be deemed to "beneficially own" shares of Common Stock
held by another Excluded Person solely by reason of any
agreement, arrangement or understanding, written or
otherwise, entered into in opposition to a transaction that,
at the time such agreement, arrangement or understanding was
entered into, has not been approved or recommended by the
Board of Directors to the stockholders of the Company (which
approval or recommendation, if adopted following a Stock
Acquisition Date, includes the concurrence of a majority of
the Continuing Directors and only if the Continuing
Directors constitute a majority of the number of directors
then in office).
(i) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in
the State of New York or the state in which the principal
office of the Rights Agent is located are authorized or
obligated by law or executive order to close.
(j) "close of business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00
P.M., New York City time, on the next succeeding Business
Day.
(k) "Common Stock" shall mean the common stock, par value
$.001 per share, of the Company; provided, that "Common
Stock" when used with reference to any Person other than the
Company shall mean the capital stock of such Person with the
greatest voting power, or the equity securities or other
equity interest having power to control or direct the
management, of such Person.
(l) "Common Stock Equivalents" shall have the meaning set
forth in Section 11(a)(iii) of this Agreement.
(m) "Confirmation Order" shall have the meaning set forth
in the second "Whereas" clause of this Agreement.
(n) "Company" shall have the meaning set forth in the
third "Whereas" clause of this Agreement.
(o) "Continuing Director" shall mean a member of the Board
of Directors of the Company who is not an Acquiring Person,
an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person.
(p) "Current Market Price" shall have the meaning set
forth in Section 11(d)(i) of this Agreement.
(q) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) of this Agreement.
(r) "Distribution Date" shall have the meaning set forth
in Section 3(a) of this Agreement.
(s) "equivalent preferred stock" shall have the meaning
set forth in Section 11(b) of this Agreement.
(t) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(u) "Excluded Person" shall have the meaning set forth in
Section 1(f) of this Agreement.
(v) "Exempted Person" shall have the meaning set forth in
Section 1(a) of this Agreement.
(w) "Expiration Date" shall have the meaning set forth in
Section 7(a) of this Agreement.
(x) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) of this Agreement.
(y) "Original Rights" shall have the meaning set forth in
Section 1(f)(i) of this Agreement.
(z) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(aa) "Preferred Stock" shall mean shares of Preferred
Stock, Series A, of the Company, and, to the extent that
there are not a sufficient number of shares of such
Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock of the
Company designated for such purpose containing terms
substantially similar to the terms of the Preferred Stock,
Series A.
(bb) "Principal Party" shall have the meaning set forth in
Section 13(b) of this Agreement.
(cc) "Purchase Price" shall have the meaning set forth in
Section 4(a) of this Agreement.
(dd) "Record Date" shall have the meaning set forth in the
fourth "Whereas" clause of this Agreement.
(ee) "Redemption Price" shall have the meaning set forth
in Section 23 of this Agreement.
(ff) "Rights" shall have the meaning set forth in the
fourth "Whereas" clause of this Agreement.
(gg) "Rights Agent" shall have the meaning set forth in
the introductory paragraph of this Agreement.
(hh) "Rights Certificates" shall have the meaning set
forth in Section 3(a) of this Agreement.
(ii) "Rights Dividend Declaration Date" shall have the
meaning set forth in the fourth "Whereas" clause of this
Agreement.
(jj) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii) of this Agreement.
(kk) "Section 11(a)(ii) Trigger Date" shall have the
meaning set forth in Section 11(a)(iii) of this Agreement.
(ll) "Section 13 Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a) of this Agreement.
(mm) "Spread" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(nn) "Stock Acquisition Date" shall mean the earlier of
the date of (i) the public announcement (which, for purposes
of this definition, shall include, without limitation, a
report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring
Person has become such or (ii) the public disclosure of
facts by the Company or an Acquiring Person indicating that
an Acquiring Person has become an Acquiring Person.
(oo) "Subsidiary" shall mean, with reference to any
Person, any corporation (or other entity) of which an amount
of voting securities (or other interests) sufficient to
elect at least a majority of the directors (or equivalent)
of such corporation (or other entity) is beneficially owned,
directly or indirectly, by such Person, or otherwise
controlled by such Person.
(pp) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii) of this Agreement.
(qq) "Summary of Rights" shall have the meaning set forth
in Section 3(b) of this Agreement.
(rr) "Trading Day" shall have the meaning set forth in
Section 11(d)(i) of this Agreement.
(ss) "Transaction" shall mean any merger, consolidation or
sale of assets or earning power described in Section 13(a)
hereof or any acquisition of Common Stock of the Company
which, without regard to any required approval of the
Company, would result in a Person becoming an Acquiring
Person.
(tt) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
(uu) "Unit" shall have the meaning set forth in the fourth
"Whereas" clause of this Agreement.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days' prior written
notice to the Rights Agent. The Rights Agent shall have no
duty to supervise, and shall in no event be liable for, the
acts or omissions of any such co-Rights Agent.
Section 3. Issue of Rights Certificates. (a) Until the
earlier of (i) the close of business on the tenth day after
the Stock Acquisition Date (or such later date as the Board of
Directors of the Company shall determine), (ii) the close of
business on the tenth Business Day (or such later date as such
Board shall determine) after the date that a tender or
exchange offer by any Person is first published or sent or
given within the meaning of Rule 14d-2(a) of the General Rules
and Regulations under the Exchange Act, if upon consummation
thereof, such Person would become an Acquiring Person or (iii)
the Expiration Date (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will
be evidenced by the certificates for the Common Stock
registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to
be certificates for Rights) and not by separate certificates,
and (y) the Rights will be transferable only in connection
with the transfer of the underlying shares of Common Stock
(including a transfer to the Company). The Board of Directors
of the Company may defer the date set forth in clause (i) or
(ii) of the preceding sentence to a specified later date or to
an unspecified later date, each to be determined (with the
concurrence of a majority of the Continuing Directors
following a Stock Acquisition Date and only if the Continuing
Directors constitute a majority of the number of directors
then in office) by action of the Board of Directors of the
Company. As soon as practicable after the Distribution Date,
the Rights Agent will, at the Company's expense, send by
first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in
substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein. In
the event that an adjustment in the number of Rights per share
of Common Stock has been made pursuant to Section 11(p)
hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of and after the
Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) As promptly as practicable, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C (the
"Summary of Rights"), by first-class, postage prepaid mail, to
each record holder of the Common Stock as of the close of
business on the Record Date, at the address of such holder
shown on the records of the Company.
(c) Rights shall be issued in respect of all shares of
Common Stock which are issued (whether originally issued or
from the Company's treasury) after the Record Date but prior
to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock
shall also be deemed to be certificates for Rights and shall
bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between (the "Company") and (the
"Rights Agent") dated as of , 1996 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal
offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge, promptly
after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of the Distribution Date or the
Expiration Date, registered holders of Common Stock shall also
be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificates.
Section 4. Form of Rights Certificates. (a) The Rights
Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with
the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any
stock exchange on which the Rights may from time to time be
listed, or to conform to usage. The Rights Certificates shall
be in a machine printable format. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date,
shall show the date of countersignature and on their face
shall entitle the holders thereof to purchase such number of
one one-thousandths of a share of Preferred Stock as shall be
set forth therein at the price set forth therein (such
exercise price per one one-thousandth of a share, the
"Purchase Price"), but the amount and the type of securities
purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a)
or Section 22 hereof that represents Rights beneficially owned
by: (i) an Acquiring Person or any Affiliate or Associate of
an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Affiliate or Associate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Affiliate or
Associate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights
or (B) a transfer which a majority of the Continuing Directors
has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section
7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or
were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
The Company shall instruct the Rights Agent in writing of
the Rights which should be so legended and shall supply the
Rights Agent with such legended Rights Certificates.
Section 5. Countersignature and Registration. (a) The
Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, Chief Executive Officer,
President or any Vice President, either manually or by
facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested
by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by an authorized
signatory of the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery
by the Company, such Rights Certificates, nevertheless, may be
countersigned by an authorized signatory of the Rights Agent
and issued and delivered by the Company with the same force
and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company;
and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution
of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date
of the execution of this Rights Agreement any such person was
not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its office or offices designated
as the appropriate place for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer
of the Rights Certificates issued hereunder. Such books shall
show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its
face by each of the Rights Certificates and the date of each
of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates. (a) Subject to the provisions of Section
4(b), Section 7(e) and Section 14 hereof, at any time after
the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split
up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a
like number of one one-thousandths of a share of Preferred
Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled
such holder (or former holder in the case of a transfer) to
purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights
Agent and shall surrender the Rights Certificate or
Certificates to be transferred, split up, combined or
exchanged at the office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment
on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e) and Section 14 hereof, countersign and deliver to
the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company
may require payment by the holder of a Rights Certificate of a
sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in
case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate, if mutilated, the
Company will execute and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights. (a) Subject to Section 7(e) hereof, the
registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein
including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii)
and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the
Rights Agent at the office or offices of the Rights Agent
designated for such purpose, along with a signature guarantee
and such other and further documentation as the Rights Agent
may reasonably request, together with payment of the aggregate
Purchase Price with respect to the total number of one
one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or
prior to the earlier of (i) the close of business on
, 2006 (the "Final Expiration Date"), or (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof
(the earlier of (i) and (ii) being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one one-thousandth of a
share of Preferred Stock pursuant to the exercise of a Right
shall initially be $ and shall be subject to
adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph
(c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and
the certificate duly executed, accompanied by payment, with
respect to each Right so exercised, of the Purchase Price per
one one-thousandth of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any
applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for
such shares) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of
Preferred Stock issuable upon exercise of the Rights hereunder
with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one
one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of
Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary agent to comply with
such request, (ii) requisition from the Company the amount of
cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as
may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of
the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced pursuant
to Section 11(a)(ii) or Section 13(a) hereof) shall be made in
cash or by certified check or bank draft payable to the order
of the Company. In the event that the Company is obligated to
issue other securities (including Common Stock) of the
Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent,
if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that,
upon any exercise of Rights, a number of Rights be exercised
so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a
new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights
Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section
11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any
such Affiliate or Associate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who
becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a
transfer which a majority of the Continuing Directors has
determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further
action, and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with,
but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or
its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set
forth in this Section 7 unless such registered holder shall
have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of
the Rights Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or
in canceled form, or, if surrendered to the Rights Agent,
shall be canceled by it, and no Rights Certificates shall be
issued in lieu thereof except as expressly permitted by any of
the provisions of this Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver
all canceled Rights Certificates to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a
Triggering Event, out of its authorized and unissued shares of
Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares
of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that,
as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or
other securities) issuable and deliverable upon the exercise
of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the
first occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of
the Rights has been determined in accordance with Section
11(a)(iii) hereof, a registration statement under the Act with
respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such
securities, or (B) the date of the expiration of the Rights.
The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue
sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 90 days after the
date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall
issue a public announcement, and shall give simultaneous
written notice to the Rights Agent stating that the
exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company
shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily
suspend the exercisability of the Rights until such time as a
registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one
one-thousandths of a share of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject
to payment of the Purchase Price), be duly and validly
authorized and issued, and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-thousandths of a share of
Preferred Stock (or Common Stock and/or other securities, as
the case may be) upon the exercise of the Rights. The Company
shall not, however, be required to pay any transfer tax which
may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-thousandths of a share of
Preferred Stock (or Common Stock and/or other securities, as
the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any
certificates for a number of one one-thousandths of a share of
Preferred Stock (or Common Stock and/ or other securities, as
the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall
have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it
has been established to the Company's satisfaction that no
such tax is due.
Section 10. Preferred Stock Record Date. Each Person in
whose name any certificate for a number of one one-thousandths
of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be)
represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a
date upon which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become
the record holder of such shares (fractional or otherwise) on,
and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock
and/or other securities, as the case may be) transfer books of
the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall
not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided
herein.
Section 11. Adjustment of Purchase Price, Number and Kind
of Shares or Number of Rights. The Purchase Price, the number
and kind of shares covered by each Right and the number of
Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a)(i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B)
subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares,
or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section
11(a) and Section 7(e) hereof, the Purchase Price in effect
at the time of the record date for such dividend or of the
effective date of such subdivision, combination or
reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall
be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books
of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person, alone or together with its
Affiliates and Associates, shall, at any time after the
Rights Dividend Declaration Date, become an Acquiring
Person, then proper provision shall be made so that each
holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of a
number of one one-thousandths of a share of Preferred Stock,
such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of
a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the Current Market
Price (determined pursuant to Section 11(d)(i) hereof) per
share of Common Stock on the date of such first occurrence
(such number of shares being referred to as the "Adjustment
Shares").
(iii) In the event that the number of shares of Common
Stock which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance
for purposes other than upon exercise of the Rights are not
sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this
Section 11(a), the Company, acting by resolution of its
Board of Directors (which resolution shall be effective only
with the concurrence of a majority of the Continuing
Directors) shall (A) determine the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current
Value"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute
for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock,
such as the Preferred Stock, which the Board has deemed to
have essentially the same value or economic rights as shares
of Common Stock (such shares of preferred stock being
referred to as "Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value
equal to the Current Value (less the amount of any reduction
in the Purchase Price), where such aggregate value has been
determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by
the Board; provided, however, that if the Company shall not
have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the later of (x)
the first occurrence of a Section 11(a)(ii) Event and (y)
the date on which the Company's right of redemption pursuant
to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the
Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over
(ii) the Purchase Price. If the Board determines in good
faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise
in full of the Rights, the 30-day period set forth above may
be extended to the extent necessary, but not more than 90
days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek shareholder approval for the
authorization of such additional shares (such 30-day period,
as it may be extended, is herein called the "Substitution
Period"). To the extent that action is to be taken pursuant
to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the
Substitution Period in order to seek such shareholder
approval for such authorization of additional shares and/or
to decide the appropriate form of distribution to be made
pursuant to such first sentence and to determine the value
thereof. In the event of any such suspension, the Company
shall issue a public announcement, with simultaneous written
notice to the Rights Agent stating that the exercisability
of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii),
the value of each Adjustment Share shall be the Current
Market Price (as determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the per share or per unit value
of any Common Stock Equivalent shall be deemed to equal the
Current Market Price per share of the Common Stock on such
date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase
(for a period expiring within 45 calendar days after such
record date) Preferred Stock (or shares having the same
rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock
at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per
share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the Current Market Price
per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of
shares of Preferred Stock which the aggregate offering price
of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the
aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date,
plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or
purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription
price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the
account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any
such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation), of
evidences of indebtedness, cash (other than a regular cash
dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred
Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price
to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall
be the Current Market Price (as determined pursuant to Section
11(d)(i) hereof) per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith
by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent)
of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Preferred Stock
and the denominator of which shall be such Current Market
Price per share of Preferred Stock. Such adjustments shall be
made successively whenever such a record date is fixed, and in
the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of Common Stock
on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the 30
consecutive Trading Days (as hereinafter defined)
immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the
Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the ten
consecutive Trading Days immediately following such date;
provided, however, that in the event that the Current Market
Price per share of the Common Stock is determined during a
period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination
or reclassification of such Common Stock, and the ex-dividend
date for such dividend or distribution, or the
record date for such subdivision, combination or
reclassification, shall not have occurred prior to the
commencement of the requisite 30 Trading Day or ten Trading
Day period, as set forth above, then, and in each such case,
the Current Market Price shall be properly adjusted to take
into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of
Common Stock are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to
securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are
not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or
such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board. If on any
such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as
determined in good faith by the Board shall be used. The
term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, Current Market
Price per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share of Preferred Stock shall be
determined in the same manner as set forth above for the
Common Stock in clause (i) of this Section 11(d) (other than
the last sentence thereof). If the Current Market Price per
share of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly
held or listed or traded in a manner described in clause (i)
of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount
equal to 1,000 (as such number may be appropriately adjusted
for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring
after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so
listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this
Agreement, the Current Market Price of a Unit shall be equal
to the Current Market Price of one share of Preferred Stock
divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest hundred-thousandth of a share of Common Stock or
other share or one-ten-millionth of a share of Preferred
Stock, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by
this Section 11 shall be made no later than the earlier of
(i) three years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive
any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof
shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase
Price, the number of one one-thousandths of a share of
Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the
Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase
Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest one-ten-millionth)
obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately
prior to this adjustment, by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment
of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandths of a share
of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the
nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be
at least ten days later than the date of the public
announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result
of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates
held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders
of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a
share of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one
one-thousandth of a share and the number of one
one-thousandths of a share which were expressed in the initial
Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated
value, if any, of the number of one one-thousandths of a
share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid
and non-assessable such number of one one-thousandths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective
as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such
record date the number of one one-thousandths of a share of
Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred
Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such
holder's right to receive such additional shares (fractional
or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in
order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price
thereof, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends, or (v) issuance of rights,
options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred
Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at
any time after the Distribution Date, (i) consolidate with
any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof),
(ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or (iii) sell or transfer (or
permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)
hereof), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants
or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights
or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the Principal
Party for purposes of Section 13(a) hereof shall have
received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by
Section 23 or Section 26 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any
time after the Rights Dividend Declaration Date and prior to
the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, the number of
Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so
that the number of Rights thereafter associated with each
share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior
to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the
occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided
in Section 11 and Section 13 hereof, the Company shall (a)
promptly prepare a certificate setting forth such adjustment,
the adjusted Purchase Price and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the
Rights Agent, and with each transfer agent for the Preferred
Stock and the Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each
holder of a certificate representing shares of Common Stock)
in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) In the event that, following the
Stock Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation
of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other Person
or cash or any other property, or (z) the Company shall sell,
mortgage or otherwise transfer (or one or more of its
Subsidiaries shall sell, mortgage or otherwise transfer), in
one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o) hereof), then, and in each
such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) each
holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable
shares of Common Stock of the Principal Party, not subject to
any liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number
of one one-thousandths of a share of Preferred Stock for which
a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such one one-thousandths
of a share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the
first occurrence of a Section 13 Event, shall be referred to
as the "Purchase Price" for each Right and for all purposes of
this Agreement) by (2) 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of
the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13
Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in
relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights; and (v) the provisions of
Section 11(a)(ii) hereof shall be of no effect following the
first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the
Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that
is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common
Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal
Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which
are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have
a sufficient number of authorized shares of its Common Stock
which have not been issued or reserved for issuance to permit
the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and
further providing that, as soon as practicable after the date
of any consolidation, merger or sale of assets mentioned in
paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with
a prospectus at all times meeting the requirements of the
Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its
Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other
transfers. In the event that a Section 13 Event shall occur at
any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in
Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a)
The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates
which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or such other system then in
use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Rights selected by the Board of Directors of the
Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such
date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share of
Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock). In lieu of
fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the
current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the
current market value of one one-thousandth of a share of
Preferred Stock shall be one one-thousandth of the closing
price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock.
In lieu of fractional shares of Common Stock, the Company may
pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in
cash equal to the same fraction of the Current Market Value of
one share of Common Stock. For purposes of this Section 14(c),
the Current Market Value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or
any fractional shares upon exercise of a Right, except as
permitted by this Section 14.
Section 15. Rights of Action. All rights of action in
respect of this Agreement, excepting the rights of action
given to the Rights Agent, are vested in the respective
registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common
Stock); and any registered holder of any Rights Certificate
(or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of
any other Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in
such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for
any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief
against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common
Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights
Agent if surrendered at the office or offices of the Rights
Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person
in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate)
is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall
be required to be affected by any notice to the contrary;
and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall
have any liability to any holder of a Right or other Person
as a result of its inability to perform any of its
obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive
order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such
obligations; provided, however, that the Company must use
its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for
any purpose the holder of the number of one one-thousandths of
a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as
provided in Section 24 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised
in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company
agrees to pay to the Rights Agent such compensation as shall
be agreed to in writing between the Company and the Rights
Agent for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and disbursements and other
disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without gross negligence, bad
faith or wilful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement,
including, without limitation, the costs and expenses of
defending against any claim of liability in the premises. The
provisions of this Section 18(a) shall survive the expiration
of the Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed by the proper
Person or Persons and where necessary, verified or
acknowledged, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent. (a) Any corporation into which the Rights Agent
or any successor Rights Agent may be merged or with which it
may be consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or shareholder services
business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto;
provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions
of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall
not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and
in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights
Agent may adopt the countersignature under its prior name and
deliver Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name;
and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this
Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations expressly imposed by
this Agreement, and no implied duties or obligations shall be
read into this Agreement against the Rights Agent, upon the
following terms and conditions, by all of which the Company
and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its
selection (who may be legal counsel for the Company), and
the opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or
established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, Chief
Executive Officer, the President, any Vice President or the
Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own gross negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in
this Agreement or in the Rights Certificates or be required
to verify the same (except as to its countersignature on
such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the
Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming
void pursuant to Section 7(e) hereof); nor shall it be
responsible for any adjustment required under the provisions
of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after actual notice
of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock
or Preferred Stock to be issued pursuant to this Agreement
or any Rights Certificate or as to whether any shares of
Common Stock or Preferred Stock will, when so issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, Chief
Executive Officer, the President, any Vice President or the
Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting
for those instructions.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or
deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which
the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct;
provided, however, that reasonable care was exercised in the
selection thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of
its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take
any further action with respect to such requested exercise
or transfer without first consulting with the Company.
(l) The Company agrees to give the Rights Agent prompt
written notice of any event or ownership which would
prohibit the exercise or transfer of the Rights Certificate.
Section 21. Change of Rights Agent. The Rights Agent or
any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon 30 days notice in writing
mailed to the Company. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If
the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to
make such appointment within a period of 30 days after giving
notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then the Company
shall become the Rights Agent until a successor Rights Agent
has been appointed, and the Rights Agent or any registered
holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of
any state of the United States, in good standing, which is
authorized under such laws to exercise corporate trust or
shareholder services powers and is subject to supervision or
examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to
the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Stock and
the Preferred Stock, and mail a notice thereof in writing to
the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Company may, at its option,
subject to Section 4 hereof, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board
of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this
Agreement.
Section 23. Redemption and Termination. (a) The Company
may, by a resolution of its Board of Directors (which
resolution shall, if adopted following the Stock Acquisition
Date, be effective only with the concurrence of a majority of
the Continuing Directors and only if the Continuing Directors
constitute a majority of the number of directors then in
office), at its option, at any time prior to the earlier of
(i) the close of business on the tenth day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have
occurred prior to the Record Date, the close of business on
the tenth day following the Record Date) or (ii) the Final
Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.001 per Right,
as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding
anything contained in this Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of
a Section 11(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at
its option, pay the Redemption Price in cash, shares of Common
Stock (based on the Current Market Price of the Common Stock
at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without
any further action and without any notice, the right to
exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the
action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made.
Section 24. Notice of Certain Events. (a) In case the
Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to
the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a
regular cash dividend out of earnings or retained earnings of
the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to
effect any reclassification of its Preferred Stock (other than
a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other
than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)
hereof), or (v) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the
Company shall give to each holder of a Rights Certificate and
to the Rights Agent, to the extent feasible and in accordance
with Section 25 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the
holders of the shares of Preferred Stock, if any such date is
to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least 20
days prior to the record date for determining holders of the
shares of Preferred Stock for purposes of such action, and in
the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of
Preferred Stock whichever shall be the earlier.
(b) In the event that a Section 11(a)(ii) Event shall occur,
then (i) the Company shall as soon as practicable thereafter
give to each holder of a Rights Certificate and to the Rights
Agent, to the extent feasible and in accordance with Section
25 hereof, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall
be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Smith Corona Corporation
65 Locust Avenue
New Canaan, Connecticut 06840
Attention: President
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the
Company or by the holder of any Rights Certificate to or on
the Rights Agent shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Attention: -----------------------------------------
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Rights Certificate (or, if prior to the Distribution Date, to
the holder of certificates representing shares of Common
Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at
the
address of such holder as shown on the registry books of the
Company.
Section 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of
this Section 26, the Company may by resolution of its Board of
Directors (which resolution, if adopted following the Stock
Acquisition Date, shall be effective only with the concurrence
of a majority of the Continuing Directors and only if the
Continuing Directors constitute a majority of the number of
directors then in office), and the Rights Agent shall if the
Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of
this Section 26, the Company may by resolution of its Board of
Directors (which resolution, if adopted following the Stock
Acquisition Date, shall be effective only with the concurrence
of a majority of the Continuing Directors and only if the
Continuing Directors constitute a majority of the number of
directors then in office), and the Rights Agent shall if the
Company so directs, supplement or amend this Agreement without
the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any
provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, or (iv) to
change or supplement the provisions hereunder in any manner
which the Company may deem necessary or desirable and which,
in the case of this clause (iv), shall not adversely affect
the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however, that this Agreement may
not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the
Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or
clarifying the rights of, and/or the benefits to, the holders
of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the
terms of this Section 26, the Rights Agent shall execute such
supplement or amendment. Notwithstanding any other provision
hereof, the Rights Agent's consent must be obtained regarding
any amendment or supplement pursuant to this Section 26 which
alters the Rights Agent's rights or duties. Notwithstanding
anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase
Price or the number of one one-thousandths of a share of
Preferred Stock for which a Right is exercisable. Prior to the
Distribution Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the holders
of Common Stock.
Section 27. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the
Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any
calculation of the number of shares of Common Stock
outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act. The Board of Directors of the Company (with,
where specifically provided for herein, the concurrence of a
majority of the Continuing Directors and only if the
Continuing Directors constitute a majority of the number of
directors then in office) shall have the exclusive power and
authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the
administration of this Agreement, including, without
limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem
the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect
to the foregoing) which are done or made by the Board of
Directors (with, where specifically provided for herein, the
concurrence of a majority of the Continuing Directors and only
if the Continuing Directors constitute a majority of the
number of directors then in office) in good faith shall (x) be
final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties and (y)
not subject the Board of Directors or the Continuing Directors
to any liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than
the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock) any legal or equitable
right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected,
impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if
any such term, provision, covenant or restriction is held by
such court or authority to be invalid, void or unenforceable
and the Board of Directors of the Company determines in its
good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section
23 hereof shall be reinstated and shall not expire until the
close of business on the tenth day following the date of such
determination by the Board of Directors.
Section 31. Governing Law. This Agreement, each Right and
each Rights Certificate issued hereunder shall be deemed to be
a contract made under the laws of the State of Delaware and
for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the
same instrument.
Section 33. Descriptive Headings. Descriptive headings of
the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Rights Agreement to be duly executed and their respective
corporate seals to be hereunto affixed and attested, all as of
the day and year first above written.
Attest SMITH CORONA CORPORATION
By: By:
Name: Name:
Title: Title:
Attest ---------------------------------------------
as Rights Agent
By: By:
Name: Name:
Title: Title:
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF PREFERRED STOCK, SERIES A
of
SMITH CORONA CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, , Secretary of Smith Corona
Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of this
Corporation, the Board of Directors, on , 1996,
adopted the following resolution creating a series of
shares of Series A:Preferred Stock designated as Preferred
Stock,
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the
provisions of its Restated Certificate of Incorporation, a
series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and
the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such
series, and the qualifications, limitations and restrictions
thereof, are as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Preferred Stock, Series A" and
the number of shares constituting such series shall be
.
Section 2. Dividends and Distributions. (A) Subject to the
prior and superior rights of the holders of any shares of any
series of Preferred Stock ranking prior and superior to the
shares of Preferred Stock, Series A with respect to dividends,
the holders of shares of Preferred Stock, Series A shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of
January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a
share of Preferred Stock, Series A, in an amount per share
(rounded to the nearest cent), subject to the provision for
adjustment hereinafter set forth, equal to 1000 times the
aggregate per share amount of all cash dividends, and 1000
times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $.001 per
share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share
of Preferred Stock, Series A. In the event the Corporation
shall at any time (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each
such case the amount to which holders of shares of Preferred
Stock, Series A were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Preferred Stock, Series A as provided in paragraph (A)
above immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares
of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Preferred Stock, Series A from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Preferred Stock, Series A, unless the
date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Preferred
Stock, Series A entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid
on the shares of Preferred Stock, Series A in an amount less
than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Preferred Stock,
Series A entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no
more than thirty (30) days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of
Preferred Stock, Series A shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Preferred Stock, Series A shall
entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time (i) declare
any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number
of shares, then in each such case the number of votes per
share to which holders of shares of Preferred Stock, Series
A were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Preferred Stock, Series A and the
holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of
the Corporation.
(C) (i) If at any time dividends on any Preferred Stock,
Series A shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly
dividend period on all shares of Preferred Stock, Series A
then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders
of Preferred Stock (including holders of the Preferred
Stock, Series A) with dividends in arrears in an amount
equal to six (6) quarterly dividends thereon, voting as a
class, irrespective of series, shall have the right to elect
two (2) Directors.
(ii) During any default period, such voting right of the
holders of Preferred Stock, Series A may be exercised
initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual
meeting of stockholders, and thereafter at annual meetings
of stockholders, provided that neither such voting right nor
the right of the holders of any other series of Preferred
Stock, if any, to increase, in certain cases, the authorized
number of Directors shall be exercised unless the holders of
ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not
affect the exercise by the holders of Preferred Stock of
such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the
right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then
exist up to two (2) Directors or, if such right is exercised
at an annual meeting, to elect two (2) Directors. If the
number which may be so elected at any special meeting does
not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase
in the number of Directors as shall be necessary to permit
the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their
right to elect Directors in any default period and during
the continuance of such period, the number of Directors
shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or
pari passu with the Preferred Stock, Series A.
(iii) Unless the holders of Preferred Stock shall, during
an existing default period, have previously exercised their
right to elect Directors, the Board of Directors may order,
or any stockholder or stockholders owning in the aggregate
not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the
holders of Preferred Stock, which meeting shall thereupon be
called by the President, a Vice President or the Secretary
of the Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to
each holder of record of Preferred Stock by mailing a copy
of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than twenty (20) days and
not later than sixty (60) days after such order or request
or in default of the calling of such meeting within sixty
(60) days after such order or request, such meeting may be
called on similar notice by any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii),
no such special meeting shall be called during the period
within sixty (60) days immediately preceding the date fixed
for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock,
and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of
Directors until the holders of Preferred Stock shall have
exercised their right to elect two (2) Directors voting as a
class, after the exercise of which right (x) the Directors
so elected by the holders of Preferred Stock shall continue
in office until their successors shall have been elected by
such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) be filled
by vote of a majority of the remaining Directors theretofore
elected by the holders of the class of stock which elected
the Director whose office shall have become vacant.
References in this paragraph (C) to Directors elected by the
holders of a particular class of stock shall include
Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period,
(x) the right of the holders of Preferred Stock as a class
to elect Directors shall cease, (y) the term of any
Directors elected by the holders of Preferred Stock as a
class shall terminate, and (z) the number of Directors shall
be such number as may be provided for in the certificate of
incorporation or by-laws irrespective of any increase made
pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the
certificate of incorporation or by-laws). Any vacancies in
the Board of Directors effected by the provisions of clauses
(y) and (z) in the preceding sentence may be filled by a
majority of the remaining Directors.
(D) Except as set forth herein, holders of Preferred
Stock, Series A shall have no special voting rights and
their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. Certain Restrictions. (A) Whenever quarterly
dividends or other dividends or distributions payable on the
Preferred Stock, Series A as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of
Preferred Stock, Series A outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire
for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Preferred Stock, Series A;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Preferred Stock, Series A, except
dividends paid ratably on the Preferred Stock, Series A and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Preferred Stock, Series A, provided
that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Preferred Stock, Series A;
or
(iv) purchase or otherwise acquire for consideration any
shares of Preferred Stock, Series A, or any shares of stock
ranking on a parity with the Preferred Stock, Series A,
except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Preferred
Stock, Series A purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A)
Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made
to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Preferred Stock, Series A unless, prior thereto, the
holders of shares of Preferred Stock, Series A shall have
received $1.00 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment. Thereafter, the holders
of the Preferred Stock, Series A shall be entitled to receive
an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of
shares of Common Stock. Following the payment of the
foregoing, holders of Preferred Stock, Series A and holders of
shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the liquidation
preference of the Preferred Stock, Series A and the
liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Preferred
Stock, Series A, then such remaining assets shall be
distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) In the event the Corporation shall at any time (i)
declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock (by
reclassification or otherwise), or (iii) combine the
outstanding Common Stock into a smaller number of shares, then
in each such case the aggregate amount to which holders of
shares of the Preferred Stock, Series A were entitled pursuant
to this Section 6 immediately prior to such event shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such
case the shares of Preferred Stock, Series A shall at the same
time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set
forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the
Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock (by reclassification or
otherwise), or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount
set forth in the preceding sentence with respect to the
exchange or change of shares of Preferred Stock, Series A
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Preferred Stock,
Series A shall not be redeemable.
Section 9. Ranking. The Preferred Stock, Series A shall
rank junior to all other series of the Corporation's Preferred
Stock as to the payment of dividends and the distribution of
assets, unless the terms of any such series shall provide
otherwise.
Section 10. Amendment. The Restated Certificate of
Incorporation of the Corporation shall not be further amended
in any manner which would materially alter or change the
powers, preferences or special rights of the Preferred Stock,
Series A so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the
outstanding shares of Preferred Stock, Series A voting
separately as a class.
Section 11. Fractional Shares. Preferred Stock, Series A
may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Preferred Stock, Series A.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the
penalties of perjury this day of , 1996.
________________________________________________________________________________
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R-
Rights
NOT EXERCISABLE AFTER , 2006 OR EARLIER IF
REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION,
AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF SUCH AGREEMENT.]*
RIGHTS CERTIFICATE
SMITH CORONA CORPORATION
This certifies that , or
registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of , 1996 (the
"Rights Agreement"), between Smith Corona Corporation, a
Delaware corporation (the "Company"), and
, a (the "Rights Agent"), to
purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and at
any time prior to 5:00 P.M. (New York City time) on
, 2006 at the office or offices of the Rights Agent designated
for such purpose, or its successor as Rights Agent, one
one-thousandth of a fully paid, nonassessable share of Preferred
Stock, Series A (the "Preferred Stock") of the Company, at a
purchase price of $ per one one-thousandth of a share
(the "Purchase Price"), upon presentation and surrender of
this Rights Certificate with the Form of Election to Purchase
and related Certification duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one
one-thousandths of a share of Preferred Stock which may be
purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and
Purchase Price as of , 1996, based on the
Preferred Stock as constituted at such date. As provided in
the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities which
may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and
adjustment upon the happening of certain events.
Upon the occurrence of a Section 11(a)(ii) Event (as such
term is defined in the Rights Agreement), if the Rights
evidenced by this Rights Certificate are beneficially owned by
(i) an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person,
Affiliate or Associate or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person
who, after such transfer, became an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, such Rights
shall become null and void and no holder hereof shall have any
right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
--------------- * The portion of the legend in brackets shall
be inserted only if applicable and shall replace the preceding
sentence.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which
terms, provisions and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the
holders of the Rights Certificates, which limitations of
rights include the temporary suspension of the exercisability
of such Rights under the specific circumstances set forth in
the Rights Agreement. Copies of the Rights Agreement are on
file at the above-mentioned office of the Rights Agent and are
also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the
Rights Agent designated for such purpose, may be exchanged for
another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a
share of Preferred Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have
entitled such holder to purchase. If this Rights Certificate
shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate may be redeemed by the
Company at its option at a redemption price of $.001 per
Right. No fractional shares of Preferred Stock will be issued
upon the exercise of any Right or Rights evidenced hereby
(other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts),
but in lieu thereof a cash payment will be made, as provided
in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to
vote or receive dividends or be deemed for any purpose the
holder of shares of Preferred Stock or of any other securities
of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the
Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the
Rights Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal.
Dated as of , 1996
SMITH CORONA CORPORATION
By ---------------------------------------
Name:
Title:
Countersigned:
---------------------------------------,
as Rights Agent
By -------------------------------------------------------
Authorized Representative
Date of Countersignature: -------------------------------
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
--------------------------------------------------------------------------------
hereby sells, assigns and transfers unto
------------------------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the within Rights Certificate on
the books of the within-named Company, with full power of
substitution.
Dated: -------------------------------------
Signature -----------------------------------------
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust
company, broker, dealer, or other eligible institution which
is a member in good standing of a medallion guaranty program
approved by the Securities Transfer Association, Inc.
Certification
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not
being sold, assigned and transferred by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not
acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: -------------------------------------
Signature -----------------------------------------
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust
company, broker, dealer, or other eligible institution which
is a member in good standing of a medallion guaranty program
approved by the Securities Transfer Association, Inc.
NOTICE
The signature to the foregoing Assignment and Certification
must correspond to the name as written upon the face of this
Rights Certificate in every particular, without alteration or
enlargement or any change whatsoever.
In the event the certification set forth above is not
completed, the Company and the Rights Agent will deem the
beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Certificate) and
such Assignment will not be honored.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: Smith Corona Corporation
The undersigned hereby irrevocably elects to exercise
Rights represented by this Rights Certificate to purchase
the shares of Preferred Stock issuable upon the exercise of
the Rights (or such other securities of the Company or of any
other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be
issued in the name of:
Please insert social security
or other identifying number
------------------------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights
evidenced by this Rights Certificate, a new Rights Certificate
for the balance of such Rights shall be registered in the name
of and delivered to:
Please insert social security
or other identifying number
------------------------------------------------------
(Please print name and address)
Dated: -------------------------------------
Signature -----------------------------------------
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust
company, broker, dealer or other eligible institution which is
a member in good standing of a medallion guaranty program
approved by the Securities Transfer Association, Inc.
Certification
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [
] are [ ] are not being exercised by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not
acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: -------------------------------------
Signature -----------------------------------------
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust
company, broker, dealer or other eligible institution which is
a member in good standing of a medallion guaranty program
approved by the Securities Transfer Association, Inc.
NOTICE
The signature to the foregoing Election to Purchase and
Certification must correspond to the name as written upon the
face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not
completed, the Company and the Rights Agent will deem the
beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Certificate) and
such Election to Purchase will not be honored.
EXHIBIT C
SUMMARY OF RIGHTS
On , 1996, the Board of Directors of Smith Corona
Corporation (the "Company") declared a dividend distribution
of one Right for each outstanding share of the Company's
Common Stock, par value $.001 per share (the "Common Stock"),
payable to stockholders of record at the close of business on
such date (the "Record Date") and payable with respect to
Common Stock issued thereafter until the Distribution Date (as
defined below) or as may be otherwise provided in the Rights
Agreement. Except as set forth below, each Right, when it
becomes exercisable, entitles the registered holder to
purchase from the Company a unit consisting initially of one
one-thousandth of a share (a "Unit") of Preferred Stock,
Series A, par value $.001 per share (the "Preferred Stock"),
of the Company, at a Purchase Price of $ per Unit,
subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement
(the "Rights Agreement"), dated as of , 1996,
between the Company and , as
Rights Agent.
Initially, the Rights will be attached to all certificates
representing shares of Common Stock, and no separate
certificates evidencing the Rights ("Rights Certificates")
will be distributed. The Rights will separate from the Common
Stock and a "Distribution Date" will occur upon the earlier of
(i) ten days (or such later date as the Board of Directors
shall determine) following public disclosure that a person or
group of affiliated or associated persons has become an
"Acquiring Person" (as defined below) or (ii) ten business
days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an "Acquiring
Person". Except as set forth below, an "Acquiring Person" is a
person or group of affiliated or associated persons who has
acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock. The term "Acquiring
Person" excludes (i) the Company, (ii) any subsidiary of the
Company, (iii) any employee benefit plan of the Company or any
subsidiary of the Company or (iv) any person or entity
organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates,
(ii) Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such
certificate. Pursuant to the Rights Agreement, the Company
reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
As soon as practicable after the occurrence of the
Distribution Date, Rights Certificates will be mailed to
holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the
separate Rights Certificates alone will represent the Rights.
Except as may be otherwise provided in the Rights Agreement,
only shares of Common Stock issued prior to the Distribution
Date will be issued with Rights.
The Rights are not exercisable until the Distribution Date
and until the Rights are no longer redeemable. The Rights will
expire at the close of business on , 2006, unless
extended or earlier redeemed by the Company as described
below.
In the event that a person becomes an Acquiring Person, each
holder of a Right will have the right to receive, upon
exercise of the Right after the Distribution Date and subject
to the provisions of the Rights Agreement, Common Stock (or,
in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise
price of the Right. Notwithstanding the foregoing, following
the occurrence of the event set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void and nontransferable and
any holder of any such right (including any purported
transferee or subsequent holder) will be unable to exercise or
transfer any such right. For example, at an exercise price of
$ per Right, each Right not owned by an Acquiring
Person (or by certain related parties) following an event set
forth in this paragraph would entitle its holder to purchase $
worth of Common Stock (or other consideration, as
noted above) for $ . Assuming that the Common Stock
had a per share value of $ at such time, the holder
of each valid Right would be entitled to purchase
shares of Common Stock for $ .
In the event that, at any time following the date on which
there has been public disclosure that, or of facts indicating
that, a person has become an Acquiring Person (the "Stock
Acquisition Date"), (i) the Company is acquired in a merger or
other business combination transaction in which the Company is
not the surviving corporation or (ii) 50% or more of the
Company's assets or earning power is sold, mortgaged or
transferred, each holder of a Right (except Rights which
previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in
this paragraph and in the preceding paragraph are referred to
as the "Triggering Events."
The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend
on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are
granted certain rights or warrants to subscribe for Preferred
Stock or convertible securities at less than the current
market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular cash dividends) or
of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at
least 1% of the Purchase Price. No fractional Units will be
issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend and
liquidation rights, the value of the one one-thousandth
interest in a share of Preferred Stock purchasable upon
exercise of each Right should approximate the value of one
share of Common Stock. Shares of Preferred Stock purchasable
upon exercise of the Rights will not be redeemable. Each share
of Preferred Stock will be entitled to a quarterly dividend
payment of 1,000 times the dividend declared per share of
Common Stock. In the event of liquidation, each share of
Preferred Stock will be entitled to a $1 preference, and
thereafter the holders of the shares of Preferred Stock will
be entitled to an aggregate payment of 1,000 times the
aggregate payment made per share of Common Stock. Each share
of Preferred Stock will have 1,000 votes, voting together with
the shares of Common Stock. These rights are protected by
customary antidilution provisions.
At any time until ten days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in
part, at a price (the "Redemption Price") of $.001 per Right
(payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors) by resolution of the
Board of Directors (provided that following a Stock
Acquisition Date such resolution is approved by a majority of
the Continuing Directors and only if the Continuing Directors
constitute a majority of the directors then in office). A
"Continuing Director" is a member of the Board of Directors
who is not an Acquiring Person, an affiliate or associate of
an Acquiring Person or a representative or nominee of an
Acquiring Person. Immediately upon such action of the Board of
Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive
dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in
the event that the Rights become exercisable for Common Stock
(or other consideration) or for common stock of the acquiring
company as set forth above.
Other than those provisions relating to the principal
economic terms of the Rights, any of the provisions of the
Rights Agreement may be amended by resolution of the Board of
Directors of the Company (provided that following a Stock
Acquisition Date such resolution is approved by a majority of
the Continuing Directors and only if the Continuing Directors
constitute a majority of the directors then in office) prior
to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by
resolution of the Board of Directors of the Company (provided
that following a Stock Acquisition Date such resolution is
approved by a majority of the Continuing Directors and only if
the Continuing Directors constitute a majority of the
directors then in office) in order to cure any ambiguity, to
make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring
Person or its affiliates or associates), or to shorten or
lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an exhibit to
. A copy of the Rights Agreement is available free of
charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
, 1996
SCHEDULE 1.73
SCC HEALTH AND WELFARE PLANS
Group Life & Health Insurance Plan for Employees of Smith Corona
Corporation
Health Insurance Plan for Employees of Smith Corona Corporation
Section 125 Plan for Employees of Smith Corona Corporation
Smith Corona Corporation Personal Accident Insurance Plan
Smith Corona Corporation Business Travel Accident Plan
Smith Corona Corporation Termination Allowance Plan
Smith Corona Corporation Work Incentive Plan
SCHEDULE 1.74
SCC RETIREMENT PLANS(1)
Qualified Plans
Defined Benefit Plans
Smith Corona Corporation Salaried Employees' Retirement Plan
Smith Corona Corporation Hourly Employees' Retirement Plan and
SCM Office Supplies, Inc. Salaried Employees' and Hourly
Employees' Retirement Plan
Defined Contribution Plan
Smith Corona Corporation Retirement Savings and Investment Plan
--------------- (1) On the Petition Date, two additional
defined benefit
plans -- the SCM Office Supplies, Inc. Hourly Employees'
Retirement Plan
and the SCM Office Supplies, Inc. Salaried Employees'
Retirement Plan --
were in existence. On December 31, 1995, these two plans were
merged with
the Smith Corona Corporation Hourly Employees' Retirement Plan.
SCHEDULE 5.5
SUBCLASSES OF SECURED CLAIMS
None.
SCHEDULE 7.1(c)
CURE PAYMENTS
Cure
Contract CounterpartyAmount
1. Computer Associates Int'l $0.00
2. ADT Security Systems 5,493.49
3. Amer. Mailing Equip 0.00
4. American Software (A/R Software) 277.50
5. American Software (Tailored System) 0.00
6. AMP, Inc 300.00
7. AMP, Inc 1,320.00
8. AMP, Inc 633.99
9. AMP, Inc 4,722.00
10. AMP, Inc 400.00
11. AMP, Inc 180.00
12. AMP, Inc 144.00
13. AMP, Inc 144.00
14. AMP, Inc 120.00
15. AMP, Inc 144.00
16. AMP, Inc 144.00
17. AMP, Inc 144.00
18. AMP, Inc 144.00
19. Ascom Hasler Mailing System 110.25
20. Ascom Hasler Mailing System 168.75
21. ASR Systems Group 0.00
22. AT&T Capital Serv. Corp 1,100.00
23. Autosplice Division 0.00
24. Bell Atlantic Business Systems 12,803.81
25. Bell Atlantic Business Systems 0.00
26. Bell Atlantic Business Systems 0.00
27. Berwind Realty, S.E 2,664.17
28. Carrier Building Systems 4,057.92
29. CGI Systems 0.00
30. CGI(Copics) 7,474.00
31. Clark Equipment Credit Co 0.00
32. Clark Equipment Credit Co 0.00
33. Clark Equipment Credit Co 0.00
34. Clarklift 135.00
35. Com Source 467.00
36. Computer Asset Group Inc 1,050.00
37. Computer Asset Group Inc 561.00
38. Computer Associates International 0.00
39. Computer Associates International 0.00
40. Computer Associates Int'l 279.86
41. Computer Associates Int'l 75.81
42. Computer Associates Int'l 400.04
43. Computer Associates Int'l 0.00
44. Computer Associates Int'l 179.76
45. Computer Associates Int'l 0.00
46. Computer Associates Int'l 684.14
47. Computer Facilities Tech 0.00
48. Copy Machine Supply 1,935.97
49. Copy Machine Supply 900.00
50. Copy Machine Supply 310.52
51. Copy Machine Supply 679.14
52. Copy Machine Supply 548.02
53. Copy Machine Supply 534.52
54. Copy Machine Supply 1,071.22
55. Copy Machine Supply 302.36
56. Copy Machine Supply 370.48
57. Copy Machine Supply 1,100.00
58. Copy Machine Supply 1,839.39
59. Copy Machine Supply 1,839.39
60. Copy Machine Supply 168.64
61. Copy Machine Supply 321.04
62. Copy Machine Supply 156.76
63. Copy Machine Supply 226.33
64. Copy Machine Supply 927.36
65. Copy Machine Supply 181.00
66. Copy Machine Supply 1,292.51
67. Copy Machine Supply 369.00
68. Copy Machine Supply 1,319.46
69. Copy Machine Supply 921.88
70. Data Design Associates 0.00
71. Data Design Associates 0.00
72. Data I/O Corp 0.00
73. DeLuxe Leasing Inc 170.00
74. Diamond Page Int'l Corp 1,022.90
75. Diamond Page Int'l Corp 1,117.74
76. Diamond Page Int'l Corp 256.16
77. Diamond Page Int'l Corp 372.60
78. Ditek International (Base License Fee) 0.00
79. Eastman Kodak Co 0.00
80. Financial Data Planning 121.06
81. GE Capital Corp 0.00
82. GE Capital Corp 28.55
83. GE Information Services 5,483.13
84. Hewlitt Packard Co 37,862.68
85. HM Holdings, Inc 0.00
86. Houghton Mifflin Company (License Fees)
87. IBM 15,628.00
88. IBM License 88,698.25
89. Immediate Mailing Service 59.94
90. Infosoft 0.00
91. Ladderman 0.00
92. Ladderman Associates 0.00
93. Landis & Gyr Powers, Inc 4,490.12
94. Levi, Ray & Shoup, Inc 0.00
95. Livingston Trade Tech 0.00
96. Material Handling Products 0.00
97. MCI International/WUI Inc 124.20
98. Microlytics 0.00
99. Miller Info. Processing Service 43.23
100. Miller Info. Processing Service 10.32
101. Miller Info. Processing Service 438.06
102. Miller Info. Processing Service 107.74
103. Miller Info. Processing Service 19.35
104. Miller Info. Processing Service 9.03
105. Miller Info. Processing Service 9.81
106. Monroe Extinguisher Co 0.00
107. MOS Leasing 71.56
108. Onondaga Litho Supply, Co 769.30
109. Pitney Bowes, Inc 0.00
110. Pitney Bowes, Inc 387.00
111. PSI Software, Inc 0.00
112. PSI Software, Inc 0.00
113. Pureflo Water 248.45
114. QRS 1,222.66
115. R.G. Data, Inc 539.59
116. Remco Business Products 939.67
117. Renewable Resources
(Distribution Agreement) 0.00
118. Riverside Fire Extinguisher 0.00
119. Rockport Trade Systems 0.00
120. Samsung Corp. (Label Printer Purchase
Agreement) 0.00
121. Southwest Yale Material Handling 349.52
122. Southwest Yale Material Handling 309.40
123. Standard Register 0.00
124. Supersoft Inc. License 0.00
125. Syncsort Inc. (License Agreement) 279.45
126. Terry Co 0.00
127. Uarco, Inc 985.00
128. Vicom, Inc 245.95
129. Xerox Corporation 0.00
130. Xerox Corporation 0.00
131. Xerox Corporation 0.00
132. Xerox Corporation 31,567.15
133. Yale Financial Services 1,344.17
134. Yale Financial Services 413.73
135. Yale Financial Services 793.88
136. Z-Axis 421.50
Total $260,798.33
SCHEDULE 12.7
AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND BY-LAWS OF NEWSCC
RESTATED CERTIFICATE OF INCORPORATION
OF
SMITH CORONA CORPORATION
Pursuant to Sections 242, 245 and 303
of the General Corporation Law
of the State of Delaware
Smith Corona Corporation, a corporation duly organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation") and originally incorporated in the
State of Delaware on September 6, 1985 under the name HSCM-10
Inc., does hereby certify as follows:
FIRST: That the Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of
State of Delaware on the 6th day of September, 1985.
SECOND: That the Certificate of Incorporation, as amended,
is hereby further amended and restated to read in its
entirety as follows:
ARTICLE I
NAME
The name of the corporation is Smith Corona Corporation (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name of its
registered agent at that address is The Corporation Trust
Company.
ARTICLE III
CORPORATE PURPOSE
The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under
the General Corporation Law of the State of Delaware as set
forth in Title 8 of the Delaware Code (the "GCL").
ARTICLE IV
CAPITAL STOCK
SECTION 1: Authorized Shares. The total number of shares
of all classes of stock which the Corporation shall have
authority to issue is two hundred sixty million (260,000,000)
shares, $.001 par value, divided into two classes of which two
hundred fifty million (250,000,000) shall be common stock
(hereinafter the "Common Stock"), and ten million (10,000,000)
shall be preferred stock (hereinafter the "Preferred Stock").
The number of authorized shares of Preferred Stock may be
increased or decreased by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote
without a separate vote of the holders of Preferred Stock as a
class.
SECTION 2: Common Stock. Subject to the rights of the
holders of shares of any series of the Preferred Stock, and
except as may be expressly provided with respect to the
Preferred Stock or any series thereof herein or in a
resolution of the Board of Directors establishing such series
or by law:
(1) The holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of
Directors, out of the assets of the Corporation which are by
law available therefor, dividends payable either in cash, in
property, or in shares of the Corporation's capital stock.
(2) Each share of Common Stock shall be entitled to one
vote for the election of directors and on all other matters
requiring stockholder action.
SECTION 3: Preferred Stock. The designations and the
powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, of the Preferred Stock
shall be as follows:
(1) The Board of Directors is expressly authorized at any
time, and from time to time, to provide for the issuance of
shares of Preferred Stock in one or more series, with such
voting powers, full or limited (including, without
limitation, more than one vote, less than one vote or one
vote per share and the ability to vote separately as a class
or together with all or some of the other classes or series
of capital stock on all or certain of the matters to be
voted on by the stockholders of the Corporation), or no
voting powers, and with such designations, preferences and
relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or
resolutions providing for the issuance thereof adopted by
the Board of Directors, including, but not limited to, the
following:
(a) the designation and number of shares constituting such
series;
(b) the dividend rate or rates of such series, if any, or
the manner of determining such rate or rates, if any, the
conditions and dates upon which such dividends shall be
payable, the preference or relation which such dividends
shall bear to the dividends payable on any other class or
classes or of any other series of capital stock and whether
such dividends shall be cumulative or non-cumulative, and if
cumulative, from which date or dates;
(c) whether the shares of such series shall be subject to
redemption by the Corporation, and, if made subject to such
redemption, the times, prices and other terms and conditions
of such redemption;
(d) the terms and amount of any sinking fund provided for
the purchase or redemption of the shares of such series;
(e) whether the shares of such series shall be convertible
into or exchangeable for shares of any other class or
classes or of any other series of any class or classes of
capital stock of the Corporation, and, if provision be made
for conversion or exchange, the time, prices, rates,
adjustments and other terms and conditions of such
conversion or exchange;
(f) the extent, if any, to which the holders of the shares
of such series shall be entitled to vote as a class or
otherwise, and if so entitled, the number of votes to which
such holder is entitled, with respect to the election of
directors or otherwise;
(g) the restrictions, if any, on the issue or reissue of
any additional series of Preferred Stock; and
(h) the rights, if any, of the holders of the shares of
such series in the event of voluntary or involuntary
liquidation, dissolution or winding up.
(2) Subject to any limitations or restrictions stated in
the resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting a
series, the Board of Directors may by resolution or
resolutions likewise adopted increase or decrease (but not
below the number of shares of the series then outstanding)
the number of shares of the series subsequent to the issue
of that series, and in case the number of shares of any
series shall be so decreased the shares constituting the
decrease shall resume that status which they had prior to
the adoption of the resolution originally fixing the number
of shares.
Section 4: Nonvoting Securities. The Corporation will not
issue nonvoting equity securities to the extent prohibited by
section 1123 of the Bankruptcy Reform Act of 1978, as amended
(the "Bankruptcy Code"); provided, however, that this Section
4 of Article IV (a) will have no further force or effect
beyond that required by section 1123 of the Bankruptcy Code,
(b) will have such force and effect, if any, only for so long
as such section 1123 is in effect and applicable to the
Corporation, and (c) in all events may be amended or
eliminated in accordance with applicable laws as from time to
time in effect.
Section 5: Restrictions on Transfer. (1) Until June 30,
1999, (a) any attempted sale, transfer, assignment,
conveyance, grant, pledge, gift or other disposition of any
share or shares of stock of the Corporation (within the
meaning of Section 382 of the Internal Revenue Code of 1986,
as amended (the "Tax Code")) or any option or right to
purchase such stock, as defined in the Treasury Regulations
under Section 382 of the Tax Code, to any person or entity (or
group of persons or entities acting in concert), or any
attempted exercise of the aforementioned option or right to
purchase such stock by any person or entity (or group of
persons or entities acting in concert), who either directly or
indirectly owns or would be treated as owning, or whose shares
are or would be attributed to any person or entity who
directly or indirectly owns or would be treated as owning, in
either case prior to the purported transfer or exercise and
after giving effect to the applicable attribution rules of the
Tax Code and applicable Treasury Regulations, 5 percent or
more of the value of the outstanding stock of the Corporation
or otherwise treated as a 5-percent (5%) shareholder (within
the meaning of Section 382 of the Tax Code), regardless of the
percent or the value of the stock owned, shall be void ab
initio insofar as it purports to transfer ownership or rights
in respect of such stock to the purported transferee and (b)
any attempted sale, transfer, assignment, conveyance, grant,
gift, pledge or other disposition of any share of stock of the
Corporation (within the meaning of Section 382 of the Tax
Code) or any option or right to purchase such stock, as
defined in the Treasury Regulations under Section 382 of the
Tax Code, to any person or entity (or group of persons or
entities acting in concert) or any attempted exercise of the
aforementioned option or right to purchase such stock by any
person or entity (or group of persons or entities acting in
concert) not described in clause (a) who directly or
indirectly would own, or whose shares would be attributed to
any person or entity who directly or indirectly would own, in
each case as a result of the purported transfer or exercise
and after giving effect to the applicable attribution rules of
the Tax Code and applicable Treasury Regulations, 5-percent
(5%) or more of the value of any of the stock of the
Corporation (or otherwise treated as a 5-percent (5%)
shareholder within the meaning of Section 382 of the Tax
Code), shall, as to that number of shares causing such person
or entity to be a 5-percent (5%) shareholder, be void ab
initio insofar as it purports to transfer ownership or rights
in respect of such stock to the purported transferee;
provided, however, if the Corporation either does not qualify
under Section 382(l)(5) of the Tax Code or chooses to make an
election under Section 382(l)(5)(H) of the Tax Code (or the
applicable provision then in effect) not to have the
provisions of Section 382(l)(5) of the Tax Code apply, the
restrictions described above in clauses (a) and (b) shall be
deemed to lapse and shall have no further force or effect as
of the earlier of the date the Corporation is aware that it
does not qualify under Section 382(l)(5) of the Tax Code and
the date of such election; provided further, however, that
neither of the restrictions described above in the foregoing
clauses (a) or (b) shall prevent a valid transfer or exercise
if (i) the transferor or exercisor, as the case may be,
obtains the written approval of the Board of Directors of the
Corporation and provides the Corporation with an opinion of
counsel satisfactory to the Corporation that, assuming, as of
the date of such opinion, the full exercise of all warrants
issued by, and any options granted pursuant to any stock
option plan of, the Corporation, the transfer or exercise
shall not result in the application of any tax law limitation
on the use of the Corporation's loss carryforwards or other
tax attributes or (ii) a tender offer, within the meaning of
the Securities Exchange Act of 1934, as amended, and pursuant
to the rules and regulations thereof, is made by a bona fide
third party purchaser to purchase at least sixty-six and two
thirds percent (66 2/3%) of the issued and outstanding common
stock of the Corporation and the offeror (A) agrees to effect,
within ninety (90) days of the consummation of the tender
offer, a back-end merger in which all non-tendering
shareholders would receive the same consideration as paid in
the tender offer, and (B) has received the tender of
sufficient shares to effect such merger. Without limiting or
restricting in any manner the effectiveness of the foregoing
provisions, the Corporation may rely and shall be protected in
relying on its shareholder lists and stock transfer records
for all purposes relating to such notices, voting, payment of
dividend or other communication or distributions to its
shareholders.
In the absence of special approval by the Board of
Directors, a purported transfer or exercise of shares in
excess of the shares that can be transferred or exercised
pursuant to this Section 5 (the "Prohibited Shares") to the
purported acquiror (the "Purported Acquiror) is not effective
to transfer ownership of such Prohibited Shares. On demand by
the Corporation, which demand must be made within thirty (30)
days of the time the Corporation learns of the transfer or
exercise of the Prohibited Shares, a Purported Acquiror must
transfer any certificate or other evidence of ownership of the
Prohibited Shares within the Purported Acquiror's possession
or control, together with any dividends or other distributions
("Distributions") that were received by the Purported Acquiror
from the Corporation with respect to the Prohibited Shares, to
an agent designated by the Corporation (the "Agent"). The
Agent will sell the Prohibited Shares in an arm's length
transaction (over a stock exchange, if possible), and the
Purported Acquiror will receive an amount of sales proceeds
not in excess of the price paid or consideration surrendered
by the Purported Acquiror for the Prohibited Shares (or the
fair market value of the Prohibited Shares at the time of any
attempted transfer to the Purported Acquiror by gift,
inheritance, or a similar transfer). If the Purported Acquiror
has sold the Prohibited Shares prior to receiving the
Corporation's demand to surrender the Prohibited Shares to the
Agent, the Purported Acquiror shall be deemed to have sold the
Prohibited Shares as an Agent for the initial transferor, or,
in the case where the Prohibited Shares are acquired pursuant
to the exercise of an option or right to purchase stock of the
Corporation, for the Corporation, and shall be required to
transfer to the Agent any proceeds of such sale and any
Distributions.
In the case of an attempted exercise of an option or a right
to purchase stock of the Corporation, the Agent will pay to
the Corporation any sales proceeds in excess of those due to
the Purported Acquiror, together with any distributions
received by the Agent. In all other cases, if the initial
transferor can be identified, the Agent will pay to it any
sales proceeds in excess of those due to the Purported
Acquiror, together with any distributions received by the
Agent. If the initial transferor cannot be identified within
ninety (90) days of receipt of such sales proceeds, if any,
the Agent may pay any such amounts to a charity of its
choosing. In no event shall amounts paid to the Agent inure to
the benefit of the Corporation (except as set forth in the
first sentence of this paragraph) or the Agent, but such
amounts may be used to cover expenses of the Agent in
attempting to identify the initial transferor.
If the Purported Acquiror fails to surrender the Prohibited
Shares within the next thirty (30) business days from the
demand by the Corporation, then the Corporation may institute
legal proceedings to compel the surrender. The Corporation
shall be entitled to damages, including reasonable attorneys'
fees and costs, from the Purported Acquiror, on account of
such purported transfer.
(2) Legend. Until June 30, 1999, all certificates
evidencing ownership of shares of Common Stock under the Plan
shall bear a conspicuous legend on the face thereof as
follows:
"THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS PURSUANT TO ARTICLE IV, SECTION 5 OF THE
RESTATED CERTIFICATE OF INCORPORATION OF THE CORPORATION
WHICH ARTICLE IS REPRINTED IN ITS ENTIRETY ON THE BACK OF
THIS CERTIFICATE."
SECTION 6: Business Combinations with Interested
Stockholders. Notwithstanding anything to the contrary set
forth therein, the Corporation shall be governed by Section
203 of the GCL.
ARTICLE V
BY-LAWS
The Board of Directors is authorized to make, alter or
repeal the By-laws of the Corporation.
ARTICLE VI
DIRECTORS
SECTION 1: Election of directors need not be by written
ballot unless the By-laws of the Corporation shall otherwise
provide.
SECTION 2: The directors of the Corporation shall be
elected at the annual meeting of stockholders, except as
provided in Section 4 of this Article VI. The directors shall
be divided into three (3) classes, as nearly equal in number
as possible, designated Class I, Class II and Class III. Class
I directors shall initially serve until the 1997 annual
meeting of stockholders; Class II directors shall initially
serve until the 1998 annual meeting of stockholders; and Class
III directors shall initially serve until the 1999 annual
meeting of stockholders. At each annual meeting of
stockholders beginning with the 1997 annual meeting,
successors to the class of directors whose term expires at
that annual meeting shall be elected for a term expiring at
the third succeeding annual meeting of stockholders after
their election. Except as otherwise provided by law, if the
number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain the number
of directors in each class as nearly equal as possible. In no
case shall a decrease in the number of directors shorten the
term of any incumbent director. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of
Preferred Stock shall have the right to elect directors at an
annual or special meeting of stockholders, the election, term
of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this
Certificate of Incorporation applicable thereto, or the
resolution or resolutions of the Board of Directors relating
to the issuance of such shares of Preferred Stock, and such
directors so elected shall not be divided into classes
pursuant to this Article VI unless expressly provided by such
terms or such resolution or resolutions.
SECTION 3: A director shall hold office until the annual
meeting of stockholders for the year in which his or her term
expires and until his or her successor shall be elected.
Directors may be removed only by the holders of at least a
majority of the outstanding Common Stock and only for cause at
a meeting called for such purpose.
SECTION 4: If any vacancy occurs on the Board of Directors
or any new directorship is created by an increase in the
authorized number of directors, a majority of the directors in
office, though less than a quorum, may fill the vacancy or
fill the newly created directorship. Any director elected to
fill a vacancy shall have the same term as that of his or her
predecessor, or, if such vacancy is a result of an increase in
the number of directors, as that of the other directors of the
class of which he or she shall be a member.
SECTION 5: Notwithstanding any other provision of this
Certificate of Incorporation or the By-Laws of the Corporation
(and in addition to any other vote that may be required by
law, this Certificate of Incorporation or the By-Laws of the
Corporation), the affirmative vote of the holders of shares
entitled to cast at least two-thirds of the votes represented
by the shares of all classes of stock of the Corporation
entitled to vote generally in elections of directors,
considered for purposes of this Article VI as one class, shall
be required to amend, alter, change or repeal, or adopt any
provision inconsistent with, this Article VI.
ARTICLE VII
MEETINGS OF STOCKHOLDERS
SECTION 1: Subject to the special rights, if any, of the
holders of any class or series of Preferred Stock established
in or pursuant to the provisions of this Certificate of
Incorporation, any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly
called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders.
SECTION 2: Notwithstanding any other provision of this
Certificate of Incorporation or the By-Laws of the Corporation
(and in addition to any other vote that may be required by
law, this Certificate of Incorporation or the By-Laws of the
Corporation), the affirmative vote of the holders of shares
entitled to cast at least two-thirds of the votes represented
by the shares of all classes of stock of the Corporation
entitled to vote generally in elections of directors,
considered for purposes of this Article VII as one class,
shall be required to amend, alter, change or repeal, or adopt
any provision inconsistent with, this Article VII.
ARTICLE VIII
INDEMNIFICATION
SECTION 1: Each person who was or is made a party or is
threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal
representative, is or was a director or officer of the
Corporation or a subsidiary thereof or is or was serving at
the request of the Corporation as a director, officer,
partner, member or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, partner, member or
trustee or in any other capacity while so serving, shall be
indemnified and held harmless by the Corporation to the
fullest extent authorized by the GCL, as the same exists or
may hereinafter be amended (but, in the case of any such
amendment to the GCL, the right to indemnification shall be
retroactive only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than
such law prior to such amendment permitted the Corporation to
provide), against all expense, liability, and loss (including,
without limitation, attorneys' fees and related disbursements,
judgments, fines, ERISA excise taxes or penalties, and amounts
paid or to be paid in settlement thereof) reasonably incurred
or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased
to be a director, officer, partner, member or trustee and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in
Section 2 hereof with respect to proceedings seeking to
enforce rights to indemnification, the Corporation shall
indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Section 1 shall be
a contract right and shall include the right to be paid the
expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that, if the GCL
so requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or
is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this Section 1 or otherwise. Such right to
indemnification and the payment of expenses incurred in
defending a proceeding in advance of the final disposition may
be conferred upon any person who is or was an employee or
agent of the Corporation or a subsidiary thereof or is or was
serving at the request of the Corporation as an employee or
agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, if, and to the extent,
authorized by the By-Laws or the Board of Directors, and shall
inure to the benefit of his or her heirs, executors and
administrators.
SECTION 2: If a claim under Section 1 of this Article VIII
is not paid in full by the Corporation within thirty (30) days
after a written claim has been received by the Corporation,
the claimant may at any time thereinafter bring suit against
the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to
the Corporation) that the claimant has not met the standards
of conduct which make it permissible under the GCL for the
Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation
(including, without limitation, its Board of Directors,
independent legal counsel, or stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct
set forth in the GCL, nor an actual determination by the
Corporation (including without limitation, its Board of
Directors, independent legal counsel, or stockholders) that
the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that
the claimant has not met the applicable standard of conduct.
SECTION 3: The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VIII shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this
Certificate of Incorporation or by the By-Laws of the
Corporation, agreement, vote of stockholders or disinterested
directors, or otherwise.
SECTION 4: The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against
any expense, liability, or loss, whether or not the
Corporation would have the power to indemnify such person
against such expense, liability or loss under the GCL.
SECTION 5: Any repeal or modification of the foregoing
provisions of this Article VIII shall not adversely affect any
right or protection hereunder of any person in respect of any
act or omission occurring prior to the time of such repeal or
modification.
SECTION 6: If this Article VIII or any portion hereof shall
be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless
indemnify each director or officer of the Corporation as to
any expense (including attorneys' fees), judgment, fine and
amount paid in settlement with respect to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an
action by or in the right of the Corporation, to the full
extent permitted by any applicable portion of this Article
VIII that shall not have been invalidated and to the full
extent permitted by applicable law.
ARTICLE IX
LIMITATION OF DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except: (i) for
any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the GCL,
or (iv) for any transaction from which the director derives
any improper personal benefit. If the GCL is amended after the
effectiveness of this Restated Certificate of Incorporation to
permit the further elimination or limitation of the personal
liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest
extent permitted by the GCL, as so amended. Any repeal or
modification of this Article IX by the stockholders of the
Corporation shall not adversely affect any right or protection
of a director of the Corporation in respect of any act or
omission occurring prior to the time of such repeal or
modification.
ARTICLE X
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
THIRD: That upon the effectiveness of this Restated
Certificate of Incorporation, all of the shares of common
stock, par value $.01 per share, which were outstanding
immediately prior to the effectiveness of this Restated
Certificate of Incorporation shall automatically be canceled
and shall cease to exist, and the holders thereof shall cease
to have any rights with respect to such shares of common
stock.
FOURTH: That such amendment and restatement of the
Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 242, 245 and 303 of
the General Corporation Law of Delaware, and that provision
for the making of such amendment and restatement of the
Certificate of Incorporation is contained in the Confirmation
Order, dated [ ], 1996, of the United States
Bankruptcy Court for the District of Delaware in Case Number
95-788 (HSB).
IN WITNESS WHEREOF, Smith Corona Corporation has caused this
Certificate to be duly signed by Ronald F. Stengel, its
President, and attested to by G. William Sisley, its
Secretary, this [ ] day of [ ], 1996.
By: -----------------------------------------
Ronald F. Stengel
President
ATTEST:
________________________________________________________________________________
G. William Sisley
Secretary
BY-LAWS OF
SMITH CORONA CORPORATION
(A Delaware Corporation)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be in the City
of Wilmington, County of New Castle, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have an
office or offices other than said registered office at such
place or places, either within or without the State of
Delaware, as the Board of Directors shall from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of the
stockholders for the election of directors or for any other
purpose shall be held at any such place, either within or
without the State of Delaware, as shall be designated from
time to time by the Board of Directors and stated in the
notice of meeting or in a duly executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of
stockholders shall be held on such date and time as shall be
designated from time to time by the Board of Directors and
stated in the notice of meeting or in a duly executed waiver
thereof. At such annual meeting, the stockholders shall elect,
by a plurality vote, directors as provided in the Certificate
of Incorporation and transact such other business as may
properly be brought before the meeting.
SECTION 3. Special Meetings. Special meetings of
stockholders, unless otherwise prescribed by statute, may be
called at any time by the Board of Directors, acting by a
majority of its members.
SECTION 4. Notice of Meetings. Except as otherwise
expressly required by statute, written notice of each annual
and special meeting of stockholders stating the date, place
and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is
called, shall be given to each stockholder of record entitled
to vote thereat not less than ten nor more than sixty days
before the date of the meeting. Business transacted at any
special meeting of stockholders shall be limited to the
purposes stated in the notice. Notice shall be given
personally or by mail and, if by mail, shall be sent in a
postage prepaid envelope, addressed to the stockholder at his
address as it appears on the records of the Corporation.
Notice by mail shall be deemed given at the time when the same
shall be deposited in the United States mail, postage prepaid.
Notice of any meeting shall not be required to be given to any
person who attends such meeting, except when such person
attends the meeting in person or by proxy for the express
purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not
lawfully called or convened, or who, either before or after
the meeting, shall submit a signed written waiver of notice,
in person or by proxy. Neither the business to be transacted
at, nor the purpose of, an annual or special meeting of
stockholders need be specified in any written waiver of
notice.
SECTION 5. List of Stockholders. The officer who has
charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing
the address of and the number of shares registered in the name
of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within
the city, town or village where the meeting is to be held,
which place shall be specified in the notice of meeting, or,
if not specified, at the place where the meeting is to be
held. The list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
SECTION 6. Quorum, Adjournments. The holders of a majority
of the voting power of the issued and outstanding stock of the
Corporation entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the
transaction of business at all meetings of stockholders,
except as otherwise provided by statute or by the Certificate
of Incorporation. If, however, such quorum shall not be
present or represented by proxy at any meeting of
stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the
power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall
be present or represented by proxy. At such adjourned meeting
at which a quorum shall be present or represented by proxy,
any business may be transacted which might have been
transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or, if after
adjournment a new record date is set, a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 7. Organization. At each meeting of stockholders,
the Chairman of the Board, if one shall have been elected, or,
in his absence or if one shall not have been elected, the
President shall act as chairman of the meeting. The Secretary
or, in his absence or inability to act, the person whom the
chairman of the meeting shall appoint secretary of the meeting
shall act as secretary of the meeting and keep the minutes
thereof.
SECTION 8. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the
chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute
or the Certificate of Incorporation, each stockholder of the
Corporation shall be entitled at each meeting of stockholders
to one vote for each share of capital stock of the Corporation
standing in his name on the record of stockholders of the
Corporation:
(a) on the date fixed pursuant to the provisions of
Section 7 of Article V of these By-Laws as the record date
for the determination of the stockholders who shall be
entitled to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then
at the close of business on the day next preceding the day
on which notice thereof shall be given, or, if notice is
waived, at the close of business on the date next preceding
the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act
for him by a proxy signed by such stockholder or his
attorney-in-fact, but no proxy shall be voted after three years
from
its date, unless the proxy provides for a longer period. Any
such proxy shall be delivered to the secretary of the meeting
at or prior to the time designated in the order of business
for so delivering such proxies. When a quorum is present at
any meeting, the vote of the holders of a majority of the
voting power of the issued and outstanding stock of the
Corporation entitled to vote thereon, present in person or
represented by proxy, shall decide any question brought before
such meeting, unless the question is one upon which by express
provision of statute or of the Certificate of Incorporation or
of these By-Laws, a different vote is required, in which case
such express provision shall govern and control the decision
of such question. Unless required by statute, or determined by
the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of
shares voted.
SECTION 10. Inspectors. The Board of Directors may, in
advance of any meeting of stockholders, appoint one or more
inspectors to act at such meeting or any adjournment thereof.
If any of the inspectors so appointed shall fail to appear or
act, the chairman of the meeting shall, or if inspectors shall
not have been appointed, the chairman of the meeting may,
appoint one or more inspectors. Each inspector, before
entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of
his ability. The inspectors shall determine the number of
shares of capital stock of the Corporation outstanding and the
voting power of each, the number of shares represented at the
meeting, the existence of a quorum, the validity and effect of
proxies, and shall receive votes, ballots or consents, hear
and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the results, and do such
acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of
the meeting, the inspectors shall make a report in writing of
any challenge, request or matter determined by them and shall
execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as an
inspector of an election of directors. Inspectors need not be
stockholders.
SECTION 11. No Action by Consent. Subject to the special
rights, if any, of the holders of any class or series of
Preferred Stock established in or pursuant to the provisions
of the Certificate of Incorporation, any action required or
permitted to be taken by the stockholders must be effected at
a duly called annual or special meeting of such holders and
may not be effected by any consent in writing by such holders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the
Board of Directors. The Board of Directors may exercise all
such authority and powers of the Corporation and do all such
lawful acts and things as are not by statute or the
Certificate of Incorporation directed or required to be
exercised or done by the stockholders.
SECTION 2. Number, Election, etc. The number of directors
of the Corporation shall be fixed, from time to time, by the
affirmative vote of a majority of the entire Board of
Directors but in no event shall be less than three (3) or more
than fifteen (15). If no number is fixed by the Board, the
number of directors shall be nine (9). Directors shall hold
office as provided in Article VI of the Certificate of
Incorporation. Directors need not be stockholders.
SECTION 3. Place of Meetings. Meetings of the Board of
Directors shall be held at such place or places, within or
without the State of Delaware, as the Board of Directors may
from time to time determine or as shall be specified in the
notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall
meet for the purpose of organization, the election of officers
and the transaction of other business, as soon as practicable
after each annual meeting of stockholders, on the same day and
at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board
of Directors may be held at such other time or place (within
or without the State of Delaware) as shall be specified in a
notice thereof given as hereinafter provided in Section 7 of
this Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such time and place as the Board
of Directors may fix. If any day fixed for a regular meeting
shall be a legal holiday at the place where the meeting is to
be held, then the meeting which would otherwise be held on
that day shall be held at the same hour on the next succeeding
business day. Notice of regular meetings of the Board of
Directors need not be given except as otherwise required by
statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board
of Directors may be called by the Board of Directors, acting
by a majority of its members.
SECTION 7. Notice of Meetings. Notice of each special
meeting of the Board of Directors (and of each regular meeting
for which notice shall be required) shall be given by the
Secretary as hereinafter provided in this Section 7, in which
notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice
need not state the purposes of such meeting. Notice of each
such meeting shall be mailed, postage prepaid, to each
director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the
day on which such meeting is to be held, or shall be sent
addressed to him at such place by telegraph, cable, telex,
telecopier or other similar means, or be delivered to him
personally or be given to him by telephone or other similar
means, at least twenty-four hours before the time at which
such meeting is to be held. Notice of any such meeting need
not be given to any director who shall, either before or after
the meeting, submit a signed waiver of notice or who shall
attend such meeting, except when he shall attend for the
express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 8. Quorum and Manner of Acting. A majority of the
entire Board of Directors shall constitute a quorum for the
transaction of business at any meeting of the Board of
Directors, and, except as otherwise expressly required by
statute or the Certificate of Incorporation or these By-Laws,
the act of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum at any meeting of the
Board of Directors, a majority of the directors present
thereat may adjourn such meeting to another time and place.
Notice of the time and place of any such adjourned meeting
shall be given to all of the directors unless such time and
place were announced at the meeting at which the adjournment
was taken, in which case such notice shall only be given to
the directors who were not present thereat. At any adjourned
meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and
the individual directors shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of
Directors, the Chairman of the Board, if one shall have been
elected, or, in the absence of the Chairman of the Board or if
one shall not have been elected, the President (or, in his
absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and
preside thereat. The Secretary or, in his absence, any person
appointed by the chairman shall act as secretary of the
meeting and keep the minutes thereof.
SECTION 10. Resignations. Any director of the Corporation
may resign at any time by giving written notice of his
resignation to the Corporation. Any such resignation shall
take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein,
immediately upon its receipt. Unless otherwise specified
therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 11. Removal of Directors. A director may be
removed only as provided in the Certificate of Incorporation.
SECTION 12. Compensation. The Board of Directors shall
have authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the
Corporation in any capacity.
SECTION 13. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of
Directors, designate one or more committees, including an
executive committee, each committee to consist of one or more
of the directors of the Corporation. The Board of Directors
may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified
member at any meeting of the committee.
Except to the extent restricted by statute or the
Certificate of Incorporation, each such committee, to the
extent provided in the resolution creating it, shall have and
may exercise all the powers and authority of the Board of
Directors and may authorize the seal of the Corporation to be
affixed to all papers which require it. Each such committee
shall serve at the pleasure of the Board of Directors and have
such name as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the
Board of Directors.
SECTION 14. Action by Consent. Unless restricted by the
Certificate of Incorporation, any action required or permitted
to be taken by the Board of Directors or any committee thereof
may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of the Board of Directors or
such committee, as the case may be.
SECTION 15. Telephonic Meeting. Unless restricted by the
Certificate of Incorporation, any one or more members of the
Board of Directors or any committee thereof may participate in
a meeting of the Board of Directors or such committee by means
of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can
hear each other. Participation by such means shall constitute
presence in person at a meeting.
ARTICLE IV
OFFICERS
SECTION 1. Number and Qualifications. The officers of the
Corporation shall be elected by the Board of Directors and
shall include the President, one or more Vice-Presidents, the
Secretary and the Treasurer. If the Board of Directors wishes,
it may also elect as an officer of the Corporation a Chairman
of the Board and may elect other officers (including one or
more Assistant Treasurers and one or more Assistant
Secretaries) as may be necessary or desirable for the business
of the Corporation. Any two or more offices may be held by the
same person, and no officer except the Chairman of the Board
need be a director. Each officer shall hold office until his
successor shall have been duly elected and shall have
qualified, or until his death, or until he shall have resigned
or have been removed, as hereinafter provided in these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation
may resign at any time by giving written notice of his
resignation to the Corporation. Any such resignation shall
take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein,
immediately upon receipt. Unless otherwise specified therein,
the acceptance of any such resignation shall not be necessary
to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be
removed, either with or without cause, at any time, by the
Board of Directors at any meeting thereof.
SECTION 4. Chairman of the Board. The Chairman of the
Board, if one shall have been elected, shall be a member of
the Board, an officer of the Corporation and, if present,
shall preside at each meeting of the Board of Directors or the
stockholders. He shall advise and counsel with the President,
and in his absence with other executives of the Corporation,
and shall perform such other duties as may from time to time
be assigned to him by the Board of Directors.
SECTION 5. The President. The President shall be the chief
executive officer of the Corporation. He shall, in the absence
of the Chairman of the Board or if a Chairman of the Board
shall not have been elected, preside at each meeting of the
Board of Directors or the stockholders. He shall perform all
duties incident to the office of President and chief executive
officer and such other duties as may from time to time be
assigned to him by the Board of Directors.
SECTION 6. Vice-President. Each Vice-President shall
perform all such duties as from time to time may be assigned
to him by the Board of Directors or the President. At the
request of the President or in his absence or in the event of
his inability or refusal to act, the Vice-President, or if
there shall be more than one, the Vice-Presidents in the order
determined by the Board of Directors (or if there be no such
determination, then the Vice-Presidents in the order of their
election), shall perform the duties of the President, and,
when so acting, shall have the powers of and be subject to the
restrictions placed upon the President in respect of the
performance of such duties.
SECTION 7. Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for,
all the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit
of the Corporation in such depositaries as may be designated
by the Board of Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable
to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise
the investments of its funds, taking proper vouchers
therefor;
(f) render to the Board of Directors, whenever the Board
of Directors may require, an account of the financial
condition of the Corporation; and
(g) in general, perform all duties incident to the office
of Treasurer and such other duties as from time to time may
be assigned to him by the Board of Directors.
SECTION 8. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided
for the purpose, the minutes of all meetings of the Board of
Directors, the committees of the Board of Directors and the
stockholders;
(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all
certificates for shares of the Corporation (unless the seal
of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the
seal to all other documents to be executed on behalf of the
Corporation under its seal;
(d) see that the books, reports, statements, certificates
and other documents and records required by law to be kept
and filed are properly kept and filed; and
(e) in general, perform all duties incident to the office
of Secretary and such other duties as from time to time may
be assigned to him by the Board of Directors.
SECTION 9. The Assistant Treasurer. The Assistant
Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in
the event of his inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall
perform such other duties as from time to time may be assigned
by the Board of Directors.
SECTION 10. The Assistant Secretary. The Assistant
Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in
the event of his inability or refusal to act, perform the
duties and exercise the powers of the Secretary and shall
perform such other duties as from time to time may be assigned
by the Board of Directors.
SECTION 11. Officers' Bonds or Other Security. If required
by the Board of Directors, any officer of the Corporation
shall give a bond or other security for the faithful
performance of his duties, in such amount and with such surety
as the Board of Directors may require.
SECTION 12. Compensation. The compensation of the officers
of the Corporation for their services as such officers shall
be fixed from time to time by the Board of Directors. An
officer of the Corporation shall not be prevented from
receiving compensation by reason of the fact that he is also a
director of the Corporation.
ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. Stock Certificates. Every holder of stock in
the Corporation shall be entitled to have a certificate signed
in the name of the Corporation by the Chairman of the Board or
the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by
him in the Corporation. If the Corporation shall be authorized
to issue more than one class of stock or more than one series
of any class, the designations, preferences and relative,
participating, optional or other special rights of each class
of stock or series thereof and the qualifications, limitations
or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the
certificate which the Corporation shall issue to represent
such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation
Law of the State of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of
the certificate which the Corporation shall issue to represent
such class or series of stock a statement that the Corporation
will furnish without charge to each stockholder who so
requests the designations, preferences and relative,
participating, optional or other special rights of each class
of stock or series thereof and the qualifications, limitations
or restrictions of such preferences and/or rights.
SECTION 2. Facsimile Signatures. Any or all of the
signatures on a certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place
of any certificates theretofore issued by the Corporation
alleged to have been lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner
of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to
indemnify it against any claim that may be made against the
Corporation on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of such
new certificate.
SECTION 4. Transfers of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer,
it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its records;
provided, however, that the Corporation shall be entitled to
recognize and enforce any lawful restriction on transfer.
Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the
entry of transfer if, when the certificates are presented to
the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of
Directors may appoint, or authorize any officer or officers to
appoint, one or more transfer agents and one or more
registrars.
SECTION 6. Regulations. The Board of Directors may make
such additional rules and regulations, not inconsistent with
these By-Laws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock
of the Corporation.
SECTION 7. Fixing the Record Date. In order that the
Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action
in writing without a meeting (if permitted by the Certificate
of Incorporation), or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 8. Registered Stockholders. The Corporation shall
be entitled to recognize the exclusive right of a person
registered on its records as the owner of shares of stock to
receive dividends and to vote as such owner and shall not be
bound to recognize any equitable or other claim to or interest
in such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of the State
of Delaware.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved
in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the
legal representative, is or was a director or officer of the
Corporation or a subsidiary thereof or is or was serving at
the request of the Corporation as a director, officer,
partner, member or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, partner, member or
trustee or in any other capacity while so serving, shall be
indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereinafter be amended (but, in
the case of any such amendment to the Delaware General
Corporation Law, the right to indemnification shall be
retroactive only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than
such law prior to such amendment permitted the Corporation to
provide), against all expense, liability, and loss (including,
without limitation, attorneys' fees and related disbursements,
judgments, fines, ERISA excise taxes or penalties, and amounts
paid or to be paid in settlement thereof) reasonably incurred
or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased
to be a director, officer, partner, member or trustee and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in
Section 2 of this Article VI with respect to proceedings
seeking to enforce rights to indemnification, the Corporation
shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Section 1 shall be
a contract right and shall include the right to be paid the
expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that, if the
Delaware General Corporation Law so requires, the payment of
such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person
while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery
to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section 1 or
otherwise. Such right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of the
final disposition may be conferred upon any person who is or
was an employee or agent of the Corporation or a subsidiary
thereof or is or was serving at the request of the Corporation
as an employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, if,
and to the extent, authorized by these By-Laws or the Board of
Directors, and shall inure to the benefit of his or her heirs,
executors and administrators.
SECTION 2. Right of Action. If a claim under Section 1 of
this Article VI is not paid in full by the Corporation within
thirty (30) days after a written claim has been received by
the Corporation, the claimant may at any time thereinafter
bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense of
prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any
is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation
(including, without limitation, its Board of Directors,
independent legal counsel, or stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including without
limitation, its Board of Directors, independent legal counsel,
or stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the
applicable standard of conduct.
SECTION 3. Indemnification Not Exclusive. The right to
indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition
conferred in this Article VI shall not be exclusive of any
other right to which any person may have or hereafter acquire
under any statute or provision of the Certificate of
Incorporation or these By-Laws or by agreement, vote of
stockholders or disinterested directors, or otherwise.
SECTION 4. Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any director,
officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other
enterprise against any expense, liability, or loss, whether or
not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the
Delaware General Corporation Law.
SECTION 5. Repeal or Modification. Any repeal or
modification of the foregoing provisions of this Article VI
shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
SECTION 6. Effect of Invalidity. If this Article VI or any
portion hereof shall be invalidated on any ground by any court
of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director or officer of the
Corporation as to any expense (including attorneys' fees),
judgment, fine and amount paid in settlement with respect to
any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the
Corporation, to the full extent permitted by any applicable
portion of this Article VI that shall not have been
invalidated and to the full extent permitted by applicable
law.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Dividends. Subject to the provisions of statute
and the Certificate of Incorporation, dividends upon the
shares of capital stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, in property or in shares of
stock of the Corporation, unless otherwise provided by statute
or the Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there
may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors may,
from time to time, in its absolute discretion, think proper as
a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of
Directors may think conducive to the interests of the
Corporation. The Board of Directors may modify or abolish any
such reserves in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in
such form as shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation
shall be fixed, and once fixed, may thereafter be changed, by
resolution of the Board of Directors.
SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes,
drafts or other orders for the payment of money of the
Corporation shall be signed, endorsed or accepted in the name
of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board
of Directors to make such designation.
SECTION 6. Execution of Contracts, Deeds, Etc. The Board
of Directors may authorize any officer or officers, agent or
agents, in the name and on behalf of the Corporation to enter
into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific
instances.
SECTION 7. Voting of Stock in Other Corporations. Unless
otherwise provided by resolution of the Board of Directors,
the Chairman of the Board or the President, from time to time,
may (or may appoint one or more attorneys or agents to) cast
the votes which the Corporation may be entitled to cast as a
shareholder or otherwise in any other corporation, any of
whose shares or securities may be held by the Corporation, at
meetings of the holders of the shares or other securities of
such other corporation. In the event one or more attorneys or
agents are appointed, the Chairman of the Board or the
President may instruct the person or persons so appointed as
to the manner of casting such votes or giving such consent.
The Chairman of the Board or the President may, or may
instruct the attorneys or agents appointed to, execute or
cause to be executed in the name and on behalf of the
Corporation and under its seal or otherwise such written
proxies, consents, waivers or other instruments as may be
necessary or proper in the circumstances.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed at any regular
meeting of the stockholders or directors, or at any special
meeting thereof if notice of such amendment or repeal is
contained in the notice of such special meeting, provided that
Sections 3 and 11 of Article II, Section 2 of Article III and
this Article VIII of these By-Laws may be amended only by (i)
the directors of the Corporation or (ii) the affirmative vote
of the holders of shares entitled to cast at least two-thirds
of the votes represented by the shares of all classes of stock
of the Corporation entitled to vote generally in elections of
directors, considered for purposes of this Article VIII as one
class.
EXHIBIT B
HISTORICAL AND PROJECTED CONSOLIDATED
BALANCE SHEETS, CONSOLIDATED INCOME STATEMENTS,
CONSOLIDATED CASH FLOW STATEMENTS
AND SUPPLEMENTAL PROJECTED PRO FORMA FINANCIAL INFORMATION
SMITH CORONA CORPORATION
PROJECTED CONSOLIDATED BALANCE SHEETS
Unaudited
($000's)
[Enlarge/Download Table]
Debtor-In-Possession
Proforma
Actual Projected Projected Projected
March 31, June 30, September 30, Proforma September 30
1996 1996 1996 Adjustments 1996
--------- --------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash
equivalents $ 24,400 $ 27,753 $19,042 $(15,957)(A) $ 3,085
Accounts
receivable, net 21,431 19,444 16,602 16,602
Inventories 22,115 18,124 25,314 25,314
Prepaid . . . . . expenses
and other
current assets 6,362 5,849 6,502 500(A) 7,002
Total . . . . . current
assets 74,308 71,170 67,460 (15,457) 52,003
Property,plant
and equipment,
net 13,996 13,569 12,141 12,141
Deferred income
taxes 3,406 3,406 3,406 3,406
Other assets 1,230 500 495 495
Total $92,940 $88,645 $83,502 $(15,457) $68,045
LIABILITIES
AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Bank loans $0 $0 $0 $0
Trade payables 3,296 5,942 4,734 4,734
Accrued . . . . .
liabilities 10,707 10,381 11,025 (3,550)(A) 7,475
Income taxes
payable 0 37 37 37
Total . . . . . current
liabilities 14,003 16,360 15,796 (3,550) 12,246
Tax note 0 0 0 2,800(B) 2,800
Postretirement
benefits 12 36 36 12,596(C) 12,632
Pension liability 833 311 311 (311)(D) O
Other long-term
liabilities 133 170 194 3,183 (C) 3,377
Liabilities subject
to compromise 62,703 62,186 61,299 (61,299)(D) 0
Total liabilities 77,684 79,063 77,636 (46,581) 31,055
Stockholders'
Equity:. . . . . .
Common stock 303 303 303 (278)(E) 25
Additional
paid-in capital 44,697 44,697 44,697 (36,562)(E) 8,135
Retained
earnings
(accumulated
deficit) (29,744) (35,418) (39,134) 67,964(D)(E) 28,830
Total
stockholders'
equity 15,256 9,582 5,866 31,124 36,990
Total $92,940 $88,645 $83,502 $(15,457) $68,045
(A) Payment of administrative, secured, reclamation
and priority claims ($5,177) and general unsecured claims ($10,780)
(B) Issuance of Priority Tax Note to IRS
(C) Assumption of liabilities through the Plan
(D) Discharge of liabilities pursuant to the Plan
(E) Cancellation of old shares, issuance of NewSCC
Common Stock and Discharge of Indebtedness Income
based on assumed value of 85% of NewSCC Common Stock
of $8,160 and no value assumed for NewSCC Warrants
[Download Table]
Proforma Projected June 30,
1997 1998 1999 2000
ASSETS
Current Assets:
Cash and cash equivalents $1,500 $1,500 $1,500 $1,500
Accounts receivable, net 22,064 31,395 37,658 49,751
Inventories 26,875 24,759 27,682 29,703
Prepaid expenses
and other current assets 5,850 3,850 3,850 3,850
Total current assets 56,289 61,504 70,690 84,804
Property, plant and
equipment, net 7,304 1,643 999 324
Deferred income taxes 3,406 3,406 3,406 3,406
Other assets 995 495 495 495
Total $67,994 $67,048 $75,590 $89,029
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Bank loans $7,626 $6,257 $7,785 $6,784
Trade payables 2,500 3,930 5,789 8,533
Accrued iabilities 6,827 6,831 6,816 6,823
Income taxes payable 37 37 37 37
Total current liabilities 16,990 17,055 20,427 22,177
Tax note 2,333 1,867 1,400 933
Postretirement benefits 3,777 2,293 1,051 0
Pension liability 0 0 0 0
Other long-term liabilities 2,993 2,634 2,274 1,945
Liabilities subject
to compromise 0 0 0 0
Total liabilities 26,093 23,849 25,152 25,055
Stockholders' Equity:
Common stock 25 25 25 25
Additional paid-in capital 8,135 8,135 8,135 8,135
Retained earnings
(accumulated deficit) 33,741 35,039 42,278 55,814
Total stockholders' equity 41,901 43,199 50,438 63,974
Total. . $67,994 $67,048 $75,590 $89,029
Note: See New-Smith Corona Corporation
Business Plan Assumptions attached hereto
SMITH CORONA CORPORATION
PROJECTED CONSOLIDATED INCOME STATEMENTS
Unaudited
($000's)
Debtor-In-Possession
[Enlarge/Download Table]
Proforma
Actual Projected Projected Projected Projected
Nine months Three months Twelve months Three months Nine months
Ended Ended Ended Ended Ended
March 31, June 30, June 30, September 30 June 30,
1996 1996 1996 1996 1997
Net sales -
Core product $ 89,792 $ 18,775 $108,567 $18,873 $53,818
Net sales -
New product 19,077
Total net sales 89,792 18,775 108,567 18,873 72,895
Cost of goods sold 83,773 16,651 100,424 14,321 55,679
Gross margin 6,019 2,124 8,143 4,552 17,216
Selling, administrative
and research
expenses 21,703 4,863 26,566 6,907 17,976
Postretirement
curtailment (gain) (7,530)
Reorganization
expenses 8,147 2,004 10,151 1,800 1,200
Restructuring
expense (income) (18,296) (760) (19,056) 75 75
Other expense (income) (1,537) (1,537) (1,216) (405)
Operating income
(loss) (3,998) (3,983) (7,981) (3,014) 5,900
Interest expense
(income) 596 (19) 577 540 510
Income (loss) before
income taxes and
extraordinary item (4,594) (3,964) (8,558) (3,554) 5,390
Income taxes (benefit) 400 75 475 162 479
Income (loss) before
extraordinary item (4,994) (4,039) (9,033) (3,716) 4,911
Extraordinary item:
Discharge of
indebtedness income 22,964
Net income (loss) $(4,994) $(4,039) $(9,033) $19,248 $ 4,911
[Download Table]
Proforma Projected Year Ended June 30,
1998 1999 2000
Net sales - core product $ 70,990 $ 68,766 $ 70,536
Net sales - new product 66,538 97,374 146,256
Total net sales 137,528 166,140 216,792
Cost of goods sold 109,843 131,968 174,982
Gross margin 27,685 34,172 41,810
Selling, administrative
and research expenses 24,562 25,157 26,250
Postretirement curtailment
(gain)
Reorganization expenses
Restructuring expense
Other expense (income)
Operating income (loss) 3,123 9,015 15,560
Interest expense (income) 1,180 1,121 1,356
Income (loss) before
income taxes and
extraordinary items 1,943 7,894 14,204
Income taxes (benefit) 645 655 668
Income (loss) before
extraordinary item 1,298 7,239 13,536
Extraordinary item:
Discharge of
indebtedness income
Net income (loss) $ 1,298 $ 7,239 $13,536
Note: See New-Smith Corona Corporation
Business Plan Assumptions attached hereto
SMITH CORONA CORPORATION
PROJECTED CONSOLIDATED CASH FLOW STATEMENTS
Unaudited
($000's)
[Enlarge/Download Table]
Debtor-In-Possession
--------------------------------------------- Proforma
Nine Months Projected Projected Projected
Ended 4/1 to 7/1 to At 10/1/96 to
3/31/96 6/30/96 9/30/96 Confirmation 6/30/97
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $(4,994) $ (4,039) $(3,716) $ 22,964 $ 4,911
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Post retirement
curtailment gain (7,530)
Depreciation and
amortization 4,402 422 1,557 4,567
Writedown of goodwill
and building
Discharge of
indebtedness income (22,964)
(Gain) loss on
disposition of
property, plant and
equipment (16,196)
Inventory provisions 4,243
Other noncash items (1,587)
Changes in assets
and liabilities:
Accounts receivable 16,223 1,987 2,842 (5,462)
Inventories 28,297 3,991 (7,190) (1,561)
Prepaid expenses and
other current assets 115 (387) (653) 1,152
Other assets 48 (500)
Trade payables (6,101) 2,646 (1,208) (2,234)
Accrued liabilities,
income taxes
payable and tax note (14,192) (289) 644 (1,115)
Postretirement benefits
and pension liability 845 (498) (1,325)
Other long-term
liabilities (80) (480) (863) (384)
Net cash provided by
(used in) operating
activities 11,023 3,353 (8,587) -- (9,481)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from the
sale of property,
plant and equipment 24,003 645
Capital expenditures (229) (124) (375)
Net cash provided by
investing activities 23,774 -- (124) -- 270
CASH FLOWS FROM
FINANCING ACTIVITIES:
Bank loans (repayments),
net (17,400) 7,626
Payment of secured,
administrative
and priority Claims (5,177)
Payment to General
Unsecured Creditors (10,780)
Net cash used in
financing activities (17,400) -- -- (15,957) 7,626
Increase (decrease)
in cash and cash
equivalents 17,397 3,353 (8,711) (15,957) (1,585)
Cash and cash equivalents:
Beginning of period 7,003 24,400 27,753 19,042 3,085
End of period $24,400 $27,753 $19,042 $3,085 $1,500
__________
Note: See New-Smith Corona Corporation Business
Plan Assumptions attached hereto
[Download Table]
Proforma Projected Year Ended June 30,
1998 1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,298 $ 7,239 $13,536
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Postretirement curtailment gain
Depreciation and amortization 6,162 1,144 1,175
Writedown of goodwill and building
Discharge of indebtedness income
(Gain) loss on disposition of
property, plant and equipment
Inventory provisions
Other noncash items
Changes in assets and liabilities:
Accounts receivable (9,331) (6,263) (12,093)
Inventories 2,116 (2,923) (2,021)
Prepaid expenses and other
current assets
Other assets 500
Trade payables 1,430 1,859 2,744
Accrued liabilities, income taxes
payable and tax note (462) (482) (460)
Postretirement benefits and
pension liability (1,484) (1,242) (1,051)
Other long-term liabilities (359) (360) (329)
Net cash provided by (used in)
operating activities (131) (1,028) 1,501
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from the sale
of property, plant and
equipment 2,000 - -
Capital expenditures (500) (500) (500)
Net cash provided by
investing activities 1,500 (500) (500)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Bank loans (repayments), net (1,369) 1,528 (1,001)
Payment of secured, administrative
and priority claims
Payment to general unsecured
creditors
Net cash used in financing activities (1,369) 1,528 (1,001)
Increase (decrease) in cash
and cash equivalents
Cash and cash equivalents:
Beginning of period 1,500 1,500 1,500
End of period $1,500 $1,500 $1,500
SMITH CORONA CORPORATION
SUPPLEMENTAL PROJECTED PRO FORMA FINANCIAL INFORMATION
[Download Table]
Projected Proforma
Nine Months
Ended Year Ended June 30,
June 30, 1997 1998 1999 2000
Operating income
As projected $ 5,900 $ 3,123 $ $9,015 $15,560
Effect of pension plans
not being terminated 1,220 1,618 1,880 1,484
Proforma projected(1) $4,680 $1,505 $7,135 $14,076
Cash flow from operating activites
As projected $(9,481) $(131) $(1,028) $1,501
Effect of pension plans
not being terminated(2) 2,682 4,148 6,270 6,590
Proforma projected $(12,163) $(4,279) $(7,298) $(5,089)
__________
(1) After giving effect to pension plans not being terminated.
(2) Includes interest on borrowings necessary to fund pension contributions.
NEW-SMITH CORONA CORPORATION BUSINESS PLAN ASSUMPTIONS
Overview
- The current product line will be expanded substantially
to include PC accessories, telecommunications equipment, and
other office related products.
- Smith Corona will continue to operate globally with
manufacturing operations in Mexico and sales and marketing
operations in the U.S. and internationally.
- Restructuring corporate functional departments will
realign operations with new business practices.
- The company will continue to divest assets including the
Cortland facility and the tool room.
- The terms and conditions of the new post-emergence bank
line are assumed to be the same as the current DIP facility
with Chemical Bank.
Manufacturing
- The company continues to manufacture the current product
line.
- New products are sourced from outside manufacturers.
- The Mexico facility will provide contract manufacturing
services to OEM's on a cost plus basis providing incremental
earnings and manufacturing overhead absorption. Raw and WIP
inventory costs for contract manufacturing will be borne by
the customer.
Selling, Administrative and Research and Manufacturing Overhead
Expenses
- Selling, administrative and research expenses are
expected to remain flat over the period covered by the
financial projections. The company will execute cost cutting
measures designed to rightsize operations associated with
current operations, but expects to add infrastructure
associated with the sourcing of new products, including
marketing personnel responsible for new product
identification and acquisition.
- Contract manufacturing will absorb some manufacturing
overhead and help offset volume related variances.
Confirmation/Plan of Reorganization
- Smith Corona will pay out in cash $5.2 MM to Secured,
Administrative, Reclamation and Priority Creditors and $10.8
MM to General Unsecured Creditors.
- The company will assume post-confirmation certain Tax,
Environmental and Post-Retirement Medical Benefit
Liabilities. Post-Retirement Medical Benefits will be
phased-out over four years.
- Unsecured Creditors will receive cash and stock
consideration.
- The business plan assumes confirmation on September 30,
1996.
EXHIBIT C
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF SCC FOR FISCAL 1995 AND FISCAL 1994
Index to Consolidated Financial Statements and Financial
Statement Schedule
Page
Independent Auditors' Report . . . . . . . . . . . . . . .c-2
Consolidated Balance Sheets as of June 30, 1995 and 1994 .c-3
Consolidated Statements of Operations for the Years Ended June
30, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . c-4
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended June 30, 1995, 1994 and 1993 . . . . . . .c-5
Consolidated Statements of Cash Flows for the Years Ended June
30, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . .c-6
Notes to Consolidated Financial Statements . . . . . . . .c-7
Consolidated Supplemental Financial Statement Schedule for the
Years Ended June 30, 1995, 1994 and 1993
Schedule II - Valuation and Qualifying Accounts . c-24
INDEPENDENT AUDITORS' REPORT
Smith Corona Corporation:
We have audited the accompanying consolidated balance sheets
ofSmith Corona Corporation and subsidiaries (in reorganization
under Chapter 11 of the Federal Bankruptcy Code since July 5,
1995 - see Note 1) (the "Company") as of June 30, 1995 and 1994,
and the related consolidated statements of operations, statements
of changes in stockholders' equity and statements of cash flows
for each of the three years in the period ended June 30, 1995.
Our audits also include the financial statement schedule listed
in the Index to Consolidated Financial Statements and Financial
Statement Schedule. These financial statements and financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Smith
Corona Corporation and subsidiaries at June 30, 1995 and 1994 and
the results of their operations and their cash flows for each of
the three years in the period ended June 30, 1995 in conformity
with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information
set forth therein.
As discussed in Note 1 to the consolidated financial statements,
on July 5, 1995, Smith Corona Corporation filed for
reorganization under Chapter 11 of the Federal Bankruptcy Code.
In addition, on August 18, 1995, SCM Office Supplies, Inc., SCC
LI Corporation (formerly known as "Histacount Corporation") and
Hulse Manufacturing Company, all wholly-owned Nonoperating
Subsidiaries of Smith Corona Corporation, filed Chapter 11
petitions. The accompanying financial statements do not purport
to reflect or provide for the consequences of the Bankruptcy
Proceedings. In particular, such financial statements do not
purport to show (a) as to assets, their realizable value on a
liquidation basis or their availability to satisfy liabilities;
(b) as to prepetition liabilities, the amounts that may be
allowed for claims or contingencies, or the status and priority
thereof; (c) as to stockholder accounts, the effect of any
changes that may be made in the capitalization of the Company; or
(d) as to operations, the effect of any changes that may be made
in its business. The outcome of these matters is not presently
determinable.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has recently experienced recurring losses
from operations, has an accumulated deficit at June 30, 1995, had
difficulty in meeting its Amended and Restated Revolving Credit
Agreement covenants, required waivers to its Debtor-In-Possession
Credit Agreement covenants and can not presently determine with
certainty the ultimate liability which may result from the filing
of claims in connection with the Bankruptcy Proceedings.
Additionally, as described in Note 8, the Company's Debtor-In-
Possession Credit Agreement expires on June 30, 1996. These
circumstances raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans concerning
these matters are also discussed in Note 1. The consolidated
financial statements do not include adjustments that might result
from the outcome of the uncertainties referred to herein and in
the preceding paragraph.
/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Stamford, Connecticut
August 22, 1995
Smith Corona Corporation and Subsidiaries
Consolidated Balance Sheets
[Download Table]
June 30,
(Dollars in thousands) 1995 1994
Assets
Current assets:
Cash and cash equivalents $7,003 $6,472
Accounts receivable (net of allowance
for doubtful accounts of $1,484 and
$1,512 for 1995 and 1994, respectively) 37,654 48,210
Inventories 54,335 62,695
Prepaid expenses and other current
assets 9,471 3,716
Deferred income taxes - 10,131
Net assets of discontinued operations - 19,072
Total current assets 108,463 150,296
Property, plant and equipment-net 22,888 36,782
Deferred income taxes 3,406 4,371
Other assets 1,309 2,239
Total $136,066 $193,688
Liabilities and stockholders' equity
Current liabilities:
Bank loans $17,400 $ -
Trade payables 19,807 27,379
Accrued liabilities 35,449 26,935
Income taxes payable 5,791 5,001
Dividends payable - 1,512
Total current liabilities 78,447 60,827
Bank loans - 20,002
Postretirement benefits 12,999 12,650
Pension liability 18,801 20,361
Other long-term liabilities 5,569 4,126
Total liabilities 115,816 117,966
Stockholders' equity:
Common stock- 30,250,000 shares issued
and outstanding 303 303
Additional paid-in capital 44,697 44,697
Retained earnings (accumulated deficit) (24,750) 30,722
Total stockholders' equity 20,250 75,722
Total $136,066 $193,688
See accompanying notes to consolidated financial statements.
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Operations
[Download Table]
(Dollars in thousands, For the year ended June 30,
except per share amounts) 1995 1994 1993
Net sales $196,309 $261,306 $236,846
Cost of goods sold 180,959 204,327 179,355
Gross margin 15,350 56,979 57,491
Selling, administrative and
research expenses 48,532 48,557 56,339
Restructuring costs 13,584 - 16,500
Operating income (loss) (46,766) 8,422 (15,348)
Interest expense 965 708 417
Income (loss) from continuing
operations before income taxes (47,731) 7,714 (15,765)
Income taxes (benefit) 14,514 2,620 (5,521)
Income (loss) from continuing
operations (62,245) 5,094 (10,244)
Discontinued operations (net of
income taxes):
Income from operations 671 2,233 1,222
Gain (loss) on disposal
of discontinued operations 9,127 (2,200) -
Net income (loss) $(52,447) $5,127 $(9,022)
Earnings per common share -
Income (loss) from continuing
operations $(2.05) $.17 $(.34)
Discontinued operations:
Income from operations .02 .07 .04
Gain (loss) on disposal
of discontinued operations .30 (.07) -
Net income (loss) per share $ (1.73) $ .17 $ (.30)
See accompanying notes to consolidated financial statements.
[Download Table]
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the years ended June 30, 1995, 1994 and 1993
Retained
Additional Earnings
(Dollars in thousands, Common Paid-in (Accumulated
except per share amounts) Stock Capital Deficit) Total
Balance, June 30, 1992 $303 $44,697 $ 46,717 $91,717
Net loss - - (9,022) (9,022)
Dividends declared
($.20 per share) - - (6,050) (6,050)
Balance, June 30, 1993 303 44,697 31,645 76,645
Net income - - 5,127 5,127
Dividends declared
($.20 per share) - - (6,050) (6,050)
Balance, June 30, 1994 303 44,697 30,722 75,722
Net loss - - (52,447) (52,447)
Dividends declared
($.10 per share) - - (3,025) (3,025)
Balance, June 30, 1995 $303 $44,697 $(24,750) $20,250
See accompanying notes to consolidated financial statements.
Smith Corona Corporation and Subsidiaries
Consolidated Statements of Cash Flows
[Download Table]
For the year ended June 30,
(Dollars in thousands) 1995 1994 1993
Cash flows from operating
activities:
Net income (loss) $(52,447) $5,127 $(9,022)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
continuing operating activities:
Discontinued operations (9,798) (33) (1,222)
Depreciation and amortization 6,689 4,998 6,253
Restructuring costs 13,584 - 16,500
Deferred income taxes 11,096 1,818 (22,675)
Other noncash items 4,512 20 318
Changes in assets and liabilities:
Accounts receivable 10,556 (16,759) 20,496
Inventories 8,360 12,837 (14,155)
Prepaid expenses and other
current assets 139 (1,675) 2,080
Other assets 895 (1,112) 2,029
Trade payables (7,572) 3,804 (9,984)
Accrued liabilities and income
taxes payable (4,280) (651) (4,844)
Postretirement benefits and
pension liability (1,211) (731) 17,257
Other long-term liabilities 1,443 198 730
Net cash provided by (used in)
continuing operations (18,034) 7,841 3,761
Net cash provided by (used in)
discontinued operations 1,370 907 (70)
Net cash provided by (used in)
operating activities (16,664) 8,748 3,691
Cash flows from investing
activities:
Proceeds from sale of
discontinued operations 27,500 - -
Capital expenditures (3,166) (11,359) (4,952)
Net cash provided by (used in)
investing activities 24,334 (11,359) (4,952)
Cash flows from financing
activities:
Bank loans (repayments), net (2,602) 1,333 8,770
Dividends paid (4,537) (6,050) (6,050)
Net cash provided by (used in)
financing activities (7,139) (4,717) 2,720
Increase (decrease) in cash and
cash equivalents 531 (7,328) 1,459
Cash and cash equivalents at
beginning of year 6,472 13,800 12,341
Cash and cash equivalents at
end of year $ 7,003 $6,472 $13,800
Cash paid during the year for:
Interest $ 1,146 $ 842 $ 576
Income taxes $ 2,300 $2,077 $ 3,269
See accompanying notes to consolidated financial statements.
Smith Corona Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
1. Petition for Reorganization Under Chapter 11 and Basis of
Presentation
On July 5, 1995, Smith Corona Corporation filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code in the District of Delaware. Prior to August 18,
1995, the bankruptcy proceedings did not include any of the
subsidiaries of the Company. On August 18, 1995, SCM Office
Supplies, Inc., SCC LI Corporation (formerly known as "Histacount
Corporation") and Hulse Manufacturing Company, all wholly-owned
Nonoperating Subsidiaries of Smith Corona Corporation filed
Chapter 11 petitions (collectively the "Bankruptcy Proceedings").
The Bankruptcy Proceedings primarily relate to all U.S. assets
and operations and do not pertain to Smith Corona Corporation's
international subsidiaries. Condensed consolidated proforma
financial information for the entities included in the Bankruptcy
Proceedings is presented in Note 17. Since July 5, 1995, the
Company has been operating as a debtor-in- possession. The costs
associated with the Bankruptcy Proceedings of approximately $572
have been categorized as selling, administrative and research
expenses in the accompanying consolidated statements of
operations.
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable
to a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.
Accordingly, the consolidated financial statements do not reflect
adjustments or provide for the potential consequences of the
Bankruptcy Proceedings of the Company. In particular, the
consolidated financial statements do not purport to show (a) the
realizable value of assets on a liquidation basis or their
availability to satisfy liabilities; (b) prepetition liability
amounts that may be allowed for claims or contingencies or the
status and priority thereof; (c) the effect of any changes that may
be made to the capitalization of the Company; or (d) the effect of
any changes that may be made in the Company's business operations.
The outcome of these matters is not presently determinable. The
Company has recently experienced recurring losses from operations;
has an accumulated deficit at June 30, 1995; had difficulty in
meeting its Amended and Restated Revolving Credit Agreement
covenants and has had to obtain waivers to meet certain of its
Debtor-In-Possession Credit Agreement covenants and cannot presently
determine with certainty the ultimate liability which may result
from the filing of claims in connection with the Bankruptcy
Proceedings. These conditions raise substantial doubt as to the
Company's ability to continue as a going concern.
Due to the Bankruptcy Proceedings, substantially all claims
against the Company, prior to July 5, 1995, (and prior to August 18,
1995 for the three Nonoperating Subsidiaries added to the
proceedings) are subject to the automatic stay provisions under the
Bankruptcy Code while the Company continues business operations as a
debtor-in-possession. Pre-petition claims may arise from the
determination by the Bankruptcy Court of allowed claims for
contingencies and other disputed amounts.
Liabilities recorded by the Company as of June 30, 1995 that
would be subject to compromise under any plan of reorganization
consist of the following:
Amount
Trade payables $11,760
Accrued liabilities 16,207
Income taxes payable 5,634
Postretirement benefits 12,999
Pension liability 18,801
Other long-term liabilities 5,569
Total(1) $70,970
(1) Excludes a net intercompany payable in the amount of $9,076 to
the entities not included in the Bankruptcy Proceedings.
At the Company's request, the Bankruptcy Court established a
bar date of October 31, 1995 for pre-petition claims against the
Company. A bar date is the date by which claims against the Company
must be filed if the claimants wish to receive any distribution in
the Bankruptcy Proceedings. The Company has given notice to all
known actual or potential claimants subject to the bar date of their
need to file a proof of claim with the Bankruptcy Court. The
Company will reconcile claims that differ from the Company's
records, and any differences that cannot be resolved by negotiated
agreement between the Company and the claimant will be resolved by
the Bankruptcy Court. Accordingly, allowed claims may arise which
are not currently reflected in the Company's financial statements
and recorded claims are subject to change. The ultimate amount of
and settlement terms for such liabilities are subject to a plan of
reorganization which is subject to approval by the Bankruptcy Court
and, accordingly, are not presently determinable.
Since the filing date, the Company has initiated preliminary
discussions with the official committee of its unsecured creditors
that was appointed by the U.S. Trustee pursuant to the Bankruptcy
Code. The timing of any filing of a Plan of Reorganization cannot
be predicted.
2. Significant Accounting Policies
Basis of Consolidation: The consolidated financial statements
include the accounts of Smith Corona Corporation and its wholly-
owned subsidiaries (the "Company"). All significant intercompany
accounts and transactions have been eliminated.
Cash Equivalents: All highly liquid investments purchased with a
maturity of three months or less are considered to be cash
equivalents.
Inventories: Inventories are stated at the lower of cost or market.
Cost is determined principally by the first-in, first-out (FIFO)
method.
Property, Plant and Equipment: Property, plant and equipment are
stated at cost. Depreciation is provided on the straight-line basis
at rates based on estimated useful lives. Lives used in computing
depreciation range from two to twelve years for equipment and forty
years for buildings. Leasehold improvements are amortized over the
lease term. At the time properties are disposed, the property and
related accumulated depreciation accounts are relieved of the
applicable amounts and any profit or loss is included in operations.
Maintenance and repairs are charged against operations as
incurred. Expenditures that materially increase capacities or
extend useful lives of property, plant and equipment are
capitalized.
Retirement Plans: Substantially all domestic employees participate
in the Company's retirement plans for salaried and hourly employees.
The cost of United States pension plans is accrued in amounts equal
to the normal cost of current service under the plans together with
amortization of prior service costs. Outside of the United States,
costs are accrued and paid in accordance with local requirements.
Postretirement Plans: The Company provides for the expected cost of
postretirement benefits over the employee's years of active service.
Research and Development: The Company's product development costs
are expensed as incurred. Research and development expense was
$7,218, $7,966 and $10,064 for the years ended June 30, 1995, 1994
and 1993, respectively.
Goodwill: The excess of the allocated acquisition cost over the
fair value of net assets of businesses acquired is included in other
assets and is being amortized by the straight-line method over forty
years.
Foreign Currency: The functional currency of the Company's foreign
operations is deemed to be the United States dollar. Consequently,
all translation gains and losses are included in income.
Forward Foreign Currency Contracts: From time to time, the Company
may enter into forward foreign currency contracts to hedge against
foreign currency fluctuations. Gains and losses on these contracts
were recorded in net income in the period in which the exchange rate
changed. During the years ended June 30, 1995 and 1993, forward
foreign currency contracts were in place to reduce the impact of
foreign currency fluctuations on transactions designated in a
currency other than the U.S. dollar. At June 30, 1995 and 1993,
there were no outstanding forward contracts. There were no such
contracts in effect during Fiscal 1994.
Income Taxes: Deferred income taxes are determined based on the
difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
Earnings Per Share: Earnings per share have been calculated based
upon 30,250,000 shares of common stock outstanding.
Reclassifications: Certain reclassifications have been made to the
prior years' financial statements to conform with the 1995
presentation. In addition, amounts in prior years' financial
statements have been reclassified to reflect continuing operations
(see Note 12).
3. Changes in Accounting Principles
Effective July 1, 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," SFAS
No. 112, "Employers' Accounting for Postemployment Benefits," and
SFAS No. 109, "Accounting for Income Taxes." The sum of the
accounting changes in Fiscal 1993 amounted to $10.
SFAS 106 requires the accrual method of accounting for the
expected costs of postretirement benefits other than pensions during
the years of an employee's service. The cumulative effect of this
accounting change was a decrease to Fiscal 1993 net income of
$3,507, or $.12 per share. In addition, the effect of adopting this
statement in Fiscal 1993, exclusive of the cumulative effect, was a
decrease to net income of $265.
SFAS 112 requires the accrual method of accounting for benefits
to former or inactive employees after employment but before
retirement. In prior years, the expense was recognized when claims
were paid. The cumulative effect of this accounting change in
fiscal year 1993 was a reduction in net income of $183 (less than
$.01 per share).
SFAS 109 requires the liability method of accounting for income
taxes rather than the deferred method previously used. The
cumulative effect of this accounting change was an increase to
fiscal year 1993 net income of $3,700, or $.12 per share.
4. Inventories
A summary of inventories, by major classification, is as
follows:
June 30,
1995 1994
Raw materials and supplies $ 995 $ 1,352
Work-in-process 17,807 27,702
Finished goods 35,533 33,641
Total $54,335 $62,695
5. Property, Plant and Equipment
A summary of property, plant and equipment, by major
classification, is as follows:
June 30,
1995 1994
Land $ 501 $ 1,703
Buildings and improvements 1,245 17,122
Machinery and other equipment 55,716 57,246
Total 57,462 76,071
Accumulated depreciation (34,574) (39,289)
Total $22,888 $36,782
Included in prepaid and other current assets as of June 30,
1995 are fixed assets held for sale with a net book value of $5,894.
6. Accrued Liabilities
Accrued liabilities consist of the following:
June 30,
1995 1994
Accrued restructuring costs $13,268 $4,132
Payroll and related expenses 5,871 7,191
Accrued promotional expenses 7,050 6,471
Other 9,260 9,141
Total $35,449 $26,935
7. Leases
The Company has entered an agreement dated February 28, 1995 to
purchase this property, under a lease option, and concurrently sell
the property to a third party purchaser. The Company anticipates
closing on the transaction in September, 1995. The facility is
subleased by the Company to the third party purchaser.
The Company leases certain facilities, equipment and vehicles
for various periods through 2009 under non-cancelable operating
leases. Rental expense under these operating leases was $6,243,
$6,868 and $6,391 for the years ended June 30, 1995, 1994 and 1993,
respectively.
The future minimum rental commitments for the operating leases
are as follows:
Year Ended Amount
June 30, (In thousands)
1996 $ 4,420
1997 3,340
1998 2,867
1999 1,387
2000 888
Thereafter 2,822
Total $15,724
The Company has entered into an agreement dated February 28,
1995 to purchase warehousing property located in Cortland, New York,
under a lease option, and concurrently sell the property to a third
party purchaser. The Company anticipates closing on the transaction
in October 1995. The facility is subleased by the Company to the
third party purchaser.
Under the Bankruptcy Code, the Company may elect to assume or
reject real estate leases, and other unexpired executory pre-
petition contracts, subject to Bankruptcy Court approval. The
Company cannot presently determine with certainty the ultimate
liability which may result from the filing of claims for all
contracts which may be rejected.
8. Bank Loans
On April 7, 1995, the Company entered into an Amended and
Restated Revolving Credit Agreement (the "Amended and Restated
Credit
Agreement") with two banks (the "Lenders"), the use of which was
generally to satisfy working capital requirements. Aggregate
borrowings under the Amended and Restated Credit Agreement amounted
to $1,376,208, $750,548 and $699,950 for Fiscal 1995, 1994 and 1993,
respectively, while aggregate repayments were $1,378,810, $749,215
and $691,180 for Fiscal 1995, 1994 and 1993, respectively. The
Amended and Restated Credit Agreement provided for extensions of
revolving credit loans and letters of credit, limited to a
percentage of eligible receivables and inventories, in an amount not
to exceed $30,000 up through March 30, 1996; the aggregate principal
amount of such lending commitment reduces to an amount not in excess
of $25,000 from March 31, 1996 through the July 1, 1996 termination
date. The Amended and Restated Credit Agreement was secured by a
security interest in the domestic assets of the Company pursuant to
a Security Agreement of even date therewith. Interest was at
variable rates equal to the greater of the prime rate of interest,
the base certificate of deposit rate plus 1.0 percent or the federal
funds effective rate plus .5 percent for any day. As of June 30,
1995, the interest rate on borrowings was 9.0 percent. A fee is
payable quarterly on the commitment.
The Amended and Restated Credit Agreement contained certain
covenants including restrictions on payment of dividends, and
limitations on sale of assets, capital expenditures, incurrence of
other debt, liens or guarantees and making of investments, loans and
advances. The primary financial covenants included not permitting
consolidated tangible net worth at the end of any fiscal quarter to
be (a) less than it was as of March 31, 1995 minus $3,000 plus (b)
80.0 percent of consolidated net income for all full fiscal quarters
subsequent to March 31, 1995, maintaining a ratio of current assets
(other than inventories) to current liabilities (other than loans
outstanding under the Amended and Restated Credit Agreement) of at
least 0.9 to 1.0 and maintaining minimum operating profit levels.
As of June 30, 1995, the Company was in technical default of its
Amended and Restated Credit Agreement, however, the loan was paid in
full in July 1995.
On July 10, 1995, the Company entered into a Debtor-In-
Possession Credit Agreement (the "Debtor-In-Possession Credit
Agreement") with its Lenders which was approved by the United States
Bankruptcy Court for the District of Delaware on August 2, 1995.
The proceeds of the Debtor-In-Possession Credit Agreement were used
to repay the amounts outstanding under the Amended and Restated
Credit Agreement. The Debtor-In-Possession Credit Agreement, as
amended, provides for extensions of revolving credit loans, term
loans and letters of credit, limited to a percentage of eligible
receivables and inventories, in an amount not to exceed $24.0
million through the June 30, 1996 termination date. Interest is 2
percent over the greatest of the Prime Rate, Base CD Rate plus 1
percent or Federal Funds Effective Rate plus .5 percent. Payments
of dividends is prohibited by the terms of the Debtor-In-Possession
Credit Agreement, under which the Company is limited to maximum
monthly amounts of inventory and cash disbursements. Additionally,
the Company is restricted to $500 of capital expenditures in each
six month period ended December 31, 1995 and June 30, 1996.
Management believes that it has adequate flexibility and that such
covenants should not impose undue restrictions on the operations of
the Company during its Bankruptcy Proceedings. The Company is
currently in compliance with the terms of the Debtor-In-Possession
Credit Agreement or has obtained waivers as necessary. The Debtor-
In-Possession Credit Agreement is secured by substantially all of
the Company's assets.
The carrying value of the Company's bank loans as of June 30,
1995 approximates fair value, which was determined based on
transactions reflected under the Debtor-In-Possession Credit
Agreement.
9. Stockholders' Equity
Authorized capital consisted of 90,000,000 shares of common
stock and 10,000,000 shares of preferred stock, both having $0.01
par value per share. As of June 30, 1995 and 1994, there were
30,250,000 shares of common stock and no shares of preferred stock
outstanding.
Under the Company's stock option plan, as amended, 3,900,000
shares of common stock were reserved for issuance to officers and
key employees at June 30, 1995. Options are granted at the fair
market value of the stock at the date of grant. The options become
exercisable beginning three years from and expire ten years after
date of grant.
A summary of the stock option activity is presented as follows:
[Download Table]
Price Range Number of Shares
Outstanding June 30, 1992 $5.63 - 12.50 1,331,500
Granted 4.88 - 7.31 1,020,500
Canceled 6.00 - 12.50 (55,500)(1)
Outstanding June 30, 1993 $4.88 - 12.50 2,296,500
Granted 5.13 - 6.50 528,500
Canceled 5.75 - 12.50 (293,000)(1)
Outstanding June 30, 1994 $4.88 - 12.50 2,532,000
Granted 2.75 - 3.25 684,000
Canceled 3.25 - 12.50 (241,500)(1)
Outstanding June 30, 1995 $2.75 - 12.50 2,974,500
Exercisable June 30, 1995 $2.75 - 12.50 1,669,000
(1)Cancelations result from employees' termination.
10. Geographic Area Information
The Company operates in one industry segment which includes
design, manufacture and distribution of typewriters, personal word
processors and related accessories. The Company manufactures its
products principally at its facilities located in Mexico and
Singapore and distributes its products through a variety of
distribution channels, domestically and internationally. Transfers
between geographic areas are generally priced to recover cost plus
an appropriate markup for profit. Information regarding the
Company's operations in different geographic locations is shown
below:
[Download Table]
For the year ended June 30,
1995 1994 1993
Net sales to customers:
United States $158,047 $215,539 $200,805
Singapore - 4,950 6,365
Other Foreign 38,262 40,817 29,676
Total $196,309 $261,306 $236,846
Inter-area transfers:
United States $21,108 $22,033 $16,728
Singapore 74,060 72,193 73,210
Other Foreign 9,457 7,398 1,081
Total $104,625 $101,624 $ 91,019
Operating income (loss):
United States $(24,466) $15,939 $(5,483)
Singapore (8,294) 5,422 4,274
Other Foreign (6,701) (7,295) (11,477)
Corporate (7,187) (5,617) (5,270)
Eliminations (118) (27) 2,608
Total $(46,766) $ 8,422 $(15,348)
Identifiable assets:
United States $88,741 $131,356 $137,131
Singapore 21,702 26,250 34,960
Other Foreign 25,623 36,082 18,525
Total $136,066 $193,688 $190,616
Sales to one of the Company's largest customers, Wal-Mart
Stores, Inc., amounted to 14.0%, 12.2% and 12.3% of consolidated
net
sales during 1995, 1994 and 1993, respectively, and was the only
customer responsible for more than 10% of net sales.
11. Pension Plans and Postretirement Benefits
The plans covering salaried employees generally provide
pension
benefits that are based upon formulas that reflect all service
with
the Company and its predecessors and the employee's compensation
during the employee's highest five consecutive years of service
before retirement. Plans covering hourly employees generally
provide benefits of stated amounts for each year of service. The
Company's funding policy is to make annual contributions in an
amount which is not less than that required by the Internal
Revenue
Service regulations.
The net periodic pension cost for the years ended June 30,
1995, 1994 and 1993 is comprised of the following components:
[Download Table]
1995 1994 1993
Service cost $1,664 $1,979 $1,829
Interest cost 5,398 5,396 5,278
Return on plan assets:
Actual (9,097) 143 (5,863)
Unrecognized (gain) loss 3,395 (5,687) 516
Amortization of deferred
costs and actuarial (gains)
and losses (595) (494) (676)
Pension cost $ 765 $1,337 $1,084
The assumptions used in the development of these amounts were:
[Download Table]
1995 1994 1993
Discount rate 8.00% 8.00% 8.50%
Rates of increase in
compensation levels 5.50% 5.50% 5.75%
Rate of return on
plan assets 9.25% 9.25% 9.25%
The following tables set forth the funded status and amounts
recognized in the Company's consolidated balance sheets:
[Download Table]
June 30, 1995
Over- Under-
Funded Funded
Plans Plans Total
Actuarial present value
of benefit obligation:
Vested benefit obligation $36,856 $29,246 $66,102
Accumulated benefit obligation $37,611 $29,265 $66,876
Projected benefit obligation $41,592 $29,265 $70,857
Market value of assets
(principally publicly traded
securities) $41,179 26,095 67,274
Funded status 413 3,170 3,583
Unrecognized gains 9,920 5,298 15,218
Net accrued pension liability $10,333 $ 8,468 $18,801
The total amount of the June 30, 1995 net accrued pension liability
is reflected on the consolidated balance sheets as liabilities subject
to compromise.
[Download Table]
June 30, 1994
Over- Under-
Funded Funded
Plans Plans Total
Actuarial present value of
benefit obligation:
Vested benefit obligation $33,796 $30,898 $64,694
Accumulated benefit obligation $34,783 $31,311 $66,094
Projected benefit obligation $39,727 $31,951 $71,678
Market value of assets
(principally publicly traded
securities) 34,812 26,869 61,681
Funded status 4,915 5,082 9,997
Unrecognized gains 5,207 5,157 10,364
Net accrued pension liability $10,122 $10,239 $20,361
The Company also has defined contribution savings plans
covering its domestic and certain of its foreign employees, under
which the Company matches a portion of the contributions made by
participating employees. The Company's costs for matching
contributions under savings plans totaled $543, $681 and $819 for
the years ended June 30, 1995, 1994 and 1993, respectively.
The Company has a non-qualified supplemental pension plan
covering certain employees which provides for incremental pension
payments from the Company's funds. The net accrued pension
liability related to the unfunded plan was $1,893 and $1,458 at
June
30, 1995 and 1994, respectively. Pension expense for the non-
qualified plan was $683, $450 and $260 in Fiscal 1995, 1994 and
1993, respectively.
The Company also provides health care and life insurance
benefits for certain retired employees. Substantially all of the
Company's domestic employees, and certain employees in foreign
countries, may become eligible for such benefits if they reach a
specified retirement age while working for the Company.
Summary information on the Company's postretirement benefit
plans, which are unfunded, is as follows:
[Download Table]
Year ended June 30,
1995 1994
Financial status of plans:
Accumulated postretirement
benefit obligation (APBO):
Retirees $7,893 $ 6,135
Fully eligible, active
plan participants 2,344 3,142
Other active plan
participants 2,112 2,411
Unrecognized gains 650 962
Accrued postretirement
benefit cost $12,999 $12,650
The accrued postretirement benefit cost as of June 30, 1995
has
been reflected on the balance sheets as liabilities subject to
compromise.
The components of net periodic postretirement benefit
cost are as follows:
[Download Table]
Year ended June 30,
1995 1994
Service cost, benefits attributed to
employee service during the year $189 $ 202
Interest cost on accumulated
postretirement benefit obligation 884 904
Amortization of gains (55) (17)
Net periodic postretirement benefit
cost $1,018 $1,089
The discount rate used in determining the APBO was 8.0% in
1995
and 1994. The assumed health care cost trend rate used in
measuring
the accumulated postretirement benefit obligation was 11% in
1995
and 1994, declining to an ultimate rate of 5.5% over approximately
sixty years.
If the health care cost trend rate assumptions were increased
by 1%, the APBO as of June 30, 1995 would be increased by 9%. The
effect of this change in health care cost trend rates on net
periodic postretirement benefit cost of 1995 would be an increase
of
8%.
12. Discontinued Operations
On November 4, 1994 the Company sold substantially all of the
assets and liabilities of Histacount Corporation, a wholly-owned
subsidiary, for $14,500. The after-tax gain on the sale includes
utilization of a capital tax-loss carry-forward and was recorded
in
the Fiscal 1995 statement of operations. On July 5, 1994 the
Company sold substantially all the assets and liabilities of SCM
Office Supplies, Inc., a wholly-owned subsidiary, for $13,000.
The
loss on the sale was recorded in the Fiscal 1994 statement of
operations. The sale proceeds of approximately $27,500 were used
to
reduce the Company's debt and accounts payable.
Accordingly, the consolidated statements of operations
reflect
SCM Office Supplies, Inc. and Histacount Corporation's operating
results as discontinued operations and the balance sheets
segregate
the net assets of discontinued operations.
Net assets and summary operating results of discontinued
operations are as follows:
June 30,1994
Current assets $15,665
Non-current assets 10,396
Total liabilities (6,989)
Net assets $19,072
[Download Table]
Year ended June 30,
1995 1994 1993
Net sales $5,774 $85,375 $76,768
Income from operations
before income taxes $1,018 $ 3,388 $1,879
Income taxes 347 1,155 657
Net income from operations 671 2,233 1,222
Gain (loss) on disposal
of assets (net of taxes
of $(196) and $(297), respectively) 9,127 (2,200) -
Net income $9,798 $ 33 $1,222
13. Income Taxes
The components of income (loss) from continuing operations
before income taxes are as follows:
[Download Table]
Year ended June 30,
1995 1994 1993
United States $(37,798) $2,723 $(18,521)
Foreign (9,933) 4,991 2,756
Total $(47,731) $7,714 $(15,765)
The components of income tax expense consist of:
[Download Table]
Year ended June 30,
1995 1994 1993
United States:
Current $141 $203 $ 274
Deferred 8,787 1,339 (4,948)
Foreign 2,071 165 934
State 3,666 1,771 (1,124)
Total $14,665 $3,478 $(4,864)
Income tax expense is included in the financial statements as
follows:
[Download Table]
Year ended June 30,
1995 1994 1993
Continuing operations $14,514 $2,620 $(5,521)
Discontinued operations 151 858 657
Total $14,665 $3,478 $(4,864)
The components of the net deferred tax assets were as follows:
[Download Table]
June 30,
1995 1994
Deferred tax assets:
Accounts receivable $1,049 $1,226
Inventory 2,311 749
Postretirement benefits
other than pensions 4,969 4,828
Pension 7,187 7,688
Restructuring 2,755 1,580
Other liabilities 8,529 6,959
Net operating loss carryforwards 18,288 12,124
Capital loss carryforwards 7,647 10,955
Miscellaneous 2,304 7
Valuation allowances (50,241) (21,320)
Total deferred tax assets $ 4,798 $24,796
Deferred tax liabilities:
Property, plant and equipment $1,392 $3,240
Miscellaneous - 7,054
Total deferred tax liabilities 1,392 10,294
Net deferred tax assets $ 3,406 $14,502
The Company recorded a Fiscal 1995 charge to income tax
expense
representing establishment of valuation allowances against
substantially all of its domestic deferred income tax assets. The
valuation allowance reflects the Company's assessment that the
Bankruptcy Proceedings of Smith Corona Corporation and ongoing
operating losses have impaired the realization of such net
deferred
tax assets.
The provisions for income taxes differ from the amounts
computed by applying the federal income tax statutory rate. The
following is a summary of the reasons for these differences:
[Download Table]
Year Ended June 30,
1995 1994 1993
Income (loss) from continuing
operations before income taxes $(47,731) $ 7,714 $(15,765)
Statutory tax rate 34% 34% 34%
Tax computed at statutory rate (16,229) 2,623 (5,360)
Increase (reduction):
State income taxes,
net of federal benefit (1,685) (1,707) (1,137)
Effect of foreign earnings 1,105 (3,467) (4,719)
Valuation allowance 32,232 15,670 5,650
Other adjustments (909) (10,499) 45
Total $ 14,514 $ 2,620 $ (5,521)
The Company's Singapore operations had been granted "pioneer
tax status" until February 1994 by the Singapore government and,
as a result, have paid no Singapore taxes on unremitted Singapore
earnings to that date. The impact of the change in status was not
significant in both Fiscal 1995 and Fiscal 1994.
The U.S. income tax returns prior to 1986 have been examined
by the Internal Revenue Service and all matters have been settled.
The Internal Revenue Service is currently examining the U.S. income
tax returns for 1989 through 1994. No matters have arisen as a result
of the examination to date. The New York State Tax authority is
currently examining the Company's 1989 through 1994 New York State
tax returns. As a result of their examination to date, the New
York State tax authority has issued a preliminary notice of deficiency
in the amount of approximately $3,400. The Company intends to
contest the proposed assessment vigorously. The Company does not believe
that the ultimate resolution of this action will have a material
adverse impact on its results of operations or financial position.
14. Commitments and Other Matters
Certain past practices of the Company regarding hazardous
substances and/or hazardous wastes are the subject of
investigation by federal and state regulatory authorities, or are the subject of
lawsuits filed by such authorities. At June 30, 1995 and 1994,
the Company had recorded approximately $4,203 and $3,274,
respectively, related to environmental matters. Because of the uncertainties
associated with assessing environmental matters, the related
ultimate liability is not determinable. However, based on facts
presently known, management does not believe that these
investigations or lawsuits, if resolved adversely to the Company,
would individually or in the aggregate have a material adverse
effect on the Company's financial position or results of
operations.
The Company is involved in proceedings with the New York
Department of Environmental Conservation (DEC) and the United
States Environmental Protection Agency regarding the clean-up of a now-
closed manufacturing facility and certain waste disposal sites in
upstate New York. The remedial investigation and feasibility
study of the now-closed manufacturing facility site has been completed.
The feasibility study report has been approved by the DEC and the
record of decision has been finalized. On March 31, 1993, the
Company executed a final signed consent order from the DEC and
remedial actions commenced. Remediation activities at the site
have been delayed as a result of an extension of the public comment
period to address the remediation plan approved by the DEC.
Management believes that the Company has made adequate provision
for the approved remediation activities.
In June 1992, the Company was served with a summons and
complaint in the U.S. District Court, Northern District of New
York, in a private contribution action. The plaintiffs in this action
are Coopers Industries, Inc., Keystone Consolidated Industries, Inc.,
The Monarch Machine Tool Co., Niagara Mohawk Power Corporation and
Overhead Door Corporation. The action, which lists the Company as
a defendant with fourteen other defendants, seeks contribution for
response costs incurred to date, and to be incurred in the future,
for the remediation of a site in Cortland, New York. Management
does not believe it disposed of any hazardous substances at this
site and is vigorously contesting this matter.
The Company filed a complaint on November 4, 1994 against
CoStar Corporation("CoStar") seeking (i) a declaratory judgment
that the Company was not infringing CoStar's trade dress, (ii) damages
for breach of warranty and fraud and (iii) rescission of contracts
induced by such fraud. The Complaint related to envelope printers
purchased by the Company from CoStar and label printers
manufactured by a third party for the Company. CoStar subsequently filed an
answer denying the Company's allegations and asserting
counterclaims alleging that the Company had infringed its label printer's trade
dress, breached the provisions of a confidentiality agreement
between the Company and CoStar, and tortiously injured CoStar's
business reputation. In addition, CoStar filed a related third-
party complaint against DH Technology, Inc. ("DH"). On June 23,
1995, the Company entered into a Settlement Agreement with CoStar
and DH in connection with the lawsuit. Pursuant to the Settlement
Agreement, the Company agreed, among other things, to pay CoStar
the sum of $55,085 on each of June 23, 1995, July 31, 1995, August 31,
1995 and September 29, 1995 and to return certain tooling and
equipment to CoStar, in exchange for, among other things, the
release by CoStar of its claims against the Company. The Company
recorded a $1,300 pretax third quarter charge primarily relating
to the writeoff of inventory and tooling.
On April 18, 1991, an antidumping proceeding was commenced
against the Company at the Department of Commerce (Commerce) and
before the International Trade Commission, concerning portable
electric typewriters imported from Singapore. Subsequently, on
June 22, 1993, the Company and Commerce signed a suspension agreement,
suspending the antidumping investigation and calling for the
Company
to monitor its international prices. On February 4, 1994, all of
the parties signed a settlement agreement covering the antidumping
investigation and related litigation. Under the terms of the
agreement, the petitioner withdrew its petition against the
Company's Singapore imports and the Company sought revocation of
various antidumping duty orders against typewriters and word
processors from Japan. Pursuant to the agreement, the antidumping
proceedings have been terminated.
On June 8, 1990, the Company filed suit in the United States
District Court for the District of Tennessee against Pelikan, Inc.
alleging patent infringement and false advertising. On February
24, 1992, the Court entered a judgment awarding the Company
approximately $3,120 plus post-judgment interest. Pelikan filed
an appeal, petitioning for a rehearing by the Court of Appeals, and
subsequently offered to pay to the Company a portion of the
judgment aggregating approximately $1,900. The $1,900 portion of the
judgment was reflected in the June 30, 1993 financial statements.
Pelikan's petition for rehearing was subsequently denied and on
August 9, 1993, the Company and Pelikan entered into an agreement
pursuant to which Pelikan agreed to pay $525 to the Company for
fees, expenses and costs incurred in the suit along with the
remaining $1,220 judgment. On August 11, 1993, Pelikan paid the
settlement amount to the Company and satisfied the judgment,
including interest.
The Company is also a defendant or plaintiff in various other
legal actions which have arisen in the ordinary course of its
business. It is the opinion of management, based on advice of
counsel with respect to legal matters, that the ultimate
resolution of these matters and the environmental matters discussed above
will not have a material adverse effect on the Company's financial
position or results of operation.
The Company has severance agreements in place with certain
executive officers and other members of management. Substantially
all the agreements expire on June 30, 1996 and provide for
severance in the event of involuntary termination from the Company.
Severance benefits under these agreements range from one-half year to two
years salary and aggregate approximately $2,500 in the event all
employees under such severance agreements were involuntarily
terminated. In addition, on June 29, 1995, the Company entered
into an agreement with a consulting firm to provide interim management
and financial consulting services to the Company. Under the terms
of the agreement, the consulting firm's President will serve as
the President, Chief Executive Officer and Director of the Company.
This firm will also provide other professional staff as deemed
necessary. Fees for services range from $1.7 to $2.5 per day per
professional which currently aggregates approximately $125 per
month.
15. Restructuring Costs
Over the past few years, the Company has faced intense
competition from foreign producers. On May 8, 1995 the Company
announced a major restructuring plan whereby the Company's
typewriter manufacturing will be relocated from its Singapore and
Batam Island, Indonesia facilities to its Mexico facility. This
action will result in the termination of approximately 1,300
workers in Singapore and Batam who will be replaced with approximately 600
workers in Mexico. This action is expected to save approximately
$10,000 pretax annually primarily through lower labor costs as
well as the greater utilization of the Mexico facility. The Company
expects to cease production in Singapore and Batam Island,
Indonesia by mid-November 1995, thereafter relocating equipment to Mexico
where typewriter production is expected to commence in the third
quarter of Fiscal 1996. The Company placed its Singapore facility
and the underlying land lease up for sale. The Batam Island
facility lease expires December 26, 1995.
In addition to the relocation of typewriter manufacturing to
Mexico, the Company will also eliminate approximately 180 support
positions within research and development, finance, service,
distribution, selling and marketing areas in both its Cortland,
New York and New Canaan, Connecticut locations. Approximately $10,000
in additional annual pretax savings are expected from elimination
of these support positions. These reductions should be completed by
the end of the first quarter of Fiscal 1996.
The net result of these actions will be to reduce the
Company's May 8, 1995 workforce of approximately 2,500 by approximately 680.
As a result of these actions, the Company recorded a pretax
charge of approximately $14,870 in the fourth quarter of Fiscal
1995, of which approximately $1,877 represents primarily non-cash
machinery and equipment asset write-offs, and the remainder
relates to employee severance. Additionally, certain costs, primarily
relating to the move of machinery and equipment, temporary lease-
back of facilities, and renovations, of approximately $6,000
pretax, will be recognized as charges to operations as incurred during
fiscal year 1996. The fourth quarter charge is lower than
previously announced as a result of revisions to prior estimates.
The Fiscal 1995 restructuring provision and subsequent
activity is as follows:
[Download Table]
Asset
Impair- Other
Severance ments Costs Total
1995 Provision $12,993 $1,492 $ 385 $14,870
1995 Activity (1) (1,499) - (100) (1,599)
June 30, 1995 balance $11,494 $1,492 $ 285 $13,271
(1) Represents cash payments, except for the asset impairments,
and other costs which are non-cash items.
In July 1992, in order to maintain its leadership as the low-
cost producer in a highly competitive worldwide business, the
Board of Directors approved and the Company announced a plan to phase
out the Company's manufacturing operations in Cortland, New York and
relocate them to a new facility in Mexico. As a result of this
decision, during Fiscal 1993, the Company provided $16,500 in
restructuring charges, of which approximately $3,000 was non-cash
in nature (see table below).
The Fiscal 1993 restructuring provision and subsequent
activity
is as follows:
[Download Table]
Asset Asset
Redeployment Impair- Other
Severance Costs ments Costs Total
1993 Provision $8,300 $3,300 $3,000 $1,900 $16,500
Activity(1) (1,050) (1,150) (621) (1,900) (4,721)
June 30, 1993 balance 7,250 2,150 2,379 - 11,779
Activity (1) (3,945) (2,150) (1,552) - (7,647)
June 30, 1994 balance 3,305 - 827 - 4,132
Activity (1) (1,969) - (827) - (2,796)
Credit Provision (2) (1,286) - - - (1,286)
June 30, 1995 balance $ 50 $ - $ - $ - $ 50
(1) Represents cash payments, except for the asset impairments,
which are non-cash items
(2) Severance no longer required due to Fiscal 1995
restructuring action.
The severance cost related to approximately 875 employees at
the Cortland facility. Severance benefit arrangements that would
be available to employees whose positions were eliminated were
communicated through a Company memorandum to all Cortland, N.Y.
employees when the restructuring action was adopted and announced
in July 1992. By the end of June 1994 all affected individuals had
been terminated.
The charge for asset redeployment costs consisted primarily
of incremental personnel costs, travel and lodging for 39 employees
responsible for the set-up and establishment of the equipment in
the Mexican facility. The employees responsible for the set-up and
establishment were notified of their termination and subsequent
temporary duty assignment. As a consequence of management's
decision, the value of certain assets which were used in the
Cortland manufacturing process became impaired and such
impairment was included in the restructuring charge. Other costs, which
were expensed as incurred, consisted of incremental costs associated
with the site selection and outside consulting fees.
The relocation plan, originally anticipated to take
approximately one year to complete, was delayed as a consequence
of heavy spring 1993 rainfall in Baja California together with a
reevaluation of lease versus purchase of the facility. By the
end of Fiscal 1994, the Company had essentially completed the
relocation. The annual savings resulting from the restructuring
originally anticipated in 1994 were not realized as cost of sales
continued to reflect the higher Cortland manufacturing labor
costs. The annual savings of approximately $15.0 million was
substantially realized during Fiscal 1995. In Fiscal 1995 a reduction in
restructuring costs of $1,286 was recognized as a further result
of the Singapore restructuring activities.
16. Quarterly Financial Data (Unaudited)(1)
[Download Table]
Fiscal Year Ended First Second Third Fourth
June 30, 1995 Quarter Quarter Quarter(4) Quarter(5)
Net sales $60,114 $63,351 $31,384 $41,460
Gross margin 13,011 13,275 (4,865) (6,071)
Operating income (loss) 1,741 826 (19,042) (30,291)(2)
Income (loss) from
continuing operations 944 324 (12,102) (51,411)
Discontinued operations
(net of income taxes):
Income from operations 270 115 - 286
Gain on disposal of
discontinued operations - 8,722 - 405
Net income (loss) $ 1,214 $9,161 $(12,102) $(50,720)
Earnings per common
share (3):
Income (loss) from
continuing operations $ .03 $ .01 $ (.40) $ (1.69)
Discontinued operations:
Income from operations .01 - - .01
Gain on disposal of
discontinued operations - .29 - .01
Net income (loss) per
share $ .04 $ .30 $ (.40) $ (1.67)
[Download Table]
Fiscal Year Ended First Second Third Fourth
June 30, 1994 Quarter Quarter Quarter Quarter
Net sales $72,217 $74,137 $60,528 $54,424
Gross margin 17,836 14,101 12,367 12,675
Operating income 5,696 1,245 207 1,274
Income from
continuing operations 3,632 708 50 704
Discontinued operations
(net of income taxes):
Income (loss) from
operations 395 836 1,337 (335)
Loss on disposal of
discontinued operations - - - (2,200)
Net income (loss) $ 4,027 $ 1,544 $ 1,387 $(1,831)
Earnings per common
share (3):
Income from
continuing operations $ .12 $ .02 $ .01 $ .02
Discontinued operations:
Income (loss) from
operations .01 .03 .04 (.01)
Loss on disposal of
discontinued
operations - - - (.07)
Net income (loss) per
share $ .13 $ .05 $ .05 $ (.06)
(1) Amounts have been reclassified, where applicable, to reflect
the discontinued operations of SCM Office Supplies, Inc. and
Histacount Corporation.
(2) Includes restructuring costs of $14,870.
(3) Based on 30,250,000 shares of common stock.
(4) Includes charges of approximately $1,200 and $2,600 for write-
downs of property, plant and equipment and inventory,
respectively.
(5) Includes charges of approximately $3,400 and $5,500 for write-
downs of property, plant and equipment and inventory,
respectively, as well as an income tax charge of approximately
$20,000 relating to the utilization of certain deferred tax
assets and a reserve for substantially all of the remaining
deferred income tax assets.
17. Condensed Consolidated Proforma Financial Information
The following proforma financial information shows the
effects of adoption of Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code," had the
guidelines of such statement been adopted as of June 30, 1995,
and separates the consolidated balance sheets as of June 30, 1995,
and consolidated statements of operations and cash flows for the
twelve months then ended, of those entities that are included in the
Bankruptcy Proceedings and those that are not.
Condensed Proforma Balance Sheets
[Download Table]
Non-
Debtor-In Debtor-In Proforma Historical
Possession Possession Elimin- Consol- Consol-
Entities Entities ations idated idated
Current assets $ 71,393 $ 37,070 $ - $108,463 $108,463
Property, plant
and equipment 12,776 10,112 - 22,888 22,888
Other assets 81,875 16,698 (93,858) 4,715 4,715
Total assets $166,044 $63,880 $(93,858) $136,066 $136,066
Bank loans $ 17,400 $ - $ - $ 17,400 $ 17,400
Other current
liabilities 7,702 19,744 - 27,446 61,047
Intercompany with
affiliates 9,076 (9,076) - - -
Other long-term
liabilities - - - - 37,369
Liabilities subject
to compromise 70,970 - - 70,970 -
Stockholders' equity 60,896 53,212 (93,858) 20,250 20,250
Total liabilities and
stockholders' equity $166,044 $63,880 $(93,858) $136,066 $136,066
Condensed Proforma Statements of Operations
[Enlarge/Download Table]
Non-
Debtor-In Debtor-In Proforma Historical
Possession Possession Elimin- Consol- Consol-
Entities Entities ations idated idated
Net sales $150,778 $ 45,531 $ - $196,309 $196,309
Net sales to affiliates 21,108 70,343 (91,451) - -
Cost of goods sold 145,508 35,451 - 180,959 180,959
Cost of goods sold to
affiliates 18,905 72,546 (91,451) - -
Gross margin 7,473 7,877 - 15,350 15,350
Selling, administrative
and research expenses 40,465 7,495 - 47,960 48,532
Restructuring costs 5,592 7,992 - 13,584 13,584
Reorganization costs 572 - - 572 -
Operating loss (39,156) (7,610) - (46,766) (46,766)
Dividend income 29,555 - (29,555) - -
Interest expense 965 - - 965 965
Loss from continuing
operations before
income tax (10,566) (7,610) (29,555) (47,731) (47,731)
Income taxes 14,135 379 - 14,514 14,514
Loss from continuing
operations (24,701) (7,989) (29,555) (62,245) (62,245)
Discontinued operations
(net of income taxes):
Income from operations 671 - - 671 671
Gain on disposal of
discontinued operations 9,127 - - 9,127 9,127
Net Loss $(14,903) $ (7,989) $(29,555) $(52,447) $(52,447)
Condensed Proforma Statements of Cash Flows
[Download Table]
Non-
Debtor-In Debtor-In Proforma
Possession Possession Elimin- Consol-
Entities Entities ations idated(1)
Cash Flows from
operating activities:
Net loss $(14,903) $(7,989) $(29,555) $(52,447)
Adjustments to
reconcile net loss
to net cash used in
continuing operating
activities:
Noncash items and
changes in
operating assets
and liabilities (2,499) 7,357 29,555 34,413
Net cash used in
continuing operations (17,402) (632) - (18,034)
Net cash provided by
discontinued operations 1,370 - - 1,370
Net Cash flow used in
operating activities (16,032) (632) - (16,664)
Cash flows from
investing activities:
Proceeds from sale of
discontinued operations 27,500 - - 27,500
Capital expenditures (2,325) (841) - (3,166)
Net cash provided by
(used in) investing
activities 25,175 (841) - 24,334
Cash flows from
financing activities:
Bank loans
(repayments), net (2,602) - - (2,602)
Dividends paid (4,537) - - (4,537)
Net cash Used in
financing activities (7,139) - - (7,139)
Increase (decrease)
in cash and cash
equivalents 2,004 (1,473) - 531
Cash and cash
equivalents at
beginning of year 1,023 5,449 - 6,472
Cash and cash
equivalents at
end of year $ 3,027 $3,976 $ - $ 7,003
(1) Historical consolidated cash flows are the same as
proforma consolidated.
18. Subsequent Events
On July 5, 1995, the Company filed a voluntary petition
for reorganization under Title 11, United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District
of Delaware. On August 18, 1995, the Company filed voluntary
petitions for reorganization under Chapter 11 of the
Bankruptcy Code for three of its wholly-owned but nonoperating
subsidiaries, SCM Office Supplies, Inc., SCC LI Corporation(formerly
Histacount Corporation) and Hulse Manufacturing Company.
An Administrator was appointed on August 2, 1995 for the
Company's wholly-owned subsidiary in Australia. The
Administrator was appointed Liquidator on August 29, 1995. The Company is
currently exploring potential distributor relationships in its
Australian market for the purpose of maintaining its
distribution capacity. The ultimate effect of this event on the
consolidated financial position of the Company has not been determined.
Financial Statement Schedule II
SMITH CORONA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended June 30, 1995, 1994 and 1993
(In thousands)
[Download Table]
Balance
at Charged to Balance at
Beginning Costs and Reductions- End of
of Period Expenses Writeoffs Period
Year ended June 30, 1995:
Allowance for doubtful
trade receivables $1,512 $ 61 $ 89 $ 1,484
Allowance for inventory
obsolescence and shrinkage $4,037 $9,930 $3,372 $10,595
Year ended June 30, 1994:
Allowance for doubtful
trade receivables $1,342 $ 170 $ - $ 1,512
Allowance for inventory
obsolescence and shrinkage $7,801 $3,021 $6,785 $ 4,037
Year ended June 30, 1993:
Allowance for doubtful
trade receivables $1,561 $ 288 $ 507 $ 1,342
Allowance for inventory
obsolescence and shrinkage $1,448 $8,549 $2,196 $ 7,801
EXHIBIT D
SMITH CORONA PREFERENCE ANALYSIS
Methodology and Assumptions
- For 90 days prior to filing:
- Identified all companies for whom accounts payable balance
decreased (i.e. position improved) greater than $10,000 (14
companies)
- Identified all companies and dividend payments where over
$50,000 was disbursed (58 companies and one dividend payment)
- Total population excluding overlap is 63 companies
- For 63 company population:
- Identified date of goods received or invoice date for service
companies
- Calculated due dates
- Captured date SCC checks cleared
- Calculated days early/late
- Identified as subject to preference all payments either more
than 10 days early or 30 days late
- For potential preferences identified:
- Payments made prior to 4/6/95 (90 days) and due within
preference
- Payments made within last 10 days
- Payments made for debt past due 60 days prior to 4/6/95 but
paid within the preference period
- Payments made within preference period and due after 7/5/95
- New value offset from accounts payable balance at filing
- Reclamation claims (added back since reclamation claim cannot
be "applied" to new value)
- Examined potential preferences for advantaged position:
- Debt due 60 days prior to 4/6/95 and paid in 90 day period
- Debt due after 7/5/95 (filing date) and paid prior to filing
- Compiled potential preferences with significant advantage to
creditors
- The following table shows the potential preference payments and
details of the sample
Summary of Potential Preference Payments For Smith Corona
[Download Table]
Total Amount
Subject to
Preference With
Total Amount Advantage Before
Subject to New Value and
Name Total Payments Preference Reclamation
--------------------- -------------- ----------- ------------
1 Peter Parts 3,032,857.15 10,358.00 --
2 National Transportation 826,613.76 130,535.20 13.02
3 Mitsumi Elec 795,685.38 50,000.00 --
4 SCC Shareholder Dividend 756,250.00 -- --
5 Kamden 705,784.68 116,862.42 --
6 Hitachi America 699,739.37 284,052.50 --
7 Winthrop Stimson 516,962.51 -- --
8 Fuji Copian 489,087.00 64,330.59 --
9 Morimura 473,023.25 271,308.85 --
10 Seal 376,627.12 (29,784.53) --
11 Epson 307,050.00 181,860.00 --
12 Circuit Systems 253,179.08 13,021.29 --
13 Young Conaway 250,000.00 -- --
14 Cardpak 231,278.15 29,677.48 --
15 Corrugados de Baja 212,384.31 7,606.70 --
16 Prudential Ins 205,250.91 51,489.27 --
17 Miles & Joffery 200,648.09 30,451.33 --
18 Foothill Capital 200,000.00 -- --
19 Intel 193,681.50 47,701.75 --
20 NYS Unemployment Ins 188,746.87 -- --
21 Deloitte & Touche 186,860.00 30,717.50 --
22 UPS 184,070.82 -- --
23 Fina Oil 178,933.80 29,950.20 --
24 Cherry St. Assoc 153,699.21 102,466.14 --
25 Motorola 153,408.20 451.33 --
26 SGS-Thomson 150,813.00 (1,848.00) --
27 Blue Cross & BS 141,884.70 -- --
28 Samsung 141,720.54 6,577.34 --
29 Wabash Transformer 138,192.98 9,604.82 --
30 Syracuse Lithographing 125,088.62 6,439.00 --
31 AVX Corp 124,798.49 48,420.00 2,122.33
32 Hamilton Research 120,000.00 -- --
33 Niagra Mohawk 116,262.24 191.22 --
34 805 Properties 111,140.57 -- --
35 GE Capital 110,471.09 10,221.54 --
36 Hyundai 110,432.69 -- --
37 The Belko Corp 108,297.57 21,091.12 --
38 Emkay 107,327.06 -- --
39 R.F. Stengel & Co 100,000.00 -- --
40 Advanced Micro Devices 97,016.86 -- --
41 Jardine 92,552.00 16,691.00 --
42 American Express 82,724.98 61,918.91 --
43 Crown City Travel 77,436.11 16,466.66 --
44 NY State Sales Tax 77,312.31 -- --
45 The Fairway Spring 76,385.91 -- --
46 Manpower 75,930.82 64,285.99 --
47 Dept.of Treas/Bur of Income 75,000.00 -- --
48 Manning Savage & Lee 72,120.74 6,953.75 --
49 Computer Assoc. Internat'l 69,538.00 495.00 --
50 Comm of Rev Services 67,456.52 -- --
51 CIT Group 60,000.00 -- --
52 Malina & Wolson 59,131.19 -- --
53 Delaware Sec. of State 58,652.00 -- --
54 Nixon Hargrave 58,388.60 58,388.60 --
55 Co-Star 55,085.00 -- --
56 Mitsumi (Santa Clara) 50,510.00 50,510.00 --
57 Gibralter Steel 48,759.39 (175.50) --
58 Davies Office Refurb 28,937.15 691.20 --
59 International Imaging 20,216.58 -- --
60 Standard Micro Systems 16,033.26 16,033.26 --
61 American Microsystems 14,467.20 14,467.20 --
62 Harris Semiconductor 13,024.66 -- --
63 American Software 11,787.77 -- --
Totals: 14,836,717.76 1,830,479.13 2,135.35
__________
Note 1: Analysis for Chemical Bank needs further examination.
[Download Table]
Potential
Plus: Reclamation Less: New Preferential
Name Claims Value Transfers
--------------------- ----------------- ---------- ------------
1 Peter Parts -- 161,621.82 --
2 National Transportation -- 830.53 --
3 Mitsumi Elec -- 918,760.97 --
4 SCC Shareholder Dividend -- -- --
5 Kamden -- 220,055.17 --
6 Hitachi America -- 426,010.70 --
7 Winthrop Stimson -- 487.00 --
8 Fuji Copian -- 82,785.76 --
9 Morimura -- -- --
10 Seal 112,420.04 583,268.88 112,420.04
11 Epson -- -- --
12 Circuit Systems -- 161,740.35 --
13 Young Conaway -- -- --
14 Cardpak 36,007.14 194,213.90 36,007.14
15 Corrugados de Baja -- 216,585.60 --
16 Prudential Ins -- -- --
17 Miles & Joffery -- 24,395.02 --
18 Foothill Capital -- -- --
19 Intel -- 64,164.20 --
20 NYS Unemployment Ins -- -- --
21 Deloitte & Touche -- -- --
22 UPS -- 67,885.34 --
23 Fina Oil -- 150,075.60 --
24 Cherry St. Assoc -- 6,494.01 --
25 Motorola -- 176,452.97 --
26 SGS-Thomson -- 42,812.04 --
27 Blue Cross & BS -- -- --
28 Samsung -- -- --
29 Wabash Transformer -- 55,693.51 --
30 Syracuse Lithographing -- 54,132.75 --
31 AVX Corp -- 45,863.62 --
32 Hamilton Research -- -- --
33 Niagra Mohawk -- 179,823.46 --
34 805 Properties -- 4,881.73 --
35 GE Capital -- 17,893.37 --
36 Hyundai -- 38,047.19 --
37 The Belko Corp -- 23,283.69 --
38 Emkay -- 23,479.32 --
39 R.F. Stengel & Co -- -- --
40 Advanced Micro Devices -- 41,026.57 --
41 Jardine -- 76,454.35 --
42 American Express -- 31,561.95 --
43 Crown City Travel -- 10,309.90 --
44 NY State Sales Tax -- -- --
45 The Fairway Spring -- 51,238.20 --
46 Manpower -- 58,141.81 --
47 Dept. of Treas/Bur of Income -- -- --
48 Manning Savage & Lee -- 13,447.37 --
49 Computer Assoc. International -- 1,619.61 --
50 Comm of Rev Services -- -- --
51 CIT Group -- -- --
52 Malina & Wolson -- -- --
53 Delaware Sec. of State -- -- --
54 Nixon Hargrave -- 37,654.40 --
55 Co-Star -- -- --
56 Mitsumi (Santa Clara) -- -- --
57 Gibralter Steel -- 50,511.25 --
58 Davies Office Refurb -- 2,464.10 --
59 International Imaging -- -- --
60 Standard Micro Systems -- -- --
61 American Microsystems -- -- --
62 Harris Semiconductor -- 201.00 --
63 American Software -- 277.5 --
148,427.18 4,316,646.51
Note 1: Analysis for Chemical Bank needs further examination.
EXHIBIT E
SMITH CORONA CORPORATION
BEST INTERESTS TEST
ASSUMPTIONS
1. The Company performs to its business plan until August 31, 1996
at which point the case is converted to a Chapter 7 liquidation
and a trustee is appointed.
2. Assets available for liquidation are assumed to be equal to the
Company's projected assets as of the end of August 1996.
3. Subsidiaries located in the United States are substantively
consolidated into the parent company's proceeding.
4. International subsidiaries are filed for administrative
liquidation in their respective countries.
5. Proceeds from international subsidiaries are assumed to be
remitted to the U.S. after all international third party
liabilities are paid in full.
6. Mexico is filed as an administration proceeding in Mexico. The
property, plant, and equipment located in Mexico (but owned by the
U.S. entity) is assumed to be liquidated for the benefit of
Mexican creditors.
7. There are no restrictions on the repatriation of cash proceeds
from liquidating assets outside the United States other than those
specifically identified.
8. The Chapter 7 trustee will receive 3% of net proceeds from the
liquidation.
9. Liquidation costs and professional fees for the Parent
Corporation are based on management estimates.
SMITH CORONA CORPORATION
BEST INTERESTS TEST
ESTIMATED RECOVERY FROM LIQUIDATION OF ASSETS
(In $000's)
Low High
Net Proceeds Available for Creditor Recovery 23,687 31,915
[Enlarge/Download Table]
Estimated Recovery
Estimated -----------------
Claim ($) (%)
Estimated Recovery for Senior Classes of Creditor
Secured Claims 515 515 100%
Administrative Claims
Vacation 400 400 100
Customer Programs 5,000 5,000 100
Environmental 11,000 11,000 100
Other (Professional Fees, Rents, Expenses, Reclamation) 4,292 4,292 100
Total Administrative Claims 20,692 20,692 100
Priority Claims
Severance 249 249 100
Taxes(1) and Wages 3,500 3,500 100
Total Priority Claims 3,749 3,749 100
Total Claims Before General Unsecured Claims 24,956 24,956 100
Low High
Estimated Proceeds Available for General Unsecured Claims (1,269) 6,959
[Enlarge/Download Table]
Estimated Recovery
Estimated ------------------
Claim Low High
Estimated Recovery for General Unsecured Claims
General Unsecured Claims
Trade (Net of Reclamation) 13,460
Employee Severance and Related Claims 10,100
Employee Benefit Programs 42,400
Other 5,576
General Unsecured Claims 71,536 (1,269) 6,959
0% 10%
_________
(1) Includes reimbursement under indemnity by Hanson
(2) Estimated Recovery does not include any net proceeds
from avoidance actions
SMITH CORONA CORPORATION
BEST INTERESTS TEST
ESTIMATED PROCEEDS FROM LIQUIDATION OF ASSETS -- PARENT CORPORATION
(In $000's)
Liquidation of Domestic Assets
[Enlarge/Download Table]
Estimated Estimated
Recovery (%) Recovery (%)
Est. Book ---------- -----------
Value Low High Low High
Estimated Assets
as of August 1996
Current Assets
Cash 16,225 100% 100% 16,225 16,225
Net Receivables 12,800 60 70 7,680 8,960
Raw/WIP Inventory 13,050 0 5 0 653
Finished Goods Inventory 4,225 50 60 2,113 2,535
Cortland Property 2,900 30 40 870 1,160
Cortland Corner Lots 0 N/A N/A 200 250
Groton Properties 0 N/A N/A 50 100
Other Current Assets 3,900 10 20 390 780
Total Current Assets 53,100 27,528 30,663
Property, Plant and Equipment(2)
Tool Room 600 80 100 480 600
Other PP&E 750 10 20 75 150
Total PP&E 1,350 555 750
Goodwill/Intangibles 750 0 0 0 0
Other Assets 350 0 0 0 0
Supplies Business/Smith
Corona Name 0 N/A N/A 3,000 5,000
Total Domestic Assets 55,550 31,083 36,413
Estimated Recovery from
International Operations
Estimated Recovery From Singapore (400) (400)
Estimated Recovery From Mexico (1,015) 990
Estimated Recovery From
International Sales Subsidiaries 1,475 2,700
Total Estimated Recovery
from International Operations 60 3,290
Low High
Proceeds Available for Creditor Recovery
Total Estimated Proceeds from Liquidation 31,143 3,703
Trustee Fees @ 3% of Estimated Proceeds (934) (1,191)
Estimated Liquidation Costs and Professional Fees (6,521) (6,597)
Net Proceeds Available for Creditor Recovery 23,687 31,915
__________
1. Assumes approximately $9.8 MM liquidated in Mexico
SMITH CORONA CORPORATION
BEST INTERESTS TEST
ESTIMATED PROCEEDS FROM LIQUIDATION OF ASSETS -- SINGAPORE
(In $ 000's)
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Estimated Estimated
Recovery (%) Recovery (%)
Est. Book ---------- -----------
Value Low High Low High
Estimated Assets
as of August 1996
Current Assets
Cash 250 100% 100 % 250 250
Net Receivables 0 60 70 0 0
Other Current Assets 0 0 0 0 0
Other Assets 0 0 0 0 0
Total Current Assets 250 250 250
Property, Plant and Equipment 0 0 0 0 0
Other Assets 0 0 0 0 0
Total Assets 250 250 250
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Estimated
Book Payout
Value (%) Estimated Payout ($)
Third Party Liabilities and
Wind Down Expenses
Other Accrued Liabilities 0 100% 0
Contingency Costs 500 100 500
Estimated Wind-Down Costs 150 100 150
Total Claims and Expenses 650 650
Low High
Estimated Proceeds Available to Parent Corporation (400) (400)
SMITH CORONA CORPORATION
BEST INTERESTS TEST
ESTIMATED PROCEEDS FROM LIQUIDATION OF ASSETS -- MEXICO
(In $000's)
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Estimated Estimated
Recovery (%) Recovery ($)
Est. Book ---------- -----------
Value Low High Low High
Estimated Assets as
of August 1996
Current Assets
Cash 25 100% 100% 25 25
Net Receivables 150 60 70 90 105
Inventory 0 40 50 0 0
Other Current Assets 300 10 20 30 60
Total Current Assets 475 145 190
Property, Plant and Equipment 1,400 0 0 0 0
Other Assets 150 0 0 0 0
Realization on US Owned
Equipment(1) 9,800 30 50 2,940 4,900
Total Assets 11,825 3,085 5,090
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Estimated
Book Est.
Value Payout(%) Payout($)
Third Party Liabilities
and Wind Down Expenses
Accounts Payable 200 100% 200
Other Accrued Liabilities 200 100 200
Estimated Wind-down Costs 700 100 700
Documentation/Legal and
Tax Obligations 200 100 200
Estimated Severance Cost 700 100 700
Contingency Costs 300 100 300
Lease Termination Costs 1,800 100 1,800
Total Claims and Expenses 4,100 4,100
Low High
Estimated Proceeds Available
to Parent Corporation (1,015) 990
__________
1. Assumes PP&E owned by the U.S., but located in Mexico,
is liquidated for the benefit of the Mexican Creditors.
SMITH CORONA CORPORATION
BEST INTERESTS TEST
ESTIMATED PROCEEDS FROM LIQUIDATION OF ASSETS -- TOTAL INTERNATIONAL
(In $000's)
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Estimated Estimated
Recovery (%) Recovery ($)
Est. Book ---------- -----------
Value Low High Low High
Estimated Assets as
of August 1996
Current Assets
Cash 2,000 100% 100 % 2,000 2,000
Net Receivables 5,500 60 70 3,300 3,850
Inventory 6,500 50 60 3,250 3,900
Other Current Assets 250 10 20 25 50
Total Current Assets 14,250 8,575 9,800
Property, Plant and Equipment 150 0 0 0 0
Other Assets 0 0 0 0 0
Total Assets 14,400 8,575 9,800
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Estimated Estimated
Book Value Payout (%) Payout ($)
Third Party Liabilities and Wind Down Expenses
Accounts Payable 700 100% 700
Other Accrued Liabilities 750 100 750
Estimated Wind-down Costs 450 100 450
Professional Fees 200 100 200
Estimated Severance Cost 1,350 100 1,350
Service Warranty Costs 500 100 500
Lease Termination Costs 2,650 100 2,650
Contingency Costs (All International) 500 100 500
Total Claims and Expenses 7,100
Low High
Estimated Proceeds Available to Parent Corporation 1,475 2,700
Dates Referenced Herein and Documents Incorporated by Reference
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