Annual Report — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 116 761K
2: EX-10.(X) Amendment #3 to the Berkshire Agreement 3 14K
3: EX-10.(Y) Supplement to Disclosure Statement 28 128K
4: EX-10.(Z) Third Amended Joint Plan Reorganization 101 452K
5: EX-21 Subsidiaries of the Company 2 14K
6: EX-23 Consent of Ernst & Young LLP 1 6K
EX-10.(Y) — Supplement to Disclosure Statement
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EXHIBIT 10(y)
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
FRUIT OF THE LOOM, INC., et al.,
Chapter 11 Cases
Debtors. No. 99-04497 (PJW)
Jointly Administered
SUPPLEMENT TO DISCLOSURE STATEMENT WITH RESPECT TO THIRD
AMENDED JOINT PLAN OF REORGANIZATION OF FRUIT OF THE LOOM
MILBANK, TWEED, HADLEY & MCCLOY LLP
1 Chase Manhattan Plaza
New York, New York 10005-1413
(212) 530-5000
- and -
SAUL EWING LLP
222 Delaware Street
Wilmington, Delaware 19801
(302) 421-6800
Attorneys for Fruit of
the Loom, Inc. et al.,
Debtors and Debtors-in-Possession
Dated: Wilmington, Delaware
March 19, 2002
DISCLAIMER
THIS SUPPLEMENT PROVIDES ADDITIONAL DISCLOSURE AND SUPPLEMENTS THE
DISCLOSURE STATEMENT DATED FEBRUARY 4, 2002 (THE "DISCLOSURE STATEMENT"). THE
PRIMARY PURPOSE OF THIS SUPPLEMENT IS TO ALERT YOU TO THE FACT THAT A SETTLEMENT
HAS BEEN REACHED WITH A GROUP OF NOTEHOLDERS HOLDING 8 7/8% NOTES, AND THAT AS A
RESULT OF THIS SETTLEMENT THERE ARE CERTAIN CHANGES TO THE DISTRIBUTIONS TO BE
RECEIVED BY CERTAIN CLASSES OF CREDITORS, ALL OF WHICH ARE DESCRIBED IN THIS
SUPPLEMENT.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN
THIS SUPPLEMENT OR IN THE DISCLOSURE STATEMENT, REGARDING THE PLAN OR THE
SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS SUPPLEMENT, THE PLAN
ATTACHED HERETO (THE "AMENDED PLAN") AND THE DISCLOSURE STATEMENT (INCLUDING ALL
EXHIBITS) IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE AMENDED PLAN.
PLAN SUMMARIES AND STATEMENTS MADE IN THIS SUPPLEMENT OR IN THE DISCLOSURE
STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE AMENDED PLAN, THE
PLAN SUPPLEMENT AND THE OTHER EXHIBITS TO THIS SUPPLEMENT OR THE DISCLOSURE
STATEMENT. THE STATEMENTS CONTAINED IN THIS SUPPLEMENT ARE MADE ONLY AS OF THE
DATE HEREOF, AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN
WILL BE CORRECT AT ANY TIME AFTER THE DATE HEREOF.
THIS SUPPLEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125 OF THE
BANKRUPTCY CODE AND NOT IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR
OTHER NONBANKRUPTCY LAW. PERSONS OR ENTITIES TRADING IN, OR OTHERWISE
PURCHASING, SELLING, OR TRANSFERRING SECURITIES OF FRUIT OF THE LOOM SHOULD NOT
RELY UPON THIS SUPPLEMENT OR THE DISCLOSURE STATEMENT FOR SUCH PURPOSES AND
SHOULD EVALUATE THIS SUPPLEMENT OR THE DISCLOSURE STATEMENT AND THE AMENDED PLAN
IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE PREPARED.
THIS SUPPLEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR
ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
FURTHER INFORMATION REGARDING FRUIT OF THE LOOM AND ITS BUSINESSES AND
OPERATIONS AND MATERIAL HISTORICAL EVENTS IS
AVAILABLE IN PUBLIC FILINGS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION.
IF YOU WISH TO OBTAIN COPIES OF SUCH FILINGS, AT YOUR OWN EXPENSE, UNLESS
OTHERWISE SPECIFICALLY REQUIRED BY BANKRUPTCY RULE 3017(D), PLEASE SEND A
WRITTEN REQUEST FOR ANY SPECIFIC DOCUMENT(S) TO: MILBANK, TWEED, HADLEY & McCLOY
LLP, 1 CHASE MANHATTAN PLAZA, NEW YORK, NEW YORK 10005, ATTN.: RENA STRAPPAZON,
LEGAL ASSISTANT, FAX NUMBER (212) 530-5219.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS SUPPLEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN
ADMISSION OF ANY FACT, LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A
STATEMENT MADE IN CONNECTION WITH SETTLEMENT NEGOTIATIONS.
THIS SUPPLEMENT SUMMARIZES CERTAIN PROVISIONS OF THE AMENDED PLAN,
STATUTORY PROVISIONS, DOCUMENTS RELATED TO THE AMENDED PLAN, EVENTS IN FRUIT OF
THE LOOM'S REORGANIZATION CASES, AND FINANCIAL INFORMATION. ALTHOUGH THE MEMBERS
OF FRUIT OF THE LOOM BELIEVE THAT THE AMENDED PLAN AND RELATED DOCUMENT
SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT
THEY DO NOT SET FORTH THE ENTIRE TEXT OF THE AMENDED PLAN, SUCH DOCUMENTS OR
STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS SUPPLEMENT HAS BEEN
PROVIDED BY FRUIT OF THE LOOM'S MANAGEMENT, EXCEPT WHERE OTHERWISE SPECIFICALLY
NOTED. FRUIT OF THE LOOM BELIEVES THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT, BUT IS UNABLE TO WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED
HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT INACCURACY OR OMISSION.
FRUIT OF THE LOOM IS SOLELY RESPONSIBLE FOR ALL STATEMENTS IN THE DISCLOSURE
STATEMENT.
THE INFORMATION CONTAINED IN THIS SUPPLEMENT IS INCLUDED HEREIN FOR
PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN AND MAY NOT BE RELIED UPON FOR
ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN. THE DESCRIPTIONS
SET FORTH HEREIN OF THE ACTIONS, CONCLUSIONS, OR RECOMMENDATIONS OF FRUIT OF THE
LOOM OR ANY OTHER PARTY IN INTEREST HAVE BEEN SUBMITTED TO OR APPROVED BY SUCH
PARTY, BUT NO SUCH PARTY MAKES ANY REPRESENTATION REGARDING SUCH DESCRIPTIONS.
THIS SUPPLEMENT SHALL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING
INVOLVING FRUIT OF THE LOOM OR ANY OTHER PARTY, NOR SHALL IT BE CONSTRUED TO BE
ADVICE ON THE TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS
TO HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN, FRUIT OF THE LOOM. YOU
SHOULD CONSULT YOUR OWN COUNSEL OR TAX ADVISOR AS TO ANY QUESTIONS OR CONCERNS
2
RESPECTING TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE REORGANIZATION ON
HOLDERS OF CLAIMS OR EQUITY INTERESTS.
IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE STATEMENTS HEREIN AND THE
AMENDED PLAN, THE AMENDED PLAN SHALL GOVERN.
BACKGROUND
Fruit of the Loom, Ltd. (a Cayman Islands company) ("FTL Cayman"), Fruit of
the Loom, Inc. (a Delaware corporation) ("FTL Inc."), Union Underwear Company,
Inc. ("Union Underwear"), and their other direct and indirect subsidiaries
listed on the signature page hereof, debtors and debtors-in-possession
(collectively, "Fruit of the Loom") commenced their Reorganization Cases (the
"Reorganization Cases") by filing petitions for relief under Chapter 11 of title
11 of the United States Code, 11 U.S.C. ss.ss. 101-1330 (as amended, the
"Bankruptcy Code") on December 29, 1999 (the "Petition Date") in the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").
On December 30, 1999, FTL Cayman also commenced a proceeding under the Companies
Law (the "Cayman Proceeding") in the Grand Court of the Cayman Islands (the
"Cayman Court").
On January 31, 2002, Fruit of the Loom filed its Second Amended Joint Plan
of Reorganization dated January 31, 2002 (as amended, the "Plan"). On January
28, 2002, the JPLs also filed an amended Scheme of Arrangement (as amended, the
"Scheme of Arrangement" or "Scheme"), which is coordinated with, and contingent
upon the effectiveness of, the Plan.
On March 19, 2002, Fruit of the Loom filed its Third Amended Joint Plan(1)
of Reorganization dated March 19, 2002 (as amended, the "Amended Plan"), a copy
of which is attached to this Supplement. To the extent required, the Scheme will
be amended to conform to the Amended Plan. The Amended Plan (and, as to FTL
Cayman only, the Scheme of Arrangement) sets forth how Claims against and
Interests (within the meaning of section 501(a) of the Bankruptcy Code) in Fruit
of the Loom will be treated upon the emergence of Fruit of the Loom from Chapter
11.
The Amended Plan and the Scheme are a result of extensive negotiations with
the Official Committee of Unsecured Creditors of Fruit of the Loom appointed in
the Reorganization Cases (the "Unsecured Creditors Committee") which represents
the holders of in excess of $450 million of unsecured debt, an ad hoc committee
consisting of DDJ Capital Management, LLC, Lehman Brothers, Inc., and Mariner
Investment Group, Inc., who are holders of the 8 7/8% Notes (the "Ad Hoc
Committee of 8 7/8% Noteholders"), the steering committee of the informal
committee of senior secured noteholders (the "Noteholders Steering Committee")
and the unofficial prepetition bank steering committee (the "Bank Steering
Committee"), together representing the interests of the holders of the Class 2
Claims holding approximately $1.2 billion of secured debt, and other
constituencies in the Reorganization Cases, to resolve the parties' objections
to the Plan, and reflects the results of a series of interconnected and mutually
dependent settlements and compromises reached among the parties since the
Petition Date.
--------
(1) Capitalized terms used in this Supplement and not defined herein shall have
the meaning ascribed to such term in the Amended Plan or in the Disclosure
Statement.
3
The Amended Plan, among other things, continues to implement the sale of
Fruit of the Loom's basic apparel business (the "Apparel Business") as a going
concern to New FOL Inc. ("Purchaser"), a wholly owned subsidiary of Berkshire
Hathaway Inc., pursuant to the terms, and subject to the conditions, of the
Asset Purchase Agreement dated as of November 1, 2001 (as amended, the
"Berkshire Agreement"), a copy of which is included in the Plan Supplement. THE
AMENDED PLAN DOES, HOWEVER, MODIFY THE DISTRIBUTIONS TO CLASS 2 AND FORMER CLASS
4A CREDITORS UNDER THE PLAN. IN ADDITION, CLASS 4A IS SPLIT INTO TWO CLASSES:
CLASS 4C WHICH CONTAINS THE CLAIMS OF THE HOLDERS OF 8 7/8% NOTES AND A NEW
CLASS 4A WHICH CONTAINS ALL OTHER FORMER CLASS 4A CLAIMS. IN PARTICULAR, THE
DISTRIBUTIONS TO CLASS 2 ARE REDUCED BY THE SUM OF $9.35 MILLION (PLUS A
POSSIBLE ADDITIONAL $1.551 MILLION), AND THE DISTRIBUTIONS THAT WENT TO OLD
CLASS 4A ARE SPLIT BETWEEN NEW CLASS 4A AND NEW CLASS 4C. THE DISTRIBUTION TO
NEW CLASS 4A IS ALSO INCREASED BY $2 MILLION, AND THE DISTRIBUTION TO NEW CLASS
4C IS ALSO INCREASED AN ADDITIONAL $15 MILLION, TO OR FOR THE BENEFIT OF CLASS
4C CREDITORS. THE ADDITIONAL FUNDS FOR THE INCREASED DISTRIBUTIONS ARE PROVIDED
BY (I) AN UPWARD ADJUSTMENT TO THE PURCHASE PRICE UNDER THE BERKSHIRE AGREEMENT,
PURSUANT TO AN AMENDMENT DATED AS OF THE DATE HEREOF AND (II) THE REDUCTION IN
THE DISTRIBUTION TO CLASS 2. IN ADDITION, THE AMENDED PLAN RESOLVES THE DISPUTE
REGARDING THE ALLOWED AMOUNT OF THE CLAIMS OF HOLDERS OF THE 7% DEBENTURES
(WHICH ARE A PART OF THE PREPETITION SECURED CREDITOR CLAIMS IN CLASS 2), BY
ALLOWING THEM IN THE AGGREGATE AMOUNT OF $90,750,629. THE FOLLOWING CHART
SUMMARIZES THE CHANGES IN DISTRIBUTIONS TO CREDITORS IN CLASS 2 AND OLD CLASS 4A
(NOW CLASS 4A AND CLASS 4C).
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CLASS TREATMENT BEFORE AMENDED PLAN TREATMENT AFTER AMENDED PLAN
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CLASS 2 - EACH HOLDER OF AN ALLOWED CLASS 2 CLAIM WOULD CASH DISTRIBUTION IS REDUCED BY (a) $9.35
PREPETITION SECURED RECEIVE ITS RATABLE PROPORTION OF (a) CASH IN MILLION AND (b) AN AMOUNT OF UP TO
CREDITOR CLAIMS AN AMOUNT TO BE DETERMINED, APPROXIMATELY $1,551,000 OF THE FARLEY GROSS-UP
EQUAL TO $277 MILLION AND (b) 92.5% OF THE RESERVE. THE MAXIMUM REDUCTION REPRESENTS
INTEREST IN FOL LIQUIDATION TRUST AN APPROXIMATE 1.2% DECREASE IN THE
REPRESENTING 92.5% OF THE ADJUSTED APPAREL DISTRIBUTIONS TO CLASS 2 CREDITORS.
BUSINESS SALE PROCEEDS AND 92.5% OF THE NET OTHERWISE, THE TREATMENT OF CLASS 2 IS
PROCEEDS OF THE LIQUIDATION OF THE NON-CORE NOT CHANGED.
ASSETS HELD BY FOL LIQUIDATION TRUST.
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CLASS 4A - GENERAL EACH HOLDER OF AN ALLOWED CLASS 4A CLAIM THE DISTRIBUTION PROVIDED FOR OLD CLASS
UNSECURED CLAIMS WOULD RECEIVE ITS RATABLE PROPORTION OF THE 4A UNDER THE PRIOR PLAN IS DIVIDED
BENEFICIAL INTERESTS IN THE UNSECURED BETWEEN NEW CLASS 4A AND NEW CLASS 4C.
CREDITORS TRUST WHICH HOLDS (a) 7.5% OF THE EACH HOLDER OF AN ALLOWED NEW CLASS 4A
BENEFICIAL INTERESTS OF FOL LIQUIDATION CLAIM WILL RECEIVE ITS RATABLE PROPORTION
TRUST REPRESENTING 7.5% OF THE OF THE BENEFICIAL INTERESTS IN THE
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ADJUSTED APPAREL BUSINESS SALE PROCEEDS UNSECURED CREDITORS TRUST, WHICH
AND 7.5% OF THE NET PROCEEDS OF LIQUIDATION OF HOLDS (a) 190/445 OF THE 7.5% INTEREST
THE NON-CORE ASSETS, AND (b) CERTAIN CLAIMS AND IN THE FOL LIQUIDATION TRUST, AND (b)
CAUSES OF ACTION (DEFINED IN THE PLAN AS 100% OF THE UCT CLAIMS, PLUS (c) AN
THE "UCT CLAIMS"). ADDITIONAL CASH DISTRIBUTION OF
$2,000,000, AND (d) UNDER CERTAIN
CIRCUMSTANCES, UP TO $2,820,000 FROM THE
FARLEY GROSS-UP RESERVE.
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CLASS 4C -- 8 7/8% NOTE THIS IS A NEW CLASS. PRIOR TO THE AMENDED THE DISTRIBUTION PROVIDED FOR OLD CLASS
CLAIMS PLAN, THESE CLAIMS WERE INCLUDED IN OLD 4A UNDER THE PRIOR PLAN IS DIVIDED
CLASS 4A. BETWEEN NEW CLASS 4A AND NEW CLASS 4C.
EACH HOLDER OF AN ALLOWED NEW CLASS 4C
CLAIM WILL RECEIVE ITS RATABLE
PROPORTION OF (a) 255/445 OF THE 7.5%
INTEREST IN THE FOL LIQUIDATION TRUST,
AND (b) AN ADDITIONAL CASH DISTRIBUTION
IN THE AMOUNT OF $15 MILLION, MINUS THE
ALLOWED ADMINISTRATIVE EXPENSE CLAIMS OF
THE MEMBERS OF AND PROFESSIONALS
RETAINED BY THE AD HOC COMMITTEE OF 8 7/8%
NOTEHOLDERS. CLASS 4C WAIVES ANY RIGHT
TO THE UCT CLAIMS.
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A more detailed description of the treatment of Claims in Classes 2, 4A, and
Class 4C under the Amended Plan is found below.
I.
INTRODUCTION
THE AMENDED PLAN AND THE SCHEME HAVE THE SUPPORT OF FRUIT OF THE LOOM, THE
JPLS, THE UNSECURED CREDITORS COMMITTEE, THE AD HOC COMMITTEE OF 8 7/8%
NOTEHOLDERS, THE NOTEHOLDERS STEERING COMMITTEE, AND THE BANK STEERING
COMMITTEE, EACH OF WHOM URGES THAT ALL CREDITORS WHO ARE ENTITLED TO VOTE, VOTE
TO ACCEPT THE AMENDED PLAN AND, IF APPLICABLE, THE SCHEME.
5
A. OVERVIEW OF AMENDMENT TO REORGANIZATION PLAN
The following is a brief summary of certain material provisions of the
Amended Plan These descriptions are qualified in their entirety by the
provisions of the Amended Plan. Except as described below, the Distributions to
holders of Claims and interests under the Plan remain unchanged under the
Amended Plan.
The Plan embodied a series of interconnected and interdependent settlements
among the various creditor constituencies and between Fruit of the Loom and its
creditors, including the members of the Ad Hoc Committee of 8 7/8% Noteholders,
which settlements are largely unchanged by the Amended Plan. The Amended Plan,
as was the Plan, is premised upon the sale of Fruit of the Loom's reorganized
Apparel Business, as a going concern, to Purchaser, and the liquidation of the
remaining assets and companies of Fruit of the Loom (collectively, but excluding
NWI Land Management Corp. and its assets, the "Non-Core Assets") for the benefit
of holders of Allowed Claims. In addition, FTL Inc.'s wholly owned subsidiary,
NWI Land Management Corp. ("NWI"), will be separately liquidated.
The Amended Plan gives effect to the settlement with the members of the Ad
Hoc Committee of 8 7/8% Noteholders. Under the Amended Plan, the Distribution to
holders of Allowed Class 2 Claims (the Prepeptition Secured Creditors) is
decreased by the aggregate amount of $9.35 million (plus a potential additional
reduction of $1.551 million for the Farley Gross-up Reserve). The Amended Plan
increases the Distribution to former Class 4A (now split into two Classes -
Class 4A and Class 4C) by the aggregate amount of $17 million, of which $7.65
million is derived from an upward purchase price adjustment under Amendment No.
3 to the Berkshire Agreement and the balance from the reduction in the
Distribution to Class 2. In addition, in certain circumstances, new Class 4A is
entitled to an additional upward adjustment of up to $2,820,000, in the event
that Farley is determined to hold Allowed Class 4A Claims, which will be funded
by a reserve (the "Farley Gross-up Reserve") established with $1.551 million
from Class 2 and $1.269 as an additional purchase price adjustment under
Amendment No. 3 to the Berkshire Agreement.
Under the Amended Plan, holders of Allowed Unsecured Claims against the
Consolidating Debtors (other than holders of Allowed Trade Convenience Claims,
holders of 8 7/8% Notes Claims, and the NWI Claims), who are classified in Class
4A, will receive their Ratable Proportion of the beneficial interests in the
Unsecured Creditors Trust which holds (a) 190/445 of 7.5% of the beneficial
interests of FOL Liquidation Trust representing (i) 190/445 of 7.5% of the
"Adjusted Apparel Business Sale Proceeds" (as hereinafter defined) and (ii)
190/445 of 7.5% of the net proceeds of liquidation of the Non-Core Assets, (b) a
supplemental payment of $2,000,000, and (c) certain claims and causes of action
(defined in the Plan as the "UCT Claims"), on account of their Allowed Unsecured
Claims, in full settlement, satisfaction and discharge of those Claims and the
Committee Avoidance Action.
Under the Amended Plan, a new Class (Class 4C) is created, which consists
solely of the claims of the holders and indenture trustee for the 8 7/8% Notes.
Under the Amended Plan, holders of Allowed 8 7/8% Note Claims, who are
classified in Class 4C, will receive on the Initial Distribution Date of the
Amended Plan (a) 255/445 of 7.5% of the beneficial interests of FOL Liquidation
Trust representing (i) 255/445 of 7.5% of the "Adjusted Apparel Business Sale
6
Proceeds" (as hereinafter defined) and (ii) 255/445 of 7.5% of the net proceeds
of liquidation of the Non-Core Assets, and (b) a supplemental payment of
$15,000,000 (minus the Allowed Administrative Expense Claims of the members of
and professionals retained by the Ad Hoc Committee of 8 7/8% Noteholders), on
account of their Allowed Unsecured Claims, in full settlement, satisfaction and
discharge of those Claims, including the guarantee Claims against each member of
Fruit of the Loom, and the Committee Avoidance Action.
Under the Amended Plan, holders of Allowed Class 2 Secured Claims will
receive their Ratable Proportion of (i) 92.5% of the beneficial interests of FOL
Liquidation Trust representing 92.5% of the Adjusted Apparel Business Sale
Proceeds and 92.5% of the net proceeds of liquidation of the Non-Core Assets,
and (ii) an estimated $277 million in Cash (less the sum of $9.35 million on
account of the Class 4A and Class 4C Supplemental Payments and an amount up to
$1,551,000 on account of the Farley Gross-up Reserve), plus certain other
amounts on account of Adequate Protection. In addition, the Amended Plan
resolves the dispute regarding the Allowed amount of the Claims of holders of
the 7% Debentures (which are a part of the Prepetition Secured Creditor Claims
in Class 2), by Allowing them in the aggregate amount of $90,750,629.
Pursuant to the Amended Plan, the UCT Claims are assigned to the Unsecured
Creditors Trust for the benefit of holders of Class 4A Claims, only, subject to
certain limitations as set forth in the Plan and described hereinafter.
For purposes of Distribution under the Plan to holders of Allowed Class 2,
Class 4A and Class 4C Claims, the "Adjusted Apparel Business Sale Proceeds"
shall mean the purchase price under the Berkshire Agreement (after all
adjustments under the Berkshire Agreement including the increase to the purchase
price under Amendment No. 3 to the Berkshire Agreement) adjusted to deduct the
following amounts: (i) all allowed administrative expense claims and priority
claims to be paid or reserved for by the Plan Entities under the Plan on the
Effective Date, including severance and other amounts due to the "Designated
Executives" (as hereafter defined) and the remaining balance of the
Post-Petition Financing, but excluding letters of credit outstanding thereunder,
(ii) all other amounts to be paid in cash or reserved for in full on the
Effective Date by the Plan Entities, including, without limitation, any required
cash payments (or reserves) for holders of Class 3 Other Secured Claims (as such
term is defined in the Plan), the cure amounts for assumed contracts, and
reserves for future expenses of the estates, (iii) Cash in the amount of $7.65
million, of which $900,000 is on account of the Supplemental Class 4A Payment,
and $6.75 million is on account of the Supplemental Class 4C Payment, and (iv)
the Cash sum in an amount to be determined of approximately $277 million to be
distributed to Class 2 (of which Cash sum, an aggregate amount of $9.35 million
will be Distributed as follows: (a) $1.1 million to the Unsecured Creditors
Trust for the benefit of holders of Allowed Class 4A Claims, and (b) $8.25
million to the 8 7/8% Notes Trustee for the benefit of holders of Allowed Class
4C Claims (or to pay the Allowed Administrative Expense Claims of the members of
and professionals retained by the Ad Hoc Committee of 8 7/8% Noteholders).
B. OVERVIEW OF SCHEME OF ARRANGEMENT
The following is a brief summary of certain material terms of the
provisions of the Scheme of Arrangement. For a more detailed description, see
Section VIII of the Disclosure
7
Statement, "Summary of Scheme of Arrangement," and the Explanatory Statement,
attached to the Disclosure Statement as Exhibit E. These descriptions are
qualified in their entirety by the provisions of the Scheme of Arrangement.
The Scheme of Arrangement is applicable ONLY to the Allowed Prepetition
Secured Creditor Claims of FTL Cayman. It provides for a transfer on the Scheme
of Arrangement effective date of the capital stock of FTL Cayman's wholly owned
subsidiary, FTL Caribe, Ltd. ("FTL Caribe"), and any other Apparel Business
assets that FTL Cayman owns, to Purchaser and the transfer of substantially all
of the other assets of FTL Cayman to FOL Liquidation Trust. Thereafter, FTL
Cayman will be liquidated under Cayman Islands Law. The accepted Unsecured
Creditors of FTL Cayman who have proved successfully in its liquidation of FTL
Cayman under Cayman Islands Law will be entitled to receive the Distribution to
which each such unsecured creditor would be entitled as a holder of an Allowed
Claim against FTL Cayman under the Plan. Holders of Allowed Claims against FTL
Cayman under the Plan will only be entitled to a single distribution on account
of such Allowed Claim under the Plan and Scheme combined.
The Scheme of Arrangement contemplates and is contingent upon confirmation
of the Plan. If for any reason the Scheme cannot become effective but the Plan
may be confirmed, then the Plan may be amended to give effect to the
transactions contemplated under the Plan and the Berkshire Agreement, without
the effectiveness of the Scheme.
C. SUMMARY OF CLASSIFICATION AND TREATMENT UNDER PLAN
The following table summarizes the classification and treatment of
prepetition Claims and Equity Interests under the Plan. The classification and
treatment for Classes 2, 4A and 4C are described in more detail in Section IV.
Estimated Allowed Claim amounts in Classes 1 through 5 are based upon Fruit of
the Loom's books and records. There can be no assurance that the estimated
amounts below are correct, and actual Allowed Claim amounts may be significantly
different from the estimates and may be dependent upon and affected by actions
taken and determinations made during the Reorganization Cases. This table is
only a summary of the classification and treatment of Claims and Equity
Interests under the Plan. Reference should be made to the Disclosure Statement
and the Amended Plan for a complete description of the classification and
treatment of Claims and Equity Interests. Accordingly, this summary is qualified
in its entirety by reference to the provisions of the Amended Plan, a copy of
which is attached as Exhibit A hereto, and the Disclosure Statement which has
previously been distributed to Creditors.
8
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN
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CLASS TYPE OF CLAIM OR TREATMENT
EQUITY INTEREST/
ESTIMATED AMOUNT OF
ALLOWED CLAIMS(2)
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1 Priority Non-Tax Claims
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1A Priority Non-Tax Claims Against the Unimpaired--not entitled to vote; paid in full, in Cash, or
Consolidated Estate such other treatment as agreed upon by a holder of an Allowed
Priority Non-Tax Claim and Fruit of the Loom, or the
Estimated Allowed Amount: Not more applicable Plan Entity.
than $2,000,000
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1B Priority Non-Tax Claims Which are NWI Unimpaired--not entitled to vote; paid in full in Cash, or such
Claims other treatment as agreed upon by a holder and NWI or the
applicable Plan Entity.
Estimated Allowed Amount: $0
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2 Prepetition Secured Creditor Claims: Impaired--entitled to vote; each holder of an Allowed
The Prepetition Bank Lenders, the Prepetition Secured Creditor Claim will receive its pro rata
Farley Lenders, the Synthetic Lease portion of (a) Cash in an amount to be determined, between
Lenders, the 7% Debentures, the 6 1/2% $275 million and $300 million (which shall be calculated as
Notes and the 7 3/8% Debentures $275 million plus an amount equal to the proceeds of asset
(including, as applicable, their sales by Fruit of the Loom from and after January 1, 2001,
respective agents and Indenture through the Confirmation Date, which exceeded $200,000 per
Trustees) sale and which exceed $15 million in the aggregate, but not to
exceed the aggregate adjustment amount of $25 million), as of
Estimated Allowed Amount: January 4, 2002, the amount of this payment would be
Approximately $1,189,627,000 approximately $277 million, and (b) 92.5% of the interest in
(including the Deficiency Claims, but FOL Liquidation Trust representing 92.5% of the Adjusted
subject to adjustment for Adequate Apparel Business Sale Proceeds and 92.5% of the net proceeds
Protection Payments,) of the liquidation of the Non-Core Assets held by FOL
Liquidation Trust. This Distribution is decreased by the
Estimated Recovery (without adjustment aggregate amount of $9.35 million to partially fund the
for True-Up and without applying increased Distribution to Classes 4A and 4C. In addition, the
Adequate Protection Payments): 70.7% sum of $1,551,000 shall be reserved by the FOL Liquidation
(based on the face amount of the Trust from the Distributions otherwise made to holders of
Claims as filed) Allowed Class 2 Claims, to fund the Farley Gross-up Reserve
for payment to the Unsecured Creditors Trust in the event that
Estimated Recovery (without adjustment any Disputed Claim held by Farley is Allowed as a Class 4A
for True-Up, but applying all Adequate Claim, and disbursed as provided in Section 7.17.3 of the
Protection Payments to principal): Amended Plan.
90.7% (based on the face amount of the
Claims as filed) Pursuant to the Amended Plan and solely to give effect to the
EPA Settlement Agreement, Holders of Allowed Prepetition
Secured Creditor Claims against NWI waived their right to
receive distributions on account of their Allowed Class 2
Claims, but reserve the right for their deficiency claims
which are Allowed Class 4 Claims (in the approximate amount
not to exceed $100 million) to participate in the
Distributions to Class 4B. If the EPA Settlement Agreement
does not become effective for any reason, the Holders of
Allowed Class 2 Claims will retain their rights to receive
distributions from the assets of NWI on account of their
Allowed Class 2 Claims.
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-------------------
(2) This amount reflects Fruit of the Loom's estimate of the aggregate amount
of the Allowed Claims in a Class; the actual final amount of Allowed Claims
in a Class may vary significantly. Fruit of the Loom hereby expresses no
opinion-as to the value of any collateral securing Allowed Secured Claims
and expressly reserves all of its rights with respect to such valuation.
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CLASS TYPE OF CLAIM OR TREATMENT
EQUITY INTEREST/
ESTIMATED AMOUNT OF
ALLOWED CLAIMS(2)
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3 Other Secured Claims Impaired--entitled to vote; at the Debtors' option, each such
holder will receive on account of its Allowed Other Secured
Estimated Allowed Amount: $2,000,000 Claim (a) Cash payments made on the Effective Date; (b)
secured notes on terms that satisfy Bankruptcy Code section
Estimated Recovery: 100% of Allowed 1129(b)(2)(A); (c) reinstatement; (d) the Collateral securing
Secured Claim Amount its Allowed Other Secured Claim; or (e) such other treatment
as may be agreed to in writing between such holder and
Reorganized-Fruit of the Loom, Fruit of the Loom, or FOL
Liquidation Trust, as applicable; provided, however, that if
the Allowed Amount of an Other Secured Claim exceeds $250,000
(provided all such Claims do not exceed $1,500,000 in the
aggregate), Fruit of the Loom may not elect the treatment
provided in (a), (c), or (e) with respect to such Other
Secured Claim without the Consent of the Prepetition Secured
Creditors; and provided further, however, that,
notwithstanding the foregoing proviso, as to any Other Secured
Claim that is secured by property to be transferred to
Purchaser under the Berkshire Agreement, such Claim shall be
treated in accordance with clause (a) unless Purchaser
consents to the treatment of that Claim in accordance with one
of the other foregoing clauses. Subject to the foregoing
provisos, if the holder of an Allowed Secured Claim receives
treatment as provided in (b) or (c) above, then such holder
will retain the Liens securing the Allowed Secured Claim until
paid in full. Any deficiency amount relating to an Allowed
Secured Claim will be treated either as a Class 4A Unsecured
Claim or a Class 5 Trade Convenience Claim.
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4 Unsecured Claims
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4A Against Consolidated Estate (other Impaired--entitled to vote; each holder of an Allowed Unsecured
than NWI Claims, 8 7/8% Notes Claims, Claim (other than NWI Claims, 8 7/8% Notes Claims, and Trade
and Trade Convenience Claims) Convenience Claims) will receive its Ratable Proportion of the
beneficial interests in the Unsecured Creditors Trust which
Estimated Allowed Amount: holds (a) 190/445 of 7.5% of the beneficial interests of FOL
$190,000,000 (not including the Liquidation Trust representing (i) 190/445 of 7.5% of the
deficiency claims of holders of Class Adjusted Apparel Business Sale Proceeds and (ii) 190/445 of
2 Claims) 7.5% of the net proceeds of liquidation of the Non-Core
Assets, (b) a supplemental payment of $2,000,000, and (c)
Estimated Recovery: $21.8 million, certain claims and causes of action (defined in the Plan as
which represents an approximate 11.5% the "UCT Claims").
recovery
Although this Class will include the deficiency claims held by
holders of Allowed Class 2 Claims for voting purposes, the
holders of the Allowed Class 2 Claims have agreed to waive
their right to a Distribution on account of their deficiency
claims in this Class as a part of the settlements embodied in
the Plan.
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CLASS TYPE OF CLAIM OR TREATMENT
EQUITY INTEREST/
ESTIMATED AMOUNT OF
ALLOWED CLAIMS(2)
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4B Unsecured Claims which are NWI Claims Impaired--entitled to vote. The Amended Plan gives effect to
the EPA Settlement Agreements. Provided the EPA Settlement
Estimated Allowed Amount: $72 million Agreement becomes effective, each holder of an Allowed NWI
(based upon the EPA Settlement; this Claim will receive its ratable share of 50% of the proceeds of
estimate does not include the Allowed the liquidation of certain assets of NWI (the other assets
amount of the Deficiency Claims of the being dedicated to remediation and cleanup of real property
holders of Class 2 Claims) owned by NWI); such liquidation will consist of dividends or
other payments relating to certain preferred shares issued by
Fruit of the Loom is unable to True Specialty Corporation (the "TSC Preferred Shares")
estimate the value, if any, and timing currently owned by NWI which entitle NWI a portion of the
of the Distribution to holders of value of True Specialty Corporation's wholly-owned subsidiary,
Allowed Class 4B Claims Velsicol Chemical Corporation ("Velsicol"). These proceeds
would be realized pursuant to a proposed settlement in which
NWI will contribute certain assets to the Custodial Trust
and/or NWI Successor and receive releases for NWI and FTL Inc.
with respect to certain environmental claims. The proceeds
would be received only after (1) the sale of Velsicol shares
or assets, and (2) payment of the first $25 million in respect
of the Preferred Shares to a fund established for payment of
environmental cleanup costs, and reimbursement to FOL
Liquidation Trust of up to $4,450,000 of administrative
expenses advanced. If the EPA Settlement were not effective,
then the holders of Allowed Class 4B Claims would be entitled
only to receive their Ratable Proportion of the proceeds of
the liquidation of NWI after payment in full of the Allowed
Administrative and Priority Claims which are NWI Claims, and
the payment of the Class 2 Claims.
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4C 8 7/8% Notes Claims (including the Impaired - entitled to vote. Each holder of an Allowed 8 7/8%
indenture trustee) Notes Claim will receive its Ratable Proportion of (a)
255/445 of 7.5% of the beneficial interests of FOL Liquidation
Allowed Amount: $255,000,000 Trust representing (i) 255/445 of 7.5% of the Adjusted Apparel
Business Sale Proceeds and (ii) 255/445 of 7.5% of the net
Estimated Recovery: $41.6 million, proceeds of liquidation of the Non-Core Assets, and (b) a
which represents an approximate 16.3% supplemental payment of $15,000,000 (minus the Allowed
recovery Administrative Expense Claims of the members of and
professionals retained by the Ad Hoc Committee of 8 7/8%
Noteholders).
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5 Trade Convenience Claims (Trade Claims Impaired--entitled to vote. Each holder of an Allowed Trade
up to $2,500 or reduced to $2,500) Convenience Claim (or a holder of an Allowed Unsecured Claim
that is a Trade Claim, who elects to reduce its Allowed Claim
Estimated Allowed Amount (Claims of up to $2,500) will receive Cash Distributions totaling up to 25%
to $2,500 only): $1.9 million of its Allowed Trade Convenience Claim, provided, however,
that the maximum aggregate distribution to holders of Allowed
Estimated Allowed Amount (Including Class 5 Claims shall not exceed $1,500,000, and in the event
Claims of $6,250 or under reduced to that Allowed Trade Convenience Claims exceed $6,000,000, the
$2,500: Not to exceed $4,500,000) percentage distribution to holders of Class 5 Claims shall be
reduced on a pro rata basis. No interest will be paid on any
Estimated Recovery: 25% Allowed Trade Convenience Claim.
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CLASS TYPE OF CLAIM OR TREATMENT
EQUITY INTEREST/
ESTIMATED AMOUNT OF
ALLOWED CLAIMS(2)
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6 Creditor Securities Fraud Claims Impaired--subordinated to all other creditor claims pursuant to
section 510(b) of the Bankruptcy Code; Each holder of a Class
Estimated Allowed Amount: N/A 6 Claim receives no distribution under the Plan, therefore is
deemed to have rejected the Amended Plan and is not entitled
to vote. The claims against Fruit of the Loom asserted in the
New England Action are included in this Class.
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7 Old Capital Stock: Impaired--deemed to reject the Plan; not entitled to vote. A
holder of an Allowed Old Capital Stock interest will not
Estimated Allowed Amount: N/A receive or retain any property or distribution under the Plan.
Subclasses:
7A--Old FTL Cayman Common Stock
7B--Old FTL Inc. Preferred Stock
7C--Old FTL Inc. Common Stock
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8 Transferred Debtor Subsidiary Equity Impaired--deemed to have rejected the Amended Plan and not
Interests entitled to vote. The New Common Stock of the Directly
Transferred Subsidiaries will be issued to Union Underwear,
Estimated Allowed Amount: N/A which will immediately transfer such New Common Stock to
Purchaser under the Berkshire Agreement. New Common Stock of
each of the Debtors that is an Indirectly Transferred
Subsidiary will be issued to the Purchaser or one of the
Directly or Indirectly Transferred Subsidiaries, as designated
by the Purchaser. As soon as practicable after the completion
of the foregoing but not less than one day after the Effective
Date, all now-existing Equity Interests in Union Underwear
will be cancelled.
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9 Other Equity Interests (Including Impaired--deemed to reject the Plan; not entitled to vote. A
Liquidating Debtors) holder of an Allowed Other Equity Interest will not receive or
retain any property or distribution under the Plan.
Estimated Allowed Amount: N/A
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D. PLAN SUPPLEMENT
The Amended Plan provides that a Plan Supplement, containing additional
information and agreements, will be filed with the Bankruptcy Court on or before
the tenth (10th) day prior to the Voting Deadline. The additional information
and agreements to be contained in the Plan Supplement include, among other
documents, the Assumption and Assignment Schedule, the Amended Certificates of
Incorporation, the Amended Bylaws, the Berkshire Agreement, including the Third
Amendment thereto, and schedules and documents related thereto, each of the Plan
Entity Agreements, the EPA Settlement Agreement, the Letter of Transmittal,
Schedule 1 to the Amended Plan, the amount of the funds to be reserved pursuant
to Section 1.13(a)(v) of the Plan, the True-Up, and the aggregate severance due
to Designated Executives. Upon its filing with the Court, the Plan Supplement
may be inspected in the office of the Clerk of the Court during normal Court
hours. Holders of Claims may obtain a copy of the Plan Supplement upon written
request to Fruit of the Loom in accordance with Section 16.3 of the Plan.
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E. THE CONFIRMATION HEARING
The hearing to determine whether to confirm the Amended Plan has been
scheduled for April 19, 2002, at 10:30 a.m. (Eastern time) before the Honorable
Peter J. Walsh, Chief United States Bankruptcy Judge, United States Bankruptcy
Court for the District of Delaware, 824 Market Street, Wilmington, Delaware
19801. The Confirmation Hearing may be adjourned from time to time by the
Bankruptcy Court without further notice, except for an announcement of the
adjourned date made at or prior to the Confirmation Hearing. In addition, except
as expressly provided in the Amended Plan, the Amended Plan may be modified
pursuant to section 1127 of the Bankruptcy Code prior to, during, or as a result
of the Confirmation Hearing, without further notice to parties in interest. At
the Confirmation Hearing, the Bankruptcy Court will determine whether the
requirements for confirmation of the Amended Plan under section 1129 of the
Bankruptcy Code have been satisfied and, if appropriate, will enter an order
confirming the Plan. See the Disclosure Statement Section XI, "VOTING
REQUIREMENTS" and Section XII, "CONFIRMATION OF THE PLAN." Both confirmation and
consummation of the Amended Plan are subject to certain conditions, which may
either be waived by Fruit of the Loom in its discretion with the Consent of the
Prepetition Secured Creditors, by Purchaser, in its discretion, or jointly
waived by, as applicable, Fruit of the Loom and Purchaser. See Section VII.J of
the Disclosure Statement, "Conditions Precedent to Confirmation and Occurrence
of Effective Date."
Pursuant to the Amended Plan, Fruit of the Loom's Apparel Business will be
sold to Purchaser as a going concern. Creditors of Fruit of the Loom will not
receive or retain any interest in the Apparel Business after the closing of the
sale to Purchaser. The remaining Fruit of the Loom entities will be liquidated
or otherwise disposed of in accordance with the terms of the Amended Plan and
the proceeds will be distributed as provided in the Amended Plan and the Scheme.
Fruit of the Loom believes that Purchaser with Berkshire as guarantor has the
financial wherewithal to close under the Agreement or to pay the Purchase Price
at closing.
II.
RECOMMENDATION
THE AMENDED PLAN HAS THE SUPPORT OF FRUIT OF THE LOOM, THE JPLS, THE
UNSECURED CREDITORS COMMITTEE, THE AD HOC COMMITTEE OF 8 7/8% NOTEHOLDERS, THE
NOTEHOLDERS STEERING COMMITTEE, AND THE BANK STEERING COMMITTEE.
IN THE VIEW OF FRUIT OF THE LOOM, THE TREATMENT OF HOLDERS OF ALL CLAIMS
UNDER THE AMENDED PLAN PROVIDES EQUAL OR GREATER RECOVERY FOR SUCH HOLDERS THAN
WOULD BE AVAILABLE IN A LIQUIDATION UNDER CHAPTER 7 OF THE BANKRUPTCY CODE.
ACCORDINGLY, THE MEMBERS OF FRUIT OF THE LOOM BELIEVE THAT THE AMENDED PLAN IS
IN THE BEST INTERESTS OF HOLDERS OF CLAIMS AND, THUS, RECOMMEND THAT ALL HOLDERS
OF IMPAIRED CLAIMS THAT ARE ENTITLED TO CAST BALLOTS VOTE TO ACCEPT THE PLAN.
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III.
NOTICE AND VOTING REQUIREMENTS
A. NOTICE TO HOLDERS OF CLAIMS AND EQUITY INTERESTS
This Supplement is being transmitted to holders of impaired Claims whose
treatment has been changed by the Amended Plan and who will receive
Distributions of property under the Amended Plan, and thus are entitled to vote
to accept or reject the Amended Plan. The Disclosure Statement was previously
provided to these holders. The Disclosure Statement was also provided to (a)
holders of Claims that are not impaired whose treatment has not been changed by
the Amended Plan, who are conclusively presumed to have accepted the Plan (and
now the Amended Plan) and are not entitled to vote thereon, and (b) holders of
Claims and Equity Interests who will receive or retain no Distribution or
property under the Amended Plan whose treatment has not been changed by the
Amended Plan and, therefore, are presumed to have rejected the Amended Plan and
are not entitled to vote thereon.
The primary purpose of this Supplement is to provide updated information
regarding Distributions under the Plan as amended by the Amended Plan to enable
you, as the holder of an impaired Claim, to make a reasonably informed decision
with respect to the Amended Plan prior to exercising your right to either change
your previous vote with respect to the Plan, or if you have not yet voted, to
vote to accept or reject the Amended Plan. IF YOU ARE A HOLDER OF 7% DEBENTURES,
A VOTE TO ACCEPT THE AMENDED PLAN WILL BE DEEMED TO BE A VOTE TO ACCEPT THE
RESOLUTION OF THE DISPUTE REGARDING THE ALLOWED AMOUNT OF THE 7% DEBENTURES.
On February 6, 2002, the Bankruptcy Court entered the Disclosure Statement
Approval Order approving this Disclosure Statement as containing information of
a kind and in sufficient detail adequate to enable impaired Claim holders to
make an informed judgment about the Plan. On March 22, 2002 the Bankruptcy Court
entered the Supplement Disclosure Order approving this Supplement as containing
information of a kind and in sufficient detail adequate to enable impaired Claim
holders to make an informed judgment about the Amended Plan. THE BANKRUPTCY
COURT'S APPROVAL OF THIS SUPPLEMENT AND OF THE DISCLOSURE STATEMENT CONSTITUTES
NEITHER A GUARANTY OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED
HEREIN NOR AN ENDORSEMENT OF THE AMENDED PLAN BY THE BANKRUPTCY COURT.
Under Chapter 11 of the Bankruptcy Code, only holders of Claims or Equity
Interests that are "impaired" and are to receive a Distribution under the
Amended Plan are entitled to vote to accept or reject the Plan. To be confirmed,
the Amended Plan must be accepted by the holders of certain Classes of Claims
and the Amended Plan must be confirmed by the Bankruptcy Court. For a discussion
of these matters, see Disclosure Statement Section XI, "VOTING REQUIREMENTS" and
Disclosure Statement Section XII, "CONFIRMATION OF THE PLAN". Fruit of the Loom
is seeking acceptances of the Amended Plan from holders of Claims in Classes 2,
3, 4 and 5. Certain holders of Claims and Equity Interests (Classes 6, 7, 8 and
9) will receive no Distribution or benefits under the Amended Plan and,
therefore, are deemed to have rejected the Amended Plan and are not entitled to
vote. The Claims in Class 1 are unimpaired, and the holders of such Claims are
conclusively presumed under section 1126 of the Bankruptcy Code to have accepted
the Plan. For a description of the Classes of Claims and Equity Interests and
their
14
treatment under the Plan, see Section VII.B, "Summary of Joint Plan of
Reorganization For Fruit of the Loom--General Description of Classification and
Treatment of Claims and Interests."
Holders of Claims in the following Classes are impaired by the Plan and the
Amended Plan, and are therefore entitled to vote on the Amended Plan:
Class 2: Prepetition Secured Creditor Claims;
Class 3: Other Secured Claims;
Class 4: Unsecured Claims (which includes Classes 4A, 4B, and 4C); and
Class 5: Trade Convenience Claims.
THE AMENDED PLAN CHANGES THE TREATMENT OF CLASSES 2, 4A AND 4C. FRUIT OF THE
LOOM BELIEVES THAT THE CHANGE IN THE DISTRIBUTION TO CLASS 2 IS NOT MATERIAL;
THE CHANGE REPRESENTS NOT MORE THAN A 1.2% DECREASE IN THE AGGREGATE VALUE
DISTRIBUTED AND RESULTS, WHEN COMBINED WITH THE RESOLUTION OF THE DISPUTED
AMOUNT OF THE 7% DEBENTURES, IN A DECREASE OF APPROXIMATELY 2% IN THE
DISTRIBUTION TO EACH HOLDER OF AN ALLOWED CLASS 2 CLAIM. THE DISTRIBUTIONS TO
CLASSES 4A AND 4C (WHICH TOGETHER CONSTITUTED OLD CLASS 4A) ARE INCREASED BY AN
AGGREGATE OF $17 MILLION. THE TREATMENT OF CLASSES 3, 4B AND 5 REMAINS UNCHANGED
IN THE AMENDED PLAN.
Holders of Claims and Equity Interests in Classes 6, 7, 8, and 9, are
impaired by the Plan and remain impaired under the Amended Plan and are
conclusively deemed to have rejected the Amended Plan and are not entitled to
vote.
Holders of Claims in Class 1 are unimpaired under the Plan and remain
unimpaired under Amended Plan, and such Class is conclusively deemed to have
accepted the Amended Plan and are not entitled to vote.
Each holder of a Claim within a Class entitled to vote should read this
Supplement, the Disclosure Statement, the Plan, the Disclosure Statement
Approval Order, the Notice of Confirmation Hearing, the instructions
accompanying the Ballots, and (for certain creditors of FTL Cayman ONLY) the
Explanatory Statement, in their entirety before voting on the Amended Plan and
the Scheme of Arrangement. These documents contain important information
concerning how Claims and Equity Interests are classified for voting purposes
and how votes will be tabulated.
B. SOLICITATION PACKAGE
Accompanying this Supplement are copies of:
1. The Supplemental Disclosure Approval Order approving this Supplement
and, among other things, amending the voting procedures, rescheduling
the Confirmation Hearing and resetting the Voting Deadline (as defined
below) and the deadline for objecting to confirmation of the Plan; and
15
2. Amendment No. 3 to the Berkshire Agreement.
YOU HAVE ALREADY RECEIVED A SOLICITATION PACKAGE INCLUDING THE DISCLOSURE
STATEMENT AND BALLOTS. IF YOU HAVE ALREADY SUBMITTED A BALLOT TO ACCEPT OR
REJECT THE PLAN YOU DO NOT NEED TO DO ANYTHING TO ACCEPT OR REJECT THE AMENDED
PLAN. YOUR VOTE WITH RESPECT TO THE PLAN WILL BE COUNTED AS A VOTE WITH RESPECT
TO THE AMENDED PLAN. IF YOU HAVE PREVIOUSLY SUBMITTED A BALLOT TO ACCEPT OR
REJECT THE PLAN AND YOU WISH TO CHANGE YOUR VOTE ON THE PLAN, THEN PLEASE CALL
OR FAX THE BALLOT AGENT, INNISFREE M&A INCORPORATED, BY TELEPHONE AT: (877)
750-2689 OR BY FAX AT (212) 446-3605 AND A NEW BALLOT WILL BE SENT TO YOU.
IF YOU HAVE NOT SUBMITTED A BALLOT WITH RESPECT TO THE PLAN, YOU MAY USE
THE BALLOT YOU RECEIVED WITH THE DISCLOSURE STATEMENT TO VOTE WITH RESPECT TO
THE AMENDED PLAN.
If you hold Claims in more than one Class and are entitled to vote in more
than one Class, a separate Ballot must be used for each Class of Claim that you
hold. IF YOU ARE A CREDITOR OF FTL CAYMAN, YOU HAVE RECEIVED A COMBINED BALLOT
AND PROXY, PERMITTING YOU TO VOTE ON BOTH THE AMENDED PLAN AND THE SCHEME OF
ARRANGEMENT, FOR EACH CLAIM YOU HOLD AGAINST FTL CAYMAN IN THE REORGANIZATION
CASES. CREDITORS OF FTL CAYMAN WILL NOT BE PERMITTED TO SPLIT THEIR VOTE ON A
SINGLE CLAIM, BUT MUST VOTE TO EITHER ACCEPT OR REJECT BOTH THE AMENDED PLAN AND
THE SCHEME OF ARRANGEMENT.
THE VOTING DEADLINE SET IN THE DISCLOSURE STATEMENT AND NOTICES THAT YOU
PREVIOUSLY RECEIVED HAS BEEN EXTENDED. IN ORDER TO BE COUNTED AS VOTES TO ACCEPT
OR REJECT THE PLAN, BALLOTS MUST BE PROPERLY FILLED OUT AND RECEIVED BY 4:00
P.M. (EASTERN TIME) ON THE NEW VOTING DEADLINE APRIL 15, 2002, (THE "VOTING
DEADLINE") BY THE BALLOT AGENT AS SET FORTH ON THE BALLOT, see Section XI.D,
"Voting Requirements--Voting Procedures."
THE RECORD DATE FOR VOTING ON THE AMENDED PLAN REMAINS FEBRUARY 1, 2002.
If you did not receive a Ballot in your original solicitation package and
believe that you should have, or if you need another Ballot, please contact
Fruit of the Loom, c/o Innisfree M&A Incorporated, by regular mail, hand, or
overnight courier at 501 Madison Avenue, 20th floor, New York, New York 10022,
Attention: Fruit of the Loom Ballots, or by telephone at: (877) 750-2689. If you
have questions about the procedures for voting your Claim, or the package of
materials that you received, please contact the Ballot Agent, Innisfree M&A
Incorporated, at the foregoing address or telephone number.
If you have questions about the amount of your Claim, please contact the
Claims Agent, Donlin Recano, Attention: Fruit of the Loom by telephone at (212)
481-1411 or by fax at (212) 481-1416 or by regular mail, hand or courier at 419
Park Avenue South, Suite 1206, New York, New York 10016.
If you wish to obtain additional copies of the Amended Plan, this
Supplement or the Disclosure Statement, or the exhibits to those documents, at
your own expense, unless otherwise specifically required by Bankruptcy Rule
3017(d), please contact Milbank, Tweed, Hadley & McCloy LLP,
16
1 Chase Manhattan Plaza, New York, New York 10005, Attn.: Rena Strappazon, Legal
Assistant, (212) 530-5000; Fax number (212) 530-5219.
C. VOTING PROCEDURES
1. Ballots. All votes to accept or reject the Amended Plan with respect to
any Class of Claims must be cast by properly submitting the duly completed and
executed form of Ballot designated for such Class. Holders of impaired Claims
voting on the Amended Plan should complete and sign the Ballot in accordance
with the instructions thereon, being sure to check the appropriate box entitled
"Accept the Plan" or "Reject the Plan".
ANY BALLOT RECEIVED WHICH IS NOT SIGNED OR WHICH CONTAINS INSUFFICIENT
INFORMATION TO PERMIT THE IDENTIFICATION OF THE CLAIMANT OR EQUITY HOLDER WILL
BE AN INVALID BALLOT AND WILL NOT BE COUNTED FOR PURPOSES OF DETERMINING
ACCEPTANCE OR REJECTION OF THE PLAN.
Ballots must be delivered to the Ballot Agent, at its address set forth
above, and received by the Voting Deadline. THE METHOD OF SUCH DELIVERY IS AT
THE ELECTION AND RISK OF THE VOTER. If such delivery is by mail, it is
recommended that voters use an air courier with a guaranteed next day delivery
or registered mail, properly insured, with return receipt requested. In all
cases, sufficient time should be allowed to assure timely delivery.
In accordance with Rule 3018(c) of the Bankruptcy Rules, the Ballots are
based on Official Form No. 14, but have been modified to meet the particular
needs of these cases. PLEASE CAREFULLY FOLLOW THE DIRECTIONS CONTAINED ON EACH
ENCLOSED BALLOT.
In most cases, each Ballot enclosed with this Disclosure Statement has been
encoded with the amount of the Allowed Claim for voting purposes (if the Claim
is a Disputed Claim, this amount may not be the amount ultimately Allowed for
purposes of Distribution) and the Class into which the Claim Interest has been
placed under the Plan.
The Ballots sent to holders of Trade Claims in Class 4A permits such
holders to elect to have their Claims treated as Trade Convenience Class Claims.
For creditors of FTL Cayman, the Ballots will combine the vote on the
Amended Plan and a vote and proxy in respect of the Scheme of Arrangement. A
creditor of FTL Cayman will not be permitted to split the vote on a single
Claim, but must vote to either accept or reject both the Amended Plan and the
Scheme of Arrangement.
2. Withdrawal or Change of Votes on the Plan. A Ballot to accept the Plan
will be deemed to be a Ballot to accept the Amended Plan. A Ballot may be
withdrawn only with the approval of the Bankruptcy Court. Fruit of the Loom
expressly reserves the absolute right to contest the validity of any such
withdrawals of votes on the Plan.
3. Voting Multiple Claims. Separate forms of Ballots are provided for
voting the various Classes of Claims. A SEPARATE Ballot must be used for each
Class of Claim. Ballot forms
17
may be copied if necessary. Any person who holds Claims in more than one Class
is required to vote separately with respect to each Claim. Please sign, and
return in accordance with the instructions in this Section, a separate Ballot on
the appropriate form to vote with respect to each such Claim. Only Ballots with
original signatures will be accepted. Ballots with copied signatures will NOT be
accepted.
D. VOTING ON THE SCHEME
FTL Cayman's Scheme Creditors will be entitled to attend and vote at a
meeting to be held to consider and, if thought fit, approve the Scheme of
Arrangement, provided their Claim has been allowed for voting purposes in the
Cayman Proceeding. Only holders of Secured Claims will be deemed to be Scheme
Creditors and therefore entitled to vote. Under the Scheme of Arrangement,
Scheme Creditors of FTL Cayman will be invited to complete a special proxy to
vote at the creditors' meeting or may attend in person. In order to assist
Creditors, the JPLs and FTL Cayman have prepared a combined ballot/proxy form. A
claim can become allowed for voting purposes in the Scheme of Arrangement in any
of the following ways:
(i) if it is listed by FTL Cayman in the Schedules (as amended from
time to time) as neither contingent, unliquidated nor disputed;
(ii) if the Scheme Creditor has filed a proof of claim on or before
the Filing Deadline- Date in accordance with the Filing Deadline Order and
that proof of claim has not been objected to or has been allowed for voting
purposes in accordance with the provisions of the Plan;
(iii) alternatively, if a creditor has lodged a Notice of Claim with
the JPLs in accordance with appropriate directions of the Cayman Court,
issued from time to time.
The Chairman of the Scheme Creditors' meeting may, for voting purposes
only, reject a claim in whole or in part, if he considers that it does not
constitute a fair and reasonable assessment of the sums owed to the relevant
creditor by FTL Cayman. The Chairman's decision is final and binding. The
Chairman will, however, advise the creditor of his decision prior to the
meeting, where possible, and, in any event, afterwards.
The value of a Claim for voting purposes in the Scheme of Arrangement will
be taken net of any set-off rights. The value attributed to the claim will
appear on the ballot/proxy form accompanying this Disclosure Statement and the
Explanatory Statement. If a creditor does not agree with the value so stated, or
it wishes to give a general proxy or vote only in the Scheme of Arrangement, the
Scheme Creditor should contact the JPLs.
The amount of a claim admitted for voting purposes by the Chairman of the
meeting of FTL Cayman's Scheme Creditors does not constitute an admission of the
existence or amount of any liability of FTL Cayman and will not bind FTL Cayman,
the JPLs or the Scheme Creditors.
THE MEETING IS SCHEDULED TO TAKE PLACE AT THE OFFICES OF MILBANK, TWEED,
HADLEY & MCCLOY LLP, 1 CHASE MANHATTAN PLAZA, NEW YORK, NEW YORK ON APRIL 17,
2002 at 10:30 a.m.. YOU MAY EITHER ATTEND THE
18
MEETING IN PERSON OR YOU MAY VOTE BY PROXY. THE JPLS RECOMMEND THAT YOU VOTE IN
FAVOR OF THE SCHEME OF ARRANGEMENT.
IV.
SUMMARY OF CHANGES TO JOINT PLAN OF
REORGANIZATION FOR FRUIT OF THE LOOM
THIS SECTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AMENDED PLAN,
WHICH ACCOMPANIES THIS SUPPLEMENT AND TO THE DISCLOSURE STATEMENT, TO THE
EXHIBITS ATTACHED THERETO, AND TO THE PLAN SUPPLEMENT.
THE STATEMENTS CONTAINED IN THIS SUPPLEMENT INCLUDE SUMMARIES OF THE
PROVISIONS CONTAINED IN THE AMENDED PLAN AND IN DOCUMENTS REFERRED TO THEREIN.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE
PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE AMENDED
PLAN OR DOCUMENTS REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE AMENDED PLAN
AND TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENTS OF SUCH TERMS AND
PROVISIONS.
THE AMENDED PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN CONTROL THE
ACTUAL TREATMENT OF CLAIMS AGAINST AND EQUITY INTERESTS IN FRUIT OF THE LOOM
UNDER THE AMENDED PLAN AND WILL, UPON THE EFFECTIVE DATE, BE BINDING UPON
HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN FRUIT OF THE LOOM, ANY
REORGANIZED FRUIT OF THE LOOM, AND OTHER PARTIES IN INTEREST.
The Amended Plan is the product of diligent efforts by Fruit of the Loom,
the Prepetition Secured Creditors, the Unsecured Creditors Committee, the Ad Hoc
Committee of 8 7/8% Noteholders and various creditor constituencies to formulate
a plan which provides for a fair allocation of the value of Fruit of the Loom's
assets in an orderly manner, consistent with the provisions of the Bankruptcy
Code and applicable nonbankruptcy law. The Amended Plan embodies a series of
interrelated and interdependent settlements, which are reflected in the
Distributions to holders of Allowed Claims under the Plan, and except as
described below, the Amended Plan does not change the terms of those settlements
as provided in the Plan and described in the Disclosure Statement. The Amended
Plan constitutes a motion, pursuant to, Bankruptcy Rule 9019, and Sections 105
and 1123 of the Bankruptcy Code to approve each and all of the settlements and
other dispute resolutions that are embodied and incorporated in the Plan.
Under the Amended Plan, Claims against and Equity Interests in Fruit of the
Loom are divided into Classes according to their seniority and other criteria.
If the Amended Plan is confirmed by the Bankruptcy Court, and consummated,
holders of Claims in Classes 1, 2, 3, 4, and 5 will receive Distributions of
Cash and, as applicable, the beneficial interests of FOL Liquidation Trust
(Class 2, Class 4A (through the Unsecured Creditors Trust), and Class 4C,
only), the Unsecured Creditors Trust (Class 4A only) and the NWI Successor
(Class 4B only).
19
The assets associated with the Apparel Business, including the capital stock of
FTL Caribe and certain of the subsidiaries of Union Underwear, will be
transferred to the Purchaser and the proceeds will be used to fund the
distributions provided for under the Plan, establish any necessary reserves, and
fund the operations of FOL Liquidation Trust, and the Unsecured Creditors Trust.
In addition, each of the Plan Entities will also be funded with the proceeds of
the Non-Core Assets that vest in that particular Plan Entity.
A. GENERAL DESCRIPTION OF CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS
WHICH ARE CHANGED IN THE AMENDED PLAN
The treatment of any Claim or Equity Interest under the Amended Plan will
be in full satisfaction, settlement, release and discharge of and in exchange
for such Claim or Equity Interest. The Confirmation Order will be a judicial
determination of the discharge of all Liabilities of Fruit of the Loom, except
as specifically provided in the Amended Plan or the Confirmation Order and
except for the Liquidating Debtors, FTL Cayman, and NWI. On the Effective Date,
members of Fruit of the Loom, other than the Liquidating Debtors, FTL Cayman,
and NWI will be discharged and released under section 1141(d)(1)(A) of the
Bankruptcy Code from any and all Claims and Equity Interests, except as
specifically provided in the Amended Plan or the Confirmation Order. All
Distributions or other transfers to be made to holders of Allowed Claims or
Allowed Equity Interests will be made by the applicable Plan Entity in
accordance with the terms of the Plan.
The Amended Plan is formulated based upon the substantive consolidation of
FTL Cayman, Union Underwear and the subsidiaries of Union Underwear and the
deemed partial consolidation of FTL Inc. (except for NWI Claims which are claims
against FTL Inc.), all pursuant to the settlements which are embodied in the
Plan. The estate of NWI is treated separately under the Amended Plan for certain
purposes and is not substantively consolidated.
Claims against NWI and certain environmental Claims asserted directly
against FTL Inc., including Claims against FTL Inc. arising from its equity
interest in, and other relationship with, NWI (collectively, the "NWI Claims")
are classified in Classes lB and 4B, and otherwise will be considered a separate
subclass of any class in which such Claims would otherwise be classified and
shall be treated as provided in Section 7.22 of the Plan, through the
liquidation of NWI. THE TREATMENT OF CLASSES 1B, 3, AND 4B HAS NOT BEEN CHANGED
IN THE AMENDED PLAN.
1. Treatment of Class 2 Secured Claims.
Subject to adjustment (as described below), each holder of a Prepetition
Secured Creditor Claim shall receive in full satisfaction, settlement, release,
and discharge of, and in exchange for, its Claim: (a) a Ratable Proportion of
Cash in the amount of $275 million, subject to adjustment upward to $300 million
based on net proceeds of asset sales by Fruit of the Loom on or after January 1,
2001 (less the aggregate amount of $9,350,000 to fund a portion of (x) the Class
4A Supplemental Payment and (y) the Class 4C Supplemental Payment), (b) the
other Cash amounts comprising the Secured Creditor Payment under the Plan, and
(c) a Ratable Proportion of 92.5% of the interests in FOL Liquidation Trust
representing 92.5% of the Adjusted Apparel Business Sales Proceeds and 92.5% of
the net liquidation proceeds of the Non-Core Assets held by FOL Liquidation
Trust, and (d) to the extent available in accordance with the EPA Settlement
20
Agreement, the NWI Reimbursement Amount (of up to $4,450,000) (collectively, a
"Base Distribution"). Any deficiency amount relating to an Allowed Secured Claim
in this Class shall be treated as a Class 4 Unsecured Claim. The holders of the
Class 2 Claims waive any right for their deficiency claims to participate in the
Distributions on account of Class 4A, but reserve their right to vote in Class
4A and Class 4B. In addition, solely to the extent that the EPA Settlement
Agreement is approved by the other necessary parties and is implemented by the
Plan, the Class 2 Claims which are Secured NWI Claims will be waived as against
the assets of NWI Successor and the Custodial Trust.
a. Adjustments to Distributions. The Distributions to holders of Allowed
Class 2 Secured Claims will be adjusted to account for the varying amounts paid
to holders under the Final Adequate Protection Order, so that (a) all Adequate
Protection Payments (excluding payments to professionals) shall be deemed to
have been payments on the principal amount (determined as of the later of the
Petition Date and the date upon which the Allowed Class 2 Secured Claims became
undersecured) of each Prepetition Secured Claim (unless the Bankruptcy Court
determines otherwise), and (b) solely for the purposes of Section 5.4.2 of the
Amended Plan there will be an adjustment (the "True-Up"), in the amount to be
distributed to each holder of a Prepetition Secured Claim to adjust for the fact
that Adequate Protection Payments were made during the bankruptcy cases based on
the interest rates set forth in the documents applicable to the various
Prepetition Secured Claims rather than on a single rate applicable to all
Prepetition Secured Claims (the difference between the payments that were
actually made and the payments that would have been made using a single rate
being the "Differential"). The True-Up will be calculated at an amount equal to
75% of the Differential from the Petition Date through February 28, 2001, and
100% of the Differential from March 1, 2001 through the Effective Date. Based
upon the Adequate Protection Payments estimated to be made through March 2002,
the adjustment to the Distributions to any subclass of Class 2 on account of the
True-up will be less than $1 million. A calculation of the True-up through March
31, 2002 will be included in the Plan Supplement.
b. Resolution of Disputed 7% Debentures Claims. The Allowed amount of the
Claims of the holders of the 7% Debentures (which are a subclass of Class 2) is
the subject of a pending objection; the Amended Plan provides that the Claims of
the 7% Debentures will be Allowed in the aggregate amount of $90,750,629. Upon
acceptance of the Amended Plan by Class 2, including a majority in amount and
two-thirds in number of the holders of the 7% Debentures who vote with respect
to the Amended Plan (or the Plan), Fruit of the Loom will request that the Court
approve the resolution of the dispute regarding the Allowed amount of the 7%
Debentures pursuant to Bankruptcy Rule 9019 as a part of the Amended Plan, or in
the alternative, that either the Bankruptcy Court grant Fruit of the Loom's
objection to the Claim of the 7% Debentures at the Confirmation Hearing, or set
a hearing at a future date to determine the Allowed amount of the 7% Debentures,
which could be Allowed in an amount which is greater or lesser than $90,750,629.
c. Farley Gross-up Reserve. The sum of $1,551,000 shall be reserved by
the FOL Liquidation Trust from the Distributions otherwise made to holders of
Allowed Class 2 Claims, to fund the Farley Gross-up Reserve for payment to the
Unsecured Creditors Trust in the event that any Disputed Claim held by Farley is
Allowed as a Class 4A Claim, and disbursed as provided in Section 7.17.3 of the
Amended Plan.
21
d. Allowed Amount of Class 2 Claims. Pursuant to the Amended Plan, on the
Confirmation Date, the Prepetition Secured Creditor Claims are to be deemed
Allowed Prepetition Secured Creditor Claims in the aggregate amount of
approximately $1.106 billion, as set forth in the Schedule of Allowed
Prepetition Secured Creditors Claims contained in the Plan Supplement; subject
to the adjustments to be made for the Adequate Protection Payments and True-Up.
Fruit of the Loom estimates the recovery to holders of the Allowed Prepetition
Secured Claims (without adjustment for the Adequate Protection Payments, and
True-Up), to be approximately 70.7% of their Allowed Claims (including the
Deficiency Claims).
2. General Unsecured Claims.
a. Class 4A. Class 4A consists of all Unsecured Claims against any member
of Fruit of the Loom other than Class 5 Claims, NWI Claims and the 8 7/8% Note
Claims. Class 4A Unsecured Claims include, among others, (i) Claims in respect
of the rejection of leases of nonresidential real property and executory
contracts; (ii) Claims relating to personal injury, property damage or products
liability or other similar Claims that have not been compromised and settled or
otherwise resolved; (iii) deficiency Claims arising from undersecured Claims in
Class 3 (after giving effect to the election, if any such election is made, by
Class 3 or any members thereof to have their Claims treated in accordance with
section 1111(b) of the Bankruptcy Code); and (iv) Claims of Fruit of the Loom's
trade vendors, suppliers, and service providers.
Each holder of an Allowed Class 4A Claim shall receive, in full
satisfaction, settlement, release, and discharge of and in exchange for its
Claim and in full settlement of the Committee Avoidance Action, a beneficial
interest in the Unsecured Creditors Trust representing its Ratable Proportion of
a beneficial interest in the Unsecured Creditors Trust, which shall hold (a)
190/445 of 7.5% of the interests in FOL Liquidation Trust representing (i)
190/445 of 7.5% of the Adjusted Apparel Business Sales Proceeds and (ii) 190/445
of 7.5% of the net proceeds of the liquidation of Non-Core Assets held by FOL
Liquidation Trust, (b) a supplemental Cash payment in the amount of $2,000,000
and (c) the UCT Claims. The Amended Plan provides that Fruit of the Loom will
waive and release its Avoidance Actions against holders of Class 4A Claims
(other than William F. Farley ("Farley"), except as a defense or offset to any
proof of claim for an Other Secured, Administrative Expense, or Priority Claim
by such holder or a Farley Claim (but no such defense or offset may be raised
against the Deficiency Claims or Administrative Expense Claims of the
Prepetition Secured Creditors in such capacity). The Amended Plan also provides
that the holders of the Allowed Class 2 Claims waive any Distributions on any
deficiency claim included in Class 4A. Fruit of the Loom projects that an
initial Distribution will be made to holders of Allowed Class 4A Claims within 6
months after the Effective Date.
Fruit of the Loom estimates that the aggregate amount of Allowed Class 4A
Unsecured Claims is approximately $190 million. The deficiency Claims of holders
of the Class 2 Claims are included in Class 4A for voting purposes only in the
amount of approximately $107 million and are not included in this estimate.
Fruit of the Loom estimates that the recovery to holders of Allowed Class 4A
Claims will be in the range of approximately $21.8 million, or approximately
11.5% of their Allowed Claims. The ultimate aggregate Allowed amount of the
Class 4A Claims
22
may be greater or less than the estimated amount. If the aggregate amount of
Allowed Class 4A Claims is greater, this will reduce the percentage recovery by
holders of all Allowed Class 4A Claims.
b. Class 4B. The treatment of Class 4B Claims is unchanged from the
treatment provided in the Plan.
c. Class 4C. Class 4C consists of all the 8 7/8% Note Claims, which are
deemed Allowed pursuant to the Amended Plan in the amount of $254,748,731.51.
Each holder of an Allowed Class 4C Claim shall receive, in full satisfaction,
settlement, release, and discharge of and in exchange for its Claim, including
its guarantee Claim against the members of Fruit of the Loom, and in full
settlement of the Committee Avoidance Action, its Ratable Proportion of (a)
255/445 of 7.5% of the interests in FOL Liquidation Trust representing (i)
255/445 of 7.5% of the Adjusted Apparel Business Sales Proceeds and (ii) 255/445
of 7.5% of the net proceeds of the liquidation of Non-Core Assets held by FOL
Liquidation Trust, and (b) a supplemental Cash payment in the amount of
$15,000,000 (minus the Allowed Administrative Expense Claims of the members of
and professionals retained by the Ad Hoc Committee of 8 7/8% Noteholders). The
Amended Plan provides that Fruit of the Loom will waive and release its
Avoidance Actions against holders of Class 4C Claims (other than William F.
Farley ("Farley"), except as a defense or offset to any proof of claim for an
Other Secured, Administrative Expense, or Priority Claim by such holder or a
Farley Claim (but no such defense or offset may be raised against the Deficiency
Claims or Administrative Expense Claims of the Prepetition Secured Creditors in
such capacity or against any Administrative Expense Claim by any members of the
Ad Hoc Committee of 8 7/8% Noteholders or any professional retained by them,
under section 503(b) of the Bankruptcy Code). Fruit of the Loom estimates that
the recovery to holders of Allowed Class 4C Claims will be in the range of
approximately $40.6 million, or approximately 16.3% of their Allowed Claims.
B. LIMITED RELEASE OF RELEASED PARTIES.
The limited release and exculpation provided to participants in the plan
process has been expanded to include the Ad Hoc Committee of 8 7/8% Noteholders
and the members thereof, so that, except as otherwise specifically provided for
by the Amended Plan (and without limiting the generality of Section 14.1 of the
Amended Plan as to Fruit of the Loom and Reorganized Fruit of the Loom), upon
consummation of the Plan, all Entities shall be conclusively presumed to have
released the following parties (but solely to the extent set forth below): (a)
Fruit of the Loom, Reorganized Fruit of the Loom, and Newco; (b) the Creditors'
Committee and the present and former members thereof (including ex officio
members), (c) the Bank Steering Committee and the members (both present and
former) thereof, (d) the Noteholders Steering Committee and the present and
former members thereof, (e) the Indenture Trustees, (f) the DIP Agent and the
DIP Lenders, (both present and former) (g) the Prepetition Secured Creditors in
their respective capacity as Prepetition Secured Creditors, (h) the Prepetition
Agent, the Synthetic Lease Agent, the Prepetition Collateral Agent, and the
Farley Agent, (i) the JPLs, (j) Berkshire and Purchaser, (k) the Ad Hoc
Committee of 8 7/8% Noteholders and the members thereof, and (l) all directors,
officers, agents, attorneys, affiliates, employees, accountants, advisors,
financial advisors of any of the foregoing (other than Farley, unless the claims
of Fruit of the Loom against Farley shall have been fully satisfied) (each of
the foregoing, a "Released Party"), from any Claim or Cause
23
of Action based on, arising from, or in any way connected with, (A) the
Reorganization Cases and the Cayman Proceeding (including, without limitation,
any actions taken and/or not taken with respect to the administration of any
Estate or the operation of the business of any Debtor), (B) the Amended Plan or
the Scheme of Arrangement or the Distributions received thereunder, or (C) the
negotiation, formulation, and preparation of the Initial Plan, the Plan, the
Amended Plan, the Scheme of Arrangement, or the Postpetition Credit Agreement
(including any of the terms, settlements, and compromises reflected in any of
the foregoing and any orders of the Bankruptcy Court related thereto), except to
the extent any such claim or Cause of Action against any Released Party arises
solely as a direct result of that Released Party's fraud or willful misconduct.
In all respects, Fruit of the Loom, Reorganized Fruit of the Loom, Newco, and
each of the Released Parties shall be entitled to rely upon the advice of
counsel with respect to their duties and responsibilities under the Plan.
Nothing in the Amended Plan will be deemed to release the parties to Berkshire
Agreement or the Plan Entities from the obligations to perform any agreement or
covenant in the Berkshire Agreement which calls for performance after the
Closing of the Berkshire Agreement.
C. MODIFICATION OF THE PLAN.
1. Modification Before the Confirmation Date.
Fruit of the Loom may alter, amend, or modify the Amended Plan or any
provision or portion thereof under section 1127(a) of the Bankruptcy Code at any
time prior to the Confirmation Date; provided, however, that Fruit of the Loom
shall make (i) no modification to the Amended Plan that adversely affects the
distribution to and treatment of Class 4A or 5 without the Consent of the
Unsecured Creditors Committee, (ii) no modification to the Amended Plan that
adversely affects the distribution to and treatment of Class 4C without the
Consent of the Ad Hoc Committee of 8 7/8% Noteholders, (iii) no Material
modification, of any nature, without the Consent of the Bank Steering Committee
and the Noteholders Steering Committee, (iv) no modification that Material
Adversely Affects the treatment of and distribution to Class 2 Claims held by
members of, or funds or accounts advised or managed by members of, the Ad Hoc
Committee without the Consent of the members of the Ad Hoc Committee (which
shall not be unreasonably withheld), and (v) no modification, except in
compliance with Section 4.07 of the Berkshire Agreement without the consent of
the Purchaser. Fruit of the Loom shall provide parties in interest with notice
of such amendments or modifications as may be required by the Bankruptcy Rules
or any order of the Bankruptcy Court and shall, in any event, provide such
notice to counsel for the Committees. A holder of a Claim that has accepted the
Amended Plan shall be deemed to have accepted the Amended Plan as altered,
amended, modified, or clarified, unless the proposed alteration, amendment,
modification, or clarification adversely changes the treatment of the Claim of
such holder.
2. Modification After the Confirmation Date and Before Substantial
Consummation.
After the Confirmation Date and prior to "substantial consummation" (as
that term is defined in Bankruptcy Code section 1101(2)) of the Plan, Fruit of
the Loom or Reorganized Fruit of the Loom, as the case may be, may, under
section 1127(b) of the Bankruptcy Code, institute proceedings in the Court to
remedy any defect or omission or to reconcile any inconsistencies in the Plan,
the Disclosure Statement, or the Confirmation Order, and otherwise provide for
such
24
matters as may be necessary to carry out the purpose and effect of the Plan, as
long as the proceedings do not adversely affect the treatment of holders of
Claims or Equity Interests under the Plan; provided, however, that, to the
extent required by the Bankruptcy Rules or an order of the Court, prior notice
of any such proceedings shall be served in accordance therewith; and, provided
further, that neither Fruit of the Loom nor Reorganized Fruit of the Loom shall
seek any Material modification to the Plan without (a) with respect to any
change which would affect the transactions under the Berkshire Agreement, the
consent of the Purchaser, (b) the Consent of the Prepetition Secured Creditors,
(c) to the extent that any such modification to the Plan would adversely affect
the treatment of Claims in Classes 4A or 5, the Consent of the Creditors'
Committee, (d) to the extent that any such modification to the Plan would
adversely affect the treatment of Claims in Class 4C, the Consent of the Ad Hoc
Committee of 8 7/8 % Noteholders, and (e) to the extent that any such
modification to the Plan would Materially Adversely Affect the distribution to
and treatment of Class 2 Claims held by members of the Ad Hoc Committee of 8
7/8% Noteholders, the Consent of the Ad Hoc Committee of 8 7/8% Noteholders,
which Consent shall not be unreasonably withheld. A holder of a Claim or Equity
Interest that has accepted the Plan shall be deemed to have accepted the Plan,
as altered, amended, modified, or clarified, if the proposed alteration,
amendment, modification, or clarification does not adversely change the
treatment of the Claim of such holder.
D. PLAN SUPPLEMENT.
Except as otherwise provided in the Plan, forms of the following documents
in form and substance subject to the Consent of the Prepetition Secured
Creditors and, solely to the extent provided in the Berkshire Agreement, the
Purchaser, shall be contained in the Plan Supplement and filed with the Clerk of
the Bankruptcy Court at least ten days prior to the amended Voting Deadline: FOL
Liquidation Trust Agreement, Unsecured Creditors Trust Agreement, the documents
establishing NWI Successor and the Custodial Trust, the EPA Settlement
Agreement, Schedule of Allowed Prepetition Secured Creditor Claims, the form
Letter of Transmittal, the aggregate severance amount for the Designated
Executives, the Assumption and Assignment Schedule, the mutual release, the
Amended Certificates of Incorporation, the Amended By-Laws, and, as applicable,
the amendment to the Scheme and the Explanatory Statement. Upon its filing with
the Bankruptcy Court, the Plan Supplement may be inspected in the office of the
Clerk of the Court during normal Bankruptcy Court hours. Holders of Claims may
obtain a copy of the Plan Supplement upon written request to Fruit of the Loom
in accordance with Section 16.4 of the Plan.
E. SCHEME OF ARRANGEMENT.
The Scheme of Arrangement, substantially in the form attached as Exhibit D
to the Disclosure Statement, has been filed with the Grand Court of the Cayman
Islands in the Cayman Proceeding with respect to FTL Cayman only, and not with
respect to any other member of Fruit of the Loom, and will be submitted to that
court for its approval with respect to FTL Cayman only. See Disclosure Statement
Section VIII, "Summary of Scheme of Arrangement" and the Explanatory Statement
for more information about the Scheme of Arrangement. To the extent required to
conform to changes in the Amended Plan, the JPLs shall file an amendment to the
Scheme of Arrangement and to the Explanatory Statement with the Cayman Court and
a copy of each will be filed as a part of the Plan Supplement.
25
V.
CONFIRMATION OF THE AMENDED PLAN
A. CONFIRMATION HEARING
The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a
confirmation hearing with respect to the Amended Plan. At the Confirmation
Hearing, the Bankruptcy Court will confirm the Amended Plan only if all of the
requirements of section 1129 of the Bankruptcy Code described in the Disclosure
Statement are met.
The Confirmation Hearing has been scheduled to begin on April 19, 2002, at
10:30 a.m. (New York time) before the Honorable Peter J. Walsh, Chief United
States Bankruptcy Judge, United States Bankruptcy Court for the District of
Delaware, 824 Market Street, Wilmington, Delaware 19801. The Confirmation
Hearing may be adjourned from time to time by the Bankruptcy Court without
further notice, except for an announcement of the adjourned date made at the
Confirmation Hearing.
B. DEADLINE TO OBJECT TO CONFIRMATION
Any objection to the confirmation of the Amended Plan must be made in
writing and specify in detail (i) the name and address of the objector, (ii) all
grounds for the objection and (iii) the amount of the Claim or number and class
of shares of stock of Fruit of the Loom held by the objector. ANY SUCH OBJECTION
MUST BE FILED WITH THE BANKRUPTCY COURT, WITH A COPY TO JUDGE WALSH'S CHAMBERS,
AND SERVED SO THAT IT IS RECEIVED BY THE BANKRUPTCY COURT, CHAMBERS, AND THE
FOLLOWING PARTIES ON OR BEFORE APRIL 9, 2002 AT 4:00 P.M. (NEW YORK TIME): (i)
counsel to Fruit of the Loom, (a) Milbank, Tweed, Hadley & McCloy LLP, 1 Chase
Manhattan Plaza, New York, New York 10005-1413, Attn: Luc A. Despins, Esq. and
(b) Saul Ewing LLP, 222 Delaware Avenue, Suite 1200, Wilmington, Delaware 19801,
Attn: Norman L. Pernick, Esq.; (ii) counsel to the Creditors' Committee, (a)
Otterbourg Steindler Houston & Rosen PC, 230 Park Avenue, 30th Floor, New York,
New York 10169, Attn: Scott L. Hazan, Esq., and (b) Pepper & Hamilton, 1201
Market Street, Suite 1600, P.O. Box 1709, Wilmington, Delaware 19899, Attn:
David Stratton, Esq.; (iii) Office of the United States Trustee, 601 Walnut
Street, Suite 950 West, Philadelphia, Pennsylvania 19106, Attn: Joseph McMahon,
Esq.; (iv) counsel to the Prepetition Secured Creditors (a) Sidley & Austin,
Bank One Plaza, 10 South Dearborn Street, Chicago, Illinois, 60603, Attn: Bryan
Krakauer; (b) Winston & Strawn, 35 West Wacker Drive, Chicago, Illinois 60601,
Attn: Thomas F. Blakemore, Esq., (c) Akin, Gump, Strauss, Hauer & Feld, LLP, 590
Madison Avenue, 20th Floor, New York, New York 10022, Attn: Fred Hodara, Esq.,
(d) Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street New York, New York
10019, Attn: Richard D. Feintuch, Esq., and (e) Moore & Van Allen, PLLC, 100
North Tryon Street, Floor 47, Charlotte, North Carolina 28202-4003, Attn: David
S. Walls, Esq.; (v) counsel to the Ad Hoc Committee of 8 7/8% Noteholders:
Hennigan, Bennett & Dorman, 601 South Figueroa Street, Suite 3300, Los Angeles,
California 90017, Attn: Bruce Bennett, Esq. and (vi) counsel to Purchaser:
Munger, Tolles & Olson LLP, 355 South Grand Avenue, 35th Floor, Los Angeles,
California 90071-1560, Attn: Thomas B. Walper, Esq.
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CONCLUSION AND RECOMMENDATION
Fruit of the Loom believes that confirmation and implementation of the
Amended Plan is preferable to any of the alternatives described above because it
will provide the greatest recoveries to holders of Claims. Any alternative to
confirmation of the Amended Plan, such as liquidation or attempts to confirm
another plan of reorganization, would involve significant delays, uncertainty,
and substantial additional administrative costs. Moreover, as described above,
Fruit of the Loom believes that its creditors will receive at least as much as
in a liquidation and, in most cases, greater and earlier recoveries under the
Amended Plan than those that could be achieved in a liquidation. FOR THESE
REASONS, FRUIT OF THE LOOM URGES ALL HOLDERS OF IMPAIRED CLAIMS ENTITLED TO VOTE
ON THE AMENDED PLAN TO RETURN THEIR BALLOTS ACCEPTING THE PLAN.
Dated: Wilmington, Delaware
March 19, 2002
FRUIT OF THE LOOM, LTD.; FRUIT OF THE LOOM, INC.,
a Delaware corporation; NWI LAND MANAGEMENT CORP.;
UNION UNDERWEAR COMPANY, INC.; ALICEVILLE COTTON
MILL INC.; FRUIT OF THE LOOM ARKANSAS, INC.; THE
B.V.D. LICENSING CORP.; THE B.V.D. LICENSING
CORP.; FOL CARIBBEAN CORP.; FAYETTE COTTON MILL,
INC.; FRUIT OF THE LOOM, TEXAS, INC.; FRUIT OF
THE LOOM CARIBBEAN, INC.; FTL SALES COMPANY, INC.;
UNION YARN MILLS, INC.; GREENVILLE MANUFACTURING,
INC.; WINFIELD COTTON MILL, INC.; MARTIN MILLS,
INC.; LEESBURG KNITTING MILLS, INC; SALEM
SPORTSWEAR CORPORATION; RABUN APPAREL, INC.;
WHITMIRE MANUFACTURING, INC.; PRO PLAYER, INC.;
GITANO FASHIONS LTD.; FOL R&D, INC., F/K/A JET SEW
TECHNOLOGIES, INC.; UNION SALES, INC.; ARTEX
MANUFACTURING CO., INC.; FTL INVESTMENTS, INC.;
FTL REGIONAL SALES CO., INC.; LEESBURG YARN MILL,
INC.; SALEM SPORTSWEAR, INC.; FRUIT OF THE LOOM
TRADING COMPANY; DEKALB KNITTING CORP.; FTL
SYSTEMS, INC.; SHERMAN WAREHOUSE CORP.; and FRUIT
OF THE LOOM, INC., a New York corporation
By: /s/ John J. Ray
-----------------------------------
Name: John J. Ray III
Title: Chief Administrative Officer
27
Dates Referenced Herein and Documents Incorporated by Reference
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