-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jym8bUBaWZgb40qhZkOWh1dYbzFkpfh91/5o+RGPnR9z9YKw18DK6X/jgg94ZEnJ CJVYf6ptHFg4Hg7ZMU0MDw== 0000912057-99-007010.txt : 19991123 0000912057-99-007010.hdr.sgml : 19991123 ACCESSION NUMBER: 0000912057-99-007010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOSS GRAPHIC SYSTEMS INC CENTRAL INDEX KEY: 0001018214 STANDARD INDUSTRIAL CLASSIFICATION: PRINTING TRADES MACHINERY & EQUIPMENT [3555] IRS NUMBER: 251200273 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-08421 FILM NUMBER: 99761822 BUSINESS ADDRESS: STREET 1: 700 OAKMONT LANE STREET 2: 48TH FLOOR CITY: WESTMONT STATE: IL ZIP: 60559-5546 BUSINESS PHONE: 6308505600 MAIL ADDRESS: STREET 1: GOSS GRAPHIC SYSTEMS INC STREET 2: 700 OAKMONT LANE CITY: WESTMONT STATE: IL ZIP: 60559-5546 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1999 OF GOSS GRAPHIC SYSTEMS, INC. (Debtor-in-Possession as of July 30, 1999) a Delaware Corporation IRS Employer Identification No. 25-1200273 SEC File Number 333-08421 700 OAKMONT LANE WESTMONT, ILLINOIS 60559-5546 (630) 850-5600 Goss (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Goss had 100 shares of Common Stock outstanding at November 15, 1999, all of which were held by an affiliate. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- GOSS GRAPHIC SYSTEMS, INC. INDEX
Page No. ---- PART I - FINANCIAL INFORMATION: Item 1 - Financial Statements Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 2 Consolidated Statements of Operations - For the three month and nine month periods ended September 30, 1999 and 1998 3 Consolidated Statements of Cash Flows - Nine months ended September 30, 1999 and 1998 4 Notes to Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 17 PART II - OTHER INFORMATION: Item 3 - Defaults Upon Senior Securities 27 Item 4 - Submission of Matters to a Vote of Security Holders 27 Item 6 - Exhibits and Reports on Form 8-K 27 SIGNATURES 29
1 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GOSS GRAPHIC SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (IN MILLIONS) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1999 1998 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 16.4 $ 57.1 Accounts receivable, net 137.0 125.3 Inventories, net 216.5 262.9 Other current assets 21.1 16.6 -------- -------- Total current assets 391.0 461.9 Property and equipment, net 177.7 186.2 Goodwill, net 301.2 308.0 Other assets 24.3 27.7 -------- -------- Total assets $ 894.2 $ 983.8 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 102.4 $ 170.9 Revolving credit facilities 50.8 178.9 Current portion of long-term debt 5.0 5.2 Advance payments from customers 134.9 161.8 Other current liabilities 164.0 194.5 -------- -------- Total current liabilities 457.1 711.3 Liabilities subject to compromise 460.7 0.0 Long-term debt, less current portion 49.0 275.5 Other liabilities 50.1 59.5 -------- -------- Total liabilities 1,016.9 1,046.3 Minority interest 8.1 8.8 Common stock, 100 shares authorized and outstanding, $0.01 par value 0.0 0.0 Additional paid in capital 197.9 162.2 Retained earnings (322.3) (228.9) Minimum pension obligation (5.3) (5.3) Cumulative translation adjustment (1.1) 0.7 -------- -------- Total shareholders' equity (130.8) (71.3) -------- -------- Total liabilities and shareholders' equity $ 894.2 $ 983.8 -------- -------- -------- --------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 2 GOSS GRAPHIC SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS) (UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ---------------------- -------------------------- 1999 1998 1999 1998 ------ ------ ------- ------ Net sales $112.2 $311.9 $ 422.1 $ 658.1 Cost of sales 103.8 312.9 397.3 614.2 ------ ------ ------- ------- Gross profit (loss) 8.4 (1.0) 24.8 43.9 Operating expenses 23.7 40.5 66.0 84.6 Reorganization items 11.3 0.0 12.6 0.0 Goodwill amortization 2.1 2.5 6.2 6.9 ------ ------ ------- ------- Operating loss (28.7) (44.0) (60.0) (47.6) Other (expense) income (0.2) 1.3 (1.9) 0.2 Write-off of investment in affiliate 0.0 (6.8) 0.0 (6.8) Interest expense (10.5) (14.2) (34.3) (35.5) ------ ------ ------- ------- Loss before income taxes (39.4) (63.7) (96.2) (89.7) Provision (benefit) for income taxes (1.5) 4.5 (2.7) 14.3 ------ ------ ------- ------- Net loss $(37.9) $(68.2) $ (93.5) $(104.0) ------ ------ ------- ------- ------ ------ ------- -------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 GOSS GRAPHIC SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, -------------------------- 1999 1998 -------- -------- OPERATING ACTIVITIES: Net loss $ (93.5) $(104.0) Depreciation 17.8 12.4 Amortization of goodwill 6.2 6.9 Write-off of investment in affiliate 0.0 6.8 Changes in assets and liabilities: Accounts receivable (3.8) (56.7) Inventory 46.5 (25.5) Accounts payable (9.9) 91.7 Customer advances (23.2) 6.1 Other current liabilities (22.6) 58.6 Other assets (5.3) (6.9) Other liabilities (8.8) (3.4) ------- ------- Net cash used for operating activities (96.6) (14.0) ------- ------- INVESTING ACTIVITIES: Capital expenditures (6.3) (22.8) Investment in affiliate 0.0 (2.4) ------- ------- Net cash used for investing activities (6.3) (25.2) ------- ------- FINANCING ACTIVITIES: Net borrowings under revolving credit facilities 11.5 55.2 Net borrowings under DIP credit facility 29.8 0.0 Other borrowings 0.0 4.3 Repayment of term loan 0.0 (12.8) Capital contribution 24.0 0.0 Repayment of mortgage notes and other obligations (3.1) (3.4) -------- -------- Net cash provided by financing activities 62.2 43.3 Net increase (decrease) in cash (40.7) 4.1 Cash at the beginning of the period 57.1 26.0 -------- -------- Cash at the end of the period $ 16.4 $ 30.1 -------- -------- -------- --------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION In the opinion of Goss Graphic Systems, Inc. ("Goss" or the "Company"), the unaudited financial statements contain all adjustments, solely of a recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. These statements should be read in conjunction with Goss's Form 10-K for the year ended September 30, 1998. The results of operations for the nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. The Company's financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities and commitments in the normal course of business. The filing of the Chapter 11 case (see Note 11 to Consolidated Financial Statements) and the Company's financial condition necessitating the Chapter 11 case raise substantial doubt with respect to the Company's ability to continue as a going concern. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations and the ability to generate cash from operations and financing sources sufficient to meet obligations. As a result of the filing of the Chapter 11 case and related circumstances, realization of assets and liquidation of liabilities is subject to significant uncertainty. While under the protection of Chapter 11, the Company may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the financial statements. Further, a plan or plans of reorganization could materially change the amounts reported in the financial statements. The financial statements do not include any adjustments relating to recoverability of the value of recorded asset amounts or the amounts and classification of liabilities that might be necessary as a consequence of a plan of reorganization. The Company's financial statements as of September 30, 1999 have been presented in conformity with the American Institute of Certified Public Accountant's Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under the Bankruptcy Code", issued November 19, 1990 ("SOP 90-7"). The statement requires a segregation of liabilities subject to compromise by the Bankruptcy Court as of the bankruptcy filing date and identification of all transactions and events that are directly associated with the reorganization of the Company. Prior years' comparative balances have not been reclassified to conform to current year balances stated under SOP 90-7. The Company is currently assessing the effect of the financial restructuring and Chapter 11 filing on the recoverability of its long-lived assets, including goodwill, for purposes of determining whether or not an impairment in value has occurred according to Statement of Financial Accounting Standards No. 121. It is possible that this assessment will result in a material charge against earnings in the quarter ended December 31, 1999. 5 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 1. BASIS OF PRESENTATION (CONTINUED) In June 1998, the Board of Directors approved a change in Goss's fiscal year-end from September 30 to December 31, effective for the calendar year beginning January 1, 1999. This report is the third report of the Company under its new fiscal year. Certain reclassifications have been made to the 1998 financial statements to conform to the classifications used in 1999. 2. INVENTORIES Net inventories are summarized as follows (in millions):
September 30, December 31, 1999 1998 ------------- ------------ Materials $ 95.0 $111.8 Work in process 83.4 94.6 Finished goods 13.1 27.7 Parts 25.0 28.8 ------ ------ Total inventories, net $216.5 $262.9 ------ ------ ------ ------
3. WORKFORCE REDUCTION CHARGE During the quarter ended December 31, 1998, Goss initiated a five percent reduction in its worldwide workforce. This reduction, which affected both salaried and hourly jobs, resulted in a charge for severance costs of $7.1 million. As of September 30, 1999, approximately $4.0 million in severance costs had been paid. The timing of the payment of the remaining severance costs may be affected by Goss's recent financial restructuring activities, including the filing for bankruptcy under Chapter 11 of the U. S. Bankruptcy Code (See Note 11 to Consolidated Financial Statements and Part 2, Management's Discussion and Analysis of Financial Condition and Results of Operations). 6 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 4. DEBT The debt obligations of Goss are as follows (in millions):
September 30, December 31, 1999 1998 ------------- ------------ Revolving credit facilities $190.2 $178.9 DIP credit facility 29.8 0.0 Mortgage loans 51.4 52.3 Senior subordinated notes 225.0 225.0 Other debt obligations 2.6 3.4 ------ ------ Total debt 499.0 459.6 Less current portion 55.8 184.1 Less liabilities subject to compromise 394.2 0.0 ------ ------ Long-term debt $ 49.0 $275.5 ------ ------ ------ ------
Goss's $200 million revolving credit facility contains covenants which must be satisfied at the end of each fiscal quarter and generally cover Goss's performance during the preceding four fiscal quarters. On August 31, 1998, Goss entered into the First Amendment to the credit facility which contained revised covenants for the quarters ended September 30, 1998, and thereafter. These covenants were predicated upon Goss's business plan at that time, and subsequently it became apparent that Goss would not be able to fulfill those covenants. As a result, Goss and its lenders amended these covenants in the Second Amendment to the credit facility dated January 12, 1999. Goss was not in compliance with these covenants at June 30, 1999 or at September 30, 1999, which constitutes an event of default. On July 30, 1999 the Bankruptcy Court approved a debtor-in-possession credit facility (the "DIP Facility") for Goss with certain of its pre-petition bank lenders and the principal shareholder of its parent company, Stonington Partners. The DIP Facility provides for up to $50 million in financing. The DIP Facility also contains covenants that must be satisfied at the end of each month beginning in August 1999. Goss was in compliance with these covenants in August and September 1999. See Note 11 to Consolidated Financial Statements and Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional detail. 7 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 5. CONTINGENCIES LEGAL CONTINGENCIES In the normal course of its business, the Company is subject to various claims and lawsuits. Typically, these matters consist of product liability claims brought by the individuals who operate the equipment that the Company sold, disputes with customers over the performance and completion of installation of equipment, and workers' compensation claims by the Company's own employees. It is not presently possible to determine the outcome of the claims and lawsuits against the Company. However, the Company maintains as an accrued liability a reserve that is its present estimate of the total cost to resolve all of these matters. Management does not believe that the ultimate disposition of any of these matters will have a material adverse effect on the Company's financial position or liquidity, although it is possible that the resolution of these matters could be material to the results of operations in a given period. ENVIRONMENTAL CONTINGENCIES The Company has received either notices of potential liability or third-party claims under the Federal Comprehensive Environmental Response, Compensation, and Liability Act at four off-site disposal facilities or so-called "Superfund Sites". The Company's share of the responsibility for these Superfund Sites generally is minor, and, although current law imposes joint and several liability on any party deemed to be responsible at a Superfund Site, management believes that the ultimate resolution of these matters will not be material to the Company. The Company's Reading, Pennsylvania, facility has been operating a groundwater remediation system under a 1981 Consent Order with the Commonwealth of Pennsylvania as a result of its and its predecessor's historical waste disposal practices. The Company has completed remediation at the site pursuant to a remediation proposal approved by the Commonwealth and has submitted a monitoring proposal to the Commonwealth for approval. Rockwell has agreed to indemnify the Company for expenses attendant to environmental matters existing as of October 14, 1996 to the extent of one-half of those expenses in excess of $1.0 million. The Company maintains as an accrued liability a reserve that is its present estimate of the total cost to resolve all of these matters. 8 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 6. SEGMENT REPORTING Information on Goss's reportable operating segments is detailed below. The column labeled "Other" consists of corporate expenses that are not allocable to the geographic operating segments and elimination of intersegment activity.
AMERICAS EUROPE ASIA OTHER TOTAL -------- ------ ---- ----- ----- THREE MONTHS ENDED SEPTEMBER 30, 1999 Sales to external customers $ 43.0 $ 34.6 $ 34.6 $ 0.0 $112.2 Intersegment sales 2.3 1.1 0.0 (3.4) 0.0 Operating profit/(loss) (13.1) (4.8) 4.4 (15.2) (28.7) Other (expense)/income (0.2) (0.2) Interest expense (10.5) (10.5) Income/(loss) before income taxes (39.4) Total assets $257.0 $234.5 $152.6 $250.1 $894.2 THREE MONTHS ENDED SEPTEMBER 30, 1998 Sales to external customers $181.3 $ 81.0 $ 49.6 $ 0.0 $311.9 Intersegment sales 4.9 17.4 0.1 (22.4) 0.0 Operating profit/(loss) (55.0) 4.4 7.5 (0.9) (44.0) Other (expense)/income (5.5) (5.5) Interest expense (14.2) (14.2) Income/(loss) before income taxes (63.7) Total assets $362.4 $268.3 $134.0 $234.4 $999.1 NINE MONTHS ENDED SEPTEMBER 30, 1999 Sales to external customers $207.8 $130.2 $ 84.1 $ 0.0 $422.1 Intersegment sales 9.2 16.2 0.4 (25.8) 0.0 Operating profit/(loss) (44.8) (1.2) 5.7 (19.7) (60.0) Other (expense)/income (1.9) (1.9) Interest expense (34.3) (34.3) Income/(loss) before income taxes (96.2) Total assets $257.0 $234.5 $152.6 $250.1 $894.2 NINE MONTHS ENDED SEPTEMBER 30, 1998 Sales to external customers $352.3 $222.1 $ 83.7 $ 0.0 $658.1 Intersegment sales 15.2 53.3 0.1 (68.6) 0.0 Operating profit/(loss) (67.0) 23.0 5.0 (8.6) (47.6) Other (expense)/income (6.6) (6.6) Interest expense (35.5) (35.5) Income/(loss) before income taxes (89.7) Total assets $362.4 $268.3 $134.0 $234.4 $999.1
9 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 7. COMPREHENSIVE INCOME As of October 1, 1998 Goss adopted SFAS No. 130 "Reporting Comprehensive Income" which requires companies to report all changes in equity during a period, except those resulting from investment by owners and distribution to owners, in a financial statement for the period in which they are recognized. Goss has chosen to disclose comprehensive income, which encompasses net income and foreign currency translation adjustments, in the notes to the consolidated financial statements. Total comprehensive income is as follows (in millions):
For the Three Months For the Nine Months Ended September 30, Ended September 30, -------------------- ------------------- 1999 1998 1999 1998 ------ ------ ------ ------ Net loss $(37.9) $(68.2) $(93.5) $(104.0) Other comprehensive income: Foreign currency translation adjustment 3.5 (2.3) (1.7) (2.9) ------ ------ ------ ------- Total comprehensive loss $(34.4) $(70.5) $(95.2) $(106.9) ------ ------ ------ ------- ------ ------ ------ -------
8. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. SFAS 133 requires all derivative instruments to be recorded on the balance sheet at their fair value and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Goss has not yet determined the impact that the adoption of SFAS 133 will have on its earnings or statement of financial position. However, Goss anticipates that, due to its limited use of derivative instruments and the nature of its derivative transactions, the adoption of SFAS 133 will not have a significant effect on its results of operations or its financial position. 10 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 9. COMBINED FINANCIAL STATEMENTS The following combined financial statements are presented in accordance with SOP 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code: GOSS GRAPHIC SYSTEMS, INC. COMBINED CONSOLIDATING BALANCE SHEET AT SEPTEMBER 30, 1999 (IN MILLIONS) (UNAUDITED)
ENTITIES IN ENTITIES NOT IN REORGANIZATION REORGANIZATION PROCEEDINGS PROCEEDINGS ELIMINATIONS CONSOLIDATED ---------------- ---------------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 1.8 $ 14.6 $ 16.4 Accounts receivable, net 74.3 62.7 137.0 Intercompany receivable 52.1 (52.1) 0.0 Inventories, net 94.1 122.4 216.5 Other current assets 14.3 6.8 21.1 -------- ------- ------- Total current assets 236.6 154.4 391.0 Property and equipment, net 101.5 76.2 177.7 Goodwill, net 208.2 93.0 301.2 Investment in subsidiaries 89.7 0.0 $(89.7) 0.0 Other assets 14.0 10.3 0.0 24.3 -------- ------- ------- ------- Total assets $650.0 $333.9 $(89.7) $894.2 -------- ------- ------- ------- -------- ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 32.3 $ 70.1 $102.4 Revolving credit facilities 29.8 21.0 50.8 Current portion of long-term debt 2.2 2.8 5.0 Advance payments from customers 80.9 54.0 134.9 Other current liabilities 103.3 60.7 164.0 -------- ------- ------- Total current liabilities 248.5 208.6 457.1 Liabilities subject to compromise 460.7 0.0 460.7 Long-term debt, less current portion 29.2 19.8 49.0 Other liabilities 32.6 17.5 50.1 -------- ------- ------- Total liabilities 771.0 245.9 1,016.9 Minority interest 7.7 0.4 8.1 Common stock, 100 shares authorized and Outstanding, $0.01 par value 0.0 0.0 0.0 Additional paid in capital 189.4 98.2 $(89.7) 197.9 Retained earnings (317.6) (4.7) (322.3) Minimum pension obligation 0.0 (5.3) (5.3) Cumulative translation adjustment (0.5) (0.6) (1.1) -------- ------- ------- Total shareholders' equity (128.7) 87.6 (89.7) (130.8) -------- ------- ------- ------- Total liabilities and shareholders' equity $650.0 $333.9 $(89.7) $894.2 -------- ------- ------- ------- -------- ------- ------- -------
11 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 9. COMBINED FINANCIAL STATEMENTS (CONTINUED) GOSS GRAPHIC SYSTEMS, INC. COMBINED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (IN MILLIONS) (UNAUDITED)
ENTITIES IN ENTITIES NOT IN REORGANIZATION REORGANIZATION PROCEEDINGS PROCEEDINGS ELIMINATIONS CONSOLIDATED --------------- ------------- ------------- ------------ Net sales $223.0 $238.2 $(39.1) $422.1 Cost of sales 232.8 203.6 39.1 397.3 ----- ----- ---- ----- Gross profit (loss) (9.8) 34.6 0.0 24.8 Operating expenses 37.0 29.0 0.0 66.0 Reorganization items 12.6 0.0 0.0 12.6 Goodwill amortization 4.2 2.0 0.0 6.2 -------- -------- ------- ------- Operating profit (loss) (63.6) 3.6 0.0 (60.0) Other (expense) income 5.6 (4.2) (3.3) (1.9) Interest expense (31.8) (5.8) 3.3 (34.3) -------- -------- ------- ------- Loss before income taxes (89.8) (6.4) 0.0 (96.2) Provision (benefit) for income taxes 0.0 (2.7) 0.0 (2.7) -------- -------- ------- ------- Net loss $(89.8) $ (3.7) $ (0.0) $(93.5) -------- -------- ------- ------- -------- -------- ------- -------
12 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 9. COMBINED FINANCIAL STATEMENTS (CONTINUED) GOSS GRAPHIC SYSTEMS, INC. COMBINED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (IN MILLIONS) (UNAUDITED)
ENTITIES IN ENTITIES NOT IN REORGANIZATION REORGANIZATION PROCEEDINGS PROCEEDINGS CONSOLIDATED -------------- --------------- ------------ OPERATING ACTIVITIES: Net loss $(89.8) $(3.7) $(93.5) Depreciation 11.0 6.8 17.8 Amortization of goodwill 4.2 2.0 6.2 Changes in assets and liabilities: Accounts receivable (24.0) 20.2 (3.8) Inventory 56.9 (10.4) 46.5 Accounts payable 2.8 (12.7) (9.9) Customer advances (16.1) (7.1) (23.2) Other current liabilities (14.6) (8.0) (22.6) Other assets 4.6 (9.9) (5.3) Other liabilities (6.4) (2.4) (8.8) ------ ------ ------ Net cash used for operating activities (71.4) (25.2) (96.6) INVESTING ACTIVITIES: Capital expenditures (4.7) (1.6) (6.3) ------ ------ ------ Net cash used for investing activities (4.7) (1.6) (6.3) FINANCING ACTIVITIES: Net borrowings under revolving credit facilities 11.5 0.0 11.5 Net borrowings under DIP credit facility 29.8 0.0 29.8 Capital contribution 24.0 0.0 24.0 Repayment of mortgage notes and other obligations (0.9) (2.2) (3.1) ------ ------ ------ Net cash provided by (used for) financing activities 64.4 (2.2) 62.2 Net decrease in cash (11.7) (29.0) (40.7) Cash at the beginning of the period 13.5 43.6 57.1 ------ ------ ------ Cash at the end of the period $ 1.8 $14.6 $ 16.4 ------ ------ ------ ------ ------ ------
13 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 10. REORGANIZATION ITEMS Reorganization items are comprised of items of income, expense and loss that were realized or incurred by the Company as a result of its decision to reorganize under Chapter 11 of the Bankruptcy Code. Such items consisted of the following (in millions):
Three Months Ended Nine Months Ended September 30, 1999 September 30, 1999 ------------------ ------------------ Professional fees directly related to the filing $ 4.5 $ 5.8 Bank fees related to the DIP Facility 1.1 1.1 Write-off of deferred issue costs on senior subordinated notes 5.7 5.7 ------ ------ Total Reorganization items $11.3 $12.6 ------ ------ ------ ------
11. CHAPTER 11 FILING On July 30, 1999 Goss, GGS Holdings, Inc. ("Holdings", its parent company), and Goss Realty LLC filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the District of Delaware. Goss, its lenders under the pre-petition bank credit facility, and holders of as least two-thirds of Goss's 12% Senior Subordinated Notes Due 2006 entered into a Forbearance, Lock-up and Voting Agreement dated as of July 28, 1999. Pursuant to that agreement, the lenders and the noteholders who are party to the agreement agreed to forbear from exercising their rights and remedies under the credit agreement and the indenture until the filing of the Chapter 11 case, and agreed to vote their claims in favor of a plan of reorganization. Under the agreement, the noteholders will exchange the $225 million principal amount of notes currently outstanding for a new $112.5 million note issue and certain new stock of Holdings. Certain of the company's lenders and Stonington Partners or an affiliate ("Stonington") will jointly provide an additional $100 million of liquidity and capital. The parties agreed to implement the agreement through a prearranged Chapter 11 proceeding initiated in the U.S. Bankruptcy Court for the District of Delaware. Goss's European and Asian subsidiaries are not included in the Chapter 11 proceeding. Goss has entered into a debtor-in-possession credit facility (the "DIP Facility") with certain of its pre-petition bank lenders and the principal shareholder of its parent company, Stonington. The DIP Facility provides for up to $50 million of financing. The Bankruptcy Court approved the DIP Facility on an interim basis on July 30, 1999 and gave final approval in an order dated August 20, 1999. Bridge loan borrowings under the DIP Facility bear interest at a per annum rate equal to, at the Company's option: (1) the sum of 2.25% plus the higher of (a) 14 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 11. CHAPTER 11 FILING (CONTINUED) the prime rate or (b) a rate that is 0.5% higher than the federal funds rate, or (2) the sum of 3.25% plus the average of quotations in the applicable currencies for deposits with maturities comparable to the interest rate period shown on Telerate Display Screen page number 3740 or 3750, plus any additional costs to the lenders of complying with applicable reserve asset ratios. Swing line borrowings bear interest at a per annum rate equal to the rate described in clause (1) above less 0.5%. The DIP Facility provides for a commitment fee equal to 0.5% of the undrawn loans, a facility fee equal to 2.0% of the total commitments, and an administrative fee of $100,000. The DIP Facility is secured by all assets of the Company. Borrowings under the facility are limited by a borrowing base formula, which considers U. S.-based accounts receivable, inventory, equipment and real property. The lenders' commitments terminate on the earliest of: (a) 6 months from the date of the interim order of the Bankruptcy Court, (b) the effective date of a plan of reorganization in the Chapter 11 case, (c) the date of distributions to any class of creditors, equity holders or other claimants under a plan of reorganization in the Chapter 11 case, (d) upon notice following an event of default, (e) 45 days after July 30, 1999 if a final order of the Bankruptcy Court approving the DIP Facility has not been entered. At September 30, 1999, outstanding borrowings under the DIP Facility were $29.8 million. During the Chapter 11 proceedings the company plans to continue to pay employee wages, salaries and benefits as usual. The company will pay for the post-petition delivery of goods and services in the ordinary course of business. Under the restructuring plan, the claims of all creditors, including trade creditors, will either not be impaired by the plan or will be paid in full over time. 12. LIABILITIES SUBJECT TO COMPROMISE The principal categories of claims classified as liabilities subject to compromise under reorganization proceedings are identified below. All amounts below may be subject to future adjustment depending on Bankruptcy Court action, further developments with respect to disputed claims, or other events. Under an approved final plan of reorganization, these claims may be settled at amounts less than their allowed amounts. Recorded liabilities subject to compromise under the Chapter 11 proceedings as of September 30, 1999 consisted of the following (in millions):
Accounts payable $ 58.6 Pre-petition revolving credit facility 169.2 Senior subordinated notes-Principal 225.0 Senior subordinated notes-Accrued interest 7.9 ------ Total $460.7 ------ ------
15 GOSS GRAPHIC SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 13. SUBSEQUENT EVENTS At hearings held on October 19, 1999 and November 2, 1999, Goss, Holdings and Goss Realty LLC received formal court confirmation of the plan of reorganization, as amended, (the "Plan"). According to the Plan, the Company will pay all claims owed to unsecured trade creditors, including all vendors and suppliers in three equal installments at dates that are three, six and nine months after the effective date of the Plan. Pursuant to the Plan, on November 19, 1999, the holders of the Company's 12% Senior Subordinated Notes Due 2006, with a principal amount outstanding of $225 million, exchanged the notes for a new note issue of Goss Holdings, Inc., the new holding company into which Holdings was merged on the effective date of the Plan ("New Holdings"), with a principal amount of $112.5 million and common stock in New Holdings representing an ownership interest of approximately 31 percent. The new note issue will have a maturity date of six years after the effective date of the Plan, and bear interest at 12.25% per annum. Interest for the two year period immediately following the effective date of the Plan will be payable by the issuance of additional new notes and interest thereafter will be payable in cash. Also pursuant to the Plan, on November 19, 1999, Stonington made a $50 million cash investment in the common stock of New Holdings and received common shares representing an ownership interest of approximately 65 percent in exchange therefore. On November 19, 1999, New Holdings made a $50 million cash equity investment in Goss (its wholly-owned subsidiary). The proceeds of the equity investment were used by Goss to repay all outstanding borrowings under the DIP Facility. Additionally, on November 19, 1999, and also pursuant to the Plan, Goss and the lenders under its revolving credit facility entered into an amended and restated credit agreement. The new credit agreement, which amends and restates the $200 million pre-petition revolving credit facility, permits borrowings of up to $250 million, including up to $75 million in letters of credit. The new credit facility requires payment of a facility fee of $3.75 million, which was paid on the closing date, and provides for overall borrowing costs that are higher than those of the pre-petition facility. The new facility also contains certain financial covenants including, but not limited to, a minimum fixed charge coverage test and a minimum Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) test. The new facility also contains various limitations on Goss's operation and borrowing, including a limitation on the amount that can be borrowed by Goss based upon its accounts receivable, inventory, equipment and real property, and provides for scheduled repayments beginning in 2002. On November 19, 1999, the Company announced that it would transfer the assembly operations of its U.S.-based single width press lines from its Reading, Pennsylvania facility to its Cedar Rapids, Iowa facility, beginning in January 2000. The transfer will result in the closure of the Reading facility in 2000. It is anticipated that the closure will result in a material charge against earnings in the quarter ended December 31, 1999. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Readers are urged to consider carefully the financial statements and related notes contained elsewhere in this report and in Goss's Form 10-K for its fiscal year ended September 30, 1998 as they read the discussion below. Goss Graphic Systems, Inc. produces newspaper, insert, and commercial printing press systems. In June of 1999, the Company began to negotiate a restructuring of its capital structure with holders of its 12% Senior Subordinated Notes due 2006, certain lenders under its revolving credit facility and Stonington Partners (hereinafter, along with any affiliated entities referred to as "Stonington"), the principal stockholder of its parent company. On July 30, 1999 Goss announced that it had reached an agreement on a restructuring with noteholders holding more than two-thirds of the Senior Subordinated Notes, certain of its bank lenders, and Stonington. Pursuant to that agreement, on July 30, 1999, Goss, GGS Holdings, Inc. ("Holdings", its parent company), and Goss Realty LLC, (collectively the "Debtors") filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court of the District of Delaware. The Debtors are currently operating their business as debtors-in-possession pursuant to the Bankruptcy Code. Under the agreement, the noteholders, subject to satisfaction of certain conditions, will exchange the $225 million principal amount of Senior Subordinated Notes currently outstanding for a total of $112.5 million in new notes and certain new stock of Holdings. Certain of the Company's lenders and Stonington, subject to satisfaction of certain conditions, will jointly provide an additional $100 million of liquidity and capital. As a result of the bankruptcy filing, actions to collect pre-petition indebtedness are stayed and other contractual obligations against the Debtors may not be enforced. In addition, under the Bankruptcy Code the Debtors may assume or reject executory contracts, including lease obligations. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be voted upon by creditors and equity holders and approved by the Bankruptcy Court. At the first day hearing held on July 30, 1999, the Bankruptcy Court entered first day orders granting authority to the Debtors, among other things, to pay pre-petition and post-petition employee wages, salaries, benefits and other employee obligations, and to pay vendors and other providers in the ordinary course for goods and services received from July 30, 1999. Goss has entered into a debtor-in-possession credit facility (the "DIP Facility") with certain of its pre-petition bank lenders and Stonington. The DIP Facility provides for up to $50 million of financing. The Bankruptcy Court approved the DIP Facility on an interim basis on July 30, 1999 and gave final approval in an order dated August 20, 1999. Bridge loan borrowings under the DIP Facility bear interest at a per annum rate equal to, at the Company's option: (1) the 17 sum of 2.25% plus the higher of (a) the prime rate or (b) a rate that is 0.5% higher than the federal funds rate, or (2) the sum of 3.25% plus the average of quotations in the applicable currencies for deposits with maturities comparable to the interest rate period shown on Telerate Display Screen page number 3740 or 3750, plus any additional costs to the lenders of complying with applicable reserve asset ratios. Swing line borrowings bear interest at a per annum rate equal to the rate described in clause (1) above less 0.5%. The DIP Facility provides for a commitment fee equal to 0.5% of the undrawn loans, a facility fee equal to 2.0% of the total commitments, and an administrative fee of $100,000. The DIP Facility is secured by all assets of the Company. Borrowings under the facility are limited by a borrowing base formula, which considers U.S.-based accounts receivable, inventory, equipment and real property. The lenders' commitments terminate on the earliest of: (a) 6 months from the date of the interim order of the Bankruptcy Court, (b) the effective date of a plan of reorganization in the Chapter 11 case, (c) the date of distributions to any class of creditors, equity holders or other claimants under a plan of reorganization in the Chapter 11 case, (d) upon notice following an event of default, (e) 45 days after July 30, 1999 if a final order of the Bankruptcy Court approving the DIP Facility has not been entered. At September 30, 1999, outstanding borrowings under the DIP Facility were $ 29.8 million. The Company's Consolidated Financial Statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities and commitments in the normal course of business. The filing of the Chapter 11 case and the Company's financial condition necessitating the Chapter 11 case raise substantial doubt with respect to the Company's ability to continue as a going concern. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations and the ability to generate cash from operations and financing sources sufficient to meet obligations. As a result of the filing of the Chapter 11 case and related circumstances, realization of assets and liquidation of liabilities is subject to significant uncertainty. While under the protection of Chapter 11, the Debtors may sell or otherwise dispose of assets, and liquidate or settle liabilities, for amounts other than those reflected in the Consolidated Financial Statements. Further, a plan or plans of reorganization could materially change the amounts reported in the accompanying Consolidated Financial Statements. The Consolidated Financial Statements do not include any adjustments relating to recoverability of the value of recorded asset amounts or the amounts and classification of liabilities that might be necessary as a consequence of a plan of reorganization. The Company is currently assessing the effect of the financial restructuring and Chapter 11 filing on the recoverability of its long-lived assets, including goodwill, for purposes of determining whether or not an impairment in value has occurred according to Statement of Financial Accounting Standards No. 121. It is possible that this assessment will result in a material charge against earnings in the quarter ended December 31, 1999. The Company's liquidity, capital resources, results of operations and ability to continue as a going concern are subject to known and unknown risks and uncertainties, including those set forth below under "Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995." 18 RESULTS OF OPERATIONS Net Sales Goss's net sales for the fiscal quarter ended September 30, 1999 decreased by 64.0% or $199.7 million to $112.2 million compared to the quarter ended September 30, 1998. Sales in the Americas decreased by $138.3 million to $43.0 million. This decline is attributable to a lower order backlog at June 30, 1999 resulting in reduced shipments to large newspaper, small newspaper, insert and commercial customers. Sales in Europe decreased by $46.4 million to $34.6 million also as the result of a lower order backlog at June 30, 1999 for both large and small newspaper customers. Sales in Asia decreased by $15.0 million to $34.6 million due to the timing of shipments to large newspaper customers. Net sales for the first nine months of 1999 were $422.1 million, a decrease of $236.0 million or 35.9 % from the first nine months of 1998. Sales decreases in the Americas and Europe of $144.5 and $91.9 million to $207.8 and $130.2 million, respectively, were partially offset by a sales increase in Asia of $0.4 million to $84.1 million. In the Americas decreased sales to large newspaper, small newspaper, insert, and commercial customers were the result of a lower order backlog as of December 31, 1998 in addition to lower current year orders. The decrease in sales in Europe is also attributable to a lower order backlog at December 31, 1998 in addition to lower current year orders from both large and small newspaper customers. In addition, the 1998 period included a large equipment newspaper sale of $35.1 million to one European customer. Sales in the Americas for the quarter and nine months ended September 30, 1999 were also negatively affected by shipment delays resulting from Goss's inability to access sufficient capital resources to purchase required materials and services in the period leading up to its Chapter 11 filing, as well as post-filing delays attributable to the time required to negotiate terms with suppliers. Gross Profit Gross profit for the quarter ended September 30, 1999 increased by $9.4 million to $8.4 million compared to the quarter ended September 30, 1998. The 1998 quarter included non-recurring charges of $1.5 million for manufacturing restructuring, $17.1 million for inventory re-valuations and $22.9 million for loss contract provisions substantially all of which were recorded in the Americas. Excluding these 1998 non-recurring charges of $41.5 million, gross profit decreased by $32.1 million and the gross profit margin decreased from 13.0% to 7.5%. Gross profit for the nine months ended September 30, 1999 decreased $19.1 million to $24.8 million compared to the nine months ended September 30, 1998. Results for the nine months ended September 30, 1999 included significant charges totaling $14.4 million in the Americas. These significant charges consist of $9.8 million for inventory write-downs related to reduced order volume and costs to address certain product and contract performance issues arising from 19 management's ongoing assessment of the Americas business unit, and $4.6 million for anticipated cost over-runs on contracts as a result of delayed shipments. The shipment delays were caused by Goss's inability to access sufficient capital resources to purchase required materials and services during the period leading up to its Chapter 11 filing as well as post-filing delays attributable to the time required to negotiate terms with suppliers. Margins on certain future period shipments may also be negatively affected by these delays. Results for the nine months ended September 30, 1998 included non-recurring charges of $9.4 million for manufacturing restructuring, $17.1 million for inventory re-valuations and $24.5 million for loss contract provisions on newspaper contracts, substantially all of which were recorded in the Americas. Excluding these non-recurring items of $51.0 million in 1998 and the $14.4 million of significant charges mentioned above for 1999, gross profit decreased by $55.7 million and the gross profit margin decreased from 14.4% to 9.3%. The change in gross profit and gross profit margin, excluding these non-recurring and significant charges, is explained below. - For the quarter ended September 30, 1999, gross profit in the Americas decreased by $13.5 million to a loss of $2.2 million and the gross profit margin decreased from 6.2% to a negative 5.1%. The decrease in gross profit is due to the reduced sales volume while the decrease in gross profit margin is due to unrecovered fixed costs resulting from unused capacity. In addition, results for the quarter ended September 30, 1998 included expense credits due to the timing of the capitalization of contract-related engineering costs into inventory. For the nine months ended September 30, 1999, gross profit decreased in the Americas by $28.7 million to $3.8 million and the gross profit margin decreased from 9.2% to 1.8%. These decreases in gross profit and gross profit margin are attributable to the same factors that affected gross profit for the quarter ended September 30, 1999 as well as income from a property tax refund and a depreciation expense adjustment which were recorded in 1998. - For the quarter ended September 30, 1999, gross profit in Europe decreased by $12.3 million to $2.6 million and the gross profit margin decreased from 18.4% to 7.5%. For the nine months ended September 30, 1999, gross profit in Europe decreased $25.1 million to $18.7 million and the gross profit margin decreased from 19.7% to 14.4%. These decreases in gross profit and gross profit margin were due to lower sales volume and lower margins on sales to large and small newspaper customers. - For the quarter ended September 30, 1999, gross profit in Asia decreased by $2.9 million to $8.0 million, and the gross profit margin increased from 22.0% to 23.1%. For the nine months ended September 30, 1999, gross profit in Asia increased $1.5 million to $16.7 million and the gross profit margin increased from 18.2% to 19.9%. The increase in gross profit and gross profit margin is due to increased sales volumes to small newspaper customers and higher margins on sales to large newspaper customers partially offset by a charge of $1.6 million for revaluation of certain inventories. 20 Operating Expenses Operating expenses, which consist primarily of engineering, selling, general and administrative expenses, decreased $16.8 million to $23.7 million for the quarter ended September 30, 1999 compared to the quarter ended September 30, 1998. The 1998 quarter included provisions for bad debt expense of $8.3 million and a charge to engineering expense for $2.9 million relating to the timing of the capitalization of contract-related engineering costs into inventory. The 1999 quarter included provisions for bad debt expense of $1.8 million. Excluding these items, operating expenses decreased by $7.4 million, or 25.3% from the 1998 quarter. The decrease is due to lower spending on development engineering, agent commissions, selling expenses and administrative expenses as a result of lower sales volumes and the 1998 workforce reduction, partly offset by increased depreciation expense attributable to new information systems. Operating expenses for the nine months ended September 30, 1999 decreased $18.6 million to $66.0 million compared to the nine months ended September 30, 1998. The 1998 period included provisions for bad debt expense of $9.1 million and $4.3 million of engineering costs associated with the development of a new insert press. The 1999 period includes provisions for bad debt expense of $4.8 million in addition to a credit of $5.0 million relating to a legal settlement. Excluding these items, operating expenses decreased by $5.1 million, or 7.1% from the 1998 period. This decrease is attributable to the same reasons mentioned above for the quarter. Reorganization Items Results for the quarter and nine month period ended September 30, 1999 were charged with $11.3 million and $12.6 million, respectively for expense items that were incurred by the Company as a result of its decision to reorganize under Chapter 11 of the Bankruptcy Code. These items consist of professional fees, bank fees and the write-off of deferred issue costs on the senior subordinated notes. Interest Expense Interest expense decreased by $3.7 million for the quarter and $1.2 million for the nine month period ended September 30, 1999 compared to 1998. The decrease for the quarter and nine month period is attributable to the discontinuation of interest accruals on the Company's $225 million senior subordinated notes since July 30, 1999 as a result of the Chapter 11 filing. This reduction in expense is slightly offset by additional interest due to increased borrowings at higher rates under the Company's revolving credit facility and DIP Facility. Income Taxes For the quarter ended September 30, 1999, the provision for income taxes decreased from $4.5 million in the 1998 period to a $1.5 million benefit in the 1999 period. For the nine month period ended September 30, 1999, the provision decreased from $14.3 million in the 1998 period to a $2.7 million benefit in the 1999 period. The expense in 1998 arose from the reevaluation of the effective income tax rate to be used for the year due to a change in the geographic mix of income. 21 FINANCIAL CONDITION AND LIQUIDITY On July 30, 1999 the Debtors filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code, which will affect the company's liquidity and capital resources. See Note 11 of the Notes to Consolidated Financial Statements. For the nine months ended September 30, 1999, operating activities used $96.6 million of cash compared to the nine months ended September 30, 1998 when operating activities used $14.0 million of cash. The increase in negative cash flow from operations in the 1999 period is due to changes in working capital largely due to a higher level of payments to suppliers and lower customer advances. Cash used in investing activities decreased to $6.3 million in the 1999 period from $25.2 million in the 1998 period due to lower spending on capital projects. Financing activities provided a net $62.2 million in cash in the 1999 period, including collections of $24.0 million of the $35.6 million in accounts receivable that were contributed to Goss's capital by Stonington in January 1999. Other than cash flow from operations, Goss's primary source of liquidity, prior to its Chapter 11 filing, was its revolving credit facility. At June 30, 1999 and September 30, 1999, Goss was not in compliance with the financial covenants contained in the revolving credit facility, which noncompliance constituted an event of default. As a result, the lenders exercised their rights under the facility agreement to prohibit additional borrowings under the facility. Following the Chapter 11 filing, Goss' primary source of liquidity is the DIP Facility. The pre-petition revolving credit facility permitted borrowings up to $200 million, including up to $175 million in letters of credit and the DIP Facility permits borrowings up to $50 million, including up to $20 million in letters of credit. At September 30, 1999, borrowings and letters of credit under this pre-petition facility, excluding $2.2 million of revolving credit relating to Goss's joint venture in China, totaled $196.9 million, an increase of $0.3 million from the end of the prior fiscal quarter. At September 30, 1999, outstanding borrowings and letters of credit under the DIP Facility were $30.5 million. Goss's revolving credit facility, as amended, contained certain financial covenants, including, but not limited to, a minimum fixed charge coverage test, a minimum Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) test, and a maximum leverage test. The DIP Facility also contains certain covenants, including but not limited to, a minimum EBITDA test, a minimum sales test and a maximum capital expenditure test. Goss was not in compliance with the financial covenants in its revolving credit facility as of the quarters ended March 31, 1998 and June 30, 1998. Goss's lenders waived this non-compliance, and on August 31, 1998, Goss entered into the First Amendment which contained revised covenants for the quarter ended September 30, 1998 and thereafter. Subsequently it became apparent that Goss would not be able to fulfill these covenants, which were further amended in the Second Amendment. As part of the Second Amendment, the revolving credit facility also was amended to include various limitations on Goss's operation and borrowing, including a limitation on the amount that can be borrowed by Goss based upon its accounts receivable, 22 inventory, equipment, real property and intellectual property. Also as part of the Second Amendment, Stonington made a capital contribution to Goss, in the form of the purchase by Stonington and the contribution to Goss of the accounts receivable previously sold to BT Commercial Corporation (see below). On November 30, 1998, Goss sold approximately $35.6 million in accounts receivable to BT Commercial Corporation. This sale was permitted by Goss's revolving credit facility and was intended to provide Goss with additional liquidity beyond what was then available under the revolving credit facility. Generally, the receivables that were sold were expected to mature between February and May, 1999. The sale was without recourse to Goss although the collectibility of the receivables was guaranteed by Stonington, a related party. Goss is party to an indenture under which it issued $225 million in subordinated notes and mortgage loans on certain of its facilities. Copies of these agreements are included as Exhibits 4.1, 4.4 and 4.5 to Goss's Form 10-K for its fiscal year ended September 30, 1997 and are incorporated herein by reference. The indenture contains cross-default provisions under which an event of default under the revolving credit facility would also be considered an event of default under the indenture. At June 30, 1999 and September 30, 1999 Goss was therefore in default under the terms of the indenture. In addition, filing a voluntary petition of bankruptcy is considered an event of default under the Company's mortgage note on its Westmont, Illinois facility and, therefore Goss was in default under the terms of the mortgage note when it filed its Chapter 11 case on July 30, 1999. Pursuant to Goss's financial restructuring activities (see Note 11 of the Notes to Consolidated Financial Statements), Goss, Stonington and certain of Goss's lenders under its revolving credit facility entered into an agreement whereby the lenders and Stonington provided Goss with debtor-in-possession financing (the DIP Facility) while Goss is in Chapter 11 proceedings. The DIP Facility allows Goss to borrow, at costs slightly higher than those contained in the revolving credit facility, an amount of up to $50 million, including up to $20 million in letters of credit. Borrowings under the DIP Facility are secured by a first priority lien on substantially all of Goss's real, personal and mixed property. The DIP Facility contains certain financial covenants, including, but not limited to, a minimum Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) test, a minimum sales test, and a maximum capital expenditures test. The DIP Facility also contains various limitations on Goss's operations and borrowings, including a limitation on the amount that can be borrowed by Goss based upon its U.S.- based accounts receivable, inventory, equipment and real property. Goss was in compliance with the financial covenants of the DIP Facility for the months ended August and September, 1999. At hearings held on October 19, 1999 and November 2, 1999, the Debtors received formal court confirmation of the plan of reorganization, as amended (the "Plan"). According to the Plan, the Company will pay all claims owed to unsecured trade creditors, including all vendors and suppliers in three equal installments at dates that are three, six and nine months after the effective date of the Plan. 23 Pursuant to the Plan, on November 19, 1999, the holders of the Company's 12% Senior Subordinated Notes Due 2006, with a principal amount outstanding of $225 million, exchanged the notes for a new note issue of Goss Holdings Inc., the new holding company into which Holdings was merged on the effective date of the Plan ("New Holdings"), with a principal amount of $112.5 million and common stock in New Holdings representing an interest of approximately 31 percent. The new note issue will have a maturity date of six years after the effective date of the Plan, and bear interest at 12.25% per annum. Interest for the two year period immediately following the effective date of the Plan will be payable by the issuance of additional new notes and interest thereafter will be payable in cash. Also pursuant to the Plan, on November 19, 1999, Stonington made a $50 million cash investment in the common stock of New Holdings and received common shares representing an interest of approximately 65 percent in exchange therefore. On November 19, 1999 New Holdings made a $50 million cash equity investment in Goss (its wholly-owned subsidiary). The proceeds of the equity investment were used by Goss to repay all outstanding borrowings under the DIP Facility. Additionally, on November 19, 1999, and also pursuant to the Plan, Goss and the lenders under its revolving credit facility entered into an amended and restated credit agreement. The new credit agreement, which amends and restates the $200 million pre-petition revolving credit facility, permits borrowings of up to $250 million, including up to $75 million in letters of credit. The new credit facility requires payment of a facility fee of $3.75 million, which was paid on the closing date, and provides for overall borrowing costs that are higher than those of the pre-petition facility. The new facility also contains certain financial covenants including, but not limited to, a minimum fixed charge coverage test and a minimum Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) test. The new facility also contains various limitations on Goss's operation and borrowing, including a limitation on the amount that can be borrowed by Goss based upon its accounts receivable, inventory, equipment and real property, and provides for scheduled repayments beginning in 2002. On November 19, 1999, the Company announced that it would transfer the assembly operations of its U.S.-based single width press lines from its Reading, Pennsylvania facility to its Cedar Rapids, Iowa facility, beginning in January 2000. The transfer will result in the closure of the Reading facility in 2000. It is anticipated that the closure will result in a material charge against earnings in the quarter ended December 31, 1999. Goss, because of the acquisition, is a highly leveraged business. As a consequence, it is dependent upon bank credit facilities to provide essential liquidity. Should Goss fail to comply with the terms of its bank credit facility at any time, it would significantly, and negatively, affect Goss's business by, among other things, restricting growth in sales or necessitating Goss's obtaining a replacement credit facility. Goss's ability to obtain a replacement facility would be dependent on the financial markets and its financial condition at that time. 24 YEAR 2000 Goss uses software and related technologies throughout its business and in certain of its products that will be affected by the Year 2000 issue which involves the inability of date sensitive computer applications to process dates beyond the year 1999. A comprehensive inventory and assessment of business systems and processes that may be affected by Year 2000 issues has been completed in each country in which Goss operates. Goss has also completed an investigation of Year 2000 issues related to the functionality of its press systems which included a comprehensive review of Goss press models sold over a period of more than thirty years and has found no date-related issues that would render presses inoperable on the arrival of the year 2000. Certain date functionality issues were identified with some older press systems and software upgrades have been developed to solve these issues. Where necessary, customers have been notified of these issues and many presses have already been upgraded. Goss's U.S. manufacturing facilities have now completed the implementation of new Year 2000 compliant manufacturing and financial applications which include general ledger, accounts receivable, accounts payable, inventory, purchasing, engineering and order entry. The Cedar Rapids implementation was completed on May 3, 1999 and the Reading implementation was completed June 25, 1999. Goss's headquarters and parts facility in Westmont, Illinois have already implemented new manufacturing and financial systems that are Year 2000 compliant. The majority of the Company's systems in Europe are already Year 2000 compliant with the exception of Nantes, France where most systems will either have codes changed on existing software or will be upgraded to Year 2000 compliant versions. These modifications are expected to be completed by December 1999. In Japan, system modification began in October 1998. Modification of individual programs has been completed. Certain non-IT systems, such as telephone and voice mail systems, time and labor collection systems and other desktop computer systems, have been assessed and all necessary upgrades have been scheduled for completion by the fourth quarter of 1999. The expected cost to convert all business systems to be Year 2000 compliant is approximately $17.6 million, the majority of which are capital expenditures. About 89% of these costs have been incurred as of September 30, 1999. These costs do not include certain costs incurred in the U.K. over the last two years to upgrade systems as part of an overall systems upgrade strategy as these costs were not tracked separately. As part of Goss's Year 2000 assessment, an evaluation is being performed of the status of certain key suppliers regarding their Year 2000 issues and how Goss may be affected. 25 Although Goss's management believes that it will be successful in avoiding any significant disruption in its business, given the complexity and number of potential risks, there can be no guarantee that the Company's efforts will be successful. If Goss's efforts to achieve Year 2000 compliance are unsuccessful, the result could have a material adverse effect on Goss's results of operations and financial condition. The potential adverse effects include the inability to order materials, manufacture and distribute products and process daily business transactions. In the event certain systems are not operational in time to avoid a Year 2000 issue, Goss has planned to manually accumulate and process data necessary to continue operations. At such time as these systems become Year 2000 compliant, the manually accumulated data will be loaded and processed into the new systems. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain of the statements contained in this Report are forward-looking. While Goss believes that these statements are accurate, Goss's business is dependent upon general economic conditions, various conditions specific to its industry, and future trends and these factors could cause actual results to differ materially from the forward-looking statements that have been made. These factors include, but are not limited to: - the Company's ability to continue as a going concern; - the availability of debtor-in-possession financing; - the Company's ability to operate successfully under a Chapter 11 proceeding; - the Company's ability to emerge from the Chapter 11 proceeding; - the Company's ability to comply with financial covenants in credit agreements; - the risk of increase in newsprint costs, which have historically negatively influenced newspaper press sales; - general economic conditions, particularly in connection with sales to newspapers, advertising expenditures and page count; - competitive pressures, including excess industry capacity; - changes in currency markets and long-term interest rates that have provided foreign competitors with pricing advantages; - the Company's ability to offer products that contain technological features sought by its customers; - changes in interest rates that would increase the Company's cost of borrowing and could decrease its liquidity; and - the Company's ability to implement operational restructuring elements, improve efficiency and obtain components at favorable prices. 26 PART II. OTHER INFORMATION Item 3. Defaults Upon Senior Securities The Company's pre-petition bank credit facility requires that the Company comply with specified financial covenants, which are measured at the end of each fiscal quarter. On June 30 and September 30, 1999 the Company was not in compliance with these covenants, which constituted an event of default under the credit facility. The lenders under that facility exercised their rights to prohibit additional borrowings under the facility. The indenture under which the Company's 12% Senior Subordinated Notes due 2006 were issued contains a cross-default provision. As a result, the event of default under the credit facility resulted in an event of default under the indenture. In addition, the pre-petition bank credit facility, the indenture, and a $30 million mortgage note on the Company's Westmont, Illinois facility provide that certain bankruptcy events, including the filing of a voluntary petition under Chapter 11, constitute events of default. At September 30, 1999, the Company had outstanding borrowings and letters of credit of $196.9 million under its pre-petition bank credit facility and there were $225 million aggregate principal amount of 12% Senior Subordinated Notes due 2006 outstanding. The balance outstanding on the mortgage note at September 30, 1999, was $28.9 million. The Company's bank lenders and holders of more than two-thirds of the outstanding principal amount of the Senior Subordinated Notes due 2006 entered into a Forbearance, Lock-Up and Voting Agreement with the Company and Stonington Partners. Item 4. Submission of Matters to a Vote of Security Holders On September 7, 1999 the Company began the solcitation of noteholder votes concerning the company's plan of reorganization. Voting on the plan of reorganization closed on October 12, 1999. The holders of the Company's 12% Senior Subordinated Notes Due 2006 who voted approved the plan of reorganization. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 2.1 Second Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, LLC Under Chapter 11 of the Bankruptcy Code, dated as of September 7, 1999. 27 PART II. OTHER INFORMATION - (CONTINUED) (b) Exhibit 2.2 Amendment to Second Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, LLC Under Chapter 11 of the Bankruptcy Code, dated as of October 21, 1999. (c) Exhibit 2.3 Second Amendment to Second Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, LLC Under Chapter 11 of the Bankruptcy Code, dated as of November 2, 1999. (d) Exhibit 27.1 Financial Data Schedule 28 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. GOSS GRAPHIC SYSTEMS, INC. Date: November 22, 1999 By: /s/ Joseph P. Gaynor, III ------------------------------------------- Joseph P. Gaynor, III, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 29 EX-2.1 2 EXHIBIT 2.1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE IN RE: ) ) CHAPTER 11 GOSS GRAPHIC SYSTEMS, INC., ET AL.,(1) ) ) CASE NO. 99-2756 (PJW) DEBTORS. ) (JOINTLY ADMINISTERED) ) - -------------------------------------------------------------------------------- SECOND AMENDED PLAN OF REORGANIZATION OF GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND GOSS REALTY, LLC UNDER CHAPTER 11 OF THE BANKRUPTCY CODE - -------------------------------------------------------------------------------- James H.M. Sprayregen Matthew N. Kleiman James W. Kapp III Chris L. Dickerson KIRKLAND & ELLIS 200 E. Randolph Drive Chicago, Illinois 60601 (312) 861-2000 Laura Davis Jones Maureen D. Luke Michael R. Nestor YOUNG CONAWAY STARGATT & TAYLOR, LLP 11th Floor, Rodney Square North PO Box 391 Wilmington, Delaware 19899-0391 (302) 571-6600 Co-Counsel to GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND GOSS REALTY, LLC Debtors and Debtors in Possession Dated: September 7, 1999 - ------------------------ (1) The Debtors are the following entities: Goss Graphic Systems, Inc., GGS Holdings, Inc., and Goss Realty, L.L.C. TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW............................1 A. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW.............................1 B. DEFINED TERMS..............................................................................1 ARTICLE II. ADMINISTRATIVE AND PRIORITY TAX CLAIMS...................................................................9 A. ADMINISTRATIVE CLAIMS......................................................................9 B. PRIORITY TAX CLAIMS........................................................................9 ARTICLE III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS.................................. 9 A. SUMMARY....................................................................................9 B. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST HOLDINGS...................................11 C. Classification and Treatment of Claims against Systems ...................................13 D. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST REALTY.....................................15 E. SPECIAL PROVISION GOVERNING UNIMPAIRED CLAIMS.............................................17 ARTICLE IV. ACCEPTANCE OR REJECTION OF THE PLAN.....................................................................18 A. VOTING CLASSES............................................................................18 B. ACCEPTANCE BY IMPAIRED CLASSES............................................................18 C. PRESUMED ACCEPTANCE OF PLAN...............................................................18 D. PRESUMED REJECTION OF PLAN................................................................18 E. NON-CONSENSUAL CONFIRMATION...............................................................18 ARTICLE V. MEANS FOR IMPLEMENTATION OF THE PLAN....................................................................18 A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED DEBTORS............18 B. CANCELLATION OF NOTES, INSTRUMENTS, MEMBER INTERESTS, COMMON STOCK AND STOCK OPTIONS............................................................19 C. ISSUANCE OF NEW SECURITIES; EXECUTION OF RELATED DOCUMENTS................................19 D. NEW HOLDINGS COMMON STOCK ................................................................19 E. NEW SYSTEMS COMMON STOCK .................................................................19 F. NEW REALTY MEMBER INTERESTS...............................................................19 G. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS, AND CORPORATE ACTION........................19 H. SOURCES OF CASH FOR PLAN DISTRIBUTION.....................................................20 ARTICLE VI. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES...................................................21 A. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES....................................21 B. CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED LEASES......................21 C. CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES ASSUMED.....................21 D. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES......................................21 E. COMPENSATION AND BENEFIT PROGRAMS.........................................................21 ARTICLE VII. PROVISIONS GOVERNING DISTRIBUTIONS......................................................................22
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PAGE ---- A. DISTRIBUTIONS FOR CLAIMS ALLOWED AS OF THE EFFECTIVE DATE.................................22 B. DISTRIBUTIONS BY THE REORGANIZED DEBTORS; DISTRIBUTIONS WITH RESPECT TO DEBT SECURITIES...22 C. DELIVERY AND DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS...................22 D. DISTRIBUTION RECORD DATE..................................................................23 E. TIMING AND CALCULATION OF AMOUNTS TO BE DISTRIBUTED.......................................23 F. MINIMUM DISTRIBUTION......................................................................23 G. SETOFFS...................................................................................24 H. SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES...........................................24 I. LOST, STOLEN, MUTILATED OR DESTROYED DEBT SECURITIES......................................24 ARTICLE VIII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS................................................................25 A. PROSECUTION OF OBJECTIONS TO CLAIMS.......................................................25 B. ESTIMATION OF CLAIMS......................................................................25 C. PAYMENTS AND DISTRIBUTIONS ON DISPUTED CLAIMS.............................................25 ARTICLE IX. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN.......................................25 A. CONDITION PRECEDENT TO CONFIRMATION.......................................................25 B. CONDITIONS PRECEDENT TO CONSUMMATION......................................................26 C. WAIVER OF CONDITIONS......................................................................26 D. EFFECT OF NON-OCCURRENCE OF CONDITIONS TO CONSUMMATION....................................26 ARTICLE X. RELEASE, INJUNCTIVE AND RELATED PROVISIONS..............................................................26 A. SUBORDINATION.............................................................................26 B. LIMITED RELEASES BY THE DEBTORS...........................................................27 C. LIMITED RELEASES BY HOLDER OF CLAIMS......................................................27 D. PRESERVATION OF RIGHTS OF ACTION..........................................................27 E. EXCULPATION...............................................................................28 F. INJUNCTION................................................................................28 ARTICLE XI. RETENTION OF JURISDICTION...............................................................................28 ARTICLE XII. MISCELLANEOUS PROVISIONS................................................................................29 A. DISSOLUTION OF COMMITTEE(S)...............................................................29 B. PAYMENT OF STATUTORY FEES.................................................................29 C. FEES AND EXPENSES OF THE PREPETITION NOTEHOLDERS COMMITTEE................................29 D. DISCHARGE OF DEBTORS......................................................................30 E. MODIFICATION OF PLAN......................................................................30 F. REVOCATION OF PLAN........................................................................30 G. SUCCESSORS AND ASSIGNS....................................................................30 H. RESERVATION OF RIGHTS.....................................................................30 I. SECTION 1146 EXEMPTION....................................................................30 J. FURTHER ASSURANCES........................................................................30 K. SERVICE OF DOCUMENTS......................................................................31 L. FILING OF ADDITIONAL DOCUMENTS............................................................32
ii - -------------------------------------------------------------------------------- PLAN OF REORGANIZATION OF GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND GOSS REALTY, LLC UNDER CHAPTER 11 OF THE BANKRUPTCY CODE - -------------------------------------------------------------------------------- Pursuant to chapter 11, title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, LLC, debtors and debtors-in-possession in the above-captioned and numbered cases, hereby respectfully propose the following Plan of Reorganization under chapter 11 of the Bankruptcy Code: ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW A. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW 1. For purposes of the Plan: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and the neuter gender; (b) any reference in the Plan to a contract, instrument, release, indenture or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (c) any reference in the Plan to an existing document or exhibit Filed, or to be Filed, shall mean such document or exhibit, as it may have been or may be amended, modified or supplemented; (d) unless otherwise specified, all references in the Plan to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits of or to the Plan; (e) the words "herein" and "hereto" refer to the Plan in its entirety rather than to a particular portion of the Plan; (f) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (g) the rules of construction set forth in section 102 of the Bankruptcy Code shall apply; and (h) any term used in capitalized form in the Plan that is not defined herein but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as the case may be. 2. In computing any period of time prescribed or allowed by the Plan, the provisions of Bankruptcy Rule 9006(a) shall apply. 3. Except to the extent that the Bankruptcy Code or Bankruptcy Rules are applicable, and subject to the provisions of any contract, instrument, release, indenture or other agreement or document entered into in connection with the Plan, the rights and obligations arising under the Plan shall be governed by, and construed and enforced in accordance with, the laws of the State in which the Bankruptcy Court resides, without giving effect to the principles of conflict of laws thereof. B. DEFINED TERMS Unless the context otherwise requires, the following terms shall have the following meanings when used in capitalized form in the Plan: 1. "Administrative Claim" means a Claim for costs and expenses of administration under section 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses incurred after the Petition Date of preserving the Estates and -1- operating the businesses of the Debtors (such as wages, salaries or commissions for services and payments for goods and other services and leased premises); (b) compensation for legal, financial advisory, accounting and other services and reimbursement of expenses awarded or allowed under section 330(a) or 331 of the Bankruptcy Code; and (c) all fees and charges assessed against the Estates under chapter 123 of title 28 United States Code, 28 U.S.C. Sections 1911-1930. 2. "Allowed" means, with respect to any Claim, except as otherwise provided herein: (a) a Claim that has been scheduled by the Debtors in their schedules of liabilities as other than disputed, contingent or unliquidated and as to which the Debtors or other party in interest have not Filed an objection by the Effective Date; (b) a Claim that either is not a Disputed Claim or has been allowed by a Final Order; (c) a Claim that is allowed: (i) in any stipulation with the Debtors of amount and nature of Claim executed prior to the Confirmation Date and approved by the Bankruptcy Court; (ii) in any stipulation with the Debtors of amount and nature of Claim executed on or after the Confirmation Date and, to the extent necessary, approved by the Bankruptcy Court; or (iii) in any contract, instrument, indenture or other agreement entered into or assumed in connection with the Plan; (d) a Claim relating to a rejected executory contract or unexpired lease that either (i) is not a Disputed Claim or (ii) has been allowed by a Final Order, in either case only if a proof of Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law; or (e) a Claim that is allowed pursuant to the terms of this Plan. 3. "Allowed ... Claim" means an Allowed Claim in the particular Class described. 4. "Amended Certificates of Incorporation" means the Certificates of Incorporation of New Holdings and Systems as Reorganized Debtors, as restated as described in Article V.G.1 of the Plan, the forms of which shall be Filed on or before the Confirmation Date. 5. "Amended Certificate of Formation" means the Certificate of Formation of Realty as a Reorganized Debtor, as restated as described in Article V.G.1 of the Plan, the form of which shall be Filed on or before the Conformation Date. 6. "Ballot Date" means the date stated in the Voting Instructions by which all Ballots must be received. 7. "Ballots" mean the ballots accompanying the Disclosure Statement upon which Holders of Impaired Claims shall indicate their acceptance or rejection of the Plan in accordance with the Plan and the Voting Instructions. 8. "Bankruptcy Code" means title I of the Bankruptcy Reform Act of 1978, as amended from time to time, as set forth in sections 101 et seq. of title 11 of the United States Code, and applicable portions of titles 18 and 28 of the United States Code. 9. "Bankruptcy Court" means the United States District Court having jurisdiction over the Chapter 11 Cases and, to the extent of any reference made pursuant to section 157 of title 28 of the United States Code and/or the General Order of such District Court pursuant to section 151 of title 28 of the United States Code, the bankruptcy unit of such District Court. 10. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as amended from time to time, as applicable to the Chapter 11 Cases, promulgated under 28 U.S.C. Section 2075 and the General, Local and Chambers Rules of the Bankruptcy Court. 11. "Bar Date" means the Bar Date for filing of proofs of claim with respect to executory contracts and unexpired leases which are rejected pursuant to this Plan or otherwise pursuant to section 365 of the Bankruptcy Code. -2- 12. "Beneficial Holder" means the Person or Entity holding the beneficial interest in a Claim or Equity Interest. 13. "Business Day" means any day, other than a Saturday, Sunday or legal holiday (as defined in Bankruptcy Rule 9006(a)). 14. "By-Laws" mean the By-Laws of the Reorganized Debtors, the forms of which shall be Filed on or before the Confirmation Date. 15. "Cash" means cash and cash equivalents. 16. "Causes of Action" mean all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialities, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages or judgments. 17. "Chapter 11 Cases" means the cases under chapter 11 of the Bankruptcy Code, commenced by the Debtors in the Bankruptcy Court. 18. "Claim" means a claim (as defined in section 101(5) of the Bankruptcy Code) against the Debtors, including, but not limited to: (a) any right to payment from the Debtors whether or not such right is reduced to judgment, liquidated, unliquidated, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (b) any right to an equitable remedy for breach of performance if such performance gives rise to a right of payment from the Debtors, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. 19. "Claim Holder" or "Claimant" means the Holder of a Claim. 20. "Class" means a category of Holders of Claims or Equity Interests as set forth in Article III of the Plan. 21. "Committee" or "Committees" means a statutory official committee (or committees, if more than one) appointed in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, if any. 22. "Common Stock" means the authorized common stock of Holdings, New Holdings and Systems. 23. "Confirmation" means the entry of the Confirmation Order, subject to all conditions specified in Article IX.A of the Plan having been (i) satisfied or (ii) waived pursuant to Article IX.C. 24. "Confirmation Date" means the date upon which the Confirmation Order is entered by the Bankruptcy Court in its docket, within the meaning of Bankruptcy Rules 5003 and 9021. 25. "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code. 26. "Consummation" means the occurrence of the Effective Date. 27. "Creditor" means any Holder of a Claim. 28. "Creditors' Committee" means that certain official committee of general unsecured creditors appointed August 20, 1999, consisting of Alliance Capital Management L.P., C.S. First Boston, HSBC Bank USA, Merrill Lynch Phoenix Fund, Inc., Megtec Systems, Baldwin Technology Corp. and Trace-a-matic Corp. -3- 29. "D&O Releasees" means all officers, directors, employees, attorneys, financial advisors, accountants, investment bankers, agents and representatives of the Debtors and their subsidiaries who served in such capacity on or after August 1, 1998 in each case in their capacity as such. 30. "Debtors" means Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty L.L.C., as debtors in the Chapter 11 Cases. 31. "Debtors in Possession" means Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty LLC, as debtors in possession in the Chapter 11 Cases. 32. "Delaware General Corporation Law" means title 8 of the Delaware Code, as now in effect or hereafter amended. 33. "Delaware LLC Law" means title 6 of the Delaware Code, as now in effect or hereafter amended. 34. "DIP Facility" means, collectively, that certain Debtor-in-Possession Multicurrency Credit Agreement with the DIP Lenders and the Amendment to Multicurrency Credit Agreement with the Prepetition Lenders and Bankers Trust Company, as agent. 35. "DIP Lenders" means those certain financial institutions party to the DIP Facility. 36. "Disclosure Statement" means the Disclosure Statement for the Plan of Reorganization for Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty L.L.C. under chapter 11 of the Bankruptcy Code, as amended, supplemented, or modified from time to time, describing the Plan, that is prepared and distributed in accordance with sections 1125, 1126(b) and/or 1145 of the Bankruptcy Code and Bankruptcy Rule 3018 and/or other applicable law. 37. "Disputed" means, with respect to any Claim or Equity Interest, any Claim or Equity Interest: (a) listed on the Schedules as unliquidated, disputed or contingent; or (b) as to which the Debtors or any other party in interest have interposed a timely objection or request for estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules or is otherwise disputed by the Debtors in accordance with applicable law, which objection, request for estimation or dispute has not been withdrawn or determined by a Final Order. 38. "Distribution Record Date" means the close of business on the Business Day immediately preceding the Effective Date. 39. "Effective Date" means the date selected by the Debtors which is a Business Day after the Confirmation Date on which: (a) no stay of the Confirmation Order is in effect, and (b) all conditions specified in both Article IX.A and IX.B of the Plan have been (i) satisfied or (ii) waived pursuant to Article IX.C. 40. "Entity" means an entity as defined in section 101(15) of the Bankruptcy Code. 41. "Equity Interest" means any equity interest of the Debtors, including, but not limited to, all issued, unissued, authorized or outstanding shares or stock (including the Common Stock), together with any warrants, options or contract rights to purchase or acquire such interests at any time. 42. "Estates" means the estates of the Debtors created by section 541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases. 43. "File" or "Filed" means file or filed with the Bankruptcy Court in the Chapter 11 Cases. 44. "Final Decree" means the decree contemplated under Bankruptcy Rule 3022. -4- 45. "Final Order" means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction with respect to the subject matter, which has not been reversed, stayed, modified or amended, and as to which the time to appeal or seek certiorari has expired and no appeal or petition for certiorari has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been or may be filed has been resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought. 46. "General Unsecured Claim" means any Unsecured Claim that is not a Pre-petition Bank Lender Claim or Old Note Claim. 47. "Goss France" means Goss Systemes Graphiques Nantes SA. 48. "Goss Japan" means Goss Graphic Systems Japan Corporation. 49. "Goss UK" means Goss Graphic Systems, Limited. 50. "Holder" means a Person or Entity holding an Equity Interest or Claim, and with respect to a vote on the Plan, means the Beneficial Holder as of the Voting Record Date or any authorized signatory who has completed and executed a Ballot or on whose behalf a Master Ballot has been completed and executed in accordance with the Voting Instructions. 51. "Holdings" or "Goss Holdings" means GGS Holdings, Inc., debtor and debtor in possession in the above-captioned and numbered case. 52. "HSBC" means HSBC Bank USA (f/k/a Marine Midland Bank). 53. "Impaired Claim" means a Claim classified in an Impaired Class. 54. "Impaired Class" means each of Classes H2, H4, H5, H6, H7, S2, S4, S5, S6, R4, R5, and R6 as set forth in Article III of the Plan. 55. "LaSalle Deficiency Claim" means the Unsecured Claim arising from or related to the LaSalle Mortgage, as such Claim is determined in accordance with section 506(a) of the Bankruptcy Code. 56. "LaSalle Mortgage" means that certain $30,000,000 mortgage by Realty for the benefit of LaSalle National Bank dated July 25, 1997, together with all related notes, certificates, security agreements, mortgages, pledges, indemnities, collateral assignments, undertakings, guaranties, and other instruments and documents, as each may have been amended or modified from time to time. 57. "LaSalle Secured Claim" means the Secured Claim arising from or related to the LaSalle Mortgage. 58. "Lock-Up Agreement" means that certain Forbearance, Lock-Up, and Voting Agreement dated July 27, 1999, by and among the Debtors, Stonington, certain of the lenders under the Prepetition Bank Credit Facilities and certain Holders of Old Notes that are signatories thereto. 59. "Management Equity" means that certain New Holdings Common Stock and related Equity Interests provided to certain management of the Debtors and/or Reorganized Debtors pursuant to the terms of the Lock-Up Agreement. 60. "Master Ballots" mean the master ballots accompanying the Disclosure Statement upon which the Nominees of the Beneficial Holders of the Old Notes shall indicate acceptances or rejections of the Plan by the Beneficial Holders in accordance with the Voting Instructions. -5- 61. "Member Interest" means the authorized member interest of Realty. 62. "New Bank Credit Facilities" means, collectively, the Tranche A Revolving Credit Facility, the Tranche B Revolving Credit Facility and the Term Loan Facility. 63. "New Holdings" means the new Delaware corporation created on the Effective Date through a merger with Holdings whose articles of incorporation and by-laws will be substantially similar to those of Holdings. 64. "New Holdings Common Stock" means the 15,000,000 shares of Common Stock of New Holdings authorized pursuant to the Certificate of Incorporation of New Holdings. 65. "New Notes" means those certain 12.25% Subordinated Notes due 2005 issued by New Holdings, issued to the Holders of Allowed Claims in Class S5, with the terms and conditions set forth in the Lock-Up Agreement, the form of which shall be Filed on or before the Confirmation Date. 66. "New Notes Indenture" means the indenture, dated as of the Effective Date, with respect to the New Notes to be entered into by New Holdings and the Old Note Indenture Trustee who shall serve as indenture trustee under the New Note Indenture. 67. "New Realty Member Interest" means the member interest of the Reorganized Realty authorized pursuant to the Amended Certificate of Formation. 68. "New Systems Common Stock" means the 100 shares of Common Stock of the Reorganized Systems authorized pursuant to the Amended Certificate of Incorporation. 69. "Nominee" means any Beneficial Holder whose securities were registered or held of record in the name of his broker, dealer, commercial bank, trust company, savings and loan or other nominee. 70. "Noteholder Releasees" means the members of the Prepetition Noteholders Committee and other holders of Old Notes that are signatories to the Lock-Up Agreement and their attorneys, financial advisors, accountants, investment banker, agents and representatives. 71. "Old Note Claims" means all Claims arising from or related to the Old Notes or the Old Note Indenture. 72. "Old Notes" mean the 12% notes due 2006, issued by Systems under the Old Note Indenture. 73. "Old Note Indenture" means the Indenture, dated as of October 15, 1996, between Systems and The Bank of New York, as trustee and HSBC Bank USA as successor trustee, relating to the Old Notes. 74. "Other Priority Claims" mean any Claim accorded priority in right of payment under section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim or an Administrative Claim. 75. "Other Secured Claims" mean, collectively, all Secured Claims against the Debtors held by any Person or Entity, other than Claims classified in Class H2, S2 and R2. 76. "Person" means a person as defined in section 101(41) of the Bankruptcy Code. 77. "Petition Date" means the date on which the Debtors filed their petition for relief commencing the Chapter 11 Case. 78. "Plan" means this Chapter 11 Plan of Reorganization, either in its present form or as it may be altered, amended, modified or supplemented from time to time in accordance with the Plan, the Bankruptcy Code and the Bankruptcy Rules. -6- 79. "Prepetition Bank Credit Facility" means that certain $200 million Amended and Restated Credit Agreement dated January 29, 1998, by and among Systems, Goss Japan, Goss France and Goss UK, the Lenders designated therein, Bankers Trust Company, as Administrative Agent and Credit Suisse First Boston, as Syndication Agent, together with all related notes, certificates, security agreements, mortgages, pledges, indemnities, collateral assignments, undertakings, guaranties, and other instruments and documents, as each may have been amended or modified from time to time. 80. "Prepetition Bank Secured Claims" means all Claims arising from or relating to the Prepetition Bank Credit Facility, which Claims shall be deemed Allowed without the need to file any proof of Claim. 81. "Prepetition Bank Unsecured Claims" means all Claims of Holders of Unsecured Claims against Realty arising from Realty's guarantee of the Prepetition Bank Credit Facility. 82. "Prepetition Lenders" means those certain financial institutions party to the Prepetition Bank Credit Facility. 83. "Prepetition Lender Releasees" means the Prepetition Lenders, the Administrative Agent under the Prepetition Bank Credit Facility, and their attorneys, financial advisors, accountants, investment banker, agents and representatives. 84. "Prepetition Noteholder Committee" means that committee of certain holders of the Old Notes and the Old Notes Indenture Trustee established prior to the Petition Date. 85. "Priority Tax Claim" means a Claim of a governmental unit of the kind specified in section 507(a)(8) of the Bankruptcy Code. 86. "Pro Rata" means proportionately so that with respect to an Allowed Claim, the ratio of (a) (i) the amount of property distributed on account of a particular Allowed Claim to (ii) the amount of the Allowed Claim, is the same as the ratio of (b) (i) the amount of property distributed on account of all Allowed Claims of the Class in which the particular Allowed Claim is included to (ii) the amount of all Allowed Claims in that Class. 87. "Professionals" means a Person or Entity (a) employed pursuant to a Final Order in accordance with sections 327 and 1103 of the Bankruptcy Code and to be compensated for services rendered prior to the Effective Date, pursuant to sections 327, 328, 329, 330 and 331 of the Bankruptcy Code, or (b) for which compensation and reimbursement has been allowed by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code. 88. "Realty" or "Goss Realty" means Goss Realty L.L.C., debtor and debtor in possession in the above-captioned and numbered case. 89. "Reorganized Debtors" means the Debtors and the Debtors in Possession, or any successor thereto, by merger, consolidation, or otherwise, on and after the Effective Date. 90. "Reorganized Holdings" means Holdings, or any successor thereto, by merger, consolidation, or otherwise, on and after the Effective Date. 91. "Reorganized Realty" means Realty, or any successor thereto, by merger, consolidation, or otherwise, on and after the Effective Date. 92. "Reorganized Systems" means Systems, or any successor thereto, by merger, consolidation, or otherwise, on and after the Effective Date. 93. "Rockwell" means Rockwell International Corporation, a Delaware corporation. -7- 94. "Rockwell Preferred Stock" means the 6.5% Redeemable Pay-in-Kind Preferred Stock of Holdings issued to Rockwell. 95. "Schedules" mean the schedules of assets and liabilities, schedules of executory contracts, and the statement of financial affairs as the Bankruptcy Court requires the Debtors to file pursuant to section 521 of the Bankruptcy Code, the Official Bankruptcy Forms and the Bankruptcy Rules, as they may be amended and supplemented from time to time. 96. "Secured Claim" means (a) a Claim that is secured by a lien on property in which the Estates have an interest, which lien is valid, perfected and enforceable under applicable law or by reason of a Final Order, or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim Holder's interest in the Estates' interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code, or (b) a Claim Allowed under this Plan as a Secured Claim. 97. "Securities Act" means the Securities Act of 1933, 15 U.S.C. sections 77a-77aa, as now in effect or hereafter amended. 98. "Stonington" means Stonington Partners, Inc., a Delaware corporation. 99. "Stonington Capital Contribution" means that certain $50 million contribution of capital to the Debtors made pursuant to the terms of the Lock-Up Agreement, and in exchange for which on the Effective Date Stonington shall receive 6,750,000 shares of New Holdings Common Stock, subject to dilution by the Management Equity as provided under the Lock-Up Agreement. 100. "Stonington Preferred Stock" means the 15% Cumulative Senior Convertible Preferred Stock of Holdings issued to Stonington. 101. "Stonington Releasees" means Stonington and their current and former parents, subsidiaries and affiliates and their respective officers, directors, employees, attorneys, financial advisors, accountants, investment bankers, agents and representatives, in each case in their capacity as such. 102. "Systems" or "Goss Graphic Systems" means Goss Graphic Systems, Inc., debtor and debtor in possession in the above-captioned and numbered case. 103. "Term Loan Facility" means that certain $150 million Term Loan Facility, by and among Systems, certain of its affiliates, and the Prepetition Lenders, the form of which shall be Filed on or before the Confirmation Date and which is referenced in the Lock-Up Agreement. 104. "Tranche A Revolving Credit Facility" means that certain $50 million Revolving Credit Facility, by and among Systems, certain of its affiliates and the lender parties thereto (excluding Stonington), the form of which shall be Filed on or before the Confirmation Date and which is referenced in the Lock-Up Agreement. 105. "Tranche B Revolving Credit Facility" means that certain $50 million Revolving Credit Facility, by and among Systems, certain of its affiliates and the Prepetition Lenders, the form of which shall be Filed on or before the Confirmation Date and which is referenced in the Lock-Up Agreement. 106. "Unimpaired Claim" means an unimpaired Claim within the meaning of section 1124 of the Bankruptcy Code. 107. "Unimpaired Class" means an unimpaired Class within the meaning of section 1124 of the Bankruptcy Code. -8- 108. "Unsecured Claim" means any Claim against the Debtors that is not a Secured Claim, Administrative Claim, Priority Tax Claim or Other Priority Claim. 109. "Voting Instructions" mean the instructions for voting on the Plan contained in the section of the Disclosure Statement entitled "PROCESS OF VOTING AND CONFIRMATION; VOTING ON THE PLAN" and in the Ballots and the Master Ballots. 110. "Voting Record Date" means July 27, 1999. ARTICLE II. ADMINISTRATIVE AND PRIORITY TAX CLAIMS A. ADMINISTRATIVE CLAIMS Subject to the provisions of section 330(a) and 331 of the Bankruptcy Code, each Holder of an Allowed Administrative Claim will be paid the full unpaid amount of such Allowed Administrative Claim in Cash on the Effective Date, or upon such other terms as may be agreed upon by such Holder and the Reorganized Debtors or otherwise upon order of the Bankruptcy Court; provided, however, that Allowed Administrative Claims representing obligations incurred in the ordinary course of business or otherwise assumed by the Debtors pursuant to the Plan will be assumed on the Effective Date and paid or performed by the Reorganized Debtors when due in accordance with the terms and conditions of the particular agreements governing such obligations. B. PRIORITY TAX CLAIMS On the Effective Date, each Holder of a Priority Tax Claim due and payable on or prior to the Effective Date shall be paid Cash in an amount equal to the amount of such Allowed Claim, or shall be paid on account of its Allowed Claim on such other terms as have been or may be agreed upon by such Holder and the Debtors. The amount of any Priority Tax Claim that is not an Allowed Claim or that is not otherwise due and payable on or prior to the Effective Date, and the rights of the Holder of such Claim, if any, to payment in respect thereof shall (i) be determined in the manner in which the amount of such Claim and the rights of the Holder of such Claim would have been resolved or adjudicated if the Chapter 11 Cases had not been commenced, (ii) survive the Effective Date and Consummation of the Plan as if the Chapter 11 Cases had not been commenced, and (iii) not be discharged pursuant to section 1141 of the Bankruptcy Code. In accordance with section 1124 of the Bankruptcy Code, the Plan shall leave unaltered the legal, equitable, and contractual rights of each Holder of a Priority Tax Claim. ARTICLE III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS A. SUMMARY The categories of Claims and Equity Interests listed below classify Claims and Equity Interests for all purposes, including voting, confirmation and distribution pursuant to the Plan and pursuant to sections 1122 and 1123(a)(1) of the Bankruptcy Code. A Claim or Equity Interest shall be deemed classified in a particular Class only to the extent that the Claim or Equity Interest qualifies within the description of that Class and shall be deemed classified in a different Class to the extent that any remainder of such Claim or Equity Interest qualifies within the description of such different ClaSection A Claim or Equity Interest is in a particular Class only to the extent that such Claim or Equity Interest is Allowed in that Class and has not been paid or otherwise settled prior to the Effective Date. THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED, SUBSTANTIVELY OR OTHERWISE. EXCEPT AS PROVIDED IN THE LOCK-UP AGREEMENT, THE CLAIMS HELD -9- AGAINST ONE OF THE DEBTORS WILL BE SATISFIED SOLELY FROM THE CASH AND ASSETS OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NOTHING IN THIS PLAN OR THE DISCLOSURE STATEMENT SHALL CONSTITUTE OR BE DEEMED TO CONSTITUTE AN ADMISSION THAT ONE OF THE DEBTORS IS SUBJECT TO OR LIABLE FOR ANY CLAIM AGAINST THE OTHER DEBTOR. THE CLAIMS OF CREDITORS THAT HOLD CLAIMS AGAINST ALL THREE DEBTORS WILL BE TREATED AS SEPARATE CLAIMS WITH RESPECT TO EACH DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT LIMITED TO, DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS PROVIDED IN THE PLAN. The classification of Claims and Equity Interests against Holdings pursuant to this Plan is as follows:
CLASS STATUS VOTING RIGHTS ----- ------ ------------- Class H1 -- Other Priority Claims Unimpaired -- not entitled to vote Class H2 -- Prepetition Bank Secured Claims Impaired -- entitled to vote Class H3 -- Other Secured Claims Unimpaired -- not entitled to vote Class H4 -- General Unsecured Claims Impaired -- not entitled to vote Class H5 -- Stonington Preferred Equity Interests Impaired -- not entitled to vote Class H6 -- Rockwell Preferred Equity Interests Impaired -- not entitled to vote Class H7 -- Equity Interests Impaired -- not entitled to vote
The classification of Claims and Equity Interests against Systems pursuant to this Plan is as follows:
CLASS STATUS VOTING RIGHTS ----- ------ ------------- Class S1 -- Other Priority Claims Unimpaired -- not entitled to vote Class S2 -- Prepetition Bank Secured Claims Impaired -- entitled to vote Class S3 -- Other Secured Claims Unimpaired -- not entitled to vote Class S4 -- General Unsecured Claims Impaired -- entitled to vote Class S5 -- Old Note Claims Impaired -- entitled to vote Class S6 -- Equity Interests Impaired -- not entitled to vote
The classification of Claims and Equity Interests against Realty pursuant to this Plan is as follows:
CLASS STATUS VOTING RIGHTS ----- ------ ------------- Class R1 -- Other Priority Claims Unimpaired -- not entitled to vote Class R2 -- LaSalle Secured Claims Unimpaired -- not entitled to vote Class R3 -- Other Secured Claims Unimpaired -- not entitled to vote
-10-
CLASS STATUS VOTING RIGHTS ----- ------ ------------- Class R4 -- Bank Unsecured Claims Impaired -- entitled to vote Class R5 -- General Unsecured Claims Impaired -- entitled to vote Class R6 -- LaSalle Deficiency Claims Impaired -- entitled to vote Class R7 -- Equity Interests Impaired -- not entitled to vote
B. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST HOLDINGS 1. CLASS H1 -- OTHER PRIORITY CLAIMS (a) CLASSIFICATION: Class H1 consists of all Other Priority Claims against Holdings. (b) TREATMENT: The legal, equitable and contractual rights of the Holders of Class H1 Claims are unaltered by the Plan. Unless the Holder of such Claim and Holdings agree to a different treatment, each Holder of an Allowed Class H1 Claim shall receive one of the following alternative treatments, at the election of the Debtor: (i) to the extent then due and owing on the Effective Date, such Claim will be paid in full in Cash by Reorganized Holdings; (ii) to the extent not due and owing on the Effective Date, such Claim (A) will be paid in full in Cash by Reorganized Holdings, or (B) will be paid in full in Cash by Reorganized Holdings when and as such Claim becomes due and owing in the ordinary course of business; or (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class H1 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class H1 is not impaired and the Holders of Class H1 Claims are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class H1 are not entitled to vote to accept or reject the Plan. 2. CLASS H2 -- PREPETITION BANK SECURED CLAIMS (a) CLASSIFICATION: Class H2 consists of the Bank Secured Claims against Holdings. (b) TREATMENT: In full and complete satisfaction of all Claims in Class H2, the Holders of Class H2 Claims will receive the treatment set forth for Holders of Class S2 Claims described below. (c) VOTING: Class H2 is impaired and the Holders of Class H2 Claims are entitled to vote to accept or reject the Plan. 3. CLASS H3 -- OTHER SECURED CLAIMS (a) CLASSIFICATION: Class H3 consists of the Other Secured Claims against Holdings. -11- (b) TREATMENT: The legal, equitable and contractual rights of the Holders of Class H3 Claims are unaltered by the Plan. Unless the Holder of such Claim and Holdings agree to a different treatment, each Holder of an Allowed Class H3 Claim shall receive one of the following alternative treatments, at the election of Holdings: (i) the legal, equitable and contractual rights to which such Claim entitles the Holder thereof shall be unaltered by the Plan; (ii) Holdings shall surrender all collateral securing such Claim to the Holder thereof, without representation or warranty by or recourse against the Debtor or Reorganized Holdings; or (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class H3 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class H3 is not impaired and the Holders of Class H3 Claims are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class H3 are not entitled to vote to accept or reject the Plan. 4. CLASS H4 -- GENERAL UNSECURED CLAIMS (a) CLASSIFICATION: Class H4 consists of the Claims of Holders of General Unsecured Claims against Holdings. (b) TREATMENT: On the Effective Date, the Holders of General Unsecured Claims shall neither receive any distributions nor retain any property under the Plan. (c) VOTING: Class H4 is impaired, but because no distributions will be made to Holders of Class H4 General Unsecured Claims nor will such Holders retain any property, such Holders are deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy Code. Class H4 is not entitled to vote to accept or reject the Plan. 5. CLASS H5 -- STONINGTON PREFERRED EQUITY INTERESTS (a) CLASSIFICATION: Class H5 consists of all Equity Interests held by Stonington relating to the 10% Cumulative Senior Convertible Preferred Stock of Holdings. (b) TREATMENT: On the Effective Date, the Holders of Stonington Preferred Equity Interests shall neither receive any distributions nor retain any property under the Plan. All Stonington Preferred Stock issued before the Petition Date will be canceled. (c) VOTING: Class H5 is impaired, but because no distributions will be made to Holders of Class H5 Equity Interests nor will such Holders retain any property, such Holders are deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy Code. Class H5 is not entitled to vote to accept or reject the Plan. 6. CLASS H6 -- ROCKWELL PREFERRED EQUITY INTERESTS (a) CLASSIFICATION: Class H6 consists of all Equity Interests held by Rockwell against Holdings relating to the 6.5% Redeemable Preferred Stock. -12- (b) TREATMENT: On the Effective Date, the Holders of Other Equity Interests shall neither receive any distributions nor retain any property under the Plan. All Rockwell Preferred Stock issued before the Petition Date will be canceled. (c) VOTING: Class H6 is impaired, but because no distributions will be made to Holders of Class H6 Equity Interests nor will such Holders retain any property, such Holders are deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy Code. Class H6 is not entitled to vote to accept or reject the Plan. 7. CLASS H7 -- EQUITY INTERESTS (a) CLASSIFICATION: Class H7 consists of all other Equity Interests against Holdings. (b) TREATMENT: On the Effective Date, the Holders of other Equity Interests shall neither receive any distributions nor retain any property under the Plan. All Common Stock issued before the Petition Date will be canceled. (c) VOTING: Class H7 is impaired, but because no distributions will be made to Holders of Class H7 Equity Interests nor will such Holders retain any property, such Holders are deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy Code. Class H7 is not entitled to vote to accept or reject the Plan. C. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST SYSTEMS 1. CLASS S1 -- OTHER PRIORITY CLAIMS (a) CLASSIFICATION: Class S1 consists of all Other Priority Claims against Systems. (b) TREATMENT: The legal, equitable and contractual rights of the Holders of Class S1 Claims are unaltered by the Plan. Unless the Holder of such Claim and Systems agree to a different treatment, each Holder of an Allowed Class S1 Claim shall receive one of the following alternative treatments, at the election of Systems: (i) to the extent then due and owing on the Effective Date, such Claim will be paid in full in Cash by the Reorganized Systems; (ii) to the extent not due and owing on the Effective Date, such Claim (A) will be paid in full in Cash by the Reorganized Systems, or (B) will be paid in full in Cash by the Reorganized Systems when and as such Claim becomes due and owing in the ordinary course of business; or (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class S1 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class S1 is not impaired and the Holders of Class S1 Claims are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class S1 are not entitled to vote to accept or reject the Plan. 2. CLASS S2 -- PREPETITION BANK SECURED CLAIMS (a) CLASSIFICATION: Class S2 consists of the Prepetition Bank Secured Claims against Systems. -13- (b) TREATMENT: On or prior to the Effective Date, each Prepetition Bank Secured Claim will be satisfied by the Holder receiving and providing its Pro Rata share of the Tranche B Revolving Credit Facility and the Term Loan Facility, so that each Class S2 Claim is paid in full. The form and substance of the definitive documentation constituting the Tranche B Revolving Credit Facility and the Term Loan Facility shall be satisfactory to sufficient Holders of Class S2 claims so that such Class will be deemed to accept such documentation. (c) VOTING: Class S2 is impaired and the Holders of Class S2 Claims are entitled to vote to accept or reject the Plan. 3. CLASS S3 -- OTHER SECURED CLAIMS (a) CLASSIFICATION: Class S3 consists of the Other Secured Claims against Systems. (b) TREATMENT: The legal, equitable and contractual rights of the Holders of Class S3 Claims are unaltered by the Plan. Unless the Holder of such Claim and Systems agree to a different treatment, each Holder of an Allowed Class S3 Claim shall receive one of the following alternative treatments, at the election of Systems: (i) the legal, equitable and contractual rights to which such Claim entitles the Holder thereof shall be unaltered by the Plan; (ii) Systems shall surrender all collateral securing such Claim to the Holder thereof, without representation or warranty by or recourse against Systems or the Reorganized Systems; or (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class S3 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class S3 is not impaired and the Holders of Class S3 Claims are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class S3 are not entitled to vote to accept or reject the Plan. 4. CLASS S4 -- GENERAL UNSECURED CLAIMS (a) CLASSIFICATION: Class S4 consists of the Claims of Holders of General Unsecured Claims against Systems. (b) TREATMENT: Unless the Holder of such Claim and Systems agree to a different treatment, each Holder of an Allowed Class S4 Claim shall be paid the full amount of its Allowed Class S4 Claim, without interest, payable in three equal installments on the first Business Day after the dates that are three, six and nine months after the Effective Date, or on such dates thereafter if the Claim becomes first payable in the ordinary course of business at such time. Unless the Holder of such Claim and Systems agree to a different treatment, and except as otherwise specifically provided herein, each Holder of a non-Allowed Class S4 Claim shall preserve all of its rights, claims and defenses against Systems; provided, however, that if any such non-Allowed Class S4 Claim becomes a liquidated, undisputed, fixed Claim (i) prior to the date that is three months after the Effective Date, such Claim shall be paid as if such Claim were allowed as of the Effective Date, or (ii) prior to the date that is six months after the Effective Date, such Claim shall be paid two-thirds of the Allowed amount on the date that is six months after the Effective Date and one-third of the Allowed amount on the date that is nine months after the Effective Date, or (iii) -14- prior to the date that is nine months after the Effective Date, such Claim shall be paid in full on the date that is nine months after the Effective Date; provided, further, that Systems shall preserve all of its rights, claims and defenses against each Holder of a non-Allowed Class S4 Claim. Any default with respect to any Class S4 Claim that existed immediately prior to the filing of the Chapter 11 Cases shall be deemed cured upon the Effective Date. (c) VOTING: Class S4 is impaired and the Holders of Class S4 Claims are entitled to vote to accept or reject the Plan. 5. CLASS S5 -- OLD NOTE CLAIMS (a) CLASSIFICATION: Class S5 consists of the Claims of Holders of Old Notes against Systems. (b) TREATMENT: On or as soon as practicable after the Effective Date, each Holder of an Allowed Old Note Claim shall receive, in full and final satisfaction of such Claim, a Pro Rata distribution of the New Notes and a Pro Rata share of 3,250,000 shares of New Holdings Common Stock, subject to dilution by the Management Equity as provided under the Lock-Up Agreement. (c) VOTING: Class S5 is impaired and the Holders of Allowed Class S5 Claims are entitled to vote to accept or reject the Plan. 6. CLASS S6 -- EQUITY INTERESTS (a) CLASSIFICATION: Class S6 consists of all Equity Interests against Systems. (b) TREATMENT: On the Effective Date, the Holders of Equity Interests shall neither receive any distributions nor retain any property under the Plan. All Common Stock issued before the Petition Date will be canceled. (c) VOTING: Class S6 is impaired, but because no distributions will be made to Holders of Class S6 Equity Interests nor will such Holders retain any property, such Holders are deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy Code. Class S6 is not entitled to vote to accept or reject the Plan. D. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST REALTY 1. CLASS R1 -- OTHER PRIORITY CLAIMS (a) CLASSIFICATION: Class R1 consists of all Other Priority Claims against Realty. (b) TREATMENT: The legal, equitable and contractual rights of the Holders of Class R1 Claims are unaltered by the Plan. Unless the Holder of such Claim and Realty agree to a different treatment, each Holder of an Allowed Class R1 Claim shall receive one of the following alternative treatments, at the election of Realty: (i) to the extent then due and owing on the Effective Date, such Claim will be paid in full in Cash by the Reorganized Debtor; (ii) to the extent not due and owing on the Effective Date, such Claim (A) will be paid in full in Cash by the Reorganized Debtor, or (B) will be paid in full in Cash by the Reorganized Debtors when and as such Claim becomes due and owing in the ordinary course of business; or -15- (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class R1 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class R1 is not impaired and the Holders of Class R1 Claims are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class R1 are not entitled to vote to accept or reject the Plan. 2. CLASS R2 -- LASALLE SECURED CLAIMS (a) CLASSIFICATION: Class R2 consists of the LaSalle Secured Claim against Realty. (b) TREATMENT: The legal, equitable and contractual rights of the Holder of the Class R2 Claim is unaltered by the Plan. Unless the Holder of such Claim and Realty agree to a different treatment, the Holder of an Allowed Class R2 Claim shall receive one of the following alternative treatments, at the election of Realty: (i) the legal, equitable and contractual rights to which such Claim entitles the Holder thereof shall be unaltered by the Plan; (ii) Realty shall surrender all collateral securing such Claim to the Holder thereof, without representation or warranty by or recourse against Realty or the Reorganized Realty; or (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. Any default with respect to any Class R2 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class R2 is not impaired and the Holder of the Class R2 Claim is conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holder of the Claim in Class R2 is not entitled to vote to accept or reject the Plan. 3. CLASSES R3 -- OTHER SECURED CLAIMS (a) CLASSIFICATION: Class R3 consists of the Other Secured Claims against Realty. (b) TREATMENT: The legal, equitable and contractual rights of the Holders of Class R3 Claims are unaltered by the Plan. Unless the Holder of such Claim and Realty agree to a different treatment, each Holder of an Allowed Class R3 Claim shall receive one of the following alternative treatments, at the election of Realty: (i) the legal, equitable and contractual rights to which such Claim entitles the Holder thereof shall be unaltered by the Plan; (ii) Realty shall surrender all collateral securing such Claim to the Holder thereof, without representation or warranty by or recourse against Realty or the Reorganized Realty; or (iii) such Claim will be otherwise treated in any other manner so that such Claims shall otherwise be rendered unimpaired pursuant to section 1124 of the Bankruptcy Code. -16- Any default with respect to any Class R3 Claim that existed immediately prior to the filing of the Chapter 11 Case shall be deemed cured upon the Effective Date. (c) VOTING: Class R3 is not impaired and the Holders of Class R3 Claims are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class R3 are not entitled to vote to accept or reject the Plan. 4. CLASS AND R4 -- PREPETITION BANK UNSECURED CLAIMS (a) CLASSIFICATION: Class R4 consists of the Claims of Holders of Unsecured Claims against Realty arising from Realty's guarantee of the Prepetition Bank Credit Facility. (b) TREATMENT: In full and complete satisfaction of all claims in Class R4, the Holders of Class R4 Claims will receive the treatment set forth for Holders of Class S2 Claims described above. (c) VOTING: Class R4 is impaired and the Holders of Class R4 Claims are entitled to vote to accept or reject the Plan. 5. CLASS R5 -- GENERAL UNSECURED CLAIMS (a) CLASSIFICATION: Class R5 consists of the Claims of Holders of General Unsecured Claims against Realty. (b) TREATMENT: On the Effective Date, the Holders of General Unsecured Claims shall share with Class R6, pro rata, pari passu, all assets or property of the Estate after payment in full of Classes R1 through R3. (c) VOTING: Class R5 is impaired and is entitled to vote to accept or reject the Plan. 6. CLASS R6 -- LASALLE DEFICIENCY CLAIM (a) CLASSIFICATION: Class R6 consists of the LaSalle Deficiency Claim against Realty. (b) TREATMENT: On the Effective Date, the Holders of LaSalle Deficiency claims shall share with Classes R5, pro rata, pari passu, all assets or property of the Estate after payment in full of Classes R1 through R3. (c) VOTING: Class R6 is impaired and is entitled to vote to accept or reject the Plan. 7. CLASS R7 -- EQUITY INTERESTS (a) CLASSIFICATION: Class R7 consists of all Equity Interests against Realty. (b) TREATMENT: On the Effective Date, the Holders of Equity Interests shall neither receive any distributions nor retain any property under the Plan. All Member Interests issued before the Petition Date will be canceled. (c) VOTING: Class R7 is impaired, but because no distributions will be made to Holders of Class R7 Equity Interests nor will such Holders retain any property, such Holders are deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy Code. Class R7 is not entitled to vote to accept or reject the Plan. E. SPECIAL PROVISION GOVERNING UNIMPAIRED CLAIMS -17- Except as otherwise provided in the Plan, including as provided in Article X, nothing under the Plan shall affect the Debtors or the Reorganized Debtors rights in respect of any Unimpaired Claims, including, but not limited to, all rights in respect of legal and equitable defenses to or setoffs or recoupments against such Unimpaired Claims. ARTICLE IV. ACCEPTANCE OR REJECTION OF THE PLAN A. VOTING CLASSES Each Holder of an Allowed Claim in Classes H2, S2, S4, S5, R4, R5, and R6 shall be entitled to vote to accept or reject the Plan. B. ACCEPTANCE BY IMPAIRED CLASSES An Impaired Class of Claims shall have accepted the Plan if (a) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims actually voting in such Class have voted to accept the Plan and (b) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of more than one-half in number of the Allowed Claims actually voting in such Class have voted to accept the Plan. C. PRESUMED ACCEPTANCE OF PLAN Classes H1, H3, S1, S3, R1, R2 and R3 are unimpaired under the Plan, and, therefore, conclusively are presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. D. PRESUMED REJECTION OF PLAN Classes H4, H5, H6, H7, S6, and R7 are impaired and shall receive no distributions, and, therefore, are presumed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. E. NON-CONSENSUAL CONFIRMATION The Debtors will seek Confirmation of the Plan under section 1129(b) of the Bankruptcy Code, to the extent applicable, in view of the deemed rejection by Classes H4, H5, H6, H7, S5, S6, and R7. In the event that any Impaired Class of Claims shall fail to accept the Plan in accordance with section 1129(a)(8) of the Bankruptcy Code, the Debtors reserve the right to request that the Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the Bankruptcy Code. ARTICLE V. MEANS FOR IMPLEMENTATION OF THE PLAN A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED DEBTORS Systems and Realty shall, as Reorganized Debtors, continue to exist after the Effective Date as separate entities, with, in the case of Systems, all the powers of a corporation or, in the case of Realty, a limited liability company, under the laws of the State of Delaware and without prejudice to any right to alter or terminate such existence (whether by merger or otherwise) under such applicable state law. As of the Effective Date, Holdings shall be merged into New Holdings with New Holdings becoming the surviving entity. Except as otherwise provided in the Plan, the Lock-Up Agreement, the New Bank Credit Facilities, the New Notes, or any agreement, instrument or indenture relating thereto, on or after the Effective Date, all property of the Estates, and any property -18- acquired by the Debtors or the Reorganized Debtors under the Plan, shall vest in the Reorganized Debtors, free and clear of all Claims, liens, charges, or other encumbrances and Equity Interests. On and after the Effective Date, the Reorganized Debtors may operate their businesses and may use, acquire or dispose of property and compromise or settle any Claims or Equity Interests, without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and the Confirmation Order. In accordance with section 1109(b) of the Bankruptcy Code, nothing in this Article V shall preclude any party in interest from appearing and being heard on any issue in the Chapter 11 Cases. B. CANCELLATION OF NOTES, INSTRUMENTS, MEMBER INTERESTS, COMMON STOCK AND STOCK OPTIONS On the Effective Date, except to the extent provided otherwise in the Plan, (i) all notes, instruments, certificates, and other documents of the Debtors evidencing the Other Secured Claims, and Prepetition Bank Secured Claims, (ii) the Old Notes, and (iii) all Equity Interests, including all Common Stock and Member Interests, shall be canceled and the obligations of the Debtors thereunder, shall be discharged. On the Effective Date, except to the extent provided otherwise in the Plan, any indenture relating to any of the foregoing, including, without limitation, the Old Note Indenture, shall be deemed to be canceled, and the obligations of the debtors thereunder, except for the obligation to indemnify the Old Notes Indenture Trustee, shall be discharged; PROVIDED HOWEVER, that the indenture or other agreement that governs the rights of the Holder of a Claim and that is administered by the Old Notes Indenture Trustee, an agent or servicer shall, continue in effect solely for the purposes of (i) allowing such Old Notes Indenture Trustee, agent or servicer to make the distributions to be made on account of such Claims under the Plan and (ii) permitting such Old Indenture Trustee, agent or servicer to maintain any rights or liens it may have for fees, costs, and expenses under such indenture or other agreement. Upon payment in full of the fees and expenses of the Old Notes Indenture Trustee pursuant to Article VII.B hereof, the liens (if any) of the Old Notes Indenture Trustee shall terminate. C. ISSUANCE OF NEW SECURITIES; EXECUTION OF RELATED DOCUMENTS On the Effective Date, the Reorganized Debtors shall issue all securities, notes, instruments, certificates, and other documents required to be issued pursuant to the Plan, including, without limitation, the New Notes, the New Bank Credit Facilities, the New Holdings Common Stock, the New Systems Common Stock and the New Realty Member Interests, each of which shall be distributed as provided in the Plan. The Reorganized Debtors shall execute and deliver such other agreements, documents and instruments, including the New Notes Indenture, as are required to be executed pursuant to the terms of the Plan or the Lock-Up Agreement. The New Notes and the New Notes Indenture shall be in a form and substance substantially similar to the Old Notes and the Old Notes Indenture. Any changes to the Old Notes or the Old Notes Indenture shall be reasonably satisfactory to the Creditors' Committee and the postpetition lenders. D. NEW HOLDINGS COMMON STOCK In exchange for receiving the New Systems Common Stock and in exchange for the treatment provided to Class H2 Claims by Systems, on the Effective Date, New Holdings will transfer to Systems the New Holdings Common Stock and the New Notes for distribution in accordance with the terms of the Plan. E. NEW SYSTEMS COMMON STOCK In exchange for receiving the New Holdings Common Stock and the New Notes, on the Effective Date, Systems will transfer to New Holdings the New Systems Common Stock. F. NEW REALTY MEMBER INTERESTS In exchange for the treatment provided to Class R4 Claims by Systems, on the Effective Date, Realty will transfer to Systems the New Realty Member Interests. G. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS, AND CORPORATE ACTION -19- 1. AMENDED CERTIFICATES OF INCORPORATION AND FORMATION On the Effective Date, the Reorganized Debtors will file their Amended Certificates of Incorporation or Formation with the Secretary of the State of Delaware in accordance with sections 102 and 103 of the Delaware General Corporation Law and section 201 of the Delaware LLC Law. The Amended Certificates of Incorporation and Formation will, among other things, prohibit the issuance of nonvoting equity securities to the extent required by section 1123(a) of the Bankruptcy Code, change the number of authorized shares of New Holdings Common Stock to 15,000,000, and eliminate the authorization of preferred stock by Systems. After the Effective Date, the Reorganized Debtors may amend and restate their Amended Certificates of Incorporation and Formation and other constituent documents as permitted by the Delaware General Corporation Law and the Delaware LLC Law. 2. DIRECTORS, OFFICERS, AND MEMBERS OF THE REORGANIZED DEBTORS Subject to any requirement of Bankruptcy Court approval, pursuant to section 1129(a)(5), the Debtors will disclose, on or prior to the Confirmation Date, the identity and affiliations of any Person proposed to serve (i) on the initial board of directors of New Holdings and Systems and (ii) to serve as a member of the Reorganized Realty. To the extent any such Person is an Insider, the nature of any compensation for such Person will also be disclosed. The classification and composition of the boards of directors and the membership shall be consistent with the Amended Certificates of Incorporation or Formation and as set forth in the Lock-Up Agreement. Each such director, officer and member shall serve from and after the Effective Date pursuant to the terms of the Amended Certificates of Incorporation or Formation, other constituent documents, the Delaware General Corporation Law or the Delaware LLC Law. New Holdings will have a nine-person board of directors consisting of the following designations: two management directors; two independent directors; three directors appointed by Stonington and two directors appointed by the Prepetition Noteholders Committee. 3. CORPORATE ACTION On the Effective Date, the adoption of the Amended Certificates of Incorporation, Certificates of Formation or similar constituent documents, the amendment of the By-laws, the selection of directors, officers and members for the Reorganized Debtors, and all actions contemplated by the Plan shall be authorized and approved in all respects (subject to the provisions of the Plan). All matters provided for in the Plan involving the corporate structure of the Debtors or the Reorganized Debtors, and any corporate action required by the Debtors or the Reorganized Debtors in connection with the Plan, shall be deemed to have occurred and shall be in effect, without any requirement of further action by the security holders or directors of the Debtors or the Reorganized Debtors. On the Effective Date, the appropriate officers and members of the Reorganized Debtors and members of the board of directors of the Reorganized Debtors are authorized and directed to issue, execute and deliver the agreements, documents, securities and instruments contemplated by the Plan in the name of and on behalf of the Reorganized Debtors. H. SOURCES OF CASH FOR PLAN DISTRIBUTION All Cash necessary for the Reorganized Debtors to make payments pursuant to the Plan shall be obtained from existing Cash balances, the operations of the Debtors or Reorganized Debtors, or post-confirmation borrowing under other available facilities of the Debtors or Reorganized Debtors including, without limitation, to the extent available, the New Bank Credit Facilities and the Stonington Capital Contribution. The Reorganized Debtors may also make such payments using Cash received from its subsidiaries through the Reorganized Debtors consolidated cash management systems and from advances or dividends from such subsidiaries in the ordinary course. -20- ARTICLE VI. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES Immediately prior to the Effective Date, all executory contracts or unexpired leases of the Reorganized Debtors will be deemed assumed in accordance with the provisions and requirements of sections 365 and 1123 of the Bankruptcy Code except those executory contracts and unexpired leases that (1) have been rejected by order of the Bankruptcy Court, (2) are the subject of a motion to reject pending on the Effective Date, (3) are identified on a list to be Filed with the Bankruptcy Court on or before the Confirmation Date, as to be rejected, or (4) are rejected pursuant to the terms of the Plan. Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such assumptions and rejections pursuant to sections 365(a) and 1123 of the Bankruptcy Code. B. 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, if any, must be Filed with the Bankruptcy Court within sixty (60) days after the date of entry of an order of the Bankruptcy Court approving such rejection. Any Claims arising from the rejection of an executory contract or unexpired lease not Filed within such times will be forever barred from assertion against the Debtors or Reorganized Debtors, their estates and property unless otherwise ordered by the Bankruptcy Court or provided in this Plan, all such Claims for which proofs of claim are required to be Filed will be, and will be treated as, General Unsecured Claims subject to the provisions of Article VIII hereof. C. CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES ASSUMED Any monetary amounts by which each executory contract and unexpired lease to be assumed pursuant to the Plan is in default shall be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of the default amount in Cash on the Effective Date or on such other terms as the parties to such executory contracts or unexpired leases may otherwise agree. In the event of a dispute regarding: (1) the amount of any cure payments, (2) the ability of the Reorganized Debtors or any assignee to provide "adequate assurance of future performance" (within the meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed, or (3) any other matter pertaining to assumption, the cure payments required by section 365(b)(1) of the Bankruptcy Code shall be made following the entry of a Final Order resolving the dispute and approving the assumption. D. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES The obligations of the Debtors to indemnify any Person or Entity serving at any time on or prior to the Effective Date as one of their directors, officers, members or employees by reason of such Person's or Entity's service in such capacity, or as a director, officer, member or employee of any other corporation or legal entity, to the extent provided in the Debtors' constituent documents, by a written agreement with the Debtors, the Delaware General Corporation Law or the Delaware LLC Law, shall be deemed and treated as executory contracts that are assumed by the Debtors pursuant to the Plan and section 365 of the Bankruptcy Code as of the Effective Date. Accordingly, such indemnification obligations shall be treated as General Unsecured Claims, and shall survive unimpaired and unaffected by entry of the Confirmation Order, irrespective of whether such indemnification is owed for an act or event occurring before or after the Petition Date. E. COMPENSATION AND BENEFIT PROGRAMS Except as otherwise expressly provided hereunder, all employment and severance policies, and all compensation and benefit plans, policies, and programs of the Debtors applicable to their employees, retirees and non-employee directors and the employees and retirees of its subsidiaries, including, without limitation, all savings plans, retirement plans, health care plans, disability plans, severance benefit plans, incentive plans, and life, -21- accidental death, and dismemberment insurance plans are treated as executory contracts under the Plan and on the Effective Date will be assumed pursuant to the provisions of sections 365 and 1123 of the Bankruptcy Code. ARTICLE VII. PROVISIONS GOVERNING DISTRIBUTIONS A. DISTRIBUTIONS FOR CLAIMS ALLOWED AS OF THE EFFECTIVE DATE 1. Except as otherwise provided in this Article VII or as may be ordered by the Bankruptcy Court, distributions to be made on the Effective Date on account of Claims that are allowed as of the Effective Date and are entitled to receive distributions under the Plan shall be made on the Effective Date, or as soon as practicable thereafter. Distributions on account of Claims that become Allowed Claims after the Effective Date shall be made pursuant to Articles VII.C and VIII.C below. 2. For purposes of determining the accrual of interest or rights in respect of any other payment from and after the Effective Date, the New Notes, the New Bank Credit Facilities, the New Holdings Common Stock, the New Systems Common Stock and the New Realty Member Interests to be issued under the Plan shall be deemed issued as of the Effective Date regardless of the date on which they are actually dated, authenticated or distributed; provided, however, that the Reorganized Debtors shall withhold any actual payment until such distribution is made and no interest shall accrue or otherwise be payable on any such withheld amounts. B. DISTRIBUTIONS BY THE REORGANIZED DEBTORS; DISTRIBUTIONS WITH RESPECT TO DEBT SECURITIES Except as provided herein, the Reorganized Debtors shall make all distributions required under the Plan. Notwithstanding the provisions of Article V.B above regarding the cancellation of the Old Note Indenture, the Old Note Indenture shall continue in effect to the extent necessary to allow the Old Notes Indenture Trustee to receive New Notes and New Holdings Common Stock on behalf of the Holders of the Old Notes and make distributions pursuant to the Plan on account of the Old Notes as agent for the Reorganized Debtor. The Old Notes Indenture Trustee providing services related to distributions to the Holders of Allowed Old Note Claims shall receive, from the Reorganized Debtors, reasonable compensation for such services and reimbursement of reasonable expenses incurred in connection with such services and upon the presentation of invoices to the Reorganized Debtors. These payments shall be made on terms agreed to with the Reorganized Debtors. C. DELIVERY AND DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS 1. DELIVERY OF DISTRIBUTIONS IN GENERAL Distributions to Holders of Allowed Claims shall be made at the address of the Holder of such Claim as indicated on records of the Debtors. Except as otherwise provided by the Plan or the Bankruptcy Code with respect to undeliverable distributions, distributions to Holders of Prepetition Bank Secured Claims, and Old Note Claims shall be made in accordance with the provisions of the applicable indenture, participation agreement, loan agreement or analogous instrument or agreement, and distributions will be made to Holders of record as of the Distribution Record Date. 2. UNDELIVERABLE DISTRIBUTIONS (a) HOLDING OF UNDELIVERABLE DISTRIBUTIONS. If any Allowed Claim Holder's distribution is returned to the Reorganized Debtors as undeliverable, no further distributions shall be made to such Holder unless and until the Reorganized Debtors are notified in writing of such Holder's then-current addreSection Undeliverable distributions shall remain in the possession of the Reorganized Debtors pursuant to this Article VII.C until such time as a distribution becomes deliverable. Undeliverable cash (including interest and maturities on the New Notes) shall not be entitled to any interest, dividends or other accruals of any kind. -22- (b) AFTER DISTRIBUTIONS BECOME DELIVERABLE. Within 20 days after the end of each calendar quarter following the Effective Date, the Reorganized Debtors shall make all distributions that become deliverable during the preceding calendar quarter. (c) FAILURE TO CLAIM UNDELIVERABLE DISTRIBUTIONS. In an effort to ensure that all holders of valid claims receive their allocated distributions, the Company will file with the Bankruptcy Court, a listing of unclaimed distribution holders. This list will be maintained for as long as the bankruptcy cases stay open. Any Holder of an Allowed Claim that does not assert a Claim pursuant to the Plan for an undeliverable distribution within five years after the Effective Date shall have its Claim for such undeliverable distribution discharged and shall be forever barred from asserting any such Claim against the Reorganized Debtors or their property. In such cases: (i) any Cash held for distribution on account of such Claims shall be property of the Reorganized Debtors, free of any restrictions thereon; and (ii) any New Notes held for distribution on account of such Claims shall be canceled and of no further force or effect. Nothing contained in the Plan shall require the Reorganized Debtors to attempt to locate any Holder of an Allowed Claim. (d) COMPLIANCE WITH TAX REQUIREMENTS. In connection with the Plan, to the extent applicable, the Reorganized Debtors shall comply with all tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements. D. DISTRIBUTION RECORD DATE As of the close of business on the Distribution Record Date, the transfer register for the Old Notes as maintained by Systems, the Old Notes Indenture Trustee, or their respective agents, shall be closed and there shall be no further changes in the record holders of any Old Notes. Moreover, Reorganized Systems shall have no obligation to recognize the transfer of any Old Notes occurring after the Distribution Record Date, and shall be entitled for all purposes herein to recognize and deal only with those Holders of record as of the close of business on the Distribution Record Date. E. TIMING AND CALCULATION OF AMOUNTS TO BE DISTRIBUTED Unless otherwise provided for in section III of the Plan or agreed to by the Holder of a Claim and the Debtors, on the Effective Date, each Holder of an Allowed Claim against the Debtors shall receive the full amount of the distributions that the Plan provides for Allowed Claims in the applicable Class Beginning on the date that is 20 calendar days after the end of the calendar quarter following the Effective Date and 20 calendar days after the end of each calendar quarter thereafter, distributions shall also be made, pursuant to Article VIII.C below, to Holders of Disputed Claims in any such Class whose Claims were allowed during the preceding calendar quarter. Such quarterly distributions shall also be in the full amount that the Plan provides for Allowed Claims in the applicable Class. F. MINIMUM DISTRIBUTION The New Notes will be issued in denominations of $1. No New Note will be issued in a denomination of less than $1 (including any notes reflecting payment in kind interest). In the event a Holder of an Allowed Class S5 Claim is entitled to distribution of New Notes that is a fraction of $1, the actual payment or issuance made will reflect a rounding of such fraction down or up to the nearest whole dollar, but in any case not to exceed the total issuance of notes. -23- G. SETOFFS The Reorganized Debtors may, pursuant to section 553 of the Bankruptcy Code or applicable non-bankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim), the claims, rights and causes of action of any nature that the Debtors or Reorganized Debtors may hold against the Holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the Debtors or Reorganized Debtors of any such claims, rights and causes of action that the Debtors or Reorganized Debtors may possess against such Holder. H. SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES Except as set forth in subsection VII.I below, as a condition precedent to receiving any distribution pursuant to the Plan on account of an Allowed Claim evidenced by the instruments, securities or other documentation canceled pursuant to Article V.B above, the Holder of such Claim shall tender the applicable instruments, securities or other documentation evidencing such Claim to the Reorganized Debtors. Any New Notes, New Holdings Common Stock, New Systems Common Stock or New Realty Member Interests to be distributed pursuant to the Plan on account of any such Claim shall, pending such surrender, be treated as an undeliverable distribution pursuant to Article VII.C above. 1. NOTES Each Holder of an Old Note Claim shall tender its Old Note relating to such Claim to the Reorganized Debtors in accordance with written instructions to be provided to such Holders by the Reorganized Debtors as promptly as practicable following the Effective Date. Such instructions shall specify that delivery of such Old Note will be effected, and risk of loss and title thereto will pass, only upon the proper delivery of such Old Notes with a letter of transmittal in accordance with such instructions. All surrendered Old Notes shall be marked as canceled. 2. FAILURE TO SURRENDER CANCELED INSTRUMENTS Any Holder of Old Notes that fails to surrender or is deemed to have failed to surrender the applicable Old Notes required to be tendered hereunder within five years after the Effective Date shall have its Claim for a distribution pursuant to the Plan on account of such Old Note discharged and shall be forever barred from asserting any such Claim against the Reorganized Debtors or its respective property. In such cases, any New Notes held for distribution on account of such Claim shall be disposed of pursuant to the provisions set forth above in Article VII.C. I. LOST, STOLEN, MUTILATED OR DESTROYED DEBT SECURITIES In addition to any requirements under the Old Note Indenture or any related agreement (including the Prepetition Bank Credit Facility, if required), any Holder of a Claim evidenced by an Old Note or a note issued under the Prepetition Bank Credit Facility that has been lost, stolen, mutilated or destroyed shall, in lieu of surrendering such Old Note or a note issued under the Prepetition Bank Credit Facility, deliver to the Reorganized Debtors: (1) an affidavit of loss reasonably satisfactory to the Reorganized Debtors or the Old Notes Indenture Trustee, as applicable, setting forth the unavailability of note or instrument; and (2) such additional security or indemnity as may reasonably be required by the Reorganized Debtors to hold the Reorganized Debtors or the Old Notes Indenture Trustee, as applicable, harmless from any damages, liabilities or costs incurred in treating such individual as a Holder of an Allowed Claim. Upon compliance with this Article VII.I by a Holder of a Claim evidenced by an Old Note or a note issued under the Prepetition Bank Credit Facility, such Holder shall, for all purposes under the Plan, be deemed to have surrendered such note or debenture. -24- ARTICLE VIII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS A. PROSECUTION OF OBJECTIONS TO CLAIMS After the Confirmation Date, the Debtors and the Reorganized Debtors shall have the exclusive authority to File objections, settle, compromise, withdraw or litigate to judgment objections to Claims. From and after the Confirmation Date, the Debtors and the Reorganized Debtors may settle or compromise any Disputed Claim without approval of the Bankruptcy Court. The Debtors also reserve the right to resolve any Disputed Claims outside the Bankruptcy Court under applicable governing law. B. ESTIMATION OF CLAIMS The Debtors or the Reorganized Debtors may, at any time, request that the Bankruptcy Court estimate any contingent or unliquidated Claim pursuant to section 502(c) of the Bankruptcy Code regardless of whether the Debtors or the Reorganized Debtors have previously objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim, including during the pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim, that estimated amount will constitute either the allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on such Claim, the Debtors or Reorganized Debtors may elect to pursue any supplemental proceedings to object to any ultimate payment on such Claim. All of the aforementioned Claims objection, estimation and resolution procedures are cumulative and not necessarily exclusive of one another. Claims may be estimated and subsequently compromised, settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court. C. PAYMENTS AND DISTRIBUTIONS ON DISPUTED CLAIMS Notwithstanding any provision in the Plan to the contrary, except as otherwise agreed by the Reorganized Debtors in its sole discretion, no partial payments and no partial distributions will be made with respect to a Disputed Claim until the resolution of such disputes by settlement or Final Order. Subject to the provisions of this Article VIII.C, as soon as practicable after a Disputed Claim becomes an Allowed Claim, the Holder of such Allowed Claim will receive all payments and distributions to which such Holder is then entitled under the Plan. Notwithstanding the foregoing, any Person or Entity who holds both an Allowed Claim(s) and a Disputed Claim(s) will receive the appropriate payment or distribution on the Allowed Claim(s), although, except as otherwise agreed by the Reorganized Debtors in their sole discretion, no payment or distribution will be made on the Disputed Claim(s) until such dispute is resolved by settlement or Final Order. In the event there are Disputed Claims requiring adjudication and resolution, the Debtors reserve the right, or upon order of the Court, to establish appropriate reserves for potential payment of such claims. ARTICLE IX. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN A. CONDITION PRECEDENT TO CONFIRMATION It shall be a condition to Confirmation of the Plan that the following condition shall have been satisfied or waived pursuant to the provisions of Article IX.C of the Plan: approval of all provisions, terms and conditions of the Plan in the Confirmation Order. -25- B. CONDITIONS PRECEDENT TO CONSUMMATION It shall be a condition to Consummation of the Plan that the following conditions shall have been satisfied or waived pursuant to the provisions of Article IX.C of the Plan: 1. the Confirmation Order shall have been signed by the Bankruptcy Court and duly entered on the docket for the Chapter 11 Case by the Clerk of the Bankruptcy Court in form and substance acceptable to the Debtor; 2. the Confirmation Order shall be a Final Order; 3. the Tranche A Revolving Credit Facility shall be available to the Debtors in an amount not less than $50 million and on such terms and conditions as set forth in the Lock-Up Agreement; and 4. the Tranche B Revolving Credit Facility shall be available to the Debtors in an amount not less than $50 million and on such terms and conditions as set forth in the Lock-Up Agreement; 5. the Term Loan Facility shall be available to the Debtors in an amount not less than $150 million and on such terms and conditions as set forth in the Lock-Up Agreement; and 6. the Stonington Capital Contribution shall be available to the Debtors in an amount not less than $50 million and on such terms and conditions as set forth in the Lock-Up Agreement. C. WAIVER OF CONDITIONS Except as otherwise required by the Lock-Up Agreement, the Debtors, in their sole discretion, may waive any of the conditions to Confirmation of the Plan and/or to Consummation of the Plan set forth in Articles IX.A and IX.B of the Plan at any time, without notice, without leave or order of the Bankruptcy Court, and without any formal action other than proceeding to confirm and/or consummate the Plan. D. EFFECT OF NON-OCCURRENCE OF CONDITIONS TO CONSUMMATION If the Confirmation Order is vacated, the Plan shall be null and void in all respects and nothing contained in the Plan or the Disclosure Statement shall: (1) constitute a waiver or release of any Claims by or against, or any Equity Interests in, the Debtor; (2) prejudice in any manner the rights of the Debtor; or (3) constitute an admission, acknowledgment, offer or undertaking by the Debtors in any respects. ARTICLE X. RELEASE, INJUNCTIVE AND RELATED PROVISIONS A. SUBORDINATION The classification and manner of satisfying all Claims and Equity Interests and the respective distributions and treatments under the Plan take into account and/or conform to the relative priority and rights of the Claims and Equity Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code or otherwise, and any and all such rights are settled, compromised and released pursuant to the Plan. The Confirmation Order shall permanently enjoin, effective as of the Effective Date, all Persons and Entities from enforcing or attempting to enforce any such contractual, legal and equitable subordination rights satisfied, compromised and settled pursuant to this Article X.A. -26- B. LIMITED RELEASES BY THE DEBTORS Except as otherwise specifically provided in the Plan, for good and valuable consideration, including, but not limited to, the commitment and obligation of Stonington to provide financial support necessary for consummation of the Plan, including the obligations and undertakings of Stonington Releasees and Noteholder Releasees set forth in the Lock-Up Agreement, including Stonington's agreement to the treatment of its Claims and Equity Interests as provided in the plan, the agreement of the Prepetition Lenders to their treatment set forth in the Plan and their financial support thereof, and the service of the D&O Releasees to facilitate the expeditious reorganization of the Debtors and the implementation of the restructuring contemplated by the Plan, Stonington Releasees, the D&O Releasees, the Prepetition Lender Releasees and the Noteholder Releasees, on and after the Effective Date, are released by the Debtors and the Reorganized Debtors and their subsidiaries from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, rights, suits, damages, causes of action, remedies and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that the Debtors or their subsidiaries would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the Holder of any Claim or Equity Interest or other Person or Entity, based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date, except in the case of the D&O Releasees, for claims or liabilities (i) in respect of any loan, advance or similar payment by the Debtors or their subsidiaries to any such Person, or (ii) in respect of any contractual obligation owed by such Person to the Debtors or their subsidiaries. C. LIMITED RELEASES BY HOLDER OF CLAIMS On and after the Effective Date, each Holder of a Claim (i) who has accepted the Plan, or (ii) who is entitled to receive a distribution of property under the Plan other than the Holder of a claim in a Class who signs and returns a timely Ballot and marks either Item 4 or Item 5 of the Ballot (whichever is applicable), shall be deemed to have unconditionally released the Stonington Releasees, the D&O Releasees, the Prepetition Lender Releasees and the Noteholder Releasees from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, rights, suits, damages, causes of action, remedies and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that such Person or Entity would have been legally entitled to assert (whether individually or collectively), based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date in any way relating or pertaining to (x) the Debtors or the Reorganized Debtors, (y) the Debtors Chapter 11 Cases, or (z) the negotiation, formulation and preparation of the Plan, the Lock-Up Agreement or any related agreements, instruments or other documents. D. PRESERVATION OF RIGHTS OF ACTION Except as otherwise provided in the Plan or in any contract, instrument, release, indenture or other agreement entered into in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtors shall retain and may exclusively enforce any claims, rights and Causes of Action that the Debtors or Estates may hold against any Person or Entity. The Reorganized Debtors may pursue such retained claims, rights or causes of action, as appropriate, in accordance with the best interests of the Reorganized Debtors. On the Effective Date, the Reorganized Debtors shall be deemed to waive and release any claims, rights or Causes of Action arising under sections 544, 547, 548, 549 and 550 of the Bankruptcy Code held by the Reorganized Debtors against any Person or Entity. -27- E. EXCULPATION The Debtors, the Reorganized Debtors, the Stonington Releasees, the Noteholder Releasees, the D&O Releasees, the Prepetition Lender Releasees and the Committee(s) and their members and Professionals (acting in such capacity) shall neither have nor incur any liability to any Person or Entity for any act taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, administration, Confirmation or Consummation of the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into in connection with the Plan, including the Lock-Up Agreement, or any other act taken or omitted to be taken in connection with the Debtors Chapter 11 Cases; provided, however, that the foregoing provisions of this Article X.E shall have no effect on the liability of any Person or Entity that results from any such act or omission that is determined in a Final Order to have constituted gross negligence or willful misconduct. F. INJUNCTION From and after the Effective Date, all Persons and Entities are permanently enjoined from commencing or continuing in any manner, any suit, action or other proceeding, on account of or respecting any claim, obligation, debt, right, Cause of Action, remedy or liability released or to be released pursuant to this Article X. ARTICLE XI. RETENTION OF JURISDICTION Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain such jurisdiction over the Chapter 11 Cases after the Effective Date as legally permissible, including jurisdiction to: A. allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim, including the resolution of any request for payment of any Administrative Claim and the resolution of any and all objections to the allowance or priority of Claims; B. grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan, for periods ending on or before the Effective Date; C. resolve any matters related to the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which the Debtors are parties or with respect to which the Debtors may be liable and to hear, determine and, if necessary, liquidate, any Claims arising therefrom, including those matters related to the amendment after the Effective Date pursuant to Article VI above to add any executory contracts or unexpired leases to the list of executory contracts and unexpired leases to be rejected; D. ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of the Plan, including ruling on any motion Filed pursuant to Article VII; E. decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters and grant or deny any applications involving the Debtors that may be pending on the Effective Date; F. enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan and all contracts, instruments, releases, indentures and other agreements or documents created in connection with the Plan or the Disclosure Statement; G. resolve any cases, controversies, suits or disputes that may arise in connection with the Consummation, interpretation or enforcement of the Plan or any Person's or Entity's obligations incurred in connection with the Plan; -28- H. issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Person or Entity with Consummation or enforcement of the Plan, except as otherwise provided herein; I. resolve any cases, controversies, suits or disputes with respect to the releases, injunction and other provisions contained in Article X and enter such orders as may be necessary or appropriate to implement such releases, injunction and other provisions; J. enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked or vacated; K. determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release, indenture or other agreement or document created in connection with the Plan or the Disclosure Statement; and L. enter an order and/or final decree concluding the Chapter 11 Cases. ARTICLE XII. MISCELLANEOUS PROVISIONS A. DISSOLUTION OF COMMITTEE(S) On the Effective Date, the Committee(s) shall dissolve and members shall be released and discharged from all rights and duties arising from, or related to, the Chapter 11 Cases. B. PAYMENT OF STATUTORY FEES All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Bankruptcy Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or before the Effective Date. C. FEES AND EXPENSES OF THE PREPETITION NOTEHOLDERS COMMITTEE The reasonable fees and expenses incurred after the Petition Date by the Prepetition Noteholders Committee's counsel and financial advisor (together with the reasonable fees and expenses of local counsel) through the date of the appointment of the Creditors' Committee with respect to these Chapter 11 Cases shall be paid (without application by or on behalf of any such professionals to the Bankruptcy Court and without notice and a hearing) by the Reorganized Debtors as an Administrative Claim under the Plan. If the Reorganized Debtors and any such professional retained by the Prepetition Noteholders Committee cannot agree on the amount of fees and expenses to be paid to such professional, the amount of any such fees and expenses shall be determined by the Bankruptcy Court. -29- D. DISCHARGE OF DEBTORS Except as otherwise provided herein and the Lock-Up Agreement: (1) the rights afforded in the Plan and the treatment of all Claims and Equity Interests therein, shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Petition Date, against the Debtors and the Debtors in Possession, or any of their assets or properties, (2) on the Effective Date, all such Claims against, and Equity Interests in the Debtors shall be satisfied, discharged and released in full and (3) all Persons and Entities shall be precluded from asserting against the Reorganized Debtors, their successors or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. Except as expressly provided herein, the Plan does not impair the rights of any Holders of Class S4 Claims, including, but not limited to: (i) Holders of Claims under executory and nonexecutory contracts and leases; (ii) persons or entities entitled to contractual or common law rights of indemnity, contribution and/or reimbursement; or (iii) claims of any party or entity relating to any environmental condition as to which any of the Debtors are or may be liable. E. MODIFICATION OF PLAN Subject to the limitations contained herein, (1) the Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plan prior to the entry of the Confirmation Order and (2) after the entry of the Confirmation Order, the Debtors or the Reorganized Debtors, as the case may be, may, upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent of the Plan. F. REVOCATION OF PLAN The Debtors, subject to the Lock-Up Agreement, reserve the right, at any time prior to the entry of the Confirmation Order, to revoke and withdraw the Plan. G. SUCCESSORS AND ASSIGNS The rights, benefits and obligations of any Person or Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign of such Person or Entity. H. RESERVATION OF RIGHTS Except as expressly set forth herein, this Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Orders. None of the filing of this Plan, any statement or provision contained herein, or the taking of any action by the Debtor with respect to this Plan shall be or shall be deemed to be an admission or waiver of any rights of the Debtors with respect to the Holders of Claims or Equity Interests prior to the Effective Date. I. SECTION 1146 EXEMPTION Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of any security under the Plan, or the making or delivery of an instrument of transfer under this Plan, may not be taxed under any law imposing a stamp tax or similar tax. J. FURTHER ASSURANCES -30- The Debtors, the Reorganized Debtors and all Holders of Claims receiving distributions under the Plan and all other parties in interest shall, from time to time, prepare, execute and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of this Plan. K. SERVICE OF DOCUMENTS Any pleading, notice or other document required by the Plan to be served on or delivered to the Reorganized Debtors shall be sent by first class U.S. mail, postage prepaid to: Goss Holdings, Inc. Goss Graphic Systems, Inc. Goss Realty, L.L.C 700 Oakmont Lane Westmont, Illinois 60559-5546 Attn: General Counsel with copies to: Kirkland & Ellis 200 E. Randolph Drive Chicago, Illinois 60601 Attn: Matthew N. Kleiman, Esq. Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue 20th Floor New York, New York 10022 Attn: Daniel H. Golden, Esq. -31- L. FILING OF ADDITIONAL DOCUMENTS On or before the Effective Date, the Debtors may 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 the Plan. Respectfully Submitted, GOSS GRAPHIC SYSTEMS, INC. and GGS HOLDINGS, INC. By: ------------------------------------- Name: Title: GOSS REALTY, L.L.C. By: ------------------------------------- Name: Title: -32- EX-2.2 3 EXHIBIT 2.2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE IN RE: ) ) CHAPTER 11 GOSS GRAPHIC SYSTEMS, INC., ET AL.,(1) ) ) CASE NO. 99-2756 (PJW) DEBTORS. ) (JOINTLY ADMINISTERED) ) - -------------------------------------------------------------------------------- AMENDMENT TO SECOND AMENDED PLAN OF REORGANIZATION OF GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND GOSS REALTY, L.L.C. UNDER CHAPTER 11 OF THE BANKRUPTCY CODE - ------------------------------------------------------------------------------ The above-captioned debtors and debtors in possession in the above-captioned chapter 11 cases (the "Debtors") as proponents of the Second Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, L.L.C. under Chapter 11 of the Bankruptcy Code (the "Plan") hereby make the following amendments to the Plan: 1. The following definition will be added to Article I.B. of the Plan: "New Rockwell Equity Distribution" means the 350,000 shares of New Holdings Common Stock issued to Rockwell International Corporation or its designee, subject to dilution by the Management Equity as provided under the Lock-Up Agreement. 2. The definition of Stonington Capital Contribution in Article I.B. of the Plan will be deleted in its entirety and replaced with the following language: "Stonington Capital Contribution" means that certain $50 million contribution of capital to the Debtors made pursuant to the terms of the Lock-Up Agreement, and in exchange for which on the Effective Date Stonington shall receive 6,513,750 shares of New Holdings Common Stock, subject to dilution by the Management Equity as provided under the Lock-Up Agreement. 3. Article III.C.5.(b), Treatment of Class S5 -- Old Note Claims will be deleted in its entirety and replaced with the following language: - ---------------------- (1) The Debtors are the following entities: Goss Graphic Systems, Inc.; GGS Holdings, Inc.; and Goss Realty, L.L.C. TREATMENT: On or as soon as practicable after the Effective Date, each Holder of an Allowed Old Note Claim shall receive, in full and final satisfaction of such Claim, a Pro Rata distribution of the New Notes and a Pro Rata share of 3,136,250 shares of New Holdings Common Stock, subject to dilution by the Management Equity as provided under the Lock-Up Agreement. 4. Article III.B.6.(b), Treatment of Class H6 -- Rockwell Preferred Equity Interests will be deleted in its entirety and replaced with the following language: On or as soon as practicable after the Effective Date, the Holder of the Rockwell Preferred Equity Interest shall receive, in full and final satisfaction of such Claim, the New Rockwell Equity Distribution. KIRKLAND & ELLIS James H.M. Sprayregen Matthew N. Kleiman 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-2000 and YOUNG CONAWAY STARGATT & TAYLOR, LLP Laura Davis Jones (#2436) Michael R. Nestor (No. 3526) 11th Floor, Rodney Square North P.O. Box 391 Wilmington, Delaware 19899-0391 (302) 571-6600 Co-Counsel for the Debtors and Debtors in Possession Dated: October 21, 1999 EX-2.3 4 EXHIBIT 2.3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE IN RE: ) ) CHAPTER 11 GOSS GRAPHIC SYSTEMS, INC., ET AL.,(1) ) ) CASE NO. 99-2756 (PJW) DEBTORS. ) (JOINTLY ADMINISTERED) ) - -------------------------------------------------------------------------------- SECOND AMENDMENT TO SECOND AMENDED PLAN OF REORGANIZATION OF GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND GOSS REALTY, L.L.C. UNDER CHAPTER 11 OF THE BANKRUPTCY CODE - -------------------------------------------------------------------------------- The above-captioned debtors and debtors in possession in the above-captioned chapter 11 cases (the "Debtors") as proponents of the Second Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc. and Goss Realty, L.L.C. under Chapter 11 of the Bankruptcy Code (the "Plan") hereby amend the Plan as set forth in the Stipulation and Plan Modification attached hereto as Exhibit A. Wilmington, Delaware Respectfully submitted, Dated: November 2, 1999 KIRKLAND & ELLIS James H.M. Sprayregen Matthew N. Kleiman 200 East Randolph Drive Chicago, IL 60601 (312) 861-2000 and YOUNG CONAWAY STARGATT & TAYLOR, LLP Laura Davis Jones (No. 2436) Maureen D. Luke (No. 3062) Michael R. Nestor (No. 3526) 11th Floor, Rodney Square North P.O. Box 391 Wilmington, Delaware 19899-0391 (302) 571-6600 - ------------------------ (1) The Debtors are the following entities: Goss Graphic Systems, Inc., GGS Holdings, Inc., and Goss Realty, L.L.C. Co-Counsel for the Debtors and Debtors in Possession EXHIBIT A STIPULATION AND PLAN MODIFICATION The secured claim (Class R2) and deficiency claim (Class R6) of LaSalle Bank National Association ("LaSalle") against Goss Realty, L.L.C. ("Realty"), together with all other claims of LaSalle against Goss Graphic Systems, Inc. ("Systems"), GGS Holdings, Inc. ("Holdings") or any of their affiliates, shall be fully settled and satisfied as follows: 1. On the Effective Date, that certain Mortgage Note dated July 25, 1997 in the original amount of $30 million made by Realty in favor of LaSalle (the "Note") shall be reinstated by payment of the sums set forth in paragraph 2 below. The maturity date of the Note shall be November 30, 2001. The Prepayment Premium shall be fixed at $4.30 million, $2.15 million of which shall be part of the Compromised Note Balance (as defined in paragraph 10.a. below) and paid as set forth in paragraph 3, and $2.15 million of which shall be paid (if at all) as set forth in paragraph 6.d.(ii). The terms of the Mortgage, Assignment of Rents and all other Loan Documents (as defined in the Note) shall remain in full force and effect EXCEPT as specifically modified herein. In the event that there is a conflict between the terms of this Plan Modification and the Note, Mortgage, Loan Documents, or any other document by and between LaSalle, Realty and/or Systems, the terms of this Plan Modification shall govern. All capitalized terms used herein not otherwise defined shall have the meanings ascribed thereto in that certain Second Amended Plan of Reorganization of Goss Graphic Systems, Inc. and Goss Realty, L.L.C. under Chapter 11 of the Bankruptcy Code, and if not defined therein, as ascribed thereto in the Loan Documents. 2. On the Confirmation Date, Realty shall pay LaSalle in cash the sum of the following amounts to reinstate and cure, in full, the Note, Mortgage and all related obligations and to pay the November 1, 1999 Note payment: a. principal of $168,386.15; plus b. interest of $645,006.45 (contract rate); plus c. interest of $397,232.61 (default rate); plus d. late fees of $39,508.92; plus e. real estate tax escrow payments of $141,200 to be deposited into the account set forth in paragraph 4(e) below for application as provided for in paragraph 4(e) and the Loan Documents; plus f. all reasonable attorney fees and costs incurred by LaSalle's counsel, Schwartz, Cooper, Greenberger & Krause and Klehr, Harrison, Harvey, Branzburg & Ellers L.L.P. up to the Confirmation Date (which fees and costs were estimated at $60,000 as of October 10, 1999); plus -1- g. $9,210.70 in fees and costs of LaSalle's expert, Michael Maglocci; plus h. $3,541.12 in costs and expenses incurred by LaSalle including without limitation that incurred in travel to Delaware for Court hearings for LaSalle's officer, counsel, expert, depositions, meetings and other experts incurred in connection with the bankruptcy of Realty and Systems. 3. As of the Confirmation Date, Systems, as lessee, shall reject that certain Single Tenant Net lease dated July 25, 1997 (the "Old Lease") for 700 Oakmont, Westmont, Illinois (the "Premises"). As of the Confirmation Date, Realty, as lessor, shall assume the Old Lease. The claim filed by LaSalle on behalf of Realty against Systems for unpaid pre-petition rent in the approximate amount of $3.1 million shall be disallowed with prejudice. Except as expressly set forth herein, Realty shall have no pre-petition claim against Systems, including, without limitation, any claim for monetary or non-monetary cure costs associated with Realty's assumption of the Old Lease. Systems represents and warrants as an inducement to Realty and LaSalle that it is not in default with respect to the Old Lease except for the claimed pre-petition Base Rent. Realty shall have an allowed unsecured Class S4 Claim against Systems in the amount of not less than $8 million (the "Rejection Claim"), which shall be satisfied and paid by Systems with payments to LaSalle as follows: a. In the event Systems pays LaSalle, without default, $8 million (the "Periodic Payment Amount") payable in forty-eight (48) installments of $166,666.66 each (the "Periodic Payments"), with each installment being paid on or before the first day of each month commencing on December 1, 1999, then the Rejection Claim shall be deem satisfied in full. The principal portion of the Compromised Note Balance shall be reduced dollar-for-dollar by the amount of all Periodic Payments paid to LaSalle. b. Systems shall be entitled to prepay all or any portion of the Periodic Payment Amount without penalty at any time, and any such payments shall reduce the principal portion of the Compromised Note Balance on a dollar-for-dollar basis. c. If Systems fails to make any Periodic Payment when due (a "Periodic Payment Default"), LaSalle may declare the entire Rejection Claim (less the amount of all Periodic Payments) immediately due without further act or deed or notice. d. After a Periodic Payment Default, LaSalle can take all action it deems appropriate to liquidate, adjudicate and collect the unpaid portion of the Rejection Claim, consistent with the terms of the Note, Mortgage, Loan Documents and applicable governing law including, without limitation, rights set forth in paragraph 7 below. -2- (i) LaSalle reserves the right to assert that the Rejection Claim equals an amount greater than $8 million, and Systems reserves the right to contest that the Rejection Claim is any amount in excess of $8 million. (ii) Determination of whether the Rejection Claim exceeds $8 million and the amount by which it exceeds $8 million is subject to final order of the Bankruptcy Court in accordance with applicable provisions of state and bankruptcy law, including without limitation, Section 502(b)(6) of the Bankruptcy Code. (iii) The unpaid portion of the Rejection Claim shall commence to bear interest at the rate of 8.66% upon the occurrence of either of the following events: (i) Realty defaults in any of its obligations to LaSalle, including payment obligations, under the Note or Loan Documents; or (ii) Systems defaults in any of its payment obligations of the Periodic Payment Amount. On the Effective Date, Realty shall assign all of its right, title and interest in and to the Rejection Claim to LaSalle to secure payment of the Compromised Note Balance and shall execute all documents reasonably necessary to perfect said interest. Except as otherwise set forth in this Plan Modification, LaSalle shall have all rights to enforce said claim without further act or deed, and to the extent and on the terms set forth in the Note, Mortgage and Loan Documents. If the Compromised Note Balance has been (x) paid in full or (y) paid in accordance with paragraph 6.d. below in the event of a sale of the Premises generating Net Sale Proceeds in excess of the Compromised Note Balance, at any time prior to the payment in full of the Periodic Payment Amount or the Rejection Claim, then (i) the Periodic Payment Amount and the Rejection Claim shall be deemed paid in full and satisfied, and (ii) LaSalle shall have no further lien or interest in the Periodic Payment Amount or the Rejection Claim. 4. On the Effective Date, Realty and Systems shall execute and enter into a new lease for the Premises ("New Lease"), which New Lease shall have an effective date as of the Petition Date. The New Lease shall be identical to the Old Lease except as follows: a. the installments of Base Rent payable monthly shall be reduced to $263,392.92; b. the Lease Term shall end on November 30, 2001 (the "Lease Termination Date"); PROVIDED, HOWEVER, that in the event LaSalle takes delivery of the Bill of Sale and Deed (each, as defined below) for recording, Systems shall have the option to extend the Lease Termination Date for up 12 additional months by giving LaSalle written notice of its exercise of the option thirty (30) days before the Lease Termination Date; PROVIDED, FURTHER, that during such extension Systems shall continue to render performance to LaSalle, as lessor, under the terms and conditions of the New Lease; -3- c. the New Lease shall not terminate prior to the earlier of the Lease Termination Date or the date on which the sale of the Premises is closed; and d. Systems shall pay and deliver the base rent directly to LaSalle by the first day of each month commencing with December 1, 1999; e. the monthly Installments to be paid under paragraph 5.4 of the New Lease shall be $35,300; said Installments shall be delivered to LaSalle by the first day of each month commencing with December 1, 1999 and deposited into Account # 8600769213; said Account is in the name of Realty and bears no interest; said monthly Installment amounts may be adjusted from time to time to the extent and as provided in the Loan Documents; and f. the New Lease shall terminate upon a closing of a sale of the Premises. 5. On the Effective Date, Realty shall execute in favor of LaSalle, or its nominee as directed by LaSalle, and deliver to LaSalle for deposit in Escrow (as hereinafter defined) (i) a special warranty deed for Premises in recordable form subject only to customary easements and restrictions ("Deed"), and (ii) a bill of sale ("Bill of Sale") for all personal property of Realty. In the event LaSalle or its nominee has the right to record the Deed and take the Bill of Sale in accordance with the terms of the Modified Plan, Realty shall also execute and deliver to LaSalle any and all additional documents a title company or LaSalle may require to effectuate the conveyance of the Premises and personalty contemplated herein (collectively "Supplemental Documents"). In the event Realty refuses or is unable to execute such documents, Realty grants to LaSalle as of the Effective Date a limited power of attorney to execute any one or more of the Supplemental Documents in its name. 6. At all times from and after the Effective Date, Realty shall use its best efforts to sell the Premises for the best price possible subject to the following conditions: a. Any broker retained to sell the Premises shall be entitled only to a customary and usual commission in the event of a sale; PROVIDED, HOWEVER, that the commission shall not exceed 2% of the gross sale proceeds without the consent of LaSalle, which consent shall not be unreasonably withheld, denied or delayed. b. Realty shall have the right to sell the Premises WITHOUT THE CONSENT of LaSalle provided the Net Sale Proceeds are equal to or greater than the then outstanding Compromised Note Balance. c. In the event Realty has a contract to sell the Premises which it wants to execute, the Net Sale Proceeds from which will be LESS THAN the Compromised Note Balance, then, at the sole option of LaSalle, (i) Realty will be allowed to proceed with said sale -4- with LaSalle retaining all of the Net Sale Proceeds and the Compromised Note Balance shall be reduced by the amount of such Net Sale Proceeds, or (ii) LaSalle will take delivery of the Bill of Sale and Deed for recording and the Compromised Note Balance shall be reduced (as of the outside date in the contract for closing the sale) by an amount equal to the Net Sale Proceeds under the contract to sell the Premises; PROVIDED, HOWEVER, that LaSalle shall not have the right to select option (ii) of this paragraph 6.c. if the aggregate of (x) the Net Sale Proceeds under the contract to sell the Premises calculated using the date of sale as the outside closing date of the contract, plus (y) the then outstanding Periodic Amount, exceeds (z) the Compromised Note Balance. In either event, LaSalle shall have no further claim against Realty, and LaSalle shall have no further claim against Systems except for its right to be paid (if at all) the remaining balance (if any) of the Periodic Amount and/or the Rejection Claim and the Indemnity Claim in accordance with paragraph 8 below. d. In the event Realty has a contract to sell the Premises under which the Net Sale Proceeds will be GREATER than the Compromised Note Balance, the Net Sale Proceeds shall be paid to LaSalle on closing and applied as follows: (i) first, to the Compromised Note Balance until paid in full; and (ii) second, 50% of the remaining Net Sale Proceeds to the $2.15 million balance of the Prepayment Premium until paid in full. After payment in full of the Compromised Note Balance and the balance of the Prepayment Premium as set forth in paragraph 6.d.(ii) hereof, LaSalle shall have no further claim against Realty or Systems or the remaining Net Sale Proceeds. 7. LaSalle shall have the absolute right to have the Deed recorded and the Bill of Sale delivered to LaSalle immediately upon the occurrence of any of the following events: a. closing of the sale of the Premises has not occurred by November 30, 2001; b. Realty defaults in any of its obligations to LaSalle, including payment obligations, under the Note or Loan Documents; c. Systems defaults in any of its payment obligations of the Periodic Payment Amount; d. Systems vacates the Premises prior to the close of a sale of the Premises or the Lease Termination Date. Upon the recording of the Deed, the Compromised Note Balance shall be credited against all sums due under the Note, and LaSalle will have no further claim against Realty or Systems except with respect to its right to be paid (if at all) the remaining balance (if any) -5- of Periodic Payment Amount and/or the Rejection Claim as set forth herein and the Indemnity Claim in accordance with paragraph 8 below. 8. The claim filed by LaSalle against Systems based on the Indemnity Agreement executed by Systems in favor of LaSalle dated July 25, 1997 ("Indemnity Claim"), shall remain unadjudicated until default by Systems or Realty of any payment or non-payment obligation under the Note, New Lease or Rejection Claim or Modified Plan. 9. Notwithstanding the closing of the bankruptcy case for Realty and Systems, the Bankruptcy Court shall retain the exclusive jurisdiction to adjudicate all matters related to (i) the Plan Modification and (ii) the Rejection Claim and the Indemnity Claim. 10. As used in this Plan Modification: a. "Compromised Note Balance" shall be the sum of (i) the amount of principal, interest, fees, expenses, and late charges (if any) then due under the Note, plus (ii) $2.15 million. b. "Net Sale Proceeds" shall be all consideration for which the Premises is sold less (i) pro-rations for real estate taxes, costs of sale (e.g., reasonable attorney fees and costs, title insurance, survey, transfer taxes customarily charged to the seller) and a brokerage commission not to exceed 2% of the purchase price in accordance with paragraph 6.a. above. c. "Escrow" shall mean the escrow established by written agreement between a title company or other entity selected by LaSalle and Realty, Realty and LaSalle. The terms of the Escrow shall include that the Deed and Bill of Sale shall be delivered to LaSalle upon receipt by escrow agent of an affidavit from an officer of LaSalle that states as follows: I hereby certify that the following circled event(s) have occurred and, with respect to events in paragraphs b through e below, notice of default was given and said defaults were not cured within five (5) calendar days of such notice: (i) The Lease Termination Date has passed and the Premises have not been sold; or (ii) Realty is in default under the Note; or (iii) Systems is in default under the New Lease; or -6- (iv) Systems has defaulted on its payment obligations of the Periodic Payments or the Rejection Claim; or (v) Realty or Systems has violated a term of the Plan Modification. The terms of the Escrow shall also include a provision requiring that the Deed and Bill of Sale shall be delivered to Realty upon receipt by escrow agent of an affidavit from an officer of Realty and an officer of LaSalle that states that the Note has been discharged and satisfied in full. 11. The grace period with respect to any payment or non-payment obligations in the Note, Loan Documents, New Lease or payment of the Periodic Payments and/or Rejection Claim shall be as set forth in the Mortgage; PROVIDED, HOWEVER, that a Late Charge as set forth in 6 of the Note shall be immediately due and payable if a payment due to LaSalle is not made on the day such payment is due, even though such payment is made within the applicable grace period. Any notice required by the terms of the Escrow, Note or Loan Documents shall be delivered to: REALTY AND SYSTEMS: Goss Graphic Systems, Inc. Goss Realty, L.L.C. 700 Oakmont Lane Westmont, Illinois 60559-5546 Telecopy: 630-850-5899 Attn: Joseph P. Gaynor, III, EVP & CFO and KIRKLAND & ELLIS: Kirkland & Ellis 200 E. Randolph Drive Chicago, Illinois 60601 Telecopy: 312-861-2200 Attn: James H.M. Sprayregen & Matthew N. Kleiman 12. All payments to be made by Realty or Systems shall be by wire transfer or personal delivery receipted for. -7- 13. Except as otherwise provided herein, all payments received by LaSalle, whether on the Note, the New Lease, the Rejection Claim or from the sale of the Premises, shall be applied as follows: first, to fees and costs; second, to interest; and third, to principal. 14. If the Effective Date of the Plan and execution of all documents necessary to consummate the transactions contemplated herein do not occur by November 30, 1999, confirmation of the Plan for Realty shall be null and void. 15. If Realty prepays the Compromised Note Balance in full other than by a sale of the Premises, and within six (6) months of said payment date Realty or its nominee, Systems or one of their affiliates enters into a contract to sell the Premises, the Net Sale Proceeds of which would exceed the Compromised Note Balance, then, Realty shall owe and pay LaSalle the full remaining balance of the $4.30 million Prepayment Premium. (remainder of this page intentionally blank) -8- GOSS REALTY, L.L.C. By: ---------------------------------------- Its: --------------------------------------- Printed Name: ------------------------------ GOSS GRAPHIC SYSTEMS, INC. By: ---------------------------------------- Its: --------------------------------------- Printed Name: ------------------------------ LASALLE BANK NATIONAL ASSOCIATION By: ---------------------------------------- Its: --------------------------------------- Printed Name: ------------------------------ -9- EX-27.1 5 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GOSS GRAPHIC SYSTEMS, INC. AND CONTAINS UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 16 0 168 31 217 391 247 69 894 457 279 0 0 0 198 894 422 422 397 482 2 0 34 (96) (3) (93) 0 0 0 (93) 0 0
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